For decades, the international energy
landscape has been relatively stable, with producers like Saudi Arabia,
Iran, and Algeria selling oil and gas to consumers in the United States
and Europe. In a few years, however, the energy terrain is likely to be
unrecognizable, as dramatic technological, economic, and geopolitical
changes reshape commercial relationships worldwide.
What is needed is a new governance
structure, one that moves beyond traditional bilateral relationships
between producers and consumers. In a rapidly evolving world,
guaranteeing energy security will require the careful management of
multiple, interlocking relationships. Only an inclusive international
forum, in which complex ideas can be shared and debated, is likely to
prove adequate to the task of navigating the new era of energy use,
production, and consumption.
The ongoing changes are profound. In many
energy-exporting countries, domestic consumption is rising steeply.
Historically, these countries have treated energy as a cheap resource.
Today, they are increasingly taking steps to remove subsidies, introduce
market prices, and increase efficiency – policies that are more
typically associated with energy-importing countries. BP predicts that
in the Middle East, with its extensive fossil-fuel reserves, primary
energy consumption will grow 77% by 2035.
At the same time, some traditional
importers are tapping new sources of energy and becoming producers,
changing the direction of energy flows. The shale-energy revolution in
the US is perhaps the best-known example of this shift, but it is not
the only one.
The rapidly growing renewable-energy
industry is another factor disrupting traditional relationships between
producers and consumers. In the first half of 2014, 13% of electricity
in Germany came from wind energy alone. Denmark, a country that in the
1970s was almost entirely dependent on energy imports, is now the
European Union’s only net energy exporter, often generating more than
100% of its electricity needs from wind power.
Meanwhile, advances in energy efficiency
are also reducing demand for traditional producers’ exports. Highly
efficient buildings often can be easily heated with locally produced
renewable electricity and supplied with hot water from solar collectors.
The introduction of the Near Zero Energy Buildings standard for new
buildings in the EU is set to reduce drastically dependence on gas for
heating.
The risk is that these rapid changes will
combine with destabilizing geopolitics to trigger a retreat from global
energy markets. If countries began to define energy security as energy
independence and try to supply all their own needs, the result could be
expensive overcapacity, massive price distortions, slower technological
progress, and weaker economic growth.
With the need to maintain trust in the
competitive, politically charged, and often unpredictable energy sector
both greater than ever and more difficult than ever to meet, an
international forum dedicated to addressing concerns and easing tensions
could be a powerful tool. But it must have the right focus. For
example, it should not aim at producing legally binding decisions.
Plenty of bodies, such as the World Trade Organization, the Energy
Charter, and the Energy Community, already do an excellent job of
developing rules or enforcing compliance in the energy sector.
Moreover, though such a body should be
inclusive, it need not have global ambitions; it would be impractical to
try to bring everybody to the table. And while its founders should take
care that it not be led or dominated by a single country or bloc of
countries, there is no harm if it starts small, with only a few
countries, before beginning to expand.
Indeed, the European Commission, which is
working toward creating an energy union, is well placed to initiate an
open dialogue with non-EU countries on long-term energy policies. The EU
is the largest energy importer in the world, and it would be well
served to join the discussion of its energy strategy to a conversation
with the world’s main exporters. As the EU revises both its energy and
foreign affairs policies, it should not miss the chance to integrate an
open energy policy dialogue into its planning.
In
this context, one of the commission’s traditional weaknesses – that
foreign and energy policies are usually decided by individual member
states – could serve as an important advantage.
The commission will be seen as a
facilitator of the discussion, rather than a leader or a dominant
player. Given a proper forum for ironing out disagreements, the rapidly
changing energy landscape could be a source of new prosperity. The
alternative is a world at risk of tensions and misunderstandings – ones
that could easily jump out of the realm of energy policy into
international relations and security.
© Project Syndicate 1995–2015
http://neurope.eu/article/navigating-the-energy-revolution/