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“The Future of Energy” Will Entail Higher Prices

 

"The Future of Energy" Will Entail Higher Prices

Source: http://thedailywoman.wordpress.com

Today the Foreign Policy Association hosted a conference on “The Future of Energy“. I had the pleasure of attending and, given that I am writing on energy, I also have some interesting insights to share.

Especially interesting was the panel discussion “The Energy Picture, Redrawn.” The key insight is that energy is crucial for sustainable development. In particular, low cost energy is crucial to raise living standards worldwide. As the panelists pointed out, it is possible to distinguish from the orbit the rich and industialized countries from the poor countries simply by the use of electricity. Some regions on the planet simply stay pitch black at night. Therefore, the panelists stressed that this “energy poverty” needed to be eliminated.

Another insight is that the energy landscape is inherently and perennially dynamic. That means that especially two factors will dominate and shape the future of energy: evolving technology – meaning to have the newly acquired ability to drill for formerly unreachable natural resources in offshore locations and the Arctic – and the expectations of future demand and access to energy sources – addressing distribution systems, the location of the natural resources and costs. In the latter respect, key questions are: At what price and how can companies access the natural resources and then distribute the generated electricity? So, even though the era of “easy oil”–the disappearance of relatively accessible and inexpensive oil–is coming to an end, we need and might flock to new frontiers. In this respect, it is important that major energy players are encouraged to gross significant revenues in order to invest into research and development to help eliminate “energy poverty” in the future. It is wrong to try to punish energy companies with “overtaxation” because it is reasonable to expect that in the age of austerity we will lack what we actually need – investment into research and development. The panelists advocated public-private-partnerships and cooperation across borders given the reality of a global energy market.

However, all this will not shield us from higher prices in the future. What trimming back nuclear capacity, for example, means is illustrated in Japan’s case. Japanese utilities have recently announced that they were planning to increase fees for peak-hour electricity usage sharply in an effort to head off possible power shortages this summer following the shutdown of Japan’s nuclear power plants.

 

Author

Roman Kilisek

Roman Kilisek is a Global Energy & Natural Resources Analyst.
His research focuses on global energy politics, mining, infrastructure and trade, global political risk and macroeconomics. He is fond of using scenario development and analysis.

He has lived on three continents and traveled to over 40 countries around the world. He now lives and works in New York City.