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| Title | 11th Annual National Power New Zealand 2009 Conference International Keynote Address | 2009.02.28 |
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FROM: Revised 090218 International Keynote Address “Global Outlook: Confronting the Challenges Facing the Energy Industry” Younghoon David Kim Vice Chair, Asia Pacific-East Asia, World Energy Council 8:30-9:00 a.m., Wednesday, February 25, 2009 11th Annual National Power New Zealand 2009 Conference Sky City Convention Centre Auckland, New Zealand Good morning. It is a great pleasure for me to be here. New Zealand is a spectacularly beautiful country – you are blessed to live in what I suppose many people now think of as Middle Earth. In that sense, New Zealand has now truly become the center of the world – perhaps our maps need to be updated! New Zealand has great natural beauty. I, myself, have been quite taken with that beauty and am the proud owner of a farm, modestly named Camp David, near Hawkes Bay where we’re raising apples and kiwi fruit. Yet, in addition to great beauty, you have been endowed with a significant upside conventional energy resource potential – however, at the same time you also have significant new and renewable energy sources to harvest, so perhaps the conventional resources may remain where they are – providing a foundation to the wonderful landscapes that modern cinematographic history is made of. That is for you to decide, of course. I mention these treasures because in Korea, we have beautiful landscapes too, but are not underpinned by the same conventional natural resources. We import 97% of our energy, and so are acutely aware of the limitations of our conventional energy landscape. But we are fortunately also blessed with both renewable energy sources that we will increasingly be able to harvest effectively, and a strong technology-oriented economy that has driven us to build up a significant nuclear energy resource. So it is the world over: Countries are blessed with variable resources of different kinds. We are all different. But what we share is an interest in a safe and secure energy supply with which to grow our economies, and ways of supplying and using that energy that will not further worsen the impact of the conventional energy economy on our climate and on our planet. I believe we also share an understanding of the fact that our energy economy is in transition, in many different ways. From dirty to clean, from short-term to long-term, from inefficient to efficient. The age of cheap energy and a suicidal lack of concern about negative externalities is over. A new age has begun. But transition, by definition, defines a process, a movement over time. We depend, and will continue to depend, on conventional energy sources to power this transition. And as we have seen in recent years, both demand and price can fluctuate wildly. As resources become scarcer, extraction harder and demand greater, all countries are faced with both unique and shared challenges, and certainly a range of shared responsibilities. The continued availability of conventional sources of energy will power this transition, and cannot be underestimated in its importance. Conventional technologies will continue to play a key role for many decades to come, and guaranteeing that availability deserves our ongoing support and attention. Traditionally, we have defined availability in terms of both known resources and price. At higher prices, we have higher availability, because we are able to extract more difficult resources. This has led many of us to look with increasing interest at the extraction of difficult resources in areas that are perhaps less suitable for that extraction. It is interesting to compare this with the economics of renewable energy, where with increased demand, the price actually goes down over time. These realities dictate that we share our attention between the new and the old, and at each step evaluate the long-term value of what we do. If only it was purely a matter of economics. However, in truth there are many other aspects that dictate our approach to this transition in which we find ourselves. With limited conventional resources and high prices, it is those with higher financial means that can afford to keep fueling their economies. Those with fewer resources – especially those in the developing world – will no longer be so fortunate. Even today, every percentage point increase in energy costs consumes a significant portion of the direct development budget. It is an equation we can never balance. Add to that, the developing world are those most immediately hit by the cost of adaptation to the impact of climate change, and the need for a different approach to energy becomes crystal clear. Turing to New Zealand once again. Renewables in your country “is” basically hydro, mainly large--10 megawatt plants and larger--with 70 percent of your electricity coming from hydro. Climate change may impact this. However, as I understand it, New Zealand should get more, rather than less, rain. Yet, due to its natural resources, New Zealand is in a position to aim for a rapid transition to additional renewable energy sources – 90% of electricity by 2025 is a wonderful goal, and, I think, eminently reachable – and this is the message we are sending to developed countries around the world: Achieve as much as you can, as soon as you can, to allow those that are going to be slower in transitioning the luxury of access to conventional energy sources for the duration of their own metamorphosis. But of course, economics do play an important role. Yet the Stern report and others warn of the exorbitant costs of not acting, and we have recently had a clear demonstration of how expensive conventional sources can rapidly become, and will become again. And so each country must do its utmost to find the optimal path to a sustainable energy economy, using the resources that it has. Which brings me to energy efficiency. Here, we understand that increases in energy cost force us to use what we need more efficiently, so as not to distort prices within our economies and create inflationary trends. This is true whether it occurs through the introduction of renewable sources or the sort of global price increases that we have recently seen, and will see again, or through the need to exploit more difficult conventional resources, But there is another issue to keep in mind – that in a globally integrated economy, the ability to compete depends on the efficiency of any economy, the ability to produce a unit of GDP at a competitive price. Considering the increasing cost of energy, an energy efficient economy is better able to compete – a compelling reason to work towards this goal. The deregulation of energy markets reduces the ability of governments to influence the price of energy. This is not seen as a good thing by everybody, admittedly, and the degree of deregulation varies around the world. But generally, the trend is towards widespread deregulation, as is the case here in New Zealand. This does not, however, relieve government of the responsibility to be an important and positive actor in the energy market. The mechanisms are different, however – primarily in creating a policy framework that encourages long-term, targeted investment by private industry in the energy sector. The IEA predicts the need for twenty-six trillion US dollars of investment in energy infrastructure. However that is widely spread across technologies, the lion’s share will come from the private sector, and will only come if the investment climate is positive. Long-term, transparent legislation is key, as is a level playing field between the various technologies. Subsidies for new technologies have to be long-term, and need to reduce over time as those technologies enter the marketplace and gain maturity. On the other hand, as painful as this may be for many of us, the ongoing subsidy support for mature conventional technologies must |
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| 27 | 11th Annual National Power New Zeal... | 2009.02.28 |
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