Energy Leaders Should Focus on the Future

The energy sector is reacting to short-term price signals instead of focusing on long-term signals which will help the utility to build a more robust energy system in the future.
Published: Fri 07 Mar 2014

High energy price volatility is currently keeping our energy industry leaders awake at night. This is according to the 2014 World Energy Issues Monitor report which was released by the World Energy Council (WEC).

As a result, focus has been taken away from both climate framework and carbon capture, use and storage. According to Christoph Frei, WEC Secretary General, this is bad news not only in terms of emissions mitigation, but also for the development of a resilient energy infrastructure. He explains, “Our energy systems are in a state of massive expansion and transition, and the signals we see today provide clear evidence of the urgent need for more robust, coherent, long-term frameworks within which to plan and implement future investment.”

React to long term signals

According to Marie-José Nadeau, Chair of WEC, the study reveals that the energy sector is responding to short-term price signals instead of long-term signals. She explains, “As the gap between energy access, energy security and energy sustainability widens, the financial investments and technical efforts required to deliver simultaneously secure, affordable and environmentally sustainable energy will increase significantly. The World Energy Council therefore urges the energy community to work on long-term frameworks, as they are key to our ability to reach our goals.”

Price volatility will continue

Energy price volatility goes beyond merely oil and gas prices and their regional differentials. It is also being influenced by the US shift from coal to gas; the increasing use of coal in Europe, which has driven up emissions; the collapse of solar module prices; and Australia re-directing its interest from North America to Asia while North American infrastructure companies are signing more deals with Asian customers.

The report also points out that energy leaders are concerned about the sector’s ability to access capital markets for energy infrastructure funding. The ongoing recessionary backdrop adds to this concern.

The report finds that in addition to energy prices, the top regional critical uncertainties are:

  • Africa: climate framework, commodity prices

  • Asia: renewable energy

  • Europe: global recession

  • Latin America & Caribbean: commodity prices, capital markets

  • Middle East & North Africa: energy efficiency, renewable energy

  • North America: nuclear energy, capital markets

The 2014 World Energy Issues Monitor is the culmination of a six-month study capturing the views of over 800 energy leaders including ministers, chief executives and the heads of the WEC’s national members committees covering 84 countries. The report, which highlights strong regional variations, looks at the global energy agenda and analyses the trends and outlook in six world regions plus 24 countries.

Further Reading:

World Energy Council-2014 World Energy Issues Monitor-What keeps energy leaders awake at night?