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Energy leaders embrace new frontiers

Energy leaders are adapting to a rapid change of pace and identifying new priorities

Commodity prices and climate change policy remain the top issues keeping energy leaders awake at night, according to the latest iteration of the World Energy Council's 'World Energy Issues Monitor'. The survey of 1,200 energy leaders in business, industry, government and academia from 95 countries also reveals that regional integration and resilience issues are likewise high on the list of concerns.

The eighth edition of the World Energy Issues Monitor demonstrates that the impact of the energy transition is having a real and measurable impact on global energy leaders.

Giving an overview of the survey, Christoph Frei, Secretary General of the Council, says: "The essence [of the survey] is that energy leaders are being hit by disruption. The Issues Monitor not only measures that this has been increasing over the past year but shows that the resulting new business models are mature to the extent that 'leap-frogging' in energy has become a reality."

To illustrate the point, Frei uses rural electrification, where tens of thousands of households are using solar and battery storage systems to bypass the need to access the traditional electricity generation and transmission infrastructurein much the same way that some parts of the world moved directly to cell phones, leap-frogging the landline communications infrastructure.

He notes that such disruptive trends and technologies are changing the role of the utility. "The Issues Monitor shows that decentralisation, digitalisation, storage and market design are things that five years ago were at the back-end of interest but have consistently moved up the agenda globally."

Having to cope with these new realities defines the title of this year's survey World Energy Issues Monitor 2017: Exposing the New Energy Realities.

Looming threats

As in previous years, the Issues Monitor focuses on the approximately 40-odd issues that make up the global energy agenda. While these remain roughly the same from year to year, new issues have emerged over time. As Frei says: "Things like cyber threats were not there five years ago." Some items have also changed name as terminology changes. For example, smart grids now come under digitalisation.

Concern surrounding economic growth continues to dominate the Monitor. Frei points out that global growth has slowed and is an issue that is "absolutely at the top" of people's thinking. According to the Monitor, the effects of economic growth, or lack thereof, was one of the issues of highest change globally from 2016 to 2017. In short, slowing economic growth puts greater uncertainty around primary energy demand and the adjustments the sector must make.

Triple lens view

In making comparisons with last year, Frei looks at the Issues Monitor through three "lenses": the macro view, the innovation standpoint, and in terms of resilience.

At the macro level, commodity prices remain at the top of the list of concerns for energy leaders and are of great significance to all regions. As a driver of the "grand energy transition" climate uncertainty is also seen as a macro issue and there is great concern over the ambiguity surrounding the outlook for CO2 prices. Also critical is regional integration.

Frei explains: "What I think people mean by this is the lack of regional integration and the trend towards less integration." He added that it is a global concernnot just in Europe, but also in regions such as Latin America, North America, Africa and Asia.

In terms of innovation, Frei observes that while some technologies and energy sources are becoming increasingly important, others are falling off the radar. "Nuclear is suffering on the Issues map, as is coal and carbon capture and storage (CCS)… Meanwhile, renewables and energy efficiency are locked in at the top of the agenda," he says. "Unconventional [fuels] have suffered since last year under the low commodity price [scenario] but it is probably among the volatile issues that go hand-in-hand with volatile oil/commodity prices."

Considering the third lens, which Frei calls "the resilience lens", the main issues are: cyber threats, extreme weather risks and the energy-water nexus. These issues do not appear high on the list of concerns. However, when looking at the number of countries and regional responses, Frei observes that all of these issues are at the top of the agenda when looking at innovation efforts.

Addressing the energy-water nexus first, he says: "In China it's a number one issue. There is a strong link between water and coal use, so China is pushing innovation and making policy adjustments with this in mind."

Meanwhile extreme weather is an issue that has affected many parts of the worldEl Niño in Latin America, hurricanes and typhoons in regions such as North America and Asia, and droughts in Africa. Frei points out that 96% of electricity generation directly depends on the availability of water. "The only technology that doesn't depend on water is wind," he says.

The cyber issue is high on the agenda for East Asia, Europe and Australia - all areas where there is a sophisticated infrastructure that is integrated and digitalised to some extent. "People are waking up to the reality that there is something looming there and in the studies we have published on resilience we have seen there is no shortage of case studies already. These show the full spectrum - from theft of data and damage to equipment, to blackouts in the Ukraine," says Frei.

Resilience, along with climate change and the new business models, says Frei, are the three fundamental forces driving the grand transition. He summarises: "The Issues Monitor shows beautifully how the new growth reality is at the top of people's mind along with the climate framework uncertainty. The new business models are really going up, while the resilience picture is one that shows great regional disparity."

The search for talent

This year's Issues Monitor has also thrown up a few new findings. While renewables and energy efficiency remain two of the key things that are keeping energy leaders occupied, there is now a real recognition that talent is important.

Frei says: "We can now really see that it's important but it's not only quantitative, it's also a qualitative thing. We cannot directly measure it but it's something we hear when we talk to people. As all the connecting issues become more important, that translates into a talent challenge."

If the 2017 Issues Monitor shows anything, it is that energy leaders are preparing to tackle the energy transition.

As Frei concludes: "The key takeaway from the report is that the transition is absolutely felt and expressed by the 1,200 energy leaders we surveyed. It is felt and expressed through the confirmation that we are in a new growth normal and that the key driving forces of the energy transitionclimate, in terms of decarbonisation; the new business models, through decentralisation, digitalisation and market designs; and resilience, which has great regional varietyare shown amazingly through the Issues Monitor."

This article appears in the latest issue of World Energy Focus, the magazine of the World Energy Council, with content produced by Petroleum Economist. For more information and to register, visit the site worldenergyfocus.org.

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