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WBCSD Electricity Utilities Sector Project

UN Commission on Sustainable Development14th session, New York, 8th May 2006

Sustainable Electricity Dialogue

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Introductory address

Raymond LEBANSenior Advisor, Prospective & International Relations, EDF, FranceProfessor & Dean, CNAM-Paris University

Wendy POULTONGeneral Manager, Corporate Sustainability, Eskom, South Africa

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Contents

Dramatic recent changes in the energy context (bad news) Electricity key to meeting energy challenges (good news) Debate, consistent public policies & increased international

cooperation needed A dialogue focusing on six objectives for concerted

action:Continuously improving energy efficiencyDiversifying & decarbonising the fuel mix Investing adequately in infrastructureBringing to market promising long-term technologies Providing wider access to electricityBuilding partnerships and developing public dialogue

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Dramatic changes in the energy context compared to 90’s

Formidable energy and electricity needs Population growth and development Energy demand from now to 2030 : + 60% ; Power

generating capacity additions up to 2030:+130% of installed capacity)

Scarcer and more expensive fossil fuels

All 2020 forecasts over 40$/b (oil) and 4.5$/Mbtu (gas) Peak-oil Increasing threat to security of supply

Obligation to reduce GHG emissions significantly Business as usual (7GtC now, 15 GtC in 2050) are

unacceptable Transformation is needed

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Electricity is key to meeting energy challenges…

Electricity is a highly efficient energy carrier with no environmental impact at the point of use (growing share)

Large part of the required investment is to be absorbed by the electricity sector (development – replacement, T&D)

Shares of electricity in finalenergy consumption (%)

2002 2025 20500

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20

30

40

50

60

BAU

Pathways to 2050

Wide scale electrification is crucial to meeting the MDGs

Electricity is a major contributor to GHG emissions (40% of energy-related emissions)

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…provided that we make wise use of technologies

Highly efficient and low-carbon/carbon-free technologies are available End-use technologies (heat pumps, solar heating…) CO2-free generation technologies like renewables (including large hydro) and nuclear More efficient gas and coal technologies

To cut CO2 emissions significantly, we need all options Optimisation – Creation of success conditions

Promising technologies can be brought to market on time Carbon C & S - Gen 4 nuclear - Electricity storage -…

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Debate, public policies & international cooperation needed

Need to share facts on technologies Advantages & drawbacks - Timeframes - Success

conditions Need to discuss which policies to articulate

Support to R&D, Incentives to invest Need to boost cooperation between industrialised

& developing countries From “project” to “programme” CDMs

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The Electricity Utilities Sector Project

In view of the urgency to act on this challenge, the eight project member companies endeavour to:

Promote a better understanding of what are the key challenges, what are the key options and actions needed, and who is responsible for what

Develop an agenda for concerted action on sustainability - to be used as a communication tool with various stakeholders of the industry -> draft manifesto with 6 key objectives

Build a factual platform for discussion: issue briefs on key elements of the debate

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(1) Continuously improving energy efficiency

Energy efficiency helps address energy security, access, price and environmental challenges

Considerable potential : 40% less demand (over b.a.u) in 2050 is possible

Very significant and long lifetime investments -> quick start needed Cost- effective technologies do - or will - exist: heat pumps –

solar water heating & insulation – reloadable hybrid vehicles ... Shares of electricity consumption (%), 2002

Industry42%

Residential30%

Services27%

Others1%

Source: IEA World Energy Outlook 2004

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(1) Continuously improving energy efficiency

Policies must address barriers to investment Inadequate pricing Regulations restricting entry to efficiency markets « Split Incentive » issue: potential investors do not

fully receive benefits Lack of information, expertise and finance available to

customers

Labelling and standard policies will remain crucial in incentivising manufacturers

Broad partnerships in research for new energy efficiency equipment - including utilities - must be made to work

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(2) Diversifying & gradually decarbonising the fuel mix

Hydrocarbons Ensure world wide diffusion of efficient generating

technologies Master the links of the CCS chain – reduce costs radically and

find adequate storage sites; EOR important for technological learning

Renewable generation 2/3 hydro potential not realised (DC notably) Further incentivise solar, wind and others where they are not

already cost-competitive (but scalability until 2030 limited)

Nuclear energy Already proven, scale-up potential considerable Waste and proliferation issues to be solved Issues such as independent safety authorities, licensing, and

industrial organisation are crucial

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(3) Investing adequately in infrastructure

Unreliable and low-quality supply in many countries

Recent blackouts in developed countries: vulnerability of today’s grids, strained by decades of neglect and increased power trading

A real, interconnected grid is needed for Security of supply Integrated and competitive markets Backup between countries Optimisation of investments and services Renewable energy integration Minimisation of losses

Whether future investment needs can be met is uncertain (conditions needed)

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(4) Bringing to market promising technologies

Accelerate R&D now for longer-term options

Carbon Capture and Storage Nuclear Gen 4 3rd generation photovoltaic Electricity storage to enhance renewables Hydrogen Continuous research in efficiency improvements Fusion is currently no more than a possibility beyond

2050

Need for government funding and enhanced international cooperation

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(5) Providing wider access to electricity

Key lessons for future action Some current electrification schemes only have a

moderate impact on poverty alleviation; only affordable schemes are successful and sustainable over the long-term

Utilities to take the lead but partnerships are key for effectiveness

Financial government support may be required – account for market structure and institutions

Electrification schemes need business development Local businesses are crucial in sustaining real impact

on poverty alleviation Evaluation of programmes must account for quality of

life improvements and socio-economic development as well as financial cost-effectiveness

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(6) Building partnerships and pursuing dialogues

Electricity utilities are a powerful agent for change and can: Work with customers to promote sustainable consumption

and end-use efficiency Reduce carbon-intensity in their fuel combustion (increase

operational efficiency) Build the infrastructure needed Innovate to bring new technologies closer to maturity

BUT… Business cannot act alone

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(6) Building partnerships and pursuing dialogues

Policymakers:

While designing and regulating competitive markets, keep in mind other drivers for sustainability: incentives for R&D & energy efficiency, signals for long-term supply risks, and clarity on who takes overall system responsibility

Creating enabling framework conditions (incl. efficiency standards) including a practical roadmap for reducing CO2 and other pollutants, addressing regulatory barriers to low-carbon or carbon-free technologies

And YOU…

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Discussants and open discussion

Larisa Dobriansky, Deputy Assistant Secretary for National Energy Policy, US DoE

Li Junfeng, Chair of Academic Committee, Energy Research Institute, National Development and Reform Commission, China

Sarah Adams, Programme Coordinator, Global Village Energy Partnership

Discussion

Online dialogue at www.wbcsd.org/web/electricitydialogue.htm …from today until 4 June 2006