(Iea)

This presentation was made by Mr. James Simpson from the International Energy Agency (IEA). He noted that in a global view, the energy map is changing, and that will affect more than just energy economics and pricing. For most European consumers, energy prices have remained stubbornly high, acting as a brake on economic recovery. Also, persistent symptoms of an unsustainable energy system can be seen, particularly with regard to climate change. That means that all are facing critical choices in reconciling energy, environmental & economic objectives.

With regard to the unconventional revolutions, and what they mean, Mr Simpson pointed out that the in the United States, a combination of horizontal drilling and hydraulic fracturing is unlocking massive amounts of resources. Conventional oil and gas output has long been in decline in the US, but that is more than compensated by a surge in unconventional oil and gas that we see extending well into the 2020's. The IEA further indicated that with our current knowledge of the resource base, they did not expect the growth in Light Tight Oil to be as large or as sustained as the growth in production of shale gas. But light tight oil will help to ease global oil markets over the medium term - that's a welcome development following several years of exceptional market tightness. When it comes to energy security, that market tightness left very little spare production capacity in the system. So it is particularly susceptible to supply shocks. So when the Libyan revolution came along and production was cut for example, the situation called for a coordinated release of strategic oil stocks onto the market. But suffice to say that already we have seen some easing of prices thanks to demand-side reasons but also extra supplies, and both Canadian oil sands and American light-tight oil are contributors to that.

The IEA projections show the United States becoming the largest global producer of both oil and gas by the end of this decade - and that's a development that was all but unthinkable a few years ago. When it comes to natural gas, the unconventional revolution in America has helped to drive significant regional price differentials. This divergence is unprecedented, according to the IEA.

The IEA indicated that for the moment there are three major regional markets - America, Europe and the Asia-Pacific. And the very large price variations between them have real impacts on relative competitiveness. What the IEA anticipate is that - over the coming decades - the connections between these markets will grow.

As unconventional gas grows and as the terms of international gas trade evolve and become more flexible (for example with a large increase in LNG trade), the IEA anticipate that this will put continued pressure on conventional gas suppliers and on traditional oil-linked pricing mechanisms for gas, or oil-indexing. The development of an Asian gas trading hub, for example, could markedly improve that region's competitiveness. The development of Europe's sizeable resources of unconventional gas could play a role in bolstering and diversifying sources of supply. That would also put pressure on conventional suppliers and oil-indexing, but our outlook for European shale gas is rather pessimistic. That's because of a host of issues including sub-soil ownership rights, geological particularities, population density, and of course public acceptance of fracking.

But already the advances seen in European gas market integration are improving pricing mechanisms, and while it is not finished, that hard work must be applauded. In terms of competitiveness, disparities in gas prices are not the only issue - in fact they are largely important because of how they impact power.

And there are considerable differences in electricity prices between regions. The highest prices persist in the European Union and Japan, well above those in the United States and China. That is due to higher fuel costs, higher capital costs, and renewables subsidy costs that are passed to consumers through the electricity price. Indeed, the IEA expect that by 2020, renewables subsidies will add 15% to residential electricity prices in the European Union. And looking forward, electricity prices are expected to increase across the world, by 15% on average, as costs rise.

The IEA's latest estimates for those without modern energy access, based on 2010 data wherever available, show that an estimated 1.265 billion people are without access to electricity - 50 million fewer than last year, but still 19% of the global population. An estimated 2.588 billion people - nearly 40 million fewer than 2009 - rely on the traditional use of biomass for cooking. There is no change in the fact that those without access to electricity are concentrated overwhelmingly in sub-Saharan Africa and developing Asia and that nearly two-thirds are concentrated in just ten countries.

Looking forward to 2030 in the central scenario, the New Policies Scenario, the IEA now project that 991 million people will be without electricity access in 2030. Numbers larger than the population of China and the United States combined today - about 1.7 billion people - gain access to electricity over the projection period, but this achievement is counteracted, to a large extent, by global population growth.

At a regional level, the number of people in developing Asia without access almost halves compared to 2010 (led by progress in India) and Latin America achieves universal access before 2030 but, in sub-Saharan Africa, a worsening trend persists until around 2025. The disparity in actual electricity consumption between regions grows over time in some cases.

Energy policies, according to the IEA must be adapted to national circumstances - nonetheless there are some factors common to all sound energy policies:

. Political consensus

. Leads to Clarity of long-term vision

. Stable institutions and clearly-defined leadership

. Stakeholders engagement

. Broad engagement with all stakeholders, leading to public acceptance

. Effective stakeholder partnerships

The IEA also tend to see energy policy in terms of its shared goals, which were adopted by IEA Ministers in 1993.

- IEA members firmly believe that when they formulate energy policies, the establishment of free and open markets is a fundamental point of departure.

Undistorted energy prices enable markets to work efficiently. Prices should not be held artificially below the costs of supply to promote social or industrial goals. Free and open trade and a secure framework for investment, and contribute to efficient energy markets and energy security. Distortions to energy trade and investment should be avoided. Other key goals that are emphasized are: Diversity, efficiency and flexibility within the energy sector, which are basic conditions for longer-term energy security.

Energy systems should have the ability to respond promptly and flexibly to energy emergencies. Cooperation, between government agencies and between countries: e.g. IEA countries co-operate through the Agency in responding jointly to oil supply emergencies. The environmentally sustainability is also key. More environmentally acceptable energy sources need to be encouraged and developed. Improved energy efficiency can promote both environmental protection and energy security in a cost-effective manner. Continued research, development and market deployment of new and improved energy technologies make a critical contribution to achieving the objectives outlined above. Energy technology policies should complement broader energy policies. International co-operation in the development and dissemination of energy technologies, including industry participation and co-operation with non-Member countries, should be encouraged.

Within OECD member countries policy making today tends to be strongly influenced by a number of factors:

. Energy security and resource constraints

. Sustainability and need for reduced emissions profiles

. Energy efficiency measures and support for renewables

. Support for new low-carbon technologies, for example investment in CCS

In many non-member countries there are other factors:

. Growing demand for energy

. Competition for resources such as water

. Access to energy

. Food security

The common weakness which the IEA has identified includes:

. Politics - a strong energy policy framework requires strong political backing, and support from all strata of actors, including civil society.

. Sustainability - the long-term can often be neglected, and specific policies promoting sustainability can themselves be inefficient or even contradictory at times.

Many problems arise in designing policies for electricity and natural gas markets. These markets are inherently network-driven, which is why close analysis of market design and the competitive environment is important. Ideally, an independent regulator should be able to take independent and unbiased decisions.

Regarding fossil fuels, issues can emerge around planning, the environmental aspects, refining aspects, and more generally the allure of easy money (at the detriment of a more diversified palette of fuels and policies). Subsidies are also a clear issue - subsidies both for production and for consumers.

The IEA refers to energy efficiency as the "hidden fuel. It provides all the benefits of a clean energy source, including improved energy security, environment, health and economic development - but by saving rather than providing energy. That is particularly important when it comes to development and developing economies, where rapid urbanization and economic growth often combine with particular difficulties in terms of network expansion and production. How we develop cities, communities, transport, and industry today will have major impacts on the ability to provide modern energy reliably and adequately.

Traditional thinking looks at EE in terms of energy savings alone. EE has been focused on measuring kWh saved through energy efficiency improvements, as the measure of success for a given energy efficiency programme. The IEA stated that we now know that the benefits of energy efficiency are much greater and expand to economic development, energy access, energy security, health, climate change, etc.

The IEA concluded with the following:

1. Improving energy efficiency has sometimes been called the low-hanging fruit. In fact, reaping the benefits are not always easy. They require institutional capacity, sound policy, and methods to properly implement them. But if done right, efficiency can yield great rewards to local populations at a fraction of the cost of increasing energy production. And at the same time, it can yield collective goods, significantly reducing carbon emissions and energy demand globally.

2. Emerging markets and developing countries will be the front-line of those efforts. That is because this is where the growth is taking place - and properly managing new building stock, urbanization, and system-level solutions hold much greater potential and feasibility than retrofitting not just old buildings, but entire communities. And so efficiency improvements in the developing world should be a responsibility that we share.

3. Efficiency is at the end a collection of individual decisions. "All efficiency is local" to distort a common phrase. While policies can encourage behaviour and lay down a framework for better decisions, energy efficiency can never be a top-down exercise. As policy makers, business leaders, and community leaders, we must emphasize that using less to do more is a common value. In that vein, the IEA has developed a corollary to the 25 Efficiency Recommendations. The 25 "Bright Ideas" are recommendations that individual citizens can implement at the household level to improve energy efficiency in their daily lives.

7. Dynamics of Legislative, regulatory framework and policy environment of energy sector in Africa - Dr T Simelane, Africa Institute of South Africa