The most pressing energy challenge for governments and businesses in today’s world is to solve the problem of how to achieve
1. Sustainable,
2. Affordable
3. and accessible energy globally.
These three concepts are inextricably linked and therefore, should be perceived as one multifaceted issue that needs to be addressed effectively both by governments and businesses. Managing trade-offs between these three dimensions can be described as an energy trilemma. This predicament continues to be a serious impediment to meeting the demands of an increasingly challenging global energy system.
Price volatilities and shocks, inadequate investment for obsolete infrastructure, geopolitical tensions, difficulties in providing energy for more than one billion people without access, and the increasingly evident effects of climate change are some of the energy challenges that have significant global implications. As these myriads of trends demonstrate, the present system, with a business-as-usual approach, is no longer capable of addressing the many challenges ahead. Currently established institutions, energy intensive economies as well as energy policies are not compatible with the changing demands for energy worldwide, and the shifting rules for how energy resources are traded and consumed.
Unless efficiently and speedily addressed, the consequences could prove to be dire. To avoid reaching a “point of no return,” a system of international co-operation is needed that would both encourage all players to share energy and energy saving technologies and also allow individual economies to function optimally.
In the global energy context, coping with the challenge of solving the energy trilemma requires a comprehensive energy policy design that is not constrained by national boundaries. As witnessed in recent history, energy crises in one segment affect and reverberate through the whole energy system, as was the case with the Chernobyl and Fukushima nuclear disasters, and the first and second oil shocks in 1973 and 1979. For this reason, governments and businesses have to set the agenda for addressing the numerous energy-related challenges that come with tackling the enormous changes that are taking place in the global energy system through collaboration and co-operation based on a manageable framework.
The old paradigm of fossil fuel-based energy systems requires a collaborative effort of restructure. The change to efficient energy systems could start with a call for widespread carbon pricing schemes which would employ a viable emission trading system and carbon taxes. With an efficient global implementation of the agreed carbon pricing schemes, which was addressed at this year’s Paris COP21, both governments and businesses will be forced to incorporate the carbon pollution reduction scheme into their agenda as part of a key policy toolkit for sustainable energy.
Well-designed and meaningful decarbonization policies, particularly implemented by G20 member countries, will be a constructive tool for boosting innovation and cutting greenhouse gas emissions, while also paving the way for low carbon economies. Achieving the de-carbonization of the world’s energy system would require meeting the objective of a 2°C degree limit to successfully fight against climate change. Additionally, despite the setbacks and complications, upgrading existing low-carbon infrastructure, whether wind, solar or geothermal, will be needed to ensure greener energy generation.
Dynamic market developments have incrementally improved the affordability of renewable energy resources. The volume of investment for renewable energy has now reached the level of that of fossil fuels. Reduced tariffs on low-carbon goods, which have recently been enacted by the Asia-Pacific Economic Cooperation countries (APEC) on goods such as solar panels and efficient light bulbs, have further increased the market share of the sector by offering affordable alternatives to consumers. The IEA states that the share of renewables for electricity generation is on the rise and by 2040 is expected to account for 37 percent of power generation for OECD countries. Renewables, therefore, as a consequence of government subsidies, are increasingly expected to play an important role.
In 2013, renewable energy received subsidies to the amount of $120 billion including solar, biofuels and wind while energy subsidies for coal, oil and natural gas, in contrast, reached $550 billion. Fossil fuel subsidies continue to take up a substantial percentage of some countries GDP’s on account of a desire to lower energy prices. Although reforming energy subsidies is a must, it has never been easy through a single formula, but support for renewable energy has to be gradually phased in and subsidies for fossil fuels progressively phased out. Only a reallocation of government spending would help businesses move away from energy intensive industries towards low carbon, smarter and cleaner economies.
Governments and businesses could specifically target the reduction of energy intensity of the overall economy through innovative business modeling, regulations and investment tools, by keeping in mind the fact that efficiency measures are one of the single most effective ways of diminishing carbon emissions and increasing accessibility to energy.
The cities of Vancouver and Frankfurt can be given as successful examples of how energy efficiency measures and the move towards more renewable energy have helped them bring down their energy imports and so reduce their environmental footprints with the added benefit of creating local jobs. These improvements to the quality of the cities’ environments, brought about by local governments, are a clear example of how economic growth - with improved accessibility to energy - can be achieved while remaining compatible with climate and environmental sustainability.
Therefore, the carefully planned development of low carbon and energy-volatility resilient systems, combined with the resolute establishment of efficiency standards, could act as a guide for integrated energy management that is responsive to the challenge of achieving sustainable, affordable and accessible energy. These three fundamental interconnected priorities, as an inseparable concept of the energy trilemma, are the most pressing issue that the energy world faces.