Fitch Asia chief – industrialisation will cancel out decarbonisation push

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The Asia-Pacific chief of Corporate Ratings Group Fitch has told an energy summit in London that decarbonisation efforts may not suffice in the face of Asian industrialisation and political intervention in the power sector has only served to mislead consumers.

Andrew Steel Andrew Steel of Fitch (right) sounded a note of pessimism when telling the audience at Denton’s Global Energy Summit that the extent of industrialisation in Asia could nullify the drive towards decarbonisation.

Addressing the opening session, “Resetting the utility model – how should utilities respond to the new 21st Century market conditions?” Steel told the gathering that “Politicians who use a low carbon future as a justification for interventions in the near to mid-term are misleading consumers.”

Steel’s remarks were made in the context of the huge industrialisation taking place in Asia, which he said was key to understanding the future of global energy markets. He said that despite the development of renewables Asia would still have a significant coal-fired power output over the next two decades to support its growth in demand.

He warned that governmental backing of what he called ‘disruptive technologies’ had made the sector complex for utilities to work within and that it was difficult to work out how the future would look. This was exacerbated by the scale of growth in emerging nations.

“A lot of money is being put into renewables. But continuing industrialisation is having an impact on ambitions for decarbonisation. Government picking of environmental solutions is ineffective - the same mistake was made in the 1970s.”

“We also have the area of accountability – politicians are causing problems for utilities then blaming the corporates for not delivering.”

To illustrate how much Asia will overshadow the entire power scene, Steel pointed out that 42 per cent of global generation is currently produced in Asia, with a 36 per cent share by the EU and US combined.

“Over the next twenty years generation will grow absolutely and Asia’s share will grow significantly, rising to 49 per cent by 2034. The EU and US share will drop to 30 per cent by 2034."

He argued that because of the pressure of demand the impact of growth of renewables will be negligible and added that as Chinese incomes reached the tipping point of $13,000 per capita, much good work on decarbonisation could be undone by a sudden upsurge in the use of automobiles, unless alternatively-powered vehicle development is accelerated.

Steel, a former head of ABN Amro’s Power and Utilities Group in Europe, was also not convinced by the claims of smart grid technology and distributed generation in making a real impact.

He posed several questions in this regard such as “Is distributed generation going to be viable without storage? Is the consumer happy to trade passive demand for proactive management?” before contrasting with the reality in Asia

“The focus in developing countries is in meeting demand rather than introducing complicated technologies”. Anne Houtman

Meanwhile the principal adviser on energy to the European Commission outlined why Europe’s Energy Union would enable a better future for the bloc’s utilities.

Anne Houtman, Principal Adviser to the Director General, European Commission believed recent policy landmarks made at EU level would go some way to clarifying Europe’s energy future. She told the audience that the Energy Union launched by Brussels last month is a ‘turning point for energy as important as the creation of the European Steel and Coal Community back in the early 50s.”

The recent perfect storm of variables such as Fukushima, the Ukrainian crisis, US shale gas revolution and the reduction of costs in renewable technologies had informed European momentum, according to Houtman.

“We want better cooperation and coordination of our policies –it’s not a revolution and doesn’t imply changes in the treaty. We are not satisfied with the present situation –we still import more than 50 per cent of our energy, and costs are higher than the US. Yes, we compensate by being more efficient but still it doesn’t fully justify the increase.”

The Commission adviser added that a sense of urgency had arisen due to events in the Ukraine, the climate and economic crisis and the vision behind the Energy Union is about capitalising on the diversity of the member states in terms of energy in order to secure greater competitiveness, security of supply and emergency preparedness.

“These differences allow complementarities that can be exploited and requires coordination between member states, starting with neighbouring member states.”

“The old system is not adapted to decentralisation, prosumers, new technologies, smart grid and so on- we will try to take into account all these development and adapt as soon as possible with new regulation.”

 

 



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