An energy world that proceeds at different speeds and often with a lot of gaps. The fifth edition of the Global Energy Architecture Performance Index Report, prepared by the World Economic Forum, focuses on the ability of the 127 countries analyzed to make their energy system sustainable, profitable and conducive to domestic growth, highlighting how the world divides into areas where efficiency and technology prevail, and regions where poor access to energy prevents their development. Although institutions and businesses are increasingly persuaded of the strategic value of energy, a lot of underdevelopment remains, which could be covered thanks to a global commitment to sharing technology, now that system implementation costs, even as regards renewables, have significantly reduced. We spoke about this with Roberto Bocca, Head of Energy and Basic Industries and Member of the WEF Executive Committee.
On which assessment criteria is the ranking of the most "virtuous" countries, in terms of energy, based?
Our survey is a global ranking based on the progress made by individual countries in terms of "Energy Transition", but what makes also this fifth edition of the Global Energy Architecture Performance Index Report 2017 (link) stand out is the precise intent to investigate, not only the transition towards cleaner renewable sources, but the set of elements that globally define a country’s energy efficiency: sustainability, affordability - or the extent to which the energy system supports each individual country’s development, - security and the degree of access to energy. From this basis, we started to move on and further examine each indicator, pointing out, for each country, among other things, the level of energy intensity, that is, the index of energy units required to produce changes in the GDP, the level of harmful emissions, the percentage of alternative energy present in the energy mix, the presence of subsidies supporting each form of energy production, the tax system linked to the energy industry, electricity prices per industry and diversification. Obviously, factors such as energy security and accessibility to energy still, and decisively, generally have less of an impact on the development of some areas of the world, such as Europe.
Europe has a sufficiently developed energy infrastructure. There are few regional dimensions that display – energetically speaking – situations like that of Europe, partly due to the political support and objectives developed on a coordinated level by the European Union
Compared with previous editions of the Report, are there any specific global trends? To what extent is the world moving towards a solid energy efficiency process?
The index benchmark analysis, from 2009 to date, reveals how progress towards effective global energy efficiency has been made, albeit to a very limited extent. For instance, the energy support index for economic development has undergone a positive shift, compared with 8 years ago, of just 0.01%, increasing from 0.60 to 0.61. The same applies to the access to energy parameter, which recorded the same increase, from 0.68 to 0.69. Obviously, this is a general figure. There are areas in the world, as highlighted by the final ranking of the Report, that reveal a rate of improvement of the indices that is almost double that of the rest of the world. For example, Europe, on a regional level, has a sufficiently developed energy infrastructure. There is a sharp increase in interchanges between gas and electricity on the continent. Partly excluding exceptionally valid niches, such as the Nordic countries, there are few regional dimensions that display – energetically speaking – situations like that of Europe, partly due to the political support and objectives developed on a coordinated level by the European Union. A common line virtually connects the countries that prove to be the most virtuous, namely, clarity in the legislations pertaining to the energy system and clarity of the goals to be achieved. These are elements that facilitate a steady flow of investments into the industry, to the full benefit of the development of advanced systems, including from a technological perspective.
Roberto BoccaHead of Energy and Basic Industries - Member of the Executive Committee - World Economic Forum
Roberto Bocca is the Head of Energy and Basic Industries at the World Economic Forum since August 2009. The activity led by Roberto includes research, publications and public-private coalitions building on the topics of energy efficiency, energy access, innovation and climate change. Before joining the Forum Roberto was a Group Leader and Director of the Emerging Consumer Markets in BP.
So, is it fair to say that for the development of the energy industry, it is crucial - both on an individual state level and in terms of regional macro-areas - that there is a concerted action between the institutions and private operators?
What we define as a "cocreation" process, that is, a concerted action between public and private parties, is crucial for tracing lines of energy development that are sustainable and commensurate with the resources available. The energy industry must necessarily benefit from coordination policies, with a final decision made by the regulator, but which must be the result of a participatory and consultation work between all parties involved. Decisions regarding diversification and investments in one or several renewable sources, must be defined collectively, as must development strategies and investment in Research and Development, which must be agreed with private operators.
How has technology intervened in the energy production industry and what have the largest advances been?
The degree of development of technologies related to the energy industry has been huge in recent years. I would also mention the advancement of digitalization as a discriminating element for future development horizons. Suffice it to think about the spread of smart networks. This trend is also reflected in the international debate regarding the energy issue. While in the past, the focus of each debate was mainly on the production and strategies of the countries most involved in this activity, today, we mainly talk about smart technologies and optimizing supply also to the end consumer. There may be scenarios for which electricity is supplied free of charge to the end consumer, provided that the customer accepts, for instance, that the dishwasher or washing machine is only used at certain times. I also say that international politics must bear this process of new "energy literacy" in mind to consolidate the understanding of this evolutionary process in terms of the public opinion that claims a role in the participatory process of defining energy policies.
Let's return to the political side, broadly speaking. An increasingly integrated system is conducive to the development of the industry, correct?
When talking about companies, especially those dealing with electricity distribution, the problem that stands out is the regulatory difference from country to country and, as a result, the transaction costs faced by their operation. It is appropriate to proceed towards a harmonization of rules, without renouncing specific features, within a broader legislative framework. We have revealed how this problem negatively affects the development, especially, of some parts of the world, such as Africa. In this case, for example, a large company is reluctant to embark upon investment projects if they involve individual countries; it changes the prospects and economic sustainability if the same company can invest in an entire region that benefits from regulatory uniformity.
In this sense, the principle of energy decentralization can also have a specific weighting
Of course. Energy is the life blood of any economic system. It is currently possible to effectively decentralize energy resources, partly thanks to the alternative energy system. In some cases, it is efficient to have a large "centralized" plant, also with renewable energies. In other cases, creating smaller plants may be efficient, to the extent that their economic performance may be ensured. In these cases, the size necessary for investments that concern the major operators can be achieved thanks to a combination of multiple projects. For example, it is easier and more economically sustainable to consider installing a large solar plant that serves more than one country, than to create individual plants, of a smaller size, but with lower economic performance. Renewable technologies, and their costs, have dropped a lot. At this point, it is essential to align energy governance systems to encourage major companies to invest.
What specific weighting, in this framework, have the decisions made during COP21 and how can the major energy countries, such as China and India, influence the balance of the global energy system?
In addition to the agreement on the fight against climate change, COP21 revealed, in my opinion, the desire of many companies to participate in this transition process, which is not only energetic, but also political and entrepreneurial. Companies are very committed in this sense and the OGCI (Oil and Gas Climate Initiative) is proof of this. In terms of geopolitics and energy, China is certainly moving towards epochal changes, partly due to severe pollution issues that are affecting the country. For this, Beijing will have to convert a system that is still largely based on coal. In this perspective, it is necessary to support the process of sharing and adopting the most advanced technologies, including from the most advanced countries, such as the United States and Europe. I reiterate that the Policy Makers must help to accelerate this process.