by Helen Sanders, Editor
“The world appears to be emerging from the worst economic crisis in decades. Many countries have made commitments under Copenhagen Accord to reduce greenhouse gas emissions. Commitments have also been made by the G-20 and APEC to phase out inefficient fossil fuel subsidies. Are we, at last, on the path to a secure, reliable and environmmentally sustainable energy system?” International Energy Agency (IEA), November 2010
To all intents and purposes,sadly the answer must be ‘no’. For the consumer, the implications are primarily in fluctuating (and typically increasing) household heating bills and fuel pump prices.For corporations, the ramifications of a volatile energy market with considerable medium-term uncertainty are both challenging and exciting, depending on how a company can take advantage of the opportunities that the current energy situation presents. In the years immediately preceding the financial crisis, the ‘green’ agenda was high in many politicians’ and corporations’ set of priorities. Over the past two and a half years, economic priorities took over,and the word ‘sustainability’ seemed to all but disappear. Now, however, politicians, CEOs and treasurers alike need to recognise that future economic stability, corporate growth and energy sustainability are inextricably linked.
Shifting energy demand
Firstly, without repeating energy predictions that are routinely spattered across the press during the latter part of the old year and the beginning of the next, the prospects for energy consumption versus production look grim. Commentators have been quick to predict a 2011 return to $100bbl for oil, although not necessarily remaining at this level throughout. The issue is not necessarily a decline in production, although inevitably this must happen, but on increasing demand, and for some industries, more rigorous carbon penalties. Unsurprisingly, China is the key perpetrator. According to the IEA World Energy Report 2010 (published November 2010), China’s demand for energy derived from fossil fuels is likely to increase by 75% between 2008 and 2035, and a tripling of electricity requirements. Other countries in Asia, particularly India, the Middle East and Latin America are also set for considerable growth in demand, with around a 35% increase in energy predicted by 2035 globally. And with energy production set to increase by only 15%, the challenge is clear.
The shift in demand from OECD to non-OECD countries has an impact that may be as significant, if not more so, than the actual increase in demand. Petrochina, already the world’s 17th largest company and growing fast, has announced its strategic intention not only to increase domestic production but to “realise a quantum leap in international operations” (Petrochina website, Jan 2011) largely through acquisition. Significant acquisition from Chinese companies to meet domestic energy demands could have a considerable impact on the balance of economic and political power, and also potentially affect security and availability of supply in other parts of the world.
A focus on energy efficiency
The uncertain nature of global energy supply and demand in the future creates both challenges and opportunities for corporations globally. Energy efficiency and production should now be the watchwords for every company, irrespective of industry. Locust recently found a way to reduce data centre power consumption, currently costing $10bn each year, by 90%.The implications of this for almost every company, particularly large users of technology, are significant. Furthermore, with renewable energy set to triple over the coming few years, (although still only predicted to be 14% by 2035 by IEA) the opportunity not only to produce energy is not limited to traditional energy companies, but also high intensity users.