The energy industry is being reshaped by major forces, including decentralization, digitization, shifting demand and prices and greater sustainability as a public policy issue. As the risks shift, so too do the opportunities. In March in Dubai, Christoph Frei, secretary general of the World Energy Council, spoke at Marsh’s Energy Industry Conference. Brock Meeks caught up with Frei after the conference.
Tom Carver: First of all, what risks to innovation do you see in the energy sector?
Christoph Frei: There are several key risk areas regarding innovation in the energy industry.
One of the main ones is decarbonization. If you look back over the past 45 years, we’ve managed to decarbonize gross domestic product by, on average, 1 percent per annum. If we want to achieve a change of 2 degrees Celsius, we must accelerate this from 1 percent to 6 percent per annum. The challenge of decarbonization is massive. We have a factor of 2.8 times more CO2 in our resources — coal, oil, gas — than we are allowed to emit.
Another challenge is innovation around electrification, decentralization and digitization. The one thing above everything else that is keeping energy leaders awake at night is the impact of digitization on the future of the energy system. New business models and digitization will define momentum on a path of innovation, which will change the way we produce and use energy in industrialized and developing worlds.
Carver: What is the industry saying about its key risk concerns?
Frei: We have an issues map where we look at about 40 risk issues in the energy sector through interviews with 300 energy leaders in more than 90 countries. Over the past five years, this has shown us a very dynamic market. The risks that have heightened in importance most dramatically are decentralized systems, digitization, electric storage, market design and renewable energies.
Issues such as carbon capture and storage have been cooling down — people just do not believe they will deliver on its promise. Unconventional, or renewable, energy is seen as less of a risk for the industry. Consider that 18 months ago, solar was being sold in Chile for 2.9 cents per megawatt. I recently spoke to several sources who said that this year they were probably looking at 2 cents per megawatt. That tells a story of continued crashing of prices.
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