Nearly $8T still needed for sustainable, reliable energy system
January 22, 2015 | By
Barbara Vergetis Lundin
Diminishing financial returns for utilities have put at risk the ability of the electricity sector in OECD markets to raise the estimated $7.6 trillion in investments needed by 2040 to meet energy policy objectives, according to a new report from the World Economic Forum. This investment is needed to simultaneously decarbonize the sector while maintaining energy security. The report offers guidance on transforming the electricity sector to a more sustainable, affordable and reliable system, and outlines recommendations for policymakers, regulators and businesses in developed markets to attract needed investment. "Since 2000, OECD countries have invested more than $3 trillion in new renewables, conventional power plants and distribution structure, but about 20 percent more investment a year is still required over the next 15 years," said Roberto Bocca, head of the energy industries at the World Economic Forum. "Collaboration across stakeholders will be critical to achieving this goal and providing the holistic perspective needed to successfully make the low-carbon transition." The electricity sector is entering a period of unprecedented investment to meet energy policy goals, but decreasing returns and increasing risk are raising questions over the future of investments. According to the report, root causes of the sector's investment challenges include suboptimal geographic deployment; lack of buy-in; inadequate carbon price signaling; declining returns of conventional generation; and business model disruption. The report contends that in order to attract investments to build the future electricity sector policymakers need to incentivize "no regrets" investments to exploit the most efficient renewable resources within and across borders, which will mean building in flexibility, increasing societal support and prohibiting retroactive policy changes. Further, regulators need to ensure that markets provide clear and effective signals by encouraging and rewarding supply and demand solutions or by recognizing the value of reliable back-up grid capacity through network tariffs. For more: © 2015 FierceMarkets, a division of Questex Media Group LLC. All rights reserved. |