[GGP] Energy Policy Transition – The Perspective of Different States

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The following are conclusions drawn from the free e-book: Energy Policy Transition – The Perspective of Different States, published by the Ignacy Lukasiewicz Energy Policy Institute. 

Energy transition is an inevitable process, currently going on in many countries. At the national level, it requires a coordinated policy involving cooperation between different institutions, and especially the world of science and industry. With the diversity of energy balance structure of different countries in mind, we can also see different approaches to the issue of energy transition. Energy transition based on low-emission energy sources is connected with real social and economic benefits such as alleviating the effects of climate change, its influence on human health, and enhancing energy independence or energy system flexibility. Transition-focused thinking means the ability to see many different forms of energy production beyond the commonly used fossil fuels.

Transforming the economy into a low emission economy (energy transition) is one of the biggest economic-environmental challenges of the 21st century. The longer the emitting countries wait to start the transition, the higher will be its costs and the more difficult its implementation, because present investment in the traditional technologies producing energy from conventional fuels will form the energy mix for many years[1]. Properly designed energy and climate policy has a stimulating influence on all areas of socio-economic life and fosters the building of a modern and highly developed economy, and modernization of the energy sector seems the only solution allowing the maintaining of energy security and competitiveness of energy production in the age of climate change[2]. Associating environmental policy with energy policy results from the fact that energy is the sector with the greatest impact on the quality of air and is the source of the concentration of greenhouse gases in the atmosphere responsible for global warming. The sector of energy production is one of the greatest CO₂ emitters and must play a fundamental role in the decarbonization of the world’s economy. Energy transition forces the modernization of the energy infrastructure and reduction of energy intensity of the economy through investment in innovative green energy technologies. Growing awareness in the international community of the need to counteract GHG emissions has increased the importance of the ecological aspect of energy security, which includes the reduction of negative effects on the natural environment at each stage of energy management (extraction, processing, transport, storage, and consumption). The threat resulting from climate change, in turn, requires revaluation of the traditional concept of energy security, including the still present preference for cheap energy sources that actually prevent the effective reduction of CO₂ emissions. 

The process of energy transition is seeding up globally as a result of the growing role of electricity in new branches of the economy, including transport. It will contribute to the replacement of previous fossil fuels (oil) with electricity perceived as “fuel” for vehicles. The global fleet of electric vehicles nearly doubled in the years 2014-2015, reaching the level of 1.3 million. In the first quarter of 2017 alone, the number of registered electric vehicles in three countries which are the leaders in this regard, i.e., China, the USA, and Japan, exceeded 1.3 million.  The IEA estimates that the number will grow up to 30 million cars by 2025 and exceed 150 million in 2040. Such development of electric cars will reduce the demand for oil by approximately 1.3 mb/d in 2040[3]. T. Seba assumes a much more dynamic development of electromobility. He anticipates within 8 years that all land transport will be powered with electricity, which will lead to a slump in oil prices and the collapse of the petroleum industry[4].  Surely, the dynamics of electromobility development will depend on the speed of overcoming different barriers to it, such as the development of an energy infrastructure for charging electric vehicles, production of efficient batteries, the growth of public acceptance, and first of all, lower prices for electric cars. This will help countries that spend considerable financial resources on the import of oil and fuels to rather spend it on electricity, which is mostly generated on domestic markets, and so the flow of funds may become a lever for economic development in each country. The crucial question is how different countries will decide to invest in it and whether they will achieve in this way certain sources of economic advantage.

It is clear that despite technological development, fossil resources are still dominant in the structure of primary energy (nearly 80%). However, in the coming decades, the situation will likely change, given the dynamics of development within the last 15 years of energy technologies based on RES, which do reduce emissions. The process will additionally stimulate a dynamic growth in demand for electricity, whose production has increased 4-fold in the last 40 years. The development of ICT systems, digitalization, and robotization are bound to make the demand for electricity grow in the future. The development of renewable energy also leads to changing the model of relations between the producer and consumer of electricity, as the previous consumer may now also produce energy, becoming a prosumer. Restrictive environmental standards also favor nuclear energy, which is regarded as one of the low-emission forms of final energy production. But it seems that nuclear energy will play only an intermediary role in the process of energy transition, because by 2040 nearly 200 out of 450 nuclear reactors may be discontinued. Within the nearest several decades, nuclear energy will mostly develop in Asia. Natural gas may also prove to be an intermediary fuel in the transition process. As a result of developing LNG technology, the natural gas market is becoming more and more integrated and globalized. Transition processes also involve new forms of contracting energy resources and electricity as a result of the development of energy exchanges and electronic platforms for energy trade. The formation of physical and virtual gas hubs provides conditions for a new architecture of energy contracts, which are alternative to long-term contracts.

It must be emphasized that one way of reducing GHG is to improve energy efficiency by optimum use of energy resources. Energy transition processes mean that optimum energy management in smart grids will soon become a challenge. It seems that the improvement of energy efficiency is the most economically optimal way of reducing GHG emissions. The growing demand for electricity causes the need to ensure stable and secure supplies to end customers. It also contributes to maintaining the proper quality of electricity, and this increases the demand for electricity storage facilities, which may help improve the flexibility of the electricity system and balance energy supply and demand. Nowadays, different methods of storing electricity are available, and ongoing work in new technologies mean there will soon be more.

Analyzing the model of energy transition in selected countries, we can see that the process not only leads to the modernization of the energy balance structure, but also to changes in thinking about the energy sector. Even a decade or two ago, nobody would have expected the US, which used to import over 100 bcm/year, to become an exporter of natural gas. The process of technological change that has taken place in the last few decades in the US refers to the area of extraction and production of energy resources, which will soon make the country change from being an importer of natural gas to being its net exporter. The so-called shale revolution, which began with natural gas and then also applied to oil, has affected the global market of energy resources and become one of the factors of transition. Considerable amounts of oil and natural gas entering the American market have led to lowering energy prices, and together with the intellectual potential has become a factor that attracts investments to the American market. In the case of the US, the process of transition has caused the creation of a huge number of jobs in areas of the economy connected with the energy sector[5].

In the EU, one of the first countries to begin the transition involving extensive implementation of renewable energy is Denmark. Similar activities are being taken in the Federal Republic of Germany, which is pursuing the regular growth of renewable energy in its energy balance structure. These activities are also a response to the oil crisis of the 1970s, when Western European countries felt the effects of excessively high dependence on imported oil. It is important, however, that Germany, having a substantial share in renewable energy technologies, has made it one of their export goods, which have become a source of their competitive advantage. Denmark has noticed a similar opportunity and is the leader in wind energy technologies. At certain times of the day, surpluses of electricity may be sent (exported) to other countries. Therefore, well developed energy structure and electricity interconnections are a significant element affecting the position of Germany (the second greatest exporter of electricity in the EU, just next to France) and Denmark on the integrating energy market in the EU. Among EU countries, Italy has also found the potential for developing its competitive energy sources as part of a “green economy”. This way, Italy has created many new jobs. Recent significant investments by Italian companies in the development of renewable energy technology is giving the economy some benefits. France has been building its position in another way. Initially, it based the modernization of its energy sector on nuclear energy, which not only enabled it to lessen its dependence on fossil fuels import, but also made the country one of the main suppliers of products and services for the nuclear industry. The Act on energy transition adopted in 2015 showed priorities such as the development of renewable energy and energy efficiency, combined with the reduction of nuclear energy.

Whereas France is planning to reduce nuclear energy, the Czech Republic and Slovakia perceive this form of electricity production as the solution ensuring a low-emission energy sector. Apart from the existing nuclear power plants, they are also planning to construct new installations, which will facilitate the process of energy transition, also supported with the development of renewable energy. Nuclear energy is also an important element of the energy balance structure in Great Britain, which is planning to build another installation as well. Recently, that country has developed its energy infrastructure and liberalized its energy market, in some elements becoming the point of reference for many emerging energy exchanges. One of the British priorities is currently to improve energy efficiency, both in households and in industry.

Within the last several decades, Poland has had significant successes. Previously, it based its energy balance on hard coal and lignite deposits, which are used to produce the majority of its electricity. Evidently, on the one hand, Poland’s future energy transition is going to involve the improvement of coal blocks, which may contribute to the reduction of greenhouse gases emission. On the other hand, the country is looking for its sources of competitive advantage, trying to determine its way of energy transition by considering the specificity of the previous energy balance structure. Austria and Switzerland skilfully use their central location in Europe. In the case of the former, its location enables it to serve the transit function for the import of energy resources to other European countries. On one hand, it provides an opportunity for developing the Austrian economy, but on the other hand, it makes the country dependent on others. Regarding the national priorities of the energy sector, further improvement of energy efficiency is important, and the sources of competitive advantage are based on technological development resulting from the extensive research sector, and technological ideas then become the export product. Similar assumptions were adopted in Switzerland, which mainly pursues technological development. The factor that makes Switzerland different from many other European countries is pumped storage power plants, which ensure the possibility to store electricity. Switzerland can also see the potential in developing the technologies of energy storage and the use of hydrogen in the energy sector and transport.

To sum up, we can see that energy transition in different countries is not the same. This mainly results from the variety of the previous energy balance structure. However, in each country, energy transition is an opportunity for re-industrialization of industry and building new branches of the economy, as well as creating competitive advantage. It is in the interest of each country to strengthen its energy security and to create new jobs as part of the economy. Social expectations and renewable technologies correspond more and more to the countries’ industrial strategies. In many countries, energy transition occurs by evolution, not revolution. Daniel Yergin emphasizes that technological speed is not the only factor to affect the pace of transition.[6] Apart from this factor, there are others. Therefore, it is even more difficult to reduce the phenomenon of energy transition to one common denominator.

Mariusz Ruszel, Tomasz Młynarski, Adam Szurlej

Download the full version – free ebook:

Energy Policy Transition – The Perspective of Different States

http://www.instytutpe.pl/en/epi/

Energy Policy Transition – The Perspective of Different States, ed. M. Ruszel, T. Młynarski, A. Szurlej, Ignacy Lukasiewicz Energy Policy Institute, Rzeszów 2017.

ISBN: 978-83-946727-2-0

In my opinion, the strongest point of the publication is that it is so

comprehensive, showing the main elements of energy transition against

the background of their practical applications in ten selected countries.

I would recommend the book to anyone who wants to understand the

comprehensive approach to the analysis of energy transition as well as

the practical forms of its implementation. 

Władysław Mielczarski, Full Professor

Lodz University of Technology 

It is a book for all those who are interested in an active participation in

the process of energy sector transition at any level of political, economic,

or technological structures. It provides, first of all, the “food” for matterof-

fact discussion and debate on the trends connected with energy

policy transitions, the reasons for them, and the ways of implementing

different models of energy transition in different countries. The authors

of the volume have put considerable effort into preparing a list of

valuable references, which should be helpful in further studies of the

discussed issues. 

Piotr D. Moncarz, NAE, Adjunct Professor
Stanford University