Interview: Developments in the Global Energy Sector

Interview: Developments in the Global Energy Sector

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Hooman Peimani

Energy Review: The current coronavirus crisis has affected domestic stability as well as the scope for energy technology transition in many developing countries. Given this situation, how do you think the crisis-hit and debt-ridden economies can leapfrog and develop clean energy infrastructure in order keep up with their low-carbon goals?

Hooman Peimani: Given the devastating effect of the COVID-19 pandemic on many developing countries, the absolutely necessary switch towards low-carbon or zero-carbon economies can only be affordable and, thus, feasible for the crisis-hit and debt-ridden economies if it is combined with their developmental and poverty-eradication programs to ensure employment, income security, and basic life necessities for their poor and low-income strata. In turn, the resulting poverty eradication and socio-economic development will bring about for them social and political stability for them, while their low-carbon goals are achieved.

In such case, the scarce available funds for developmental projects should be invested in clean technologies, which can be produced locally with the available resources in the existing industries and/or in small and medium-sized enterprises to be promoted. It is crucial to focus on the appropriate clean technologies for given countries, which are technologically suitable and therefore could be developed locally at affordable costs. Examples include vertical-axis wind turbines, small hydro types and solar boilers.

Hence, instead of seeking to emulate plans for expanding clean energy technologies designed for developed countries with proven limited success and slow pace of move towards zero-carbon economies requiring certain complicated, difficult to produce, transport, instal, operate and repair/maintain and expensive types of clean energy (e.g., horizontal-axis wind turbines and solar panels), crisis-hit and debt-ridden countries should develop their own pattern of switch to clean energy objective while addressing their economic underdevelopment. Towards this end, diffusing clean energy technologies in their countries and involving a significant number of their low-income people in the production, transportation, installment, operation, repair/maintenance and expansion of their appropriate types of clean energy technologies will be necessary.

ER: Do you agree that the global clean energy drive could adversely affect the conventional energy industry? If so, what would be the future of coal energy sector?

Hooman Peimani: The global clean energy drive will adversely affect the conventional energy industry. However, provided the drive’s continuity and expansion to include all the global fossil energy consumers, this will happen not in the immediate future, but over a 30-40 year period as the existing drive towards net-zero carbon economy has been very slow and with fluctuations.

This is the result of a variety of factors, including the in-built limits of clean renewable energy, mainly the intermittency of wind and solar energy, the absence or limited availability of continuous types (hydro and geothermal) and the destructive nature of hydro for the flooded areas behind dams and surrounding areas due to sudden increase in humidity and the opposite in the areas around the previous natural path of their feeding rivers. Likewise, it is due to the limited availability of the clean renewable energy technologies and its concentration in a small number of countries to deprive many interested countries of them or create political and economic barriers to their unrestricted access to them.

As well, barriers to the expansion of nuclear energy capable of large-scale generation of clean alternative energy to fossil energy is another factor to make the mentioned drive challenging and slow. The contributing factors include the anti-nuclear movement initiated by some environmental groups in Europe, North America and, to a lesser extent, in Asia since the 1980s worsened by exaggerated assessments of the Chernobyl and Fukushima accidents.

Difficulties in the use of clean energy as the main source of energy for the major energy-consuming sectors heavily dependent on fossil energy account for another factor slowing down the pace and narrowing the scale of the drive to a clean energy-dominant global economy. These sectors include (land, sea and air) transportation, heavy industries, mining and agriculture.

Consequently, the adverse impact of clean energy on the conventional energy industry will be gradual and conditioned to the continuity of the global clean energy drive and its extension to the entire sectors of all countries.

Yet, within this context, the coal industry will certainly be the major target as coal is the most pollutive type of fossil energy and consequently the first obvious target of phasing out. This is evident globally, but at a varying extent subject to the extent of dependency of the countries currently using coal and the availability of inexpensive alternatives.

The future of the coal industry is surely bleak also because of the availability of a cheaper fossil energy alternative to coal in some countries, namely gas and shale gas in the case of the USA. Its abundance at low prices has led to shutting down of many coal-fired power generators as well as nuclear ones in the USA.

ER: What would be the long term geopolitical impact of clean energy development on the global petroleum industry?

Hooman Peimani: The road towards a clean energy-based global energy mix is a long one. In fact, there is a serious doubt that the small number of developed countries, which have committed themselves to achieve zero-carbon economies by 2045 (Sweden), 2050 (e.g., Germany) and 2060 (China) will actually achieve it. Despite all the news we hear every day on the expansion of wind and solar energy, in particular, the share of these types of clean energy and, in general, renewable energy of the global energy mix is still very small (about 14% in 2019).

The production of the required technologies (e.g., wind turbines and solar panels) is in itself energy intensive, dependent on fossil energy and thus pollutive. This is reflected in the growing global emission of Greenhouse Gases (GHG) while clean energy has been expanding.

That fact aside, the replacement of even the global fossil-fuelled-based power generation sector with a renewable energy one has proven to be a herculean task, if not impossible, without using nuclear energy at a large scale, given the intermittent nature of clean renewable energy (i.e., wind and solar) and the limits of continuous types (i.e., hydro and geothermal).

In such a situation, the short-term cost of a switch to clean-energy economies is surely higher than retaining the existing pollutive ones. As a major reason, this explains why the pace of such a switch is quite slow even in economically-advanced and rich countries, as demonstrated in the postponement of its actual achievement to 30-40 years in the future as evident in the case of the above-mentioned countries.

Notwithstanding the necessity of a swift switch to zero-carbon economies, the ongoing global reality only reflects a trend towards such a goal. In reality, the switch has become more an aspirational objective than a coordinated global effort towards its actual realization. Consequently, the global economy is still heavily dependent on oil, gas and coal and will remain so should the current trend continue.

Given this observable reality, clean energy development has a very limited geopolitical impact on the petroleum industry for the time being. The oil and gas-producing regions will remain of strategic importance for the global economies in the foreseeable future. By default, the global petroleum industry will retain its significant role to be eroded over time, provided the drive towards clean energy economies continues and expands extensively. Only will a large, growing and sustainable expansion of clean energy to replace the corresponding amount of fossil energy on a steady manner have an irreversible geopolitical impact on the global petroleum industry reflecting a corresponding decline in the geopolitical importance of the major fossil energy-producing regions. ■□■

Dr. Hooman Peimani is a senior research and policy leader with 30 years of experience in consulting, academia, analysis, and monitoring of global energy security covering energy and environmental issues and related geopolitical topics. He is currently focused on Asia, the Middle East, Europe and North America.