Part 1: Energy’s biggest challenges and where the industry and our world are headed

As Secretary General of the World Energy Council, Christoph Frei has spent a decade defining the world energy agenda and bringing together energy leaders and decision makers to build a sustainable future. In the first of a three-part series, Frei takes a look at where we stand ten years after the Grand Energy Transition has taken up speed and what the top challenges are.

 

By Marc Engelhardt

Energy Stories: Christoph Frei, in  the past, structural changes to our energy systems have tended to take a long time. In the ten years since you moved to the helm of the World Energy Council, how has the Grand Energy Transition moved forward?

 

Christoph Frei: It’s absolutely dramatic to see how the perspective on the sector – by the very people who lead it – has changed. Ten years ago, issues in the D3 space (the Ds being decarbonization, digitalization and decentralization) were quasi nonexistent. Today, they have moved center stage. We’ve all underestimated the speed at which solutions are being engineered and implemented. A big problem for energy today? “We don’t see policy makers stepping up,” says Christoph Frei (left) to journalist Marc Engelhardt during his interview in Geneva, Switzerland.

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What challenges still keep you awake at night?

 

While technology is changing rapidly, the policy side is slowing down. We don’t see policy makers stepping up, but we urgently need policy leadership. The climate challenge for instance can only be solved with great clarity around a carbon price that needs to be globally watertight. Without that signal, it’s going to be impossible to solve the climate issue in line with the Paris objectives.

Is the climate crisis the biggest challenge you see?

 

Well, the World Energy Council looks at the world of energy through the trilemma lens. The trilemma represents sustainability in energy, which means finding a balance between energy security and environmental and social needs. The orders of magnitude are enormous in all regards. We have 1 billion people alone who do not yet have access to energy, which is 600 million less than ten years ago, despite population growth. That sounds great – and it is a huge success – but still it will cost us about 1,000 dollars to electrify a person, which means we’re talking about a 1 trillion dollar challenge. Now if we look at climate change, it’s two, possibly three magnitudes higher than that. So yes, I think it is the biggest challenge we’re facing.

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And what are the strategies to meet the climate challenge?

 

There’s really only two ways and they have to go hand in hand. On the one hand, we need the right policy signals, and carbon pricing is the number one element there. Another is effective trade policies, particularly for technology trade. Because if you don’t provide the cheapest and most effective technologies everywhere, we will neither connect the poorest nor deliver the cleanest and most effective solutions. Those are the policy-led aspects, and additionally, we need dynamic innovation on a global scale that delivers all the new technologies, solutions and entrepreneurial business models to actually solve the issue.

In a recent report, you also asked for more and different leadership. What do you mean by that?

 

If you look at companies today, the level of innovation often has to do with the leadership culture, especially coming from the top. It’s something that inspires a whole organization and makes it successful. And I wouldn’t say there’s only one style. I think we see a lot of different approaches today, but the essence is it’s only going to work with empowerment from the top. Without a vision, without the clarity that we need to respond to the climate challenge, a company is going to fall behind the innovation curve.

What other strategic priorities are needed to accelerate the energy transition?

 

One is clearly market design. We come from a system where consumption was volatile and the market was designed to supply this demand. Today, supply of renewables is equally volatile and we have to be much more dynamic in adjusting this double volatility. Then there is the whole resilience aspect, and of course digitalization. How do we deal with data? Suddenly, there is a lot of it. How do we deal with privacy? And if you look at sector coupling: How do we integrate separate sectors that have different regulators today? So it is about bringing all these new developments together with the aim of helping markets deliver robust supplies.

Can it be done?

 

I think the key question is how to do it pragmatically without disrupting the system. One of the key policy innovations we see is sandboxing. A number of countries, the UK, Germany, the Netherlands and others, have started creating regulatory sandboxes to experiment with new regulatory ideas. I am absolutely confident it can be done, but we may need to go through a learning curve, and the sandbox provides niches to collect experiences that can then be scaled to the whole system. 

You talk of a global challenge, but currently we see a trend towards more nationalism and rising trade barriers. How will these trends effect the energy transition?

 

We have just revised our future scenarios, and they describe three possible routes where our world may be headed: The first is a world with working trade agreements and market frameworks, a well-oiled machinery that creates the rhythm of the international and the national markets where the best and most economical solution wins. The second route is rather like a symphony orchestra with a conductor who says: I may not always opt for the cheapest technology because I know that there is a carbon objective to meet. Choosing electromobility today may not be the cheapest option, but it’s an effective way of helping to push this technology. Both routes describe a just and quite ideal world.

And what is the third scenario like?

 

The third route is one where we do not put as much muscle into the international agreements and we end up in a fragmented, national-resource-oriented context. There would be no guidance from an internationally agreed carbon price. Also, if you only use local technologies, you will use second best, and they will probably be neither cheap nor clean.

So which scenario is the most preferable?

 

The one scenario that performs best in a climate perspective is the orchestrated one, but it’s slightly more expensive and therefore delivers less on the energy access side. The one that performs best on the energy access side is the first scenario because it delivers the most effective and cheapest technology. However, the third scenario is not only less secure, it is also the most expensive one. So what we probably need is a combination of free trade to get the best technology everywhere, and at the same time an orchestration particularly of the carbon price because without that guidance, the energy transitions will not proceed.

Artificial intelligence, uberization, hydrogen – what are the key trends industry leaders around the world need to know about? Read part two of our interview with Christoph Frei.

2019-08-08

Marc Engelhardt reports from Geneva on the UN, international organizations, and global developments in economics, science, politics and energy. He has worked as a correspondent for a number of media outlets, including the Neue Züricher Zeitung, ARD and Die Zeit.

 

Combined picture and video credits: World Energy Council, Raphel Zubler 

About

Dr. Christoph Frei was born in Switzerland in 1969. He holds diplomas in electrical engineering and econometrics as well as a Master in energy systems and in applied ethics. Frei received a PhD from the Swiss Federal Institute of Technology in Lausanne in 2001 and has an assignment as Adjunct Professor at his alma mater. His work and his publications have covered energy scenarios, climate and labor market policy, energy water nexus and the future of utilities. Frei speaks English, French, German and some Italian and Spanish. He is married and has three children. In April 2009, he became the World Energy Council’s fifth Secretary General.

 

With more than 3,000 members from government, private and state corporations in over 90 countries, the World Energy Council is the biggest network of leaders and practitioners in the energy field. It was founded in 1923 by visionary energy leader Daniel Dunlop who brought together 40 countries to discuss the problems then facing the global energy industry. Its aim, now and back then, is to provide impartial information for energy strategies on all levels, focusing on three main challenges: energy equity, including access and affordability; energy security and growth; and environmental sustainability, including mitigation and adaptation. The World Energy Congress is its triennial flagship event: In 2019, more than 200 speakers contributed to discussions in Abu Dhabi. Annual reports include the World Energy Issues Monitor and the World Energy Trilemma Index.

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