18-03-04

Regulation of energy development and environmental protection across North America is fragmented and inefficient, and a new system is needed to satisfy ever-increasing energy demands, said a prominent US economist. A more co-ordinated and collaborative system could respond to fast-changing energy markets and would better integrate conventional energy including oil, gas and coal and renewable sources such as wind and solar power, biomass and hydro, said Michael Moore, chief economist at the National Renewable Energy Laboratory in Golden, Colorado.

"Regulatory issues have grown increasingly balkanised," resulting in a regulatory paralysis that prevents or delays new projects, he told a group of energy experts in Calgary.

North American energy markets and technologies are becoming more integrated, so "regulatory systems should be as well," Moore said. One example, said Moore, is new wire-transmission technology that enables both electricity and telecommunications data to be sent on the same transmission line. Yet each sector is separately regulated by international, national and local government agencies that have their own often-overlapping authorities, characteristics, tariffs and rules.

Another example is international natural gas pipelines. National governments are focused on trans-boundary security issues while local authorities are concerned with who’s affected by the pipeline right-of-way.

"We need cross-agency regulations of (energy) markets," Moore said, including common financing and investment incentives that would allow energy infrastructure -- such as transmission grids and pipelines -- to be regularly upgraded and expanded.

Inefficiencies in the regulatory process are one of the energy industry’s most common complaints, according to a paper by Brian Bietz, former chair of the Alberta Natural Resources Conservation Board.

Bietz, who now runs Bietz Resources consulting firm in Calgary, says that issues identified by industry include:
-- A lack of regulatory harmonization between jurisdictions.
-- Overlap and duplication among regulatory agencies.
-- Inconsistencies in how rules are applied within agencies.
-- Overly prescriptive regulations and lack of flexibility.
"The potential cost of inefficient regulations alone makes it critical that industry continue to examine options for regulatory improvement," Bietz said.

At the same time that North America is gripped by what Moore calls regulatory paralysis, the worldwide demand for energy continues to grow at a rapid rate. Most of the growth in demand from now to 2050 will occur in Asia (especially China) and Africa, and to some extent in South America, Moore said. Some of the poorer nations will want to move up the energy-production ladder and compete directly with North American energy producers.
"No one is going to willingly return to the Stone Age," he said. "It could be a titanic struggle," he added, made more difficult by an uncoordinated, overly complex regulatory system.

Renewable energy sources will be "partners in the energy equation," but they aren’t likely to supplant conventional energy supplies any time soon, Moore noted. "The world of fossil fuel energy isn’t going to go away tomorrow -- probably not in the next century."
Many of the problems Moore identified are those that the University of Calgary’s new Institute of Sustainable Energy, Environment and Economy (ISEEE) will try to find solutions for, said ISEEE managing director Robert Mansell. ISEEE organized Moore’s talk, along with the Van Horne Institute for International Transportation and Regulatory Affairs, the U of C’s economics department and the Canadian Energy Research Institute.

A focus of ISEEE’s research and development program includes finding ways to co-ordinate and collaborate on energy and environmental regulation and policy, Mansell told.
"We’re starting with how can we better co-ordinate (energy and environment R&D) across the university, and then use that as a stepping stone to better integration with, for example, the regulatory agencies." A big challenge is to turn environmental problems into something useful that has value, Mansell said.

Carbon dioxide is a greenhouse gas that needs to be kept out of the atmosphere, for example. One of ISEEE’s core R&D areas is finding ways to capture industrial CO2 and use it for recovering more oil and natural gas while permanently storing the CO2 underground. Environmental groups are concerned that regulatory streamlining will lead to a lowering of environmental standards and weaker regulations across North America.

But Mansell said that studies show the cleanest countries and regions with the highest environmental standards are also those that tend to be the most prosperous. Better regulatory co-ordination across North America isn’t going to lead to Alberta lowering its standards to match another jurisdiction, Mansell said.

"It just won’t happen, because society here wouldn’t allow it to happen. People put a high value on a clean environment, so it’sjust not in the cards."

Source: Business Edge