IEA Work: Findings of Recent

Findings of
Recent IEA Work

2005
I N T E R N A T I O N A L E N E R GY A G E N C Y
Findings of
Recent IEA Work
2005
An electronic version of this book
with direct links to references is available at
www.iea.org/findings
I N T E R N A T I O N A L E N E R GY A G E N C Y
page2-20x27b 14/03/05 9:40 Page 1
I N T E R N AT I O N A L E N E R GY AG E N C Y
The International Energy Agency (IEA) is an autonomous body which was established in
November 1974 within the framework of the Organisation for Economic Co-operation and
Development (OECD) to implement an international energy programme.
It carries out a comprehensive programme of energy co-operation among twenty-six of the

OECD’s thirty member countries. The basic aims of the IEA are:
• to maintain and improve systems for coping with oil supply disruptions;
• to promote rational energy policies in a global context through co-operative relations with
non-member countries, industry and international organisations;
• to operate a permanent information system on the international oil market;
• to improve the world’s energy supply and demand structure by developing alternative
energy sources and increasing the efficiency of energy use;
• to assist in the integration of environmental and energy policies.
The IEA member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, the Republic of
Korea, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, Turkey, the United Kingdom, the United States. The European Commission takes
part in the work of the IEA.
O R G A N I S AT I O N F O R E C O N O M I C C O - O P E R AT I O N A N D D E V E LO P M E N T
The OECD is a unique forum where the governments of thirty democracies work together to
address the economic, social and environmental challenges of globalisation. The OECD is also
at the forefront of efforts to understand and to help governments respond to new developments
and concerns, such as corporate governance, the information economy and the challenges of
an ageing population. The Organisation provides a setting where governments can compare
policy experiences, seek answers to common problems, identify good practice and work to co-
ordinate domestic and international policies.
The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,
Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak
Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.
The European Commission takes part in the work of the OECD.
© OECD/IEA, 2005
No reproduction, copy, transmission or translation of this publication may be made

without written permission. Applications should be sent to:
International Energy Agency (IEA), Head of Publications Service,
9 rue de la Fédération, 75739 Paris Cedex 15, France.
FOREWORD
This new edition of “Findings of Recent IEA Work”, launched at the Ministerial-level
meeting of the IEA's Governing Board on 2-3 May 2005, provides a broad sampling
of the Agency’s working programme. Each page focuses on a specific subject,
including references to further IEA work that will be of use to governments,
academics, journalists and the wider public.
“Findings of Recent IEA Work” is divided into five sections which correspond to the
main challenges policymakers face in the energy domain:
■ Security of Supply and Energy Markets

■ Energy Diversification and Efficiency
■ Energy Technology
■ Environment and Climate Change
■ Energy in the Wider World
This publication is designed to serve as a ready reference to IEA work and will provide
an overview of the many, varied and fascinating activities in which we are engaged.
Claude Mandil
Executive Director of the IEA
3
TABLE OF CONTENTS
■ SECURITY OF SUPPLY AND ENERGY MARKETS 7

● World Energy Outlook 2004 8
● World Energy Investment Outlook 2003 10
● Emergency Response Strategies and Mechanisms 11
● Global Oil Market Security 12
● Energy Policies of IEA Countries - 2004 Review 13
● IEA Monthly Oil Market Report 14
● The Oil Market Report Website 15
● The Impact of Higher Oil Prices on the Global Economy 16
● Energy Statistics, an Essential Component of Energy Analysis and Policy 17
● The Joint Oil Data Initiative (JODI) 18
● Security of Supply in Electricity Markets 19
■ ENERGY DIVERSIFICATION AND EFFICIENCY 21

● Security of Gas Supply in Open Markets 22
● The Future of Gas for Power Generation 23
● Power Generation Investment in Electricity Markets 24
● Demand Response in Liberalised Electricity Markets 25
● Saving Electricity in a Hurry 26
● Towards Hydrogen 27
● Coal and Sustainable Development 28
● Research, Development and Demonstration Trends 29
● A New Methology Measures Solar Collector Market Data 30
● Renewable Energy Cost Developments for Electricity Generation 31
● Renewable Energy Policies in IEA Countries 32
● Renewable Energy Markets 33
● Natural Cycles of Renewables and the Case of Wind Intermittency 34
● Biofuels for the Transport Sector 35
● IEA Energy Indicators 36
● Energy Efficient Domestic Appliances and Equipment 37
■ ENERGY TECHNOLOGY 39
● Advanced Electricity Networks 40
● CO2 Capture and Storage Technologies 41
● Experience Curves for Energy Technology Policy 42
● Trends in Energy Use and Efficiency-impact on CO2 Emissions 43
● Basic Science and Future Energy Technologies 44 5
● Energy Technology Information 45
● International Collaboration in Energy Technology 46
● Oil and Gas Supply Technologies and Energy Security 47
● IEA R&D Collaboration on Fusion Power and ITER 48
● Coal Technology Roadmapping 49
● Transport Technologies to Reduce Oil Consumption and Emissions 50
● Saving Oil in a Hurry 51
■ ENVIRONMENT AND CLIMATE CHANGE 53

● World Alternative Policy Scenario 54
● CO2 Emissions from Fuel Combustion 55
● Dealing with Climate Change - Database for Policies and Measures 56
● Greenhouse Gas Emissions Trading: an Energy View 57
● Competitive Implications of European CO2 Emissions Trading 58
● Energy Security and Climate Policy Interactions 59
● Beyond Kyoto 60
● Technologies and Climate Policies 61
● Emissions Reductions through Project-based Activities 62
■ ENERGY IN THE WIDER WORLD 63

● The Producer-consumer Dialogue 64
● Energy and Development 65
● Russian Energy Policy Developments 66
● Russian Electricity Reform 67
● Energy Efficiency in Transition Economies 68
● District Heating Policy in Transition Economies 69
● Energy Reforms in the Black Sea/South East Europe Region 70
● China's Quest for Energy Security 71
● China's Challenges in Developing its Gas Market 72
● India's Quest for Energy Security 73
● Gas in India 74
● Working with South East Asia on Oil Security and Emergency Preparedness 75
● Electricity and Gas Sector Reforms in Brazil 76
● Towards African Energy Information Systems 77
● African Energy – In-depth Review of Angola's Energy Sector 78
6
1
SECURITY OF SUPPLY
AND ENERGY MARKETS 2
■ WORLD ENERGY OUTLOOK 2004
■ WORLD ENERGY INVESTMENT OUTLOOK 2003 3
■ EMERGENCY RESPONSE STRATEGIES AND MECHANISMS
■ GLOBAL OIL MARKET SECURITY
■ ENERGY POLICIES OF IEA COUNTRIES - 2004 REVIEW 4

■ IEA MONTHLY OIL MARKET REPORT
■ THE OIL MARKET REPORT WEBSITE
■ THE IMPACT OF HIGHER OIL PRICES ON THE GLOBAL ECONOMY

5
■ ENERGY STATISTICS, AN ESSENTIAL COMPONENT OF ENERGY
ANALYSIS AND POLICY
■ THE JOINT OIL DATA INITIATIVE (JODI)
■ SECURITY OF SUPPLY IN ELECTRICITY MARKETS
7
SECURITY OF SUPPLY AND ENERGY MARKETS
1
WORLD ENERGY OUTLOOK 2004
KEY MESSAGES
■ In the World Energy Outlook 2004 Reference Scenario, the world's energy needs are projected
to be almost 60% higher in 2030 than they are today and fossil fuels continue to dominate the
2 energy mix.
■ Developing countries will approach OECD countries as the largest consumers of commercial
energy by 2030; nonetheless their per capita energy use will remain well below that of the
OECD.
■ The worlds' energy resources are ample to 2030 and beyond. Less certain is how much it will
3 cost to extract them and deliver them to consumers.
■ Major oil- and gas- importers - including most OECD countries, China and India - will become
ever more dependent on imports from distant, often politically unstable parts of the world.
■ These medium to long-term energy supply and demand trends raise serious concerns. The
world's vulnerability to supply disruptions will increase as international trade expands. Climate-
destabilising carbon-dioxide emissions will continue to rise. Huge amounts of new energy
4 infrastructure will need to be financed. And many of the world's poorest people will still be
deprived of modern energy services.
SUMMARY
World Energy Outlook 2004 paints a sobering picture of how the global energy system is likely to
5 evolve from now to 2030. If governments stick with the policies in force as of mid-2004, the world's
energy needs will increase to 16.5 billion tonnes of oil equivalent. Fossil fuels will continue to
dominate the global energy mix, meeting most of the increase in overall energy use.
The earth's energy resources are more than adequate to meet demand until 2030 and well beyond.
Fossil-fuel resources are, of course, finite, but we are far from exhausting them. Our analysis
suggests that global production of conventional oil will not peak before 2030 if the necessary
investments are made. Proven reserves of gas and coal are even more plentiful than those of oil.
There is considerable potential for discovering more of all these fuels in the future.
A central message of this Outlook is that short-term risks to energy security will grow. Recent
geo-political developments and surging energy prices have brought that message dramatically
home. Rising oil demand will have to be met by a small group of countries with large reserves,
primarily Middle East members of OPEC and Russia. Booming trade will strengthen the mutual
dependence among exporting and importing countries. But it will also exacerbate the risks that
wells or pipelines could be closed or tankers blocked by piracy, terrorist attacks or accidents.
If current government policies do not change, energy-related emissions of carbon dioxide will grow
marginally faster than energy use. CO2 emissions will be more than 60% higher in 2030 than now.
Well over two-thirds of the projected increase in emissions will come from developing countries,
8 which will remain big users of coal – the most carbon-intensive of fuels.
Converting the world's resources into available supplies will require massive investments. In some
1
cases, financing for new infrastructure will be hard to come by. Meeting projected demand will
entail cumulative investment of some $16 trillion from 2003 to 2030, or $568 billion per year.
The electricity sector will absorb the majority of this investment.
Reducing energy poverty is an urgent necessity.There will be some encouraging advances in energy
development in non-OECD countries over the projection period. But even for the most developed
among them in energy terms, the use of modern energy and the per capita consumption of every 2
kind of energy will remain far below that of OECD countries.
These trends are, however, not unalterable. More vigorous government action could steer the
world onto a markedly different energy path.This Outlook presents an Alternative Scenario, which
analyses, for the first time, the global impact of environmental and energy-security policies that
countries around the world are already considering, as well as the effects of faster deployment of
energy-efficient technologies. In this scenario, global energy demand and carbon-dioxide emissions 3
are significantly lower than in the Reference Scenario. Dependence on imported energy in major
consuming countries and the world's reliance on Middle East oil and gas are also lower. But even
in this alternative case energy imports and emissions would still be higher in 2030 than today. It is
therefore clear that achieving a truly sustainable energy system will depend on technological
breakthroughs that radically alter how we produce and use energy.
4
REFERENCE
World Energy Outlook 2004, IEA/OECD, Paris 2004
9
1
WORLD ENERGY INVESTMENT OUTLOOK 2003
KEY MESSAGES
■ Energy sector investment of $16 trillion is needed over the next three decades to meet the
expected 60% rise in global energy demand.
2
■ Although the challenge of financing this investment will be toughest in developing countries and
emerging market economies, securing the reliable supply of affordable energy will be crucial to
the economic health of IEA member states and non-members alike.
SUMMARY
The quantitative study identifies the amount of capital needed to finance the construction of energy
3
supply infrastructure, including production, transformation and transportation of energy for oil, gas,
nuclear, electricity, coal and renewables worldwide in 18 countries and regions. It also analyses the
obstacles the energy sector must overcome in order to attract this level of investment and fund
its required expansion.
OECD countries face challenges in financing electricity investments. This has not been a problem
until now, but different financial risks have been introduced by the transition to competitive
4 markets.While liberalisation has resulted in many benefits, there is some increased risk to investors
in power generation, especially peaking capacity.There are also obstacles, such as public resistance
to expansions in transmission networks, which lag behind investment in generation capacity in
some OECD countries. Recent power failures in the United States and some European countries
have driven home the importance of this issue.
Total investments in the oil and gas sectors will each amount to more than $3 trillion to 2030, or
5 around 19% each of global energy investment. Whether the huge amounts of capital needed to
mobilise the bulk of the world's remaining hydrocarbon reserves in the Middle East will be
forthcoming is a major uncertainty. If the projected amount of investment in this region is not
forthcoming and production does not, therefore, increase as rapidly as expected, more capital
would need to be spent in other more costly regions.
Financing the $5 trillion of investment in the electricity sector in developing countries will be a
daunting task, particularly in Africa and India. Far-reaching reforms are urgently needed - chief
among which is to make tariff structures more cost-reflective - to facilitate higher capital flows in
these and other developing regions.
REFERENCES
World Energy Investment Outlook 2003, IEA/OECD, Paris 2003
10
1
EMERGENCY RESPONSE STRATEGIES
AND MECHANISMS
KEY MESSAGES
■ The IEA has continued to review and improve its emergency response policies. Regular reviews
of emergency policies in IEA member countries and emergency exercise activities have
2
highlighted the need for emergency policy to be flexible and quick to implement.The IEA must
respond to oil supply disruptions with swift, decisive and collective action.
■ Workshops on crisis scenarios, scenario exercises and tools for evaluating the economic
impacts of oil crises are an important part of IEA emergency response strategy.
■ The IEA will continue to monitor and assess its emergency capabilities and response measures
including stockholding and stock drawdown, demand restraint, fuel-switching and surge capacity. 3
SUMMARY
The emergency measures available to the IEA must necessarily evolve with the complexity of world
energy markets if they are to be effective. In 2004, the emergency response capability of the IEA and
its member countries was reviewed through the Third Emergency Response Exercise, reviews of IEA
member and candidate countries' emergency preparedness, workshops and the continued monitoring 4
and assessment of emergency reserves in IEA member countries which are net importers of oil.
The Third IEA Emergency Response Exercise illustrated that, very early after a disruption, the
Agency must take the opportunity to impress markets by making an immediate public statement
that is factual, authoritative and credible. Within IEA member countries, there is also the need
for more flexible response procedures which could be approved quickly in an IEA coordinated
response. Also, key IEA non-member countries were involved, for the first time, in the Emergency 5
Response Exercise.
A survey of macro-economic impacts of oil supply disruptions and the study into the impact of
higher oil prices on the world economy demonstrated the global economic importance of oil.The
OECD estimates that a sustained increase in the crude oil price would reduce economic growth
in the OECD and by a greater amount in developing economies. Emergency response measures
and instruments, including stockholding, demand restraint, fuel switching and emergency website
information are continuously assessed and improved by specific studies and workshops. In 2004,
one such study, Oil Demand Restraint in the Transport Sector:An Analysis of Potential Fuel Savings, offered
a fresh look into the transport sector, which is by far the biggest sector in terms of international
growth in oil demand.
REFERENCES
The Third Emergency Response Training and Disruption Simulation Exercise, IEA/OECD,
October 2004
Emergency Response Reviews of IEA Member Countries: Finland, Greece and Portugal,
IEA/OECD, 2004
Oil Demand Restraint in the Transport Sector: an analysis of potential fuel-savings,
IEA commissioned study conducted by Imperial College, London, May 2004
11
1
GLOBAL OIL MARKET SECURITY
KEY MESSAGES
■ Continuing tightness and volatility in the oil market is underpinned by capacity constraints,
growing demand and geopolitical tensions. The evolution of emergency policies and
2 mechanisms must remain closely related to developments in global market trends and socio-
political events.
■ In recognition of the importance of IEA non-member countries emergency response
capabilities, the IEA continues to work closely with these countries, including China and India,
on emergency response policies and the development of strategic oil stocks. In 2004, the IEA
was particularly involved with China, India, the ASEAN countries and new EU-members.
3
SUMMARY
The oil market in 2004 was characterised by high oil prices, increasing demand in Asia and reduced
spare production capacity in the Middle East. Such a combination of factors greatly amplifies the
potential effect of an oil supply disruption. For this reason, oil security continues to be a core
mission for the IEA.
4 An assessment of the near-term risks to the oil market was the first phase of the Third IEA
Emergency Response Training and Disruption Simulation Exercise, conducted in 2004. Industry and
financial experts identified issues in oil supply chains as the main risk in the near-term, especially
with the current conditions of a tight supply/demand balance, low spare production capacity and
high price volatility.
Growing Asian demand is a critical feature of the global oil market today and, consequently, security
5 of supply is an issue of increasing concern to affected countries. China and India have shared
information with IEA member countries whilst making preparations to build strategic oil stocks.
India, notably, hosted a 2004 IEA workshop on emergency oil stock issues. Furthermore, events
such as the IEA/ASEAN joint conference on Oil Supply Disruption Management Issues, held in
Cambodia in 2004, have helped raise the profile of energy security amongst the countries of
South East Asia.The IEA will continue to collaborate on emergency preparedness and have dialogue
with key non-IEA member countries in all areas of the world.
REFERENCES
Non-member country training and simulation activities held during the Third Emergency
Response Training and Disruption Simulation Exercise, IEA/OECD, October 2004
Oil Supply Disruption Management Issues Workshop, IEA/ASEAN/ASCOPE, Cambodia,
April 2004
India-IEA Joint Workshop on Emergency Oil Stock Issues, India, January 2004
12
1
ENERGY POLICIES OF IEA COUNTRIES
2004 REVIEW
KEY MESSAGES
■ In 2003 and 2004, energy security was the object of renewed attention, reflecting factors such
2
as higher and more volatile energy prices, historically low oil stocks and growing geopolitical
concerns in the Middle East, notably the hostilities in Iraq.
■ Energy Policies of IEA Countries focused on how the 3 E's can be simultaneously ensured: energy
security, economic growth and environmental protection.
SUMMARY
3
2004 marked the 30th anniversary of the IEA. While energy markets and the world have changed
in many ways since 1974, energy security remains a fundamental goal of the IEA member countries.
However, the security considerations have become more broadly defined.The IEA's focus has been
expanded from oil to other forms of energy, such as natural gas, of which consumption and imports
are rapidly increasing, and electricity, following several series of transmission failures in recent years.
Furthermore, reliable access to energy supply needs to be compatible with other policy objectives,
namely the pursuit of greater economic efficiency in the energy sector and the mitigation of 4
environmental consequences of energy production and use.
Achieving all these objectives simultaneously presents a daunting task. While market reforms
should, in principle, reinforce energy security, they also depend on the design of reforms and
incentives for investors. Actions to reduce greenhouse gas emissions, meanwhile, could have
profound implications on energy markets and energy security. In short, the challenges for energy
policy makers have become far more complex than in 1974. 5
In the 2004 review, the IEA tried to identify common challenges based on the in-depth reviews over
the past four years covering all 26 member countries.While they have made considerable progress
in pursuing the shared goals, there remain challenges to make their energy policies more effective.
These include co-operation among all stakeholders including the general public, the relevant
ministries and central/local governments; cost-effectiveness in climate change mitigation including
energy efficiency and renewable policies; ensuring real benefits from market reform; and fostering
appropriate investment under liberalised energy markets.The governments have to pursue strong
and coherent energy policies.
REFERENCES
Energy Policies of IEA Countries - 2003 Review, IEA/OECD, Paris 2003
Energy Policies of Canada, France,The Netherlands, Sweden, Portugal, Luxembourg,
IEA/OECD, Paris 2004-2005
13
1
IEA MONTHLY OIL MARKET REPORT
KEY MESSAGES
■ The IEA's monthly Oil Market Report (OMR) covers short-term developments in the world oil
market. It provides the first opportunity to examine the latest OECD statistics and gives up to
2 18 months projections for future oil supply and demand in OECD and non-OECD countries.
■ The OMR highlights changing trends in oil demand, with recent data and forecasts for OECD
and non-OECD countries.
■ It features supply data for OPEC countries, as well as production on a field-by-field basis (when
available) for OECD countries, as well as over 50 other oil-producing countries.
■ End-user, spot and futures price developments in crude and products are analysed, as well as
3
developments in regional crude and product prices: North West Europe, Mediterranean, United
States Gulf Coast,West Africa, North Sea, Middle East and Asia.
■ The OMR gives details of the latest refinery crude throughputs for OECD countries and
calculations of net product worth and refining margin trends for Northwest Europe, the
Mediterranean, the United States West and Gulf Coasts, Singapore and China.
■ It includes a comprehensive coverage of industry and government-controlled stock data in each
4 OECD region (and selected OECD countries) for crude oil, gasoline, middle distillates and fuel
oil, in both barrels and days of forward demand.
■ A user guide and an annual statistical supplement, containing historical background data, is
produced in conjunction with the August issue of the OMR.
SUMMARY
5
Over the last 20 years, the IEA's Oil Market Report has become essential reading for all those
involved in oil market decision-making, forecasting, analysis and planning. It provides extensive
coverage of market fundamentals: demand, supply, prices, refinery activity and OECD stocks.
Forecasts of oil demand and supply are summarised in a World Balance Table, with extensive detail
of the underlying analysis provided in supplementary tables. The OMR provides comprehensive
coverage and analysis of the oil market based on timely data submitted to the IEA by member
governments each month. Spot crude and product price assessments in the Report are based on
daily Platts prices. An annual statistical supplement is published in order to provide readers with a
longer perspective of the evolution of the oil market than the short-term developments covered
by the Report. A condensed version of the Report in Russian is available on the IEA Website.
The Report is published under the responsibility of the Executive Director and Secretariat of the
IEA. Although some of the data are supplied by member governments, largely on the basis of
information received from oil companies, neither governments nor companies necessarily share the
Secretariat's views or conclusions in the OMR.
REFERENCE
Oil Market Report, monthly IEA publication, www.oilmarketreport.org
14
1
OIL MARKET REPORT WEBSITE:
WWW.OILMARKETREPORT.ORG
KEY MESSAGES
■ In the effort to provide the most up-to-date oil market trends and add transparency to the
2
market, the IEA's Oil Market Report (OMR) website is an internet portal offering further
coverage of the in-depth analysis on short-term oil market developments provided by the Report.
■ This web service is a perfect complement to the macro analysis in the Report. For each section
of the OMR, a counterpart on the website with drop-down boxes, enables the rapid selection
of topics. The charts also come with a choice of “views” that allow subscribers to look at
developments according to their analytical need.
■ The information is downloadable in PDF format and can be copied and pasted into other
3
documents for use in presentations and essays.
SUMMARY
In addition to providing a PDF of the latest OMR, the website, through over 3 000 charts covering
all aspects of oil market fundamentals, provides greater detail. The charts reflect the latest data
contained in the OMR and allow subscribers to go beyond the broad market trends presented in
4
the report.
The service went online for OMR electronic subscribers in July 2003 for an initial two-month
operation period; the site was then officially launched on 10 September 2003, accompanied by a
mirror public access site. Monthly updates to www.oilmarketreport.org are reserved for OMR
subscribers for two weeks following the release of the Report, but are then made available for all
visitors via the public site at http://omrpublic.iea.org. 5
The organisation of the website mirrors that of the OMR. Information is searchable by section
(supply, demand, stocks, prices, refinery activity, trade and market overview), location (regions,
individual countries) and products (gasoline, distillates, crude oil etc.).
In addition to over 3000 downloadable charts and the latest OMR, the web site supports a full
archive of previous OMRs going back to 1990, a Russian version of the OMR, special features,
presentations, a publication schedule and OMR contacts.
REFERENCE
www.oilmarketreport.org
15
1
THE IMPACT OF HIGHER OIL PRICES
ON THE GLOBAL ECONOMY
KEY MESSAGES
■ Oil prices still matter to the health of the world economy. Higher oil prices since 1999 – partly
2
the result of OPEC supply-management policies – contributed to the global economic downturn
in 2000-2001 and are dampening the current cyclical upturn.
■ Higher oil prices affect all consumers, but they hurt those in developing countries most as
they are more reliant on energy-intensive manufacturing sectors to spur economic growth.
Moreover, in developing countries there are often limited alternatives to oil products.
■ An IEA study indicates that world GDP would be at least half of 1% lower – in the year
3 following a $10 oil price increase.
SUMMARY
Higher oil prices since 1999 contributed to the global economic downturn in 2000-2001 and are
dampening the current cyclical upturn.World GDP growth may have been at least half a percentage
point higher in the last two or three years had prices remained at mid-2001 levels. Higher prices
4 are contributing to stubbornly high levels of unemployment and exacerbating budget-deficit
problems in many OECD and other oil-importing countries.
The vulnerability of oil-importing countries to higher oil prices varies markedly depending on the
degree to which they are net importers and the oil intensity of their economies. According to
an IEA-study in collaboration with the OECD and the International Monetary Fund Research
Department, a sustained $10 per barrel increase in oil prices from $25 to $351 would result in the
5 OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. Inflation would
rise by half a percentage point and unemployment would also increase. The adverse economic
impact of higher oil prices on oil-importing developing countries is generally even more severe
than for OECD countries. This is because their economies are more dependent on imported oil
and more energy-intensive and because energy is used less efficiently.
World GDP would be at least half of 1% lower – in the year following a $10 oil price increase.
This is because the economic stimulus provided by higher oil-export earnings in OPEC and other
exporting countries would be more than outweighed by the depressive effect of higher prices
on economic activity in the importing countries. A loss of business and consumer confidence,
inappropriate policy responses and higher gas prices would amplify these economic effects in the
medium term. For as long as oil prices remain high and unstable, the economic prosperity of
oil-importing countries – especially the poorest developing countries – will remain at risk.
1.This is equivalent to the price of WTI increasing in current dollars from about $31 to $41 per barrel.
REFERENCE
Impact of Sustained High Oil Prices on the Global Economy, IEA Paper, 2004
16
1
ENERGY STATISTICS, AN ESSENTIAL COMPONENT
OF ENERGY ANALYSIS AND POLICY
KEY MESSAGES
■ Detailed, complete, timely and reliable statistics are essential to monitor the global energy
situation. Energy statistics on supply, trade, stocks, transformation and demand are indeed 2
the basis for any sound energy policy decision.
■ In view of the importance of energy in world development, one would expect that basic energy
information to be readily available and reliable. This is not always the case and one can even
observe a decline in quality, coverage and timeliness of energy statistics over the last few years.
■ This decline happens at a time when transparency is high on the agenda: at the 9 th International
Energy Forum in Amsterdam in May 2004, energy ministers commended the work done in the
Joint Oil Data Initiative, and at their October 2004 meeting, G8 finance ministers called for 3
more action to improve transparency.
■ The International Energy Agency has embarked upon a programme of actions to reverse the
current trends by developing tools to facilitate the preparation and delivery of reliable statistics,
thus raising the profile of energy statistics.
SUMMARY
There are several reasons behind the decline of quality in energy statistics, including liberalisation of
4
energy markets, additional data requests, budget cuts and diminishing expertise.The liberalisation, for
instance, has had a double impact on statistics: more companies to survey, and more confidentiality issues.
Additional data have been requested from energy statistics offices over recent years, ranging from
statistics on renewables to indicators on energy efficiency and data on greenhouse gas emissions.
This additional workload occurred at a time when statistics offices in many countries were experiencing
a reduction in their resources. The actions taken by the IEA to improve statistics include raising
awareness of policy makers, strengthening bonds with national administrative and international
organisations and facilitating the preparation of reliable statistics. Strengthening the expertise of 5
energy statisticians, and rebuilding corporate memory are also key priorities.This is the reason why
the IEA, in co-operation with Eurostat, has released an Energy Statistics Manual.
REFERENCES
Energy Statistics of OECD Countries, 2001-2002, IEA/OECD, Paris 2004
Coal Information 2004 - with 2003 data, IEA/OECD, Paris 2004
Energy Balances of OECD Countries, 2001-2002, IEA/OECD, Paris 2004
Electricity Information 2004 - with 2003 data, IEA/OECD, Paris 2004
Energy Statistics of non-OECD Countries 2001-2002, IEA/OECD, Paris 2004
Oil Information, 2004 - with 2003 data, IEA/OECD, Paris 2004
Energy Balances of non-OECD Countries 2001-2002, IEA/OECD, Paris 2004
Natural Gas Information, 2004 - with 2003 data, IEA/OECD, Paris 2004
CO2 Emissions from Fuel Combustion, 1971-2002, IEA/OECD, Paris 2004
Renewables Information 2004 - with 2003 data, IEA/OECD, Paris 2004
Oil, Gas, Coal and Electricity, IEA/OECD, Paris 2004
Energy Prices and Taxes, IEA/OECD, Paris 2004
Energy Statistics Manual, IEA/OECD, Paris 2004
CDs and Electronic Services
For all the above (except Oil, Gas, Coal and Electricity Quarterly Statistics)
Monthly Oil Data Service and Monthly Gas Data Service
17
1
THE JOINT OIL DATA INITIATIVE (JODI)
KEY MESSAGES
■ Enormous progress has been made since the launching of the Joint Oil Data Initiative, but there
are still challenges ahead.
2
■ At the 9th International Energy Forum in Amsterdam in May 2004, ministers were invited to
substantiate their commitment to the initiative.
■ A JODI World database, which is updated monthly, has been developed and although currently
not yet open to the public, it is envisaged to release the database in 3rd Quarter 2005.
■ The International Energy Forum Secretariat has taken over the co-ordinating role for the JODI
and the management of the World database and website.
3
SUMMARY
Six international organisations - APEC, Eurostat, IEA, OLADE, OPEC and UNSD - took up the
challenge in early 2001 to improve oil data transparency. They combined their efforts, involved
their member countries and launched the JODI, with the aim to provide more reliable and timely
monthly oil data from as many producer and consumer countries as possible.
4
Progress was fast and substantial.Within a short period more than 85 countries, representing about
95% of world oil demand and supply, as well as many oil companies have been participating. The
focus has been on participation, timeliness, completeness, quality and accessibility of data. Political
support was provided through the presentation of the initiative at the 8th and 9th International
Energy Forum meetings.
5 At these meetings, the political awareness of the JODI was raised by showing the difficulties
encountered with statistical systems, such as confidentiality issues, reliability etc. Contacts between
oil companies, countries and organisations have been multiplied and reinforced, strengthening the
producer-consumer dialogue.
Following the 5th JODI conference in Indonesia in October 2004, the IEFS took on the co-ordinating
role of the JODI and the management of the JODI World database and the JODI website.
The next challenge ahead is the opening up of the JODI World database to the general public. If
the data quality standards are met, the database will be released in third quarter 2005.
REFERENCES
The Joint Oil Data Initiative - Closer to Transparency, brochure for 9th International Energy
Forum, Amsterdam, May 2004
www.oil-data-transparency.org
18
1
SECURITY OF SUPPLY IN ELECTRICITY MARKETS
KEY MESSAGES
■ With careful market design and regulation markets can deliver long term benefits including
adequate and timely investment in power generation.
2
■ Failures in markets must be clearly distinguished from failures in the regulatory framework.
■ Efficient transmission investment and operation to support trade and competition call for a
regulatory framework to provide the right incentives.
■ Electricity reform did not cause the 2003 blackouts.
■ However, transmission system operators must communicate and coordinate to meet the
challenge of increased trade from liberalisation.They must also be well trained and have access 3
to real-time system management tools. Appropriate ventilation management is also required to
maintain reliable transmission services.
SUMMARY
Security of supply in the electricity sector requires a secure supply of fuels for power generation,
adequate and timely investment in generation and network infrastructures and efficient and reliable 4
operation of these assets. Markets are a powerful tool for achieving these goals efficiently.
Experience in OECD power markets confirms that competitive electricity markets can work to
deliver long term benefits if they are well designed and regulated and politically supported.
Most OECD electricity sectors were characterised by comfortable reserves of generating capacity
before reform. When markets opened, this overcapacity provided a cushion. Competition has
successfully deflated the cushion, so now there is increased focus on the investment challenge. 5
Electricity markets have in general been able to attract adequate and timely investment in power
generation.Yet the issue has been the subject of intense debate. Investment in transmission capacity
has mainly remained a regulated business in OECD countries. It is a challenge to establish a
regulatory framework that encourages efficient investment in transmission to support reliable
operation, trade and competition.
Concerns were raised following the 2003 blackouts that electricity reform may have reduced
transmission reliability.Although investigations show that reform was not to blame, increasing trade
from market liberalisation has created new real-time challenges for transmission system operators.
Enhanced coordination and communication in transmission system operation is necessary to
maintain reliability. Effective vegetation management and well trained system operators capable of
identifying and managing emergencies, supported by effective real-time system management tools,
are also necessary to maintain efficient and reliable transmission services.
REFERENCES
Security of Supply in Electricity Markets - Evidence and Policy Issues, IEA/OECD, Paris 2002
Transmission Network Reliability in Competitive Electricity Markets Workshop, IEA, Paris 2004
Transmission Network Performance in Competitive Electricity Markets Workshop,
IEA, Paris 2004
19
1
ENERGY DIVERSIFICATION
AND EFFICIENCY 2
■ SECURITY OF GAS SUPPLY IN OPEN MARKETS
■ THE FUTURE OF GAS FOR POWER GENERATION 3
■ POWER GENERATION INVESTMENT IN ELECTRICITY MARKETS
■ DEMAND RESPONSE IN LIBERALISED ELECTRICITY MARKETS
■ SAVING ELECTRICITY IN A HURRY 4

■ TOWARDS HYDROGEN
■ COAL AND SUSTAINABLE DEVELOPMENT
■ RESEARCH, DEVELOPMENT AND DEMONSTRATION TRENDS

5
■ A NEW METHOLOGY MEASURES SOLAR COLLECTOR
MARKET DATA
■ RENEWABLE ENERGY COST DEVELOPMENTS

FOR ELECTRICITY GENERATION
■ RENEWABLE ENERGY POLICIES IN IEA COUNTRIES
■ RENEWABLE ENERGY MARKETS
■ NATURAL CYCLES OF RENEWABLES AND THE CASE OF

WIND INTERMITTENCY
■ BIOFUELS FOR THE TRANSPORT SECTOR
■ IEA ENERGY INDICATORS
■ ENERGY EFFICIENT DOMESTIC APPLIANCES AND EQUIPMENT 21

ENERGY DIVERSIFICATION AND EFFICIENCY
1
SECURITY OF GAS SUPPLY IN OPEN MARKETS
KEY MESSAGES
■ In open gas markets, supply and demand can be balanced by the market. The challenge for
security of supply is to make sure that the market can always achieve this balance and that
2 adequate investment all along the gas chain can be mobilised in a timely way.
■ While open markets provide customers with choice and more efficiency, market reform also
changes the well-established business environment that has supported security of supply and
raises new issues that policy-makers must address.
■ Instead of managing the sector, governments have to create a regulatory framework that will
enable markets to deliver reliable and secure supplies from the production/import point to the
3 final customer. This may involve efforts to minimise geopolitical risk in some cases.
SUMMARY
OECD countries increasingly need to import gas, as the discovery of additional gas reserves in
OECD countries has not kept pace with the depletion of gas reserves in OECD and the increase
in gas demand. The growing import dependence calls for a greater awareness of gas policies in
4 supplier countries and along ever longer pipelines. Furthermore, dependence on one exporting
company and one country compounds this situation for some European importing countries.
Most of the increase in gas demand is driven by the power sector. As the gas and the electricity
systems become more closely interlinked, the reliability of the two systems has to be assessed in
combination. In some countries, the projected high dependence of power generation on imported
gas might create a domino effect on the power sector in cases of gas supply shortages, if not
5 anticipated.
Global cumulative investment in the gas industry is estimated at $2.7 trillion up to 2030. In view of
such investment requirements, governments will need to create a regulatory framework, which is
transparent, stable and conducive to business. While markets are developing in the OECD, price
signals may still be insufficient or come too late to provide enough incentives for new investment.
Open markets raise new issues for the security of supply. Where markets demonstrably fail to
deliver timely and adequate investment, governments will have to define objectives, responsibilities
and standards for security of supply.
REFERENCES
Security of Gas Supply in Open Markets, IEA/OECD, Paris 2004
Workshop with Gas Regulators on Security of Gas Supply in Liberalised Markets,
IEA, Paris 2003
Workshop on Gas Security of Supply, IEA, Paris 2002
22
1
THE FUTURE OF GAS FOR POWER GENERATION
KEY MESSAGES
■ Globally and across all three IEA regions, power generation will be the driver of gas demand
growth over the next 10 years. However, there are uncertainties, including high gas prices,
regulatory risks, impact of climate change policy and dependency on imported gas from a small 2
number of suppliers.
■ Technological developments, commercial incentives and environmental legislation will continue
to shape demand for gas in power. Environmental legislation can introduce major uncertainty.
For electricity companies, this means that all fuel options should remain open.
■ The choice of the electricity mix will be made by market players and will vary from country to
country according to its own resource base, its proximity to other global resources and its 3
domestic regulations. However, government policies will shape these decisions and can greatly
contribute to minimise risks and uncertainties.
SUMMARY
Gas demand in the power sector is the major driver of growth in gas demand.The main advantages
of using gas for power generation include economic, environmental and technical advantages. 4
Gas also better fits to liberalised power markets as combined-cycle gas turbines (CCGTs) plants
can be built in a more flexible way when demand arises.
However, there are a number of uncertainties that may postpone or even deter investment in
gas-fired CCGTs.The first one is linked with security of fuel supply.The more gas is used for power,
the more security of electricity and gas systems is linked, with the risk of a domino effect in case
of a gas supply disruption.This risk is aggravated in some importing countries which depend on one 5
or few suppliers. Another concern is the current high level of gas prices which may undermine
the cost competitiveness of CCGTs, notably compared to coal. Regulatory risks are also a major
uncertainty. Stability of regulation is one requirement for energy investment.
The pricing structure for gas-to-power is another major concern, as traditional contractual
arrangements do not fit very well to the power sector. Finally, a major uncertainty lies in the
possible taxation of energy sources and the price of CO2.
In view of these uncertainties, the governments’ major responsibilities are to address and minimise
these risks and provide a predictable, transparent and sustainable regulatory framework, which will
lead to investment and efficient electricity and gas markets.
REFERENCES
High-level Meeting on the Role of Gas for Power, IEA, Paris 2004
The Future of Gas for Power Generation Workshop, IEA, Paris 2004
23
1
POWER GENERATION INVESTMENT
IN ELECTRICITY MARKETS
KEY MESSAGES
■ Governments have a crucial role in establishing the framework for markets but market
2
intervention by governments can jeopardise the long term benefits.
■ Electricity price fluctuations reflect the volatile nature of electricity and are intrinsic to well-
functioning electricity markets.
■ Demand response makes electricity markets work better.
■ Abuse of market power and price manipulation remains a serious threat to well functioning
3 electricity markets.
SUMMARY
Electricity markets have been opened to competition in nearly all IEA countries.The introduction
of competition in the generation and retail supply of electricity should improve the economic
efficiency of the power sector.There is a great deal of evidence to suggest that market liberalisation
4 has generally improved the productive efficiency of the sector. Furthermore, with many markets
opened in the presence of surpluses of generating capacity, competitive pressures have reduced
power prices. The key long-term question is whether efficient and timely power generation
investment will emerge.
This report examines three major issues associated with power generation investment in
liberalised electricity markets.The first issue is how liberalisation and investment risks have affected
5 technology choices in power generation. The second issue addressed is how power generation
investors are adapting to investment risks. Financial hedges have not developed sufficiently to offer
significant long-term hedging value to investors. Thirdly, the emergence of tighter electricity
markets has led to increased electricity price volatility. This has put pressure on governments to
intervene in electricity markets. The report reviews recent cases of electricity price volatility in
Norway, Canada, Australia and New Zealand. Experiences show that markets are indeed effective
tools to manage the inherent volatile nature of electricity – but sufficient political commitment is
a crucial prerequisite.
REFERENCES
Power Generation Investment in Electricity Markets, IEA/OECD, Paris 2003
Joint IEA/NEA Workshop on Power Generation Investment in Liberalised Electricity
Markets, IEA, Paris 2003
24
1
DEMAND RESPONSE
IN LIBERALISED ELECTRICITY MARKETS
KEY MESSAGES
■ Liberalised electricity markets work better with a strong demand response capability.
2
■ Current market designs do not sufficiently enable demand response.
■ More innovative products and greater choice are needed to activate the demand-side.
■ Significant investment in the appropriate technology and communications infrastructure is
needed to get strong demand response.
■ Governments and regulators have a key role to play.
3
SUMMARY
In effective electricity markets, tightening supply-demand conditions are reflected by price spikes.
A relatively low level of response by consumers to price spikes will often be sufficient to
significantly dampen these prices, thereby increasing efficiency and reducing costs and risks for all
market participants. By clipping price peaks, demand response will also lead to lower wholesale
prices on average and a more efficient market. 4
Demand response presents a viable alternative to traditional supply-side remedies in constrained
wholesale markets. It offers a highly flexible and naturally distributed resource to network
operators, and reduces the need for investment in peak supply capacity.
However, at present most buyers do not participate actively in the price-setting process in
liberalised electricity markets. As a result, the ability of prices signals to moderate supply and
5
demand movements can be muted.
Concentration on the supply-side of the market and the abuse of market power continue to
trouble the efficient operation of many liberalised electricity markets. Market power abuses can be
reduced by increasing the elasticity of demand relative to price – and this is what demand response
does. Demand response may also generate important environmental effects as it has been shown
to deliver a net reduction in consumption.
REFERENCES
The Power to Choose – Demand Response in Liberalised Electricity Markets,
IEA/OECD, Paris 2003
Enhancing Demand Response in Liberalised Electricity Markets Workshop, IEA,
Paris 2003
25
1
SAVING ELECTRICITY IN A HURRY
KEY MESSAGES
■ Temporary electricity shortages (from one day to a year) have occurred in IEA member
countries and are caused by both unexpected losses in generation capacity or increases in
2 demand.
■ Campaigns to quickly reduce electricity demand, so as to avoid blackouts, have proven effective
in many member countries.
■ The campaigns rely heavily on short-term changes in behaviour and rapid installation of
electricity conserving technologies.
■ Savings range from 4% achieved in 3 days to 20% after 4 months.
3
■ Quickly raising electricity prices is an important tool, but raising the price to make the market
clear can be technically and politically unfeasible.
■ Voluntary demand reduction campaigns are cheaper and cause less disruption to the economy
than prolonged blackouts and curtailments.
SUMMARY
4
Temporary shortfalls of electricity supply can occur as a result of a drought, a heat wave, a breakdown
in a power plant or partial loss of transmission capacity. The traditional response has been to cut
power to customers while trying to restore supplies. But prolonged blackouts may be economically
and politically unacceptable if the shortage is expected to continue more than a few hours. An
alternative approach is to launch an aggressive programme to quickly conserve electricity relying on
a combination of measures to improve energy efficiency and change consumer behavior.
5
Several regions, including Sweden, Ontario, California, New Zealand and Norway have recently
implemented such programmes. It is possible to quickly reduce electricity demand by 3-20%,
sometimes with programmes started in only a few days. Moreover, the reductions in demand can be
accomplished without major economic disruption or hardships.
A combination of policies is necessary to achieve these savings. Higher electricity prices will be one
component but technical and political barriers may prevent it from playing a large role. An existing
infrastructure of continuing energy efficiency programmes can facilitate launching a programme to
save electricity in a hurry.
REFERENCES
Saving Electricity in a Hurry, IEA/OECD, Paris 2005
Saving Electricity in Hurry Workshop, IEA, Paris, June 2003
26
1
TOWARDS HYDROGEN
KEY MESSAGES
In the context of mid- to long-term energy scenarios, hydrogen technology and fuel cells might offer
considerable advantages over existing energy systems in terms of supply security and diversification
and reduction of greenhouse gas emissions. However, extensive R&D efforts and technology 2
breakthroughs are needed to make cost effective hydrogen available from fossil fuels (with CO2
sequestration), nuclear and renewable sources and for fuel cells to be competitive in the energy
market. The economic dimension of a possible transition to a hydrogen-fuelled society in the mid
to long term deserves careful consideration with regard to energy policy, infrastructure, economic
implications, opportunities and barriers for technology development and deployment.
SUMMARY 3
To respond to the growing interest in hydrogen and fuel cells and to improve co-operation and co-
ordination of R&D programmes and policy strategies in the IEA countries, the IEA established the
Hydrogen Co-ordination Group (HCG) in April 2003. Members of the Group are representatives
from twenty-four IEA countries and the energy technology collaborative network.The IEA Secretariat
has provided co-ordination and organisational support for the Group's activities. Several IEA
Countries (Australia, Canada, France, Germany, Japan, the United Kingdom and the United States) 4
have provided voluntary financial support for the Group's activities. Further contributions are being
considered by other countries.The HCG's initial programme of work included four tasks, namely:
■ Review of R&D programmes and policy strategies in the IEA countries;
■ Review of ongoing IEA activities to identify needed work on critical-path technologies;
■ Recommending further collaborations within the IEA technology collaboration framework;
■ Identifying analyses and support to help guide the work of the IEA. 5
The first outcome of the HCG activity was the publication Hydrogen & Fuel Cells - Review of National
R&D Programs, a first-of-kind map of government R&D activities, budgets and policy strategies in
the IEA countries. Released by the IEA at the UNFCCC COP 10 in December 2004, this book was
very well received by the international R&D community.
Outcomes from the second and third HCG tasks will be reported in a publication on R&D
priorities and gaps relating to hydrogen and fuel cells, including hydrogen production, hydrogen
storage and fuel cells. It will be issued by the Hydrogen and Advanced Fuel Cells Implementing
Agreements in collaboration with the IEA Secretariat in June 2005.
To accomplish the last task of the HCG programme of work, and with the financial support of some
IEA countries, the Secretariat is carrying out an analytical study to investigate the potential of
hydrogen and fuel cells in future energy scenarios and examine how government policies may foster
market penetration. The study builds on IEA expertise and involves experts from member
countries and the private sector.The outcomes of the analysis will be published in December 2005
in the book Prospects for Hydrogen & Fuel Cells.
REFERENCE
Hydrogen & Fuel Cells - Review of National R&D Programs, IEA/OECD, Paris 2004
27
1
COAL AND SUSTAINABLE DEVELOPMENT
KEY MESSAGES
■ Government policies can indirectly encourage private sustainable development measures.
Government regulations, where they are competitively neutral and can be achieved cost-
2 effectively, are also readily taken up by coal producing and using companies.
■ Coal mining is a high-volume, low-margin business and spending on other than core activities is
likely to be limited as a consequence. There is nevertheless clear evidence that coal producing
companies recognise that the future of their activities rests on the continuing use of coal in power
generation (and blast furnace technology for steel-making), in turn depending on compliance with
tightening environmental standards. Research along the whole coal chain is therefore seen as an
3 essential activity to protect the future of coal, whether conducted privately or by governments.
■ Although not limited to developing countries, many company activities illustrate the role of
“good citizenship” in undertaking commercial activities in developing countries by assisting
governments in achieving their development goals.
■ Technology transfer can be entirely consistent with commercial goals. Often core commercial
activities can have far-reaching implications for the countries purchasing consulting services or
new plants.
4
■ Some companies, usually larger ones, are anticipating the evolution of public policy and societal
goals to ensure their commercial survival in the longer-term. But this option is not always
available for smaller companies or for companies under greater commercial pressure, for
whom short-term survival is the only goal.
■ For companies it is crucial that governments and society in general are accurately informed of
the implications of policy actions affecting the coal producing and using industries.
5
SUMMARY
Awareness in the coal industry of the importance of sustainable development is high. A clear
majority of surveyed respondents see it as aligning with their commercial objectives. Reducing
emissions from coal use is the key priority, but some companies have embarked on broad initiatives
to better align their business practices to sustainable development priorities. Other frequently
undertaken activities are stakeholder programmes; health, safety and environment programmes;
public policy advocacy and technology transfer.
The range of activities suggests an evolutionary process - one that commences with a sole internal
focus on economic priorities for the business, and then broadens to include local environmental
issues and the community. Leading companies are now moving to look more at global issues, to
recognise and share the responsibility for the social and environmental impacts of producing and
using their products and to better engage stakeholders.
REFERENCES
Coal and Sustainable Development - Attitudes and Activity, IEA/OECD, Paris 2003
A more detailed analysis of the findings are available on http://www.iea.org/ciab/index.asp
28
1
RESEARCH, DEVELOPMENT AND
DEMONSTRATION TRENDS
KEY MESSAGES
■ Total government energy research, development and demonstration (RD&D) budgets in IEA
2
member countries increased sharply after the oil price shocks in the 1970s.This is particularly
valid for renewables, which spiked from no investment in 1973 to almost $2 billion in 1981.
■ Energy R&D budgets declined to about half of their peak levels by 1987 and remained relatively
level to 2002.
■ However, budgets for renewables dropped by a greater margin. As a percentage of total RD&D
funding, funding for renewables was higher from 1974 through 1986 than in the period since 1987.
3
SUMMARY
IEA analysis reveals that renewables RD&D has declined (about 9% lower since 1987). At the same time,
market deployment funding has increased, but renewables’ market share has decreased from ca. 6 % of
TPES (total primary energy supply) in 1992, to 5.5 % in 2001. The United States, Japan and Germany
accounted for 70.4% of IEA government renewable energy RD&D funding in the period 1974-2002.
4
From 1974 to 2002, IEA countries’ renewable energy RD&D budgets totalled about $23.55 billion,
some 8% of total energy RD&D funding in that period. Expenditures grew rapidly in the late 1970s
and peaked in 1980 at just under $2 billion.They declined in the early 1980s but have been relatively
stable since the late 1980s.
Germany, Japan and the United States accounted for about 66% of total renewables RD&D funding
in the period 1990 to 2002. Italy,The Netherlands and Switzerland accounted for an additional 15%. 5
The United States had the highest average renewables RD&D budget ($236.9 million per year).
The average annual budget in Japan was $110.9 million. In Germany it averaged $82.8 million.
Renewable energy RD&D funding priorities usually reflect resource endowments. For example,
New Zealand and Turkey have major geothermal resources. 70% of RD&D funding in New Zealand
and 45% in Turkey was allocated to geothermal during the period 1990-2002. About 43% of
renewables RD&D in Denmark and 37% in the United Kingdom went to wind energy. Natural
resource endowments, however, do not always dictate renewable energy RD&D priorities.
Germany has limited solar resources, but its budget for PV (photovoltaics) represented 48% of its
renewable energy RD&D budget from 1990 to 2002.
It is difficult to determine the impact of private-sector spending on renewable energy markets,

but general patterns can be discerned. However, the decreasing share of public funding appears to
be inconsistent with presumed political intentions in many IEA countries to increase the share of
renewables.
REFERENCE
Renewable Energy Market and Policy Trends in IEA Countries, IEA/OECD, Paris 2004
29
1
A NEW METHODOLOGY MEASURES SOLAR
COLLECTOR MARKET DATA
KEY MESSAGES
■ A new methodology, developed by the IEA Solar Heating and Cooling Programme in
2
collaboration with other agencies and organisations, allows for the first time a comparison of
solar heating and cooling markets with those for other renewables.
■ The scale of solar heating and cooling markets is ~70,000 MWth, a much higher level than
previously thought.
■ Market growth rates are on a similar level as those for wind and photovoltaics, over 20% per year.
3
SUMMARY
At a September 2004 joint meeting in Austria, the IEA Solar Heating and Cooling Programme
(SCH) and a number of solar thermal trade associations agreed upon a methodology to measure
the installed capacity of solar collectors in GWth. Solar thermal experts from seven countries
established this methodology, which converts installed collector area into solar thermal capacity.
They agreed to use a factor of 0.7 kWth/m2 to derive the nominal capacity from the area of
4 installed collectors.
This factor is based largely on parameters referred to in the European standards for the testing of
solar thermal collectors (EN 12975). It will now be possible to compare the installed capacity of
solar thermal collectors with other renewable sources.
The new data – expressed for the first time in GWth, rather than in square meters of installed
5 collector area – shows the global installed capacity of solar thermal systems at the end of 2001 to
be 70 GWth (70.000 MWth), or 100 million square meters of solar thermal collectors. Collectors
in 26 IEA member countries represent some 85-90% of the world's solar thermal market.
The data also shows that the leading countries for installed flat-plate and evacuated tube collectors
are Israel, Greece and Austria. For swimming pool heating with unglazed plastic correctors,Australia,
the United States and Austria lead. Market growth of 26% was achieved for hot-water and space-
heating plants between 2000 and 2001.The world’s most dynamic markets are in China and Europe.
In 2001, the area of installed flat-plate and evacuated tube collectors per 1000 inhabitants was
6.4 square meters in China, 3.9 square meters in Europe, 2.8 square meters in Japan, and
0.08 square meters in the United States and Canada. Annual collector yield from the systems
monitored, excluding air collectors, is calculated at approximately 41,795 GWh (150,463 TJ),
representing 6.7 billion liters of oil equivalent and a CO2 avoidance of 18.2 million tons.
REFERENCES
Technical Note: Solar Thermal Capacity, IEA Solar Heating and Cooling Programme
Explanatory Note: Solar Thermal Capacity, IEA Solar Heating and Cooling Programme
IEA Solar Heating and Cooling Programme Web site: http://www.iea-shc.org/
30
1
RENEWABLE ENERGY COST DEVELOPMENTS
FOR ELECTRICITY GENERATION
KEY MESSAGES
■ Some renewables in very good locations are competitive with conventional energy sources,
but in less optimal locations they are not as competitive.
2
■ Supportive policies are needed to encourage further technological improvement, especially of
“new” renewables in energy markets.
■ Deployment support is an extension of R&D policy, as renewables' development is furthered
through market experience.
SUMMARY 3
Except for large hydropower and combustible renewables and waste plants, the average costs of
renewable electricity are not widely competitive with wholesale electricity prices. However, depending
on the technology, application and site, costs can be competitive with grid electricity or commercial
heat production in very good locations.To exploit market opportunities it is necessary to assess the
competitiveness of specific applications and services in distinct locations and circumstances, be it large-
scale on-grid applications, niche markets on and off-grid, or other specific market situations. 4
Under best conditions - optimised system design, siting and resource availability - electricity from
biomass, small hydropower, wind and geothermal power plants can produce electricity at costs
ranging from $0.02 to 0.05/kWh. Some biomass applications, as well as geothermal heat
production, are competitive in specific sites. Solar thermal heat and hot water applications are
competitive in some countries. In countries with supportive policy frameworks, solar technologies
can compete with retail electricity.
5
Some renewable electricity technologies have already gained a significant market share. However,
they have not yet fully developed their world-wide potential. For example, small hydropower is well
established, as are some segments of the biomass industry. Although the average costs of renewable
electricity are not widely competitive with wholesale electricity, renewables can offer electricity
and electric services at competitive rates.
To support the market entry of new renewables, many policies have been established in IEA
countries to offset their higher costs and to facilitate the market experience that will result in
lower costs in the future. Such “market learning” approaches are especially relevant to some
renewables with large cost-reduction potential. The number of countries that pursued aggressive
policies to encourage renewable technology prior to 2000 was quite limited. But, thanks to
significant investment in just a few countries, new renewables like wind, solar photovoltaics and
solar thermal power showed strong growth up to 2001 and substantial cost reductions resulting
from their market experience, thus indicating the success of government intervention. The policy
context is changing, as many new policies have been implemented between 2000 and 2003,
increasing the number of countries with supportive policy conditions.
REFERENCE
Energy Prices and Taxes, Fourth Quarter, IEA/OECD, Paris 2004
31
1
RENEWABLE ENERGY POLICIES
IN IEA COUNTRIES
KEY MESSAGES
■ Over the past three decades, a combination of policies has resulted in market growth of
2
emerging technologies, including advanced biomass, solar hot water, solar PV and wind. In no
country is there evidence of strong market growth where only one policy is in place.
■ Longevity and predictability of policy support is important to overall market success. The
challenge is how to incorporate strong incentives for cost reduction and competition while
ensuring longevity and predictability of policy support.
■ National policies are strengthened when local, state or provincial governments have the
3 authority to act independently of national governments.
SUMMARY
The evolution of policies for renewable energy sources shows a discernible pattern over the past
three decades. Starting with investments in research, development and demonstration in the early
1970s, government support for market deployment of renewable energies reflected a variety of
4 approaches. From 1978 to end-1984, countries employed guaranteed prices, investment incentives,
voluntary programmes and tax measures. By the mid-1980s, virtually all IEA countries had RD&D
policies in place. By the early 1990s, many more countries had adopted market deployment policies,
and the first obligations were introduced. Almost all countries have established guaranteed prices
at some point, with varying degrees of success. A few countries have moved to quotas and others
have established tradable certificate systems or will soon do so. At the same time, several recent
5 commitments point to future guaranteed price systems.While a clear evolution of overall policies
and measures in IEA countries is evident, this does not necessarily denote a single trend. Each
country has chosen policies and measures that best match domestic resource endowments,
economic structure and market development objectives.
In Japan, PV technology has been supported by RD&D, demonstration projects, financial incentives
and net metering agreements. In Spain, wind technology has been supported by feed-in tariffs,
low interest loans, capital grants and local support for turbine manufacturing. Most wind power
growth is in areas where regional governments have supported development through administrative
changes and financial support.
In Italy and Germany, feed-in tariffs for renewable energy sources have an eight- to twenty-year
time frame. Long-term support for biomass district heating plants in Austria provides another
example. The erratic nature of support for renewable energy in the United States, in contrast,
has undermined private-sector investment. Thirteen US states have established local renewable
portfolio standards, however, and many more states offer their own financial incentives.
REFERENCE
Renewable Energy - Market & Policy Trends in IEA Countries, IEA/OECD, Paris 2004
32
1
RENEWABLE ENERGY MARKETS
KEY MESSAGES
■ The share of renewables in total primary energy supply in IEA countries increased from
4.6% in 1970 to 5.5% in 2001. Most of the increase in the share of renewables occurred from
1970 to 1990, when renewables supply grew by 2.8% a year. The annual growth rate of 2
renewables supply slowed to 1.2% from 1990 to 2001.
■ Most first generation renewable energy technologies, including hydro, biomass combustion and
geothermal power did not increase and even declined in the 1990s, in many IEA countries.
Energy supply from second generation technologies, e.g. wind and solar, grew by 23% per year
from 1980 to 2001. However, they started from a very low base.
■ Although electricity generation from these “new” renewables have increased significantly, they 3
are concentrated in just a few IEA countries.This highlights the challenge to create international
markets for emerging technologies.
SUMMARY
Renewables growth in the 1970s and early 1980s was in large measure the result of RD&D and
policy support in the aftermath of the oil price crisis. The renewables portfolio then consisted 4
primarily of large hydropower, biomass combustion and geothermal technologies. Their growth
in the 1970s was the result of their improved competitiveness in the aftermath of the oil price
increases of the 1970s. Growth in hydropower production, biomass supply and geothermal slowed
considerably in the 1990s, though.
Albeit from a very low base, the second generation of renewables, solar electric, wind power and
some advanced biomass technologies, have grown at impressive rates over the past two decades. 5
This is the result of substantial investment by IEA governments in RD&D and support for market
deployment policies.
Three factors affect renewables cost and market growth: the intensity and availability of the
natural energy resource; the maturity of each renewable technology and the market rules set
by governments. Renewables’ share increased from 4.6% in 1970 to 5.98% in 1992. Then, due to
reduced competitiveness caused by lower oil prices, the share of renewables in the IEA countries
declined to 5.5% in 2001, from which it has started to rebound.
Renewables accounted for 15.1% of electricity production in IEA countries in 2001, compared with
coal (38%), nuclear (24.9%), natural gas (16.9%), and oil (5.1%). The share of renewables in IEA
electricity production declined from 24.1% in 1970 to 15.1% in 2001. Hydropower contributed the
majority of electricity generation from renewables at 86.3%, followed by combustible renewables
and waste at 9.1%, solar, wind and ocean energy collectively at 2.7% and geothermal at 1.9%.
REFERENCE
Renewable Energy - Market & Policy Trends in IEA Countries, IEA/OECD, Paris 2004
33
1
NATURAL CYCLES OF RENEWABLES AND
THE CASE OF WIND INTERMITTENCY
KEY MESSAGES
■ Natural cycles of resource availability are inherent in all renewable energy technologies,
2
causing random variations in output. However, for each technology, these cycles operate over
different time ranges from yearly to seasonal, to hourly, and even minute-by-minute fluctuation.
The intermittency of wind is part of this picture and thus a known phenomenon which poses
new challenges in degree but not in kind.
■ Technologies and policy options exist to manage short-term fluctuations in output from
renewable energy technologies, even at high levels of market penetration.
3 ■ Imperfect markets often obscure the true economic cost of managing intermittency, so that
barriers to the penetration of renewables are mainly a question of economics and policy.
SUMMARY
Natural cycles are an inherent aspect of all renewable resources. In the case of mature renewable
energy technologies such as hydropower and biomass, they are well understood and managed.
4 ‘New’ renewable energy technologies such as wind power or solar photovoltaics have recently
become prominent in discussions among policy makers, researchers and the media.
Although some fresh issues arise in the management of new renewable energy technologies,
there are no insurmountable technological barriers prohibiting greater uptake of renewables. For
example, the geographical aggregation of generators such as wind turbines reduces the volatility of
output. Improved wind forecasting and modelling will improve predictability. Both geographical
5 aggregation and forecasting are already widely used in electricity markets, but need to be
reinforced. Significant further research is carried out on both issues. Furthermore, important
developments in electricity market reform in many countries actually act in favour of better grid
integration and management of natural cycles of renewables.This is especially the case with trends
towards upgrades and inter-connection of electricity grids and with the implementation of new
communication technologies. Finally, because each renewable energy technology fluctuates over a
different time-scale, important gains from the complementarity of these cycles are possible through
interlinked grids (for example by combining the use of wind and hydro power).
The extent to which the intermittency of the natural resource will become a barrier to renewables
is mainly a question of economics and policy. Transparent, inter-connected and well-regulated
markets will minimise grid operation costs. In some cases, structural adaptation will be needed.
Few countries rely on just one technology for their electricity needs. A portfolio of generating
technologies, including a variety of renewable energy technologies, is likely to provide the most
efficient trade-off to manage the costs of natural cycles of renewables.
REFERENCE
Natural Cycles of Renewables and the Case of Wind Intermittency – Status and
Prospects for Market Penetration, IEA/ETO Papers, 2005
34
1
BIOFUELS FOR THE TRANSPORT SECTOR
KEY MESSAGES
■ Although liquid biofuels (ethanol and biodiesel) still account for only a small percentage of
motor fuels in both North America and the EU (no more than 2% on an energy-basis in any
country in these regions), their use is growing rapidly and could increase dramatically over the 2
coming decade.
■ Given the current commercial technologies available for producing liquid biofuels and the costs
of growing the feedstocks in North America and the EU, it is not clear whether their benefits
will outweigh the costs of production. If technology improvement goals can be achieved,
however, the resource base for biofuels would increase and the net benefits of increased
production could grow substantially. 3
SUMMARY
Biofuels provide a number of important benefits when blended with petroleum transportation fuels:
■ Octane enhancement (for gasoline) to meet vehicle performance requirements
■ Reduction in emissions of a variety of pollutants (but also increases in some)
■ Displacement of petroleum fuel and reductions in dependence on imported petroleum 4
■ Reductions in total (“well-to-wheels”) greenhouse gas emissions associated with motor vehicles
■ Expansion of markets for domestic agricultural products like grains and oil-seed crops
Given current and projected production of crops used as ethanol feedstocks (corn in North
America; corn, wheat, barley and sugar beets in Europe) and current and expected near-term
production and conversion technologies, it should be possible to substitute 5% of gasoline fuel with
ethanol within 10 years. This should not require major disruptions to domestic crop markets or
5
food supplies, although crop prices may increase. Going beyond this level may require significant re-
allocation of crops and cropland. For biodiesel, lower potential production volumes are foreseen,
given the higher land requirements per unit production for its feedstocks (mainly soy in North
America and rape in Europe).
Research programmes under way, particularly in the United States, are developing a new generation
of biofuel crops and conversion techniques, focused on cellulosic feedstocks for ethanol and on
biomass gasification for biodiesel. If research goals can be achieved, relatively low cost cellulosic
ethanol and moderate-cost biodiesel could be the result. This will dramatically increase the
resource base and the net environmental and economic benefits of these fuels.
REFERENCE
Biofuels for Transport - An International Perspective, IEA/OECD, Paris 2004
35
1
IEA ENERGY INDICATORS
KEY MESSAGES
■ Energy indicators are an important tool for analysing the interactions between economic/
human activity, energy use and CO2 emissions.They are particularly important when analysing
2 progress of energy efficiency developments.
■ Many IEA member countries already employ energy indicators, a set of disaggregated measures
of how energy is used. The IEA’s role is to assist and internationalise these efforts through
the maintenance of transparent international databases and through collaboration with other
international organisations.
3 SUMMARY
Since 1997, the IEA has developed a series of energy indicators as tools for studying energy-use
developments. The main purpose of this work is to assist member countries in analysing factors
behind changes in energy use and CO2 emissions. Indicators (and the associated databases) also
reveal key couplings between energy use, energy prices and economic activity.This insight is crucial
for assessing and monitoring past and present energy efficiency policies and for designing effective
4 future action. Data developed for the IEA indicators project are also used for IEA analytic activities,
such as analysis for the World Energy Outlook and various energy efficiency and energy technology
projects within the Secretariat. Important insights from the IEA project on indicators are
highlighted in the recent IEA publication Oil Crises and Climate Challenges: 30 Years of Energy Use in
IEA Countries.
An important aim of the IEA’s work on indicators is to increase the transparency and quality of
5 energy-use data. This provides a better basis for meaningful comparison of energy and emissions
developments across countries, as well as a tool to measure progress in emissions reductions and
efficiency improvements within one country over time. The IEA has worked with member
countries and with the European Commission to ensure efficient collection of consistent data.
The IEA is also assisting non-member countries with improving their energy statistics and
establishing energy indicators.This effort includes work with other international organisations such
as the Energy Charter Secretariat and the International Atomic Energy Agency (IAEA). An
interagency publication Energy Indicators for Sustainable Development – Guidelines and Methodologies,
prepared jointly by IEA, IAEA, UN-DESA, EUROSTAT and the European Environmental Agency,
is being released during spring 2005.
REFERENCES
Energy Indicators and Sustainable Development – Guidelines and Methodologies,
IAEA/UN-DESA/EUROSTAT/EEA/IEA,Vienna, April 2005
Oil Crises and Climate Challenges - 30 Years of Energy Use in IEA Countries,
36
1
ENERGY EFFICIENT DOMESTIC APPLIANCES
AND EQUIPMENT
KEY MESSAGES
■ By improving the energy efficiency of residential appliances, IEA member countries could reduce
2
electricity demand and CO2 emissions by an additional 322 million tonnes (Mt) per year by 2010.
■ These savings can be achieved at negative cost to society, since the extra costs are more than
offset by savings in running costs over the life of the appliance.
■ Additional policy action is required to achieve these benefits. Existing policies in IEA member
countries do not capture many of the cost-effective savings available.
■ Mandatory minimum energy performance standards and labelling, supported by an active and 3
effective institutional framework, are the most effective way to achieve the potential savings.
■ Without specific policy intervention, standby power waste in domestic equipment is likely to
grow. Since it is easy to avoid, standby power offers the single largest source of energy savings in
the residential sector. Set-top boxes deserve special attention because sales of very inefficient
units are poised for rapid sales.
SUMMARY 4
Residential appliances and equipment use 30% of all electricity generated in OECD countries and
produce 12% of all energy-related CO2 emissions. New sources of electricity demand growth
include standby power and “set-top boxes” that are used to bring digital signals to televisions.
Standby power alone now represents up to 11% of household electricity use although technologies
exist to cut it by up to 2/3. Similarly, more than a billion set-top boxes will be purchased in the next
decade, resulting in over 10 GW of new electrical demand. Better designs could cut this demand 5
by at least 50%.
Appliance policies to date have been effective and cost-effective, reducing IEA greenhouse gas
emissions by some 37 Mt CO2/year by 2000, avoiding the need for at least 20 gas-fired power
stations.And they will help to cut emissions by 126 Mt CO2/year by 2010 as more efficient equipment
replaces less efficient equipment in the stock. But unless these policies are reinforced, appliance
energy consumption in the OECD will grow by 14% from 2000 to 2010 and by 42% by 2020.
This could be avoided with cost-effective policies that target the least life-cycle cost efficiency level
for each appliance class. Up to 322 Mt of CO2 could be avoided by 2010 if such policies were
adopted early and on a widespread basis. Existing policies in IEA member countries do not capture
all the cost-effective savings available.There is much variation in the coverage, stringency and design
and implementation of appliance policies.
REFERENCES
Cool Appliances - Policy Strategies for Energy Efficient Homes, IEA/OECD, Paris 2003
Things that Go Blip in the Night - Standby Power and how to Limit it, IEA/OECD, Paris 2001
37
1
ENERGY TECHNOLOGY
2
■ ADVANCED ELECTRICITY NETWORKS
■ CO2 CAPTURE AND STORAGE TECHNOLOGIES 3
■ EXPERIENCE CURVES FOR ENERGY TECHNOLOGY POLICY
■ TRENDS IN ENERGY USE AND EFFICIENCY -

IMPACT ON CO2 EMISSIONS
4
■ BASIC SCIENCE AND FUTURE ENERGY TECHNOLOGIES
■ ENERGY TECHNOLOGY INFORMATION
■ INTERNATIONAL COLLABORATION IN ENERGY TECHNOLOGY
■ OIL AND GAS SUPPLY TECHNOLOGIES AND ENERGY SECURITY 5
■ IEA R&D COLLABORATION ON FUSION POWER AND ITER
■ COAL TECHNOLOGY ROADMAPPING
■ TRANSPORT TECHNOLOGIES TO REDUCE OIL CONSUMPTION

AND EMISSIONS
■ SAVING OIL IN A HURRY
39
ENERGY TECHNOLOGY
1
ADVANCED ELECTRICITY NETWORKS
KEY MESSAGES
■ Advanced electricity networks will be needed to provide reliable and secure electricity supply
while meeting ever-steeper demands for power transfer, high-quality power and integration of
2 complex generating sources.
■ Today’s available technologies need to be more widely used. Much more advanced and
sophisticated infrastructure, technologies and systems will have to be put into place for
tomorrow, at both the transmission and distribution levels.
■ Upgrades will need to address system-wide issues. But individual entities are unlikely to make
such investments without incentives. Technology development will need to go hand-in-hand
3 with supportive policy, economic and regulatory frameworks.
SUMMARY
Electricity system reliability is now seen as an important element in energy security in general.
Yet many factors are creating challenges to the capacity and reliability of electricity transmission
and distribution (T&D) systems, notably ageing equipment, increasing electricity trading, network
4 congestion and difficulties in obtaining new transmission rights-of-way. Growing demand for the
high-quality power needed to run a digital economy and for the integration of more distributed
and intermittent generation sources will only pose further challenges.
Electricity load is increasing at a higher rate than transmission capacity. Tomorrow’s electricity
infrastructure and control systems will have to handle larger, more complex loads and rapidly-
increasing network interconnections.They will need to recognise and dispatch small-scale generating
5 components. The performance of power systems decreases, however, as size and complexity of
networks increase. New technologies, new information and control systems and new approaches to
system management will be needed to modernise and enhance the reliability and security of existing
electricity networks and provide the network architecture for a future energy system.
Many promising technologies and systems are emerging that can meet these needs. They include
large-scale devices for routing power flow on the grid, advanced information systems for observing
and assessing grid behaviour and real-time controls and operating tools. Technology development
is needed in such areas as superconducting cables and equipment, advanced sensors, advanced
visualisation technologies and power flow and control technologies with rapid response capabilities.
Existing technologies can play a more widespread role if costs are reduced.
Long-term, system-wide investments will be needed to put these technologies into place, as well as
incentives to mobilise those investments. Policy, economic and regulatory frameworks can create
the incentives and speed progress towards a power delivery system worthy of the 21st-century.
REFERENCE
Energy Technologies for a Sustainable Future - Advanced Electricity Networks,
40
ENERGY TECHNOLOGY
1
CO2 CAPTURE AND STORAGE TECHNOLOGIES
KEY MESSAGES
■ Capture and storage of carbon dioxide from fossil fuel use could become the largest single
means of abating CO2 emissions and permitting the continued use of fossil fuels, especially coal,
in a CO2-constrained world. 2
■ Considerable private and public effort will be needed to bring carbon dioxide capture and
storage (CCS) technologies to the stage of commercial application. Some $500 million per year
in RD&D funding will be needed to finance demonstration projects. In addition, an enabling
legal and regulatory environment for CCS projects should be created and various economic
instruments for climate change mitigation should be adapted to include CCS.
SUMMARY
3
The frontier of current technology does not offer adequate solutions to reduce emissions at a cost
compatible with economic growth and competitiveness. With appropriate development and
deployment policies, new clean energy technologies could contribute substantially to the IEA's
shared goals of environmental protection, energy security and economic growth.
CO2 capture and storage (CCS) is one option. It involves separating CO2 produced during fossil
fuel use, then transporting this CO2 and storing it in geological media or in the ocean. If CCS
technologies are to become a feasible option for the power industry, they need further 4
development and demonstration. Industry participation in technology demonstration and
dissemination is essential. Several large corporations are already involved in CO2 capture and
storage research and demonstration projects. But current efforts are insufficient to achieve rapid
technology introduction and there is no clear incentive for industry to invest more.
The IEA publication Prospects for CO2 Capture and Storage analyses the current state of CCS
technology, its competitiveness with other emissions- mitigation options and the policies needed for
its further development. This publication’s comparison of CCS with other emission mitigation 5
options is based on the findings of the IEA’s Energy Technology Perspectives model. In February
2004, the IEA and its energy technology network organised three successful events focusing chiefly
on CCS. The IEA Asia-Pacific Conference on Zero Emissions Technologies for Fossil Fuels in
Queensland (Australia) was accompanied by a technical workshop on CCS and an Asia-Pacific
Economic Co-operation (APEC) workshop on improving power plant efficiency in the APEC region.
A workshop on legal aspects of storing CO2 was organised by the IEA in July 2004, in close co-
operation with the IEA Working Party on Fossil Fuels and the Carbon Sequestration Leadership
Forum. It addressed CO2 storage issues, both land-based and offshore, and helped to pinpoint the
legal issues that need to be tackled before CCS can be widely applied. Finally, the September 2004
Greenhouse Gas Technologies 7 Conference, organised by the IEA GHG R&D Programme in
Vancouver (Canada), covered both technology and policy issues and attracted over 600 participants.
REFERENCES
Prospects for CO2 Capture and Storage, IEA/OECD, Paris 2004
IEA Asia-Pacific Conference on Zero Emissions Technologies for Fossil Fuels, Queensland,
Australia, February 2004
IEA/CSLF Joint Workshop on Legal Aspects of Storing Carbon Dioxide, Paris, July 2004
7th International Conference on Greenhouse Gas Control Technologies,Vancouver,
Canada, September 2004
41
ENERGY TECHNOLOGY
1
EXPERIENCE CURVES
FOR ENERGY TECHNOLOGY POLICY
KEY MESSAGES
■ Learning-by-doing experience through the deployment of new energy-efficient technologies
2
helps to reduce technology costs and thus costs of controlling CO2 emissions.
■ Government deployment schemes are one way to overcome initially high costs.
■ IEA analysis points to the importance of technology learning for renewables.
SUMMARY
3 The cumulative production of industrial goods or services progressively reduces their cost, which
declines by a certain percentage for each doubling of installed capacity, a phenomenon known as
the “experience curve”. The purpose of the IEA’s work in this area is to use experience curves
as tools for energy technology policy analysis.
Experience curves are tools for analysis and design of deployment programmes.They also help in
estimating the long-term costs of controlling CO2 emissions. Such curves indicate that there are
4 low-cost paths to CO2 stabilisation but also that following such paths may demand huge “learning
investments”.
Case studies show how government deployment programmes can initiate and accelerate progress
along the experience curve for new pre-commercial technologies.These studies demonstrate the
need for governments to adopt a two-pronged policy that combines research and development
with deployment strategies. Support for R&D results in new, clean, energy-efficient technologies
5 that have initially high costs. Deployment policies are needed in order to reduce the costs of these
technologies for large-scale market deployment. This cost reduction is known as “technology
learning” and experience curves measure this effect.
The Energy Technology Perspectives model has been used to analyse deployment strategies for
renewables. The analysis suggests that government deployment policies can make an important
difference in terms of the future share of renewables. Furthermore, the costs of supporting early
learning investment in a new technology can be more than offset by the long-term cost reductions
that the deployment support results in. This underlines the importance of experience curves for
the assessment of energy technology policies. Analysis of experience curves will therefore be
expanded to other technology areas.
REFERENCE
Technology learning in the ETP model, Paper for the 6th IAEE European Conference on
Modelling in Energy Economics and Policy, Zurich, Switzerland, September 2004
42
ENERGY TECHNOLOGY
1
TRENDS IN ENERGY USE AND EFFICIENCY -
IMPACT ON CO2 EMISSIONS
KEY MESSAGES
■ IEA countries have achieved significant energy savings since the first oil price shock in 1973.
2
Without these savings energy use in 1998 in a group of representative IEA countries would
have been 50% higher.
■ However, the rate of energy savings has slowed significantly since the late 1980s. As a
consequence, the rate of decline in CO2 emissions relative to GDP has also slowed.
■ These trends raise concerns because improved energy efficiency generally has been the most
important factor moderating historic growth in CO2 emissions. Accelerating energy efficiency
improvements is thus a crucial challenge for climate policies.
3
SUMMARY
The IEA publication Oil Crises and Climate Challenges - 30 Years of Energy Use in IEA Countries
examines how energy efficiency and factors such as economic structure, income, lifestyle, climate,
prices and fuel mix have shaped developments in energy use and CO2 emissions in IEA countries
since the organisation was founded 30 years ago. It looks in detail at developments sector-by-sector
4
and provides energy policy makers with data and insights pointing to ways of using energy efficiency
and lower-carbon fuels to achieve a more sustainable future.
One of the major findings of the report is that IEA countries have significantly reduced the need
for energy to fuel economic growth. Compared with 1973, it now takes one-third less energy to
produce one unit of GDP in IEA economies. An important reason for this development is that
considerable energy savings have been achieved in the various branches of manufacturing, in 5
different end-uses in households and commercial buildings and in different modes of passenger and
freight transportation.The United States, Japan and the group of 8 European countries included in
the study all achieved about the same level of economy-wide savings between 1973 and 1998. But
there were important differences at sector level. The amount of energy saved among the eleven
countries corresponds to more than the group’s total demand for oil in 1998.
An alarming finding also emerges from the study: energy savings rates across all sectors and in
almost all countries have slowed since the late 1980s. So has the decline in CO2 emissions relative
to GDP. This indicates that the oil price shocks in the 1970s and the resulting energy policies did
considerably more to control growth in energy demand and CO2 emissions than energy efficiency
and climate policies implemented in the 1990s.
REFERENCE
Oil Crises and Climate Challenges - 30 Years of Energy Use in IEA Countries,
43
ENERGY TECHNOLOGY
1
BASIC SCIENCE AND
FUTURE ENERGY TECHNOLOGIES
KEY MESSAGES
■ The biggest single challenge for this century: energy is needed for 10 billion people worldwide
2
and current technology will not provide it in a clean and sustainable way.
■ The types of revolutionary and accelerated evolutionary advance that are needed will only be
possible through increased focus on basic energy sciences and stronger linkages between
science and technology programmes, including international co-operation.
■ Despite progress in basic science and the successes in applied energy R&D programmes, the
process of research integration between science and applied energy programmes has, to date,
3 been unsuccessful and poorly understood.
■ IEA is uniquely placed to exert leadership in this promising but difficult area, by bringing
together nations and disparate communities, notably from the realms of science, policy, and
technology, to rise to the challenges of accelerating long-term energy innovation.
SUMMARY
4
The importance of linkages between basic science and energy technology R&D was addressed at
the IEA Conference “Linking Basic Science and the Development of New Energy Technologies”
in Paris in April 2003. The Ad Hoc Group on Science and Energy Technologies (AHGSET) was
established in March 2004 to reflect the IEA’s commitment to continued exploration of this
important issue. One of the central activities of AHGSET is to sponsor workshops, bringing
together key stakeholders from the scientific, energy technology and public policy domains to
5 explore what energy technologists need from basic scientists (demand pull) and what the results
of basic science can contribute to energy technologists’ needs (science mining).
The AHGSET workshop “New Links Between Basic Research and Applied Energy R&D – the
Computational Approach” took place in Berlin on 8-9 November 2004. Sponsored by Germany,
it contributed greatly towards bridging the gap between scientists and engineers. The AHGSET
workshop “Methodologies and Tools for Multicriteria Evaluation of Energy Chains and for Energy
Technology Perspectives” took place in Paris on 3-4 March 2005. Sponsored by France, it
characterised the scope and limits of existing decision-aiding processes.
In the autumn of 2005, a planned workshop in the United States will focus on “Strengthening the
Critical Connections between Science and Energy Technology Programmes”. It will build on findings
to date and determine future orientation.
REFERENCES
Linking Basic Science and the Development of New Energy Technologies Workshop,
Paris, April 2003
New Links between Basic Research and Applied Energy R&D Workshop –
The Computational Approach, Berlin, November 2004
44
ENERGY TECHNOLOGY
1
ENERGY TECHNOLOGY INFORMATION
KEY MESSAGES
Information dissemination maximises the impact of research and development by enhancing the effect
of joint collaborative work. It speeds the rate at which new energy technologies are deployed.
2
SUMMARY
IEA international projects, known as "Implementing Agreements", produce and disseminate
technological information. Some focus largely on collecting and disseminating technological data to
a wider audience.
■ Energy and Environmental Technology Information Centres (EETIC) is the collective
name for a network for information gathering, analysis and dissemination. It has two components.
● CADDET (Centre for the Analysis and Dissemination of Demonstrated Energy Technologies)
3
offers information and technical literature on full-scale demonstrated energy-efficient and
renewable energy technologies, including the InfoStore database covering some 1 600 projects.
● GREENTIE (Greenhouse Gas Technology Information Exchange) provides information on
suppliers of greenhouse gas-mitigating goods and services. Its main output, the Directory of
Suppliers, contains nearly 6 000 entries.The Project Broker Facility guides users to suppliers.
■ The Advanced Motor Fuels Information newsletter (AMFI), monitors developments in
4
the entire field of automotive fuels, from the acquisition and transportation of raw materials,
fuel production and distribution through to the use of fuels in vehicles.
■ The IEA Air Infiltration and Ventilation Centre (AIVC) offers technical support aimed
at optimising ventilation technology with a comprehensive bibliographic database.
■ The Clean Coal Centre (CCC) maintains the Coal Abstracts database and eight databases
which make up the CoalPower5 database. Coal Abstracts is a database of 200 000 abstracts on
the world’s literature on coal. CoalPower5 contains details of the world’s coal-fired power 5
plants. The CCC’s Clean Coal Compendium will shortly offer an encyclopaedia on topics
related to coal use and the underlying science.
■ The Energy Technology Data Exchange (ETDE) provides governments, industry and
the research community in member countries with access to the widest range of information
on energy research, science and technology in the world. The ETDE World Energy Base,
ETDEWEB, includes 3.4 million citations to energy-related research and literature.
■ The Heat Pump Centre (HPC) is a worldwide information service that includes topical and
non-topical articles, news on general developments, technology and applications, working fluids,
markets, recent published works, software and current events. All applications in buildings and
industry are addressed, including heating-only, heating and cooling systems, air conditioning and
refrigeration.
■ The on-line IEA OPEN Energy Technology Bulletin reports regularly on the activities, findings,
events and publications of the IEA Implementing Agreements, and on those of the IEA energy
technology community as a whole. The Bulletin is e-mailed to close to 5 000 subscribers worldwide.
REFERENCES
The IEA Energy Information Centre
The IEA Technology Agreements
The IEA OPEN Energy Technology Bulletin
45
ENERGY TECHNOLOGY
1
INTERNATIONAL COLLABORATION
IN ENERGY TECHNOLOGY
KEY MESSAGES
For more than 30 years, IEA international energy technology co-operation has been a fundamental
2 building block in facilitating progress of new or improved energy technologies.
SUMMARY
When the IEA was founded in 1974, the main objective of its member countries was to reduce
dependence on imported oil through the development of alternative sources while improving
energy efficiency. More recently, concerns such as greenhouse gas emissions and globalisation have
3 underlined the need for international co-operation.
To support these core issues, the IEA created international energy technology RD&D collaboration
legal contracts – Implementing Agreements – and a system of standard rules and regulations that
would allow interested member and non-member governments to share costs and research the
development and deployment of particular technologies. Participants in Implementing Agreements
benefit from greater project scale, reduced cost and duplication of work, accelerated development
and deployment, harmonised standards, strengthened national RD&D capabilities, information
4 sharing and networking.
In 2005 there were 40 Implementing Agreements, with several thousand participants from
58 countries, organisations or companies:
■ Fossil Fuels: Clean Coal Centre, Clean Coal Science, Enhanced Oil Recovery, Fluidised Bed
Conversion, Greenhouse Gas, Multiphase Flow Sciences.
■ Transport:Advanced Fuel Cells,Advanced Materials for Transportation,Advanced Motor Fuels,
5 Hybrid and Electric Vehicles.
■ Buildings: Buildings and Community Systems, Demand Side Management, District Heating and
Cooling, Energy Storage, Heat Pumps.
■ Industry: Emissions Reduction in Combustion, High-Temperature Superconductivity, Process
Integration, Pulp and Paper.
■ Fusion: Environmental Aspects Fusion Power, Fusion Materials, Large Tokamaks, Nuclear
Technology Fusion Reactors, Plasma Wall Interaction in TEXTOR, Reversed Field Pinches,
Stellarator, Poloidal Field Diverters (ASDEX Upgrade).
■ Renewable Energies: Bioenergy, Geothermal, Hydrogen, Hydropower, Ocean Energy,
Photovoltaics, SolarPACES, Solar Heating and Cooling,Wind.
■ Cross-Sectional Activities: Climate Technology Initiative, Energy Technology Data Exchange,
Energy Technology Systems Analysis Programme, Energy and Environmental Technology
Information Centre.
Each of the 40 Implementing Agreements simultaneously undertakes several RD&D projects,
disseminating the results through published work, seminars and web sites.
REFERENCE
IEA Technology Agreements Web Page: http://www.iea.org/techagr
46
ENERGY TECHNOLOGY
1
OIL AND GAS SUPPLY TECHNOLOGIES
AND ENERGY SECURITY
KEY MESSAGES
■ Technology can make a significant contribution to sustaining adequate oil and gas supply at
2
acceptable prices by enabling production cost reductions, increased oil reserves and regional
supply diversification.
■ Significant cost reductions and growth of reserves have resulted from new technology over the
past 25 years. However, there is great potential for further improvements.
■ Maximising the contribution of oil and gas supply technologies to energy security requires
efforts with a near-term focus as well as work that will only yield results in the future. Both
must start now and continue over time.They must involve governments and industry.
3
SUMMARY
Technology has a critical role to play in enhancing energy security in the medium and long term. It
reduces actual production costs, helps to increase oil reserves and contributes to greater
geographical diversity of supply. The development of deep offshore oil and gas production is an
important trend, while unconventional oil production in Canada and enhanced oil recovery involve
4
new technologies that also enhance security of supply. In gas production, the role of unconventional
gases such as tight formation gas and coalbed methane is growing.The same is true for the use of
CO2 to enhance fossil fuel production.
The technological and economic characteristics of these technologies have been analysed and the
resulting data has been documented and formatted for the IEA’s Energy Technology Perspectives
(ETP) model.This model is used for global energy scenario analysis and will help to analyse the long- 5
term role of fossil fuels from an energy security perspective.
Given the resource depletion in certain regions of the world, efficient and cleaner technologies will
provide only part of the solution for achieving sustained energy security over time. A strategy
portfolio will be required and the role of oil and gas production technologies in this portfolio is being
assessed, based on the ETP model. Only a continuing commitment to long-term R&D and support
for deployment of new technologies will provide the substantial long-term cost reductions needed
to sustain supply security.
Governments have a role to play in co-operation with the private sector, in removing barriers to
rapid and widespread deployment of clean and efficient energy technology.They can act decisively
in creating and stimulating markets for new technology and in supporting “technology learning”.
They can do this by direct investment and by setting market rules.
REFERENCES
Global Natural Gas Dialogue - Trends,Technologies and Investments Workshop,
Houston, May 2004
Technology Issues for the Oil and Gas Sector Workshop, IEA, Paris, January 2005
47
ENERGY TECHNOLOGY
1
IEA R&D COLLABORATION ON FUSION POWER
AND ITER
KEY MESSAGES
■ The international fusion community is now considering the construction of the first experimental
2
reactor, ITER. With the participation of China, the European Union, Japan, Korea, Russia and
the United States, the purpose of the project is to demonstrate that energy from fusion is
scientifically and technically feasible.
■ Through its Fusion Power Co-ordinating Committee (FPCC), the IEA co-ordinates nine
international co-operation programmes (Implementing Agreements) dealing with fusion topics
directly relevant to ITER and the fusion programme beyond ITER.
3
SUMMARY
Although declining in line with other energy R&D investments, nuclear fusion R&D has in the past
ten years accounted for about 11% of the total government budgets for energy R&D.A number of
experimental facilities such as JET, JT-60,TFTR and DIIID have been built and successfully operated
in the EU, Japan, the United States and Russia to investigate the physics of the fusion process.
4 Considerable efforts have been devoted to technology and materials R&D, safety and
environmental issues and economic assessments.The IEA has a significant involvement in the fusion
programme. The nine international co-operation programmes (Implementing Agreements) within
the FPCC purview deal with a broad range of fusion topics directly relevant to ITER and beyond
ITER (tokamak physics, alternative confinement approaches, technology, materials, safety, economic
and environmental implications of fusion)
5 Fusion energy has been demonstrated in experimental devices at levels of a few megawatts for
short time spans.The scientific and technological knowledge is now available for the construction
of ITER, the first 500 MW experimental plant. Successful operation of the facility would open the
way to the first demonstration power plant. Power generation from fusion requires further R&D
and advances, notably in materials however. Fusion promises inherent safety features and limited
hazards to the public, even in the case of external events such as earthquakes. It produces no
greenhouse gas and no radioactive or toxic products. Most neutron-induced radio-activated
materials resulting from operation of fusion power plants can be disposed of as inert waste,
recycled, or given shallow-land disposal a few decades after the operation.
Public acceptance of fusion can be eased if the public is actively involved in the decision process at
an early stage. The cost of fusion electricity is estimated by modelling and extrapolation with the
support of industry.The fuels used for fusion, deuterium and lithium, are plentiful and cheap . ITER
is crucial to demonstrate the feasibility of fusion power. According to current evaluations and
planning, combining ITER with proper R&D and material development might bring a demonstration
power plant on line in about 35 years.
REFERENCE
Technology Options: Fusion Power, IEA Energy Technology Policy and Collaboration Paper,
Paris 2003
48
ENERGY TECHNOLOGY
1
COAL TECHNOLOGY ROADMAPPING
KEY MESSAGES
■ Coal-fired systems based on both pulverised coal combustion (PCC) and integrated gasification
combined cycles (IGCC) will need to be included in a comprehensive Zero Emissions
Technologies (ZETs) response to reducing CO2 emissions. 2
■ ZETs based on PCC may be of particular importance in countries such as China and India,
which have large and growing fleets of PCC-based power generation plants.
■ ZETs systems based on IGCC technology have the advantage of capturing CO2 before
combustion takes place, resulting in not only a smaller efficiency penalty but also the potential
to supply large volumes of hydrogen. PCC-based ZETs could close the gap with IGCC-based
systems if and when the technology for ultra-supercritical steam cycles, currently under 3
development, comes into use.
SUMMARY
Coal will continue to play a major role in energy supply over the coming decades, with strong
growth in developing countries. In order to reduce the environmental impact of its use, development
and application of Clean Coal Technologies (CCTs), designed to minimise the emissions of various 4
undesirable species from coal-fired power plants, should continue. Further development of CCTs
will lead to a number of Zero or near-Zero Emissions Technologies that emit very low levels of all
pollutants and CO2.
At present, the state-of-the-art clean coal technologies most likely to provide the basis for ZETs
are supercritical PCC and IGCC.With the clear need for more than one candidate ZET, there is a
corresponding number of possible routes forward, some based on PCC and others on IGCC. In 5
both cases, there are likely to be some distinct steps in taking forward today’s coal-based systems
to achieve zero emissions.
Only with effective RD&D programmes will it be possible, over the next few years, for these
options to be developed and refined to the point where they can be adopted commercially as part
of the solution to global warming and climate change.The publication Roadmapping Coal’s Future,
from the IEA Coal Industry Advisory Board and the IEA Working Party on Fossil Fuels, brings
more details on this strategic issue.
REFERENCE
Roadmapping Coal’s Future, Brochure, IEA Coal Industry Advisory Board and
IEA Working Party on Fossil Fuels, April 2005
(available on IEA Clean Coal Centre and www.iea.org)
49
ENERGY TECHNOLOGY
1
TRANSPORT TECHNOLOGIES TO REDUCE
OIL CONSUMPTION AND EMISSIONS
KEY MESSAGES
■ The transport sector is responsible for almost 60% of oil consumption in OECD countries.
2 It is a major source of pollution and greenhouse gas emissions. Transport is the chief sector
driving future growth in world oil demand, particularly in developing countries, where oil
consumption growth will soon outstrip that in OECD countries.
■ Existing low-cost technologies for vehicle design, both on-board the vehicle and for transport
systems, could reduce oil consumption in transport by 30-50% over the next 25 years.
3 SUMMARY
IEA’s cost and effectiveness analysis shows that, in both OECD and developing countries, fuel
efficiency and emissions can be improved in the short and medium term (over the next 10-20 years)
through cost-effective light vehicle technologies. These include: better streamlining to improve
aerodynamics; greater use of lightweight materials; advanced engine lubricants and advanced tyre
design; improved engine designs and configurations (including hybridisation) and improvements to
4 drive-trains. A mix of such technologies could reduce fuel consumption by 30-40%.
On-board vehicle technologies providing information can also be a low-cost way of improving fuel
efficiency by enabling drivers to drive more efficiently. Diagnostic equipment indicating fuel
consumption, optimal gear changes and engine revolutions and tyre pressure, or other equipment
such as cruise controls, can together reduce average fuel consumption by 10%. In conjunction with
the right fiscal incentives from highway tolls and access and parking charges, technologies such as
5 telematics and electronic logistical systems can improve the overall logistics of travel and save
drivers time, as well as reducing fuel consumption and emissions.
However, while these various near-term technologies raise overall fuel efficiency, the savings thus
achieved might be “spent” on heavier, more powerful vehicles or more air conditioning, so that net
fuel savings might be reduced. Government policies, such as fiscal incentives, are necessary both to
support the deployment of fuel-saving technologies and to discourage on-going increases in vehicle
size, weight and power.
In addition to vehicle technologies, new fuel technologies are being developed for the medium
term. Natural gas, LPG and biofuels can all be used in existing conventional combustion engines
(requiring varying degrees of engine modification), though biofuels are the most compatible with
current gasoline and diesel vehicles. Other fuel carriers, namely electricity and hydrogen, can also
power vehicles, but their relative cost and incompatibility with current vehicles places their
widespread use at least 10 years off. Further development and cost reductions in fuel cell vehicles
and related technologies are also needed, including fuel cell stack systems, controller systems,
hydrogen storage on-board vehicles and battery systems.
REFERENCE
Energy Technologies for a Sustainable Future - Transport, IEA/OECD, Paris 2004
50
ENERGY TECHNOLOGY
1
SAVING OIL IN A HURRY
KEY MESSAGES
■ A variety of existing policy approaches could rapidly reduce oil demand in the transport sector,
for example during a petroleum supply disruption. Available evidence suggests that some
policies could rapidly cut oil demand at a modest implementation cost. On an IEA-wide basis, 2
savings of at least one million barrels per day appear possible through well-conducted demand
restraint programmes.This is enough to offset a fairly large reduction in world oil supplies.
■ Measures that seem most promising, in terms of large potential oil savings and low cost, include:
encouraging telecommuting; extending mass transit services, temporarily free of charge;
encouraging car-pooling alongside rider “matching” services and lower speed limits (and/or
tighter enforcement of existing limits). Restrictive measures like fuel rationing with coupons 3
or “odd/even” licence plate days to limit vehicle use are nominally inexpensive, but may be
costly to society in terms of lost mobility.
SUMMARY
During 2004, oil prices reached levels recently unprecedented. Many countries are concerned
about oil costs and oil security and seek ways to improve their capability to handle market volatility. 4
Energy supply security is a core mission of the International Energy Agency. Its founding treaty
obliges member countries to maintain emergency oil reserves, but also to apply voluntary and
mandatory measures for reducing oil consumption during an oil supply disruption at very short
notice. In most OECD countries the prime consumer of oil is the transport sector, which should
be a central focus of emergency oil demand restraint programmes.
The IEA has completed a quantitative assessment of the potential impacts and costs of oil demand 5
restraint measures in transport, under conditions such as supply disruptions or other oil-related
emergencies.This shows that opportunities exist to substantially reduce transportation oil demand
quickly and cheaply, if countries are prepared in advance.
Most important, greater awareness is needed regarding the crucial role of transport demand
response in dealing with oil supply disruptions. While oil demand in transport is indeed very
“inelastic” in the short term, a number of measures can help to change that and provide an
important tool for lowering the duration and cost of disruptions in petroleum supply and the
accompanying price spikes.
REFERENCE
Saving Oil in a Hurry, IEA/OECD, Paris 2005
51
1
ENVIRONMENT
AND CLIMATE CHANGE 2
■ WORLD ALTERNATIVE POLICY SCENARIO
■ CO2 EMISSIONS FROM FUEL COMBUSTION 3
■ DEALING WITH CLIMATE CHANGE:

DATABASE FOR POLICIES AND MEASURES
■ GREENHOUSE GAS EMISSIONS TRADING: AN ENERGY VIEW

4
■ COMPETITIVE IMPLICATIONS OF EUROPEAN CO2 EMISSIONS
TRADING
■ ENERGY SECURITY AND CLIMATE POLICY INTERACTIONS
■ BEYOND KYOTO
5
■ TECHNOLOGIES AND CLIMATE POLICIES
■ EMISSIONS REDUCTIONS THROUGH PROJECT-BASED ACTIVITIES
53
ENVIRONMENT AND CLIMATE CHANGE
1
WORLD ALTERNATIVE POLICY SCENARIO
KEY MESSAGES
■ The World Alternative Policy Scenario presented in the World Energy Outlook (WEO) 2004
analyses the global impact of environmental and energy-security policies that countries around
2 the world are already considering, as well as the effects of faster deployment of energy-efficient
technologies.
■ Global primary energy demand is about 10% lower in 2030 than in the Reference Scenario
whilst energy-related emissions of carbon dioxide would be reduced by some 16%.
■ More efficient use of energy account for almost 60% of the reduction in CO2 emissions.
A shift in the fuel mix for power generation accounts for most of the rest.
3
SUMMARY
The WEO 2004 presents a World Alternative Policy Scenario, which depicts a more efficient and
more environment-friendly energy future than does the Reference Scenario. It analyses how
global energy trends could evolve if countries around the world implemented a set of policies and
measures that they are currently considering. In this scenario, global primary energy demand would
4 be about 10% lower in 2030 than in the Reference Scenario. The reduction in demand for fossil
fuels would be even bigger, thanks largely to policies that promote renewable energy sources.
Demand for oil would be markedly lower than in the Reference Scenario. Global oil demand would
be 11% lower in 2030 – an amount equal to the current combined production of Saudi Arabia, the
United Arab Emirates and Nigeria. Stronger measures to improve fuel economy in OECD countries
and the faster deployment of more efficient vehicles in non-OECD countries would contribute
5 almost two-thirds of these savings in 2030. Oil-import dependence in the OECD countries and
China would drop as a result. Coal demand would fall even more. The amount saved would be
around the current coal consumption of China and India combined. World natural gas demand
would be 10% lower.
By 2030, energy-related emissions of carbon dioxide would be 16% lower than in the Reference
Scenario.This is roughly equal to the combined current emissions of the United States and Canada.
Almost 60% of the cumulative reduction of CO2 emissions would occur in non-OECD countries.
In fact, OECD emissions would level off by the 2020s, and then begin to decline. More efficient use
of energy in vehicles, electric appliances, lighting and industry account for more than half of the
reduction in emissions. A shift in the power generation fuel mix in favour of renewables and
nuclear power accounts for most of the rest. However, even in this Alternative Scenario carbon
dioxide emissions at a global level would still be higher in 2030 than today.
REFERENCE
54
1
CO2 EMISSIONS FROM FUEL COMBUSTION
KEY MESSAGES
■ Global emissions of CO2 from fossil fuel combustion increased from 20.7 billion tonnes (Gt)
in 1990 to 24.1 Gt in 2002 (i.e. a 16.4% increase). In 2002 alone, global CO2 emissions rose
by 2%. The regions that contributed most to the 1990-2002 increase in world energy-related 2
CO2 emissions were China, OECD North America and Asia.
■ In 2002, 80% of global energy-related CO2 emissions were emitted by 22 countries – 12 of
which are OECD countries. These 22 countries also produced 80% of the world's 2002
economic output (GDP) and represented 78% of the world's TPES (total primary energy
supply). Moreover, 65% of the world's population lived in these countries.
■ The developed countries and countries with economies in transition, referred to as Annex I 3
Parties to the U.N. Framework Convention on Climate Change, collectively exceeded their
1990 emissions level by 1.2% in 2000 and by 1.6% in 2002. However, if emissions of other gases
are included,Annex I emission levels, collectively, are below the 1990 level.Yet that achievement
masks great variations among the Annex I countries. Emissions in the economies in transition
declined steeply between 1990 and 2002 (i.e. -31%), while collectively the other developed
countries of Annex I have seen their emissions rise by 14%.
4
■ The public electricity and heat production sector was the largest contributor (i.e. 35%) to
world emissions in 2002 and its emissions have grown 33% since 1990. The transport sector
has become the second largest source (i.e. 24%) of energy-related CO2 emissions worldwide,
increasing 28% since 1990 as a result of rising demand for mobility as economies grow.
SUMMARY
The publication CO2 Emissions from Fuel Combustion contains statistics on CO2 emissions by sector 5
and by fuel from 1971 to 2002 for more than 140 countries and regions. It provides comparisons
between countries and regions made for selected indicators such as: CO2 emissions / GDP; CO2
emissions / population; CO2 emissions /total primary energy Supply; CO2 emissions / kWh from
electricity and heat generation. It also presents the evolution of CO2 emissions over the last
31 years, highlights regional and sectoral trends, looks at Key Sources as defined by the IPCC Good
Practice Guidance and Uncertainty Management in National Greenhouse Gas Inventories and
provides summary data for CH4, N2O, HFC, PFC and SF6.
A CD-ROM and an on-line service are available that provide the complete historical series from
1960 to 2002 for Annex II countries and from 1971 to 2002 for other countries.They also contain
a detailed sectoral breakdown of CO2 emissions for individual fuels.
REFERENCES
CO2 Emissions from Fuel Combustion, 1971-2002, IEA/OECD, Paris 2004
Energy Balances of OECD Countries, 2001-2002, IEA/OECD, Paris 2004
Energy Balances of Non-OECD Countries, 2001-2002, IEA/OECD, Paris 2004
55
1
DEALING WITH CLIMATE CHANGE:
DATABASE FOR POLICIES AND MEASURES
KEY MESSAGES
■ IEA member countries are multiplying initiatives to curb greenhouse gas emissions. Over
2
1000 energy-related policies and measures have been implemented or planned since 1999,
when the IEA began to collect and compile information on such actions.
■ While certain energy-related national climate change policies have been taken explicitly to
meet Kyoto objectives, others are the result of domestic efforts, independent of Kyoto.
SUMMARY
3
Since energy production and use is responsible for over 80% of human induced greenhouse
gas emissions, energy is at the heart of the climate change problem. “Dealing with Climate
Change” is a project which started in 1999 with the aim to collect and classify (by type, energy
source and sector) information on energy related policies and measures taken or planned to
reduce greenhouse gas emissions in IEA member countries. The database now contains over
1000 records from 1999 to 2004. All policies listed have been reviewed and endorsed by IEA
4 member countries.
Policy trends from the database show that member countries are adopting a portfolio of actions
in all economic sectors.These include fiscal measures and regulatory instruments, the development
of tradable permits systems, the use of voluntary agreements, the funding and support of research,
development and demonstration, as well as outreach measures.
5 With the recent entry into force of the Kyoto Protocol in February 2005, the database will
continue to grow in importance as a tool for decision-makers and policy experts, researchers and
scholars; but also as a source of comprehensive information to a broader public. This interactive
service is a searchable database and is accessible online.
REFERENCE
The database is accessible online at climate.iea.org
56
1
GREENHOUSE GAS EMISSIONS TRADING:
AN ENERGY VIEW
KEY MESSAGES
■ Emissions trading is a key element in international cooperation to limit greenhouse gas emissions
as it seeks to lower the cost of achieving emission goals. 2
■ Greenhouse gas emissions trading has been introduced to limit CO2 emissions from a range of
large fossil fuel-users in the European Union and CO2 markets give already a credible price
signal. Power generation accounts for more than 60% of emissions covered by the EU scheme.
It should alter the operation of existing capacities and affect future investment choices.
■ The impact of emissions trading on power generation and its overall cost-effectiveness hinge
eventually on the structure of power markets. 3
SUMMARY
In 1999 and 2002, the IEA conducted market experiments (simulations) with electricity industry
participants. They explored the implications of a CO2 “cap-and-trade” system on their business.
These experiments helped identify how a price on CO2 emissions would affect the behaviour of
power generators and how other policies (on renewables and nuclear) could influence generators' 4
CO2 compliance strategies.
A standard economic analysis indicates how merit order of power plants would change as a result
of CO2 prices, as well as the level at which new investment in cleaner technology would supersede
the operation of existing, more CO2-intensive, plants. A crucial element in this picture is the
extent to which electricity prices will reflect the full cost of holding allowances allocated for free.
The outcome hinges on the underlying structure of electricity markets - their level of development 5
and the degree of competition that they achieve - and on conditions for entry of new producers
under any CO2 cap-and-trade system. Uncertainty on future prices (coal, gas, electricity and CO2)
must also be taken into account.
These questions are relevant beyond the 25 countries of the EU: other regional initiatives seek to
introduce emissions trading as a policy to limit growth in CO2 emissions in power generation.
Eventually, linking these systems could broaden the cost-effectiveness potential of emissions trading.
REFERENCES
4th IEA-EPRI-IETA Annual Workshop on Greenhouse Gas Emissions Trading:
Domestic and International Issues, Paris, 3-4 October 2004
Emissions Trading and its Possible Impacts on Investment Decisions in the Power Sector,
IEA Paper, 2003
Towards International Emissions Trading: Design Implications for Linkages, IEA/ OECD
Paper, October 2002
International Emission Trading - From Concept to Reality, IEA/OECD, Paris 2001
Trading Greenhouse Gases outside Kyoto, IEA Paper, October 2002
57
1
COMPETITIVE IMPLICATIONS OF
EUROPEAN CO2 EMISSIONS TRADING
KEY MESSAGES
■ The implementation of the EU Emissions Trading Scheme (ETS) could have modest impacts on
2
the cost structure of most of the energy-intensive industries and power generators covered in
the scheme – non-cost aspects of competitiveness are more difficult to address. Local
circumstances, especially power prices, and openness to foreign competitors could of course
alter these conclusions. While aluminium is not included in the Scheme, it would be affected
through increasing electricity prices.
■ The currently free allocation of emission allowances, known as grandfathering, does minimise
3 the effects on companies' costs. As grandfathering is sometimes considered as a transitory
measure, a careful balance would have to be found to maintain low impacts on international
competitiveness, incentives to reduce CO2 emissions and to invest in innovative processes and
international market openness.
■ IEA analysis shows that foreign imports could increase their competitiveness in European
markets for some steel products and aluminium, in spite of freight costs and border tariffs.
4 ■ Overall, industry's ability to pass on the carbon cost to consumers is a critical and much
debated element in the assessment of the EU ETS effects on EU industry's competitiveness.
SUMMARY
The EU ETS is embedded in the broader regime created by the Kyoto Protocol, but applies only to
a subset of countries and industrial activities whose products, in some cases, face competition from
5 countries without emission constraints. Industrialists have been actively debating how much the EU
ETS would affect their competitiveness vis-à-vis the rest of the world.The IEA conducted a study to
shed light on the possible consequences of emissions trading for several industries – considering
both the direct and indirect costs associated with emissions trading, based on the assumption of an
average allowance price of €10 per tCO2 (which is in line with current price levels).
Electricity may be the only sector in a position to reflect part or all of the opportunity cost of
holding CO2 allowances – as opposed to the real financial cost. To what extent electricity prices
will rise as a result will be a major factor of the competitiveness picture for EU industrial activities.
This also has an effect on the Scheme's overall efficiency as a means to send a carbon price signal
to other activities throughout the economy.
REFERENCES
Industrial Competitiveness under the European Union Emissions Trading Scheme,
IEA Paper, November 2004
Emissions Trading and its Possible Impacts on Investment Decisions in the Power Sector,
IEA Paper, October 2003
58
1
ENERGY SECURITY AND
CLIMATE POLICY INTERACTIONS
KEY MESSAGES
■ As policy intervention progressively intensifies to address energy security and climate change
concerns, the potential for significant policy interaction is also likely to increase, highlighting 2
the need for greater policy integration.
■ The IEA developed proxy measures for various aspects of energy security that allow to quantify
the impact of other policy objectives, including climate change mitigation, on the evolution of
countries' energy security situation, hence facilitating policy integration.
SUMMARY 3
Historically, energy security has been the main driver of government action in the energy field.
Over the past two decades, climate change has progressively emerged as another important driver.
This has brought governments to give more attention to the need to adopt integrated approaches
to energy policy making, considering both security and climate concerns. Few efforts have gone
beyond a qualitative assessment of interactions between these policy drivers.
The IEA initiated work to assess whether a quantified approach can contribute to better 4
understand interactions between various energy policy objectives and eventually, be useful to
define policies that contribute effectively to multiple goals. The approach developed to quantify
policy interactions avoids the difficulties involved in assessing policy objectives in economic terms.
Rather, it relies on the observation of how proxy measures for energy security or climate change
would evolve under various policy scenarios (e.g. changes in power generation mix, changes in
transportation fuels, increasing diversity of international oil and gas supply, increase in domestic
supply, stronger energy efficiency measures).
5
Preliminary results show that such an approach allows a more systematic assessment of the
linkages between national circumstances (access to various countries' fossil fuel output, structure
of power generation) and the evolution of different policy drivers such as energy security and their
sensitivity to various energy policy choices, which would not have been possible with a qualitative
approach.
REFERENCE
Energy Security and Climate Policy Interactions: An Assessment Framework,
IEA Paper, December 2004
59
1
BEYOND KYOTO
KEY MESSAGES
■ Stabilising greenhouse gas concentrations in the atmosphere will require deep, worldwide cuts
in energy-related CO2 emissions. Global participation will be needed.
2
■ Market mechanisms, including the emissions trading framework initiated by the Kyoto Protocol,
provide financial incentives and improve the economic efficiency of countries' commitments.
They can be supplemented by improvements in existing technologies and developments in new
technologies to reduce emissions to acceptable levels.
■ Future commitments must be flexible enough to allow uncertainties in costs and benefits to be
incorporated into decisions on future emission pathways and concentration levels.
3
■ Options such as dynamic targets and/or non-binding targets for developing countries and
dynamic targets and/or “price caps” for industrialised countries could bring additional flexibility
while ensuring sustained efforts to protect the climate system.
SUMMARY
Mitigating climate change will require profound changes in world energy production and use.While
4
the full effects of climate change are not likely to be felt for decades, the need for action is more
immediate; increasing greenhouse gas concentrations are almost irreversible. Solutions exist in the
form of energy efficiency improvements, fuel switching to non-carbon sources and carbon capture
and storage. But the long-term costs of mitigation and the precise extent and pace of climate
damage remain uncertain. Policy-makers face the arduous task of conceiving and implementing
measures under uncertainty and run the risk of taking either excessive or insufficient action.
5 On-going work explores options for future climate policies by the countries that could drive the
necessary changes in world energy production and use. New options building on the emissions
trading framework initiated by the Kyoto Protocol could mitigate cost concerns arising from
uncertainties. Dynamic targets would allow adapting emission allowances to actual economic
performances. Non-binding targets would allow developing countries to sell emission allowances if
their actual emissions do not exceed their assigned amounts. Price caps would allow industrialised
countries to exceed their targets while help ensure that all reasonable efforts are made to abate
emissions.These options could help reconcile concerns for climate change mitigation with the urgent
and ongoing demand for the energy to fuel continued economic development.These approaches may
also serve as suitably differentiated building blocks for a post-Kyoto Protocol regime in which all
countries, both developed and developing, engage in next steps to combat the threat of global warming.
REFERENCES
Beyond Kyoto - Energy Dynamics and Climate Stabilisation, IEA/OECD, Paris, 2002
Evolution of mitigation commitments: Some Key Issues, IEA/OECD Paper,2003
Lessons from the Kyoto Protocol: Implications for the Future, International Review for
Environmental Strategies, 5.1, 2004
60
1
TECHNOLOGY AND CLIMATE POLICIES
KEY MESSAGES
■ Stabilising greenhouse gas concentrations in the atmosphere will require deep, worldwide cuts in
energy-related CO2 emissions.Technologies for a broad range of energy sources will be needed.
■ Policies that integrate externalities can generate moves towards more climate-friendly technologies.
2
■ Research, development and demonstration efforts play a crucial role in preparing new technologies
for the market.
■ Technology deployment programmes are important to accelerate market uptake and bring
down costs.
SUMMARY 3
Mitigating climate change and achieving stabilisation of greenhouse gas atmospheric concentrations
– the objective of the United Nations Framework Convention on Climate Change (UNFCCC) –
will require deep reductions in global energy-related carbon dioxide emissions.All technologies will
be needed: end-use energy efficiency improvements; switches towards less carbon-intensive fuels
and non-carbon emitting energy sources such as renewables and nuclear power; fossil fuel use with
carbon dioxide capture and storage. Besides R&D efforts, adequate policies, regulations, legislation 4
and economic tools will be needed.
Policies specifically designed to promote technical change or “technology push” could play a critical
role in making available and affordable new energy technologies. However, such policies would not
be sufficient to achieve the Convention's objective in the absence of broader policies. First, because
there is a large potential for cuts that could be achieved in the short run with existing technologies;
and second, the development of new technologies requires a “market pull” as much as a technology 5
push. Learning-by-doing processes linked to early deployment of not-yet fully mature technologies
would speed their wide dissemination on the markets.
International energy technology collaboration and transfer can play a prominent role in promoting
technological change. Such collaboration is gaining increasing support. Advantages of collaboration
may consist of lowering R&D costs and stimulating other countries to invest in R&D. A number
of options might be considered to strengthen international energy technology collaboration.
On-going work aims at investigating past and recent experiences in international technology
collaboration, including transfer to developing countries, and draws lessons from successes and
failures to better shape future international collaboration in this field.
REFERENCES
Technology Innovation, Development and Diffusion, IEA/OECD Paper, Paris 2003
International Energy Technology Collaboration and Climate Change Mitigation,
Information Paper, Annex I Expert Group, Paris 2004
International Technology Collaboration Case Study: Concentrating Solar Power
Technologies, IEA/OECD Paper, Paris 2004
Energy Technologies at the Cutting Edge, IEA/OECD, May 2005
61
1
EMISSIONS REDUCTIONS
THROUGH PROJECT-BASED ACTIVITIES
KEY MESSAGES
■ Project-based mechanisms, such as the Kyoto Protocol's Clean Development Mechanism
2 (CDM) and Joint Implementation (JI) as well as domestic offsets, are market-based instruments
providing incentives to mitigate greenhouse gas (GHG) emissions from individual projects.
They are voluntary in nature and contribute to increasing the supply of credits.They thus need
to be linked to another instrument, such as an emissions trading scheme, which recognises
the projects' credits towards compliance with a GHG objective. Such linking can enhance
compliance options and improve market liquidity, but may require implementing accounting and
compliance management solutions.
3
■ The estimated market potential of the CDM in 2010 is a credit demand in the order of 250 Mt
CO2e at a price of $11.00/tCO2e. Key factors affecting the market for CDM credits include
Russia's and Ukraine's strategic behaviour in the GHG market, buyer governments' preferences
for CDM credits, the capacity of the CDM institutions and, critically, a signal that post-2012
emission reductions have a market value.
■ Guidelines for project-based mechanisms can be standardised. Standards can be set for baseline
4 calculation methodologies which can promote consistency, limit the opportunities for gaming
(selecting advantageous baselines) and reduce transaction costs.
SUMMARY
GHG emissions trading schemes typically do not cover all GHG emissions and sources. Project-
based mechanisms can provide additional incentives to look for more cost-effective GHG
mitigation possibilities. The success of all credit trading regimes depends on clear rules: technical,
5 methodological and administrative processes that ensure credits are awarded to projects in a fair,
consistent and transparent manner. One of the principal challenges in awarding credits for
GHG mitigation projects is setting emission baselines.These are the best estimates of what would
have occurred in the absence of a project. Credits are then calculated as the difference between
emissions of the project and its baseline.
The IEA has studied a number of project-based activities in the energy sector (electricity, CO2
capture and storage, transport, upstream natural gas and energy efficiency).The findings contribute
to the development of baseline guidance, which balance criteria of environmental integrity, low
development cost, transparency and a reasonable degree of crediting certainty.
REFERENCES
Linking Project-based Mechanisms with Domestic Greenhouse Gas Emissions Trading
Schemes, IEA/OECD Paper, 2004
Road-Testing Baselines for Greenhouse Gas Mitigation Projects in the Electric Power
Sector, IEA/OECD Paper, 2002
Estimating the Market Potential for the Clean Development Mechanism – Review of Models
and Lessons Learned,World Bank/IEA/International Emissions Trading Association Paper, 2004
Emissions Reductions in the Natural Gas Sector through Project-Based Mechanisms,
IEA Paper, 2003
62
1
ENERGY IN
THE WIDER WORLD 2
■ THE PRODUCER-CONSUMER DIALOGUE
■ ENERGY AND DEVELOPMENT 3
■ RUSSIAN ENERGY POLICY DEVELOPMENTS
■ RUSSIAN ELECTRICITY REFORM
■ ENERGY EFFICIENCY IN TRANSITION ECONOMIES 4

■ DISTRICT HEATING POLICY IN TRANSITION ECONOMIES
■ ENERGY REFORMS IN THE BLACK SEA/SOUTH EAST EUROPE

REGION
■ CHINA’S QUEST FOR ENERGY SECURITY 5
■ CHINA’S CHALLENGES IN DEVELOPING ITS GAS MARKET
■ INDIA’S QUEST FOR ENERGY SECURITY
■ GAS IN INDIA
■ WORKING WITH SOUTH EAST ASIA ON OIL SECURITY AND

EMERGENCY PREPAREDNESS
■ ELECTRICITY AND GAS SECTOR REFORMS IN BRAZIL
■ TOWARDS AFRICAN ENERGY INFORMATION SYSTEMS
■ AFRICAN ENERGY – IN-DEPTH REVIEW OF ANGOLA’S ENERGY

SECTOR
63
ENERGY IN THE WIDER WORLD
1
THE PRODUCER-CONSUMER DIALOGUE
KEY MESSAGES
■ The Producer-Consumer Dialogue remains an essential part of IEA outreach activity.
■ The IEA played an important role in establishing the International Energy Forum Secretariat in
2 Riyadh and will continue to support its development via its membership of the Executive Board.
■ The Joint Oil Data Initiative (JODI) has been further commended by ministers at the 9th IEF
Meeting (Amsterdam) and quoted as one of the best and most concrete examples of the
achievement of the Producer-Consumer Dialogue.
■ At the December 2004 meeting of the Executive Board of the IEFS, board members agreed
that the IEFS should be more involved in the JODI. In January 2005, the IEFS organised an
3 inter-organisational JODI meeting in Riyadh and took over the co-ordination of the initiative.
SUMMARY
The IEA has long fostered its involvement in the Producer-Consumer Dialogue and sees this as an
essential part of its outreach activity. Interaction takes place at different levels.
4 Since its inception, the Dialogue has become increasingly successful in balancing the interests of
both producing and consuming nations and allowing for a better exchange of views on all energy-
related issues. Part of the successfully resolved items is the recognition of stable and well-supplied
oil markets and the need for transparency. One of the key achievements of the Dialogue is the JODI
exercise, the co-ordination of which will be taken by the International Energy Forum Secretariat
(IEFS). The IEA has been actively involved in the establishment of the IEFS and is a non-voting
member of its Executive Board.
5
On a more distributed level, the IEA-sponsored Energy Experts Group remains a platform for
debate, addressing policy issues at the academic, technical and policy development level. It
continues to be an essential link in the Dialogue as it explores topics of immediate consequence
and maximises direct interaction among participants. Typically, no press representatives are
admitted and discussions remain off-the-record under “Chatham House” rules. Both the Joint Oil
Data Initiative and the future role of the International Energy Forum and its new Secretariat have
become an intrinsic part of a formal Dialogue.
The last experts meeting was held on the 5th and 6th February 2004 in Bangkok, Royal Kingdom of
Thailand.The Secretariat decided to take the 2-day meeting to Asia in co-operation with the Royal
Government of Thailand in order to ensure a broader turnout of Asian representatives and bring
global focus to some of the key energy issues affecting this fast developing region.
64
1
ENERGY AND DEVELOPMENT
KEY MESSAGES
■ Many countries have established a virtuous circle of improvements in energy infrastructure and
economic growth. But in the world’s poorest countries, the process has barely got off the
ground. 2
■ Almost 1.6 billion people in developing countries did not have access to electricity in their
homes in 2002, representing a little over one-third of world population. The World Energy
Outlook 2004 concluded that the total number of people still without electricity will fall only
slightly, to just under 1.4 billion in 2030.
■ It is unlikely that the UN’s Millennium Development Goal for poverty-reduction will be
achieved unless access to electricity is dramatically increased. 3
SUMMARY
Energy is a prerequisite to economic development and also helps to meet such basic human needs
as food and shelter. It contributes to social development by improving education and public health.
Electricity plays a particularly important role in human development. Most developed countries
have found ways to harness energy to create a virtuous circle of economic growth and human 4
development. But in the world’s poorest countries, the process has barely got off the ground.
The World Energy Outlook 2004 found that electrification rates are set to rise, but the total
number of people still without electricity will fall only slightly, from 1.6 billion in 2002 to just
under 1.4 billion in 2030.The ranks of the electricity-deprived will fall in Asia, but will continue to
swell in Africa. The number of people using only traditional biomass for cooking and heating in
unsustainable ways will continue to grow. 5
IEA analysis suggests the UN’s Millennium Development Goals aim to reduce by 50% the
proportion of people living on less than a dollar a day between 2000 and 2015 will not be met
unless access to electricity can be provided to more than half-a-billion people who, according to
our Reference Scenario, will still lack it in 2015.
Governments must act decisively to accelerate the transition to modern fuels and to break the
vicious circle of energy poverty and human under-development in the world’s poorest countries.
This will require increasing the availability and affordability of commercial energy, particularly in
rural areas. Good governance in the energy sector will be critical to improving both the quantity
and quality of energy services. The rich industrialised countries have economic and security
interests in helping developing countries along the energy-development path.
REFERENCES
World Energy Outlook 2004, IEA/OECD, Paris 2004 (Chapter 10: Energy and Development)
The Developing World and the Electricity Challenge Workshop, IEA, Paris, January 2005
65
1
RUSSIAN ENERGY POLICY DEVELOPMENTS
KEY MESSAGES
■ The IEA monitors Russian energy developments and is concerned about increasing state
control through inefficient state monopolies.
2 ■ Recent events raise questions about the nature of the Russian commitment to competition
and market reform of the energy sector.
■ Whether Russia plays a significant role in the future as a key oil and gas exporter depends on
the political will to pursue reforms to attract the necessary investment and ensure competition.
■ Improving energy efficiency will be a critical step towards coping with increasing energy
demand in Russia. Removing energy subsidies and raising internal prices so that they cover
3 costs is a key to enhancing energy security within Russia and beyond its borders.
SUMMARY
After five years as the centerpiece of growth in non-OPEC oil, the outlook for Russian oil
production growth is dimming. Investors become wary and the outlook for medium term export
capacity constraints begin to bind. Although Russia has kept increasing export capacity in line
4 with production growth, private oil companies are becoming more vocal as to the lack of efficient
location of this new capacity – and the need to diversify export markets. A final decision on new
major export capacity to the North or East is hotly debated within the Russian government.
The need to ensure that an eastern pipeline will be filled to ensure its economic return will demand
improvements in Russia’s legal, fiscal and regulatory regimes to be able to attract investment to
ensure exploration and greenfield development in Eastern Siberia.
5 On the natural gas side, instead of seeking to enhance upstream competition in Russia, the
government has used its monopoly position to extract favourable gas supply from Central Asian
countries. It thus stifled competition between independent gas producers through its control of
pipeline infrastructure and expanding into the downstream sectors of Central and Eastern Europe.
The IEA doubts that this strategy is compatible with reform and greater competition in European
energy markets and ultimately whether it is in the best interest of European energy security.
It is obvious that growing European imports of Russian oil and gas are counter-balanced by Russian
reliance on oil and gas revenues. Both sides would be better served by market reforms within the
Russian energy sector that would ensure timely investments and diversity of suppliers. The IEA
believes that the only way forward for an energy-secure future for both Russia and OECD Europe
is through meaningful market reform and real competition across Eurasian markets. In the interim,
public policy makers need to be alert to the market power of Russian state monopolies.
REFERENCES
Russia Energy Survey 2002, IEA/OECD, Paris 2002
World Energy Outlook 2004: Russia - An In-depth Study, IEA/OECD, Paris 2004
Energy Sector Reform and Investment Needs to Secure the Russian-European Energy
Partnership, EuroFuture, p. 91, Spring 2005
66
1
RUSSIAN ELECTRICITY REFORM
KEY MESSAGES
■ The Russian government is pursuing a strategy of high economic growth and recognises the
central role the electricity sector has to play.
2
■ It has embarked on an ambitious programme of electricity reform, which will have to create
market structures and market rules to succeed and a regulatory framework that will foster
competitive wholesale and retail electricity markets. It will also have to deal with sensitive social
issues related to the removal of cross subsidies.
■ A key to the success of competitive markets will be strong and independent regulators.
SUMMARY 3
In spring 2005, the IEA released its book Russian Electricity Reform: Emerging Challenges and
Opportunities. The book focuses on key aspects of the proposed reform. It also raises concerns
about the need for complementary reforms in the Russian natural gas sector. Only competitive
markets based on transparent prices that reflect costs can deliver the efficient, reliable and
internationally competitive performance needed to meet the government’s economic targets. Such
markets are essential to attract new investment required to ensure security of electricity supply 4
after 2010. A competitive market structure with diverse ownership and a strong transmission
network linking major centers of generation and load will provide the best means of ensuring
efficient market outcomes. Russia’s costly experience in privatising its oil sector during the early
1990s provides a sharp reminder of the potential dangers of this process.
A key to the success of competitive markets in electricity and eventually other parts of Russia’s
energy sector will be strong and independent regulators that can establish access to monopoly 5
products and services on fair and reasonable terms for all market players.The IEA is concerned about
the lack of resources and independence of regulatory bodies in Russia, given their crucial role to avoid
market power abuse in the face of powerful vested interests and dominant players such as Gazprom.
The Russian government’s recognition that tariff rebalancing and removal of cross-subsidies are
necessary pre-conditions for the successful introduction of market reforms is reassuring. It plans to
use this period to gradually raise regulated tariffs to levels consistent with the delivered price of
electricity sourced through the competitive market. The recent public backlash against charging for
certain public services demonstrates the importance of getting this balance right.
The IEA commends the Russian government on its efforts to embrace this electricity reform – a key
element critical to meeting the challenges of strengthening economic performance and energy security.
REFERENCES
Russian Electricity Reform - Emerging Challenges and Opportunities, IEA/OECD, Paris 2005
OECD Regulatory Reform Review of Russia, OECD, Paris 2005 (Electricity Chapter produced
by the IEA)
Energy Sector Reform and Investment Needs to Secure the Russian-European Energy
Partnership, EuroFuture, p. 91, Spring 2005
67
1
ENERGY EFFICIENCY IN TRANSITION ECONOMIES
KEY MESSAGES
■ The energy efficiency potential in Transition Economies remains significant despite intense
economic restructuring and energy reforms.
2 ■ High energy intensity and consumption, combined with energy price increases, impose high
burdens on households and businesses.
■ Governments should make energy efficiency a higher policy priority and allocate adequate
resources to energy agencies and action plans.
■ This effort will pay for itself thanks to the large and multiple benefits of energy efficiency.
3 SUMMARY
Energy intensity (tonne of oil equivalent per unit of GDP) and unit consumption ratio (toe/t of
product) in Transition Economies (TE) are, despite clear progress during the last decade, still much
higher than the Western Europe average.This, combined with energy price increases towards energy
cost recovery, has imposed a heavy burden on household revenues (15-20% in Central Europe and
the Baltics and 25-50% in South East Europe and in the Commonwealth of Independent States).
4 The economic potential for energy savings in these regions exceeds 20% and 30-50%, respectively.
In district heating alone, savings in natural gas per year through better heat generation could save
the amount of gas consumed in Germany. Even more savings are available through improvements
in distribution and buildings.
If TE governments wish to reach their objectives of energy performance convergence with
Western Europe, they should make energy efficiency a higher policy priority in energy and other
5 state policies (e.g. housing, transport), develop robust multi-sectoral action plans and allocate
sufficient resources to energy agencies.This win-win strategy will improve business competitiveness,
increase consumers’ welfare, create value and local jobs and increase energy security. It will also
generate environmental benefits through reduced emissions of greenhouse gases and local air
pollutants and reduces the need for investment in energy infrastructure, shifting activities to more
sustainable directions.
REFERENCES
Energy Efficiency in Transition Economies: A Policy Priority, IEA/OECD Paper, December 2004
Central and Eastern European Countries Appliance Policy Workshop,Turin,
September 2003 (www.ceecap.org)
Policy Initiative on District Heating in EITs:
Coming in from the Cold - Improving District Heating Policy in Transition Economies, IEA/OECD,
Paris 2004 (also available in Russian)
Regional Round Table Workshop, IEA, Paris, December 2002
District Heating Policy in Transition Economies Workshop, Prague, February 2004
Oil Crises & Climate Challenges - 30 Years of Energy Use in IEA Countries, IEA/OECD, Paris 2004
IEA Demand-Side Management Programme (http://dsm.iea.org/)
68
1
DISTRICT HEATING POLICY
IN TRANSITION ECONOMIES
KEY MESSAGES
■ District heating is a critical energy source for economies in transition as it covers about sixty
2
percent of their heating and hot water needs.
■ If properly managed, district heating can have significant environmental, economic and social
benefits for consumers and substantial efficiencies for governments.
■ Well-designed policies can help to improve the quality and efficiency of district heating services,
simultaneously enhancing their long-term sustainability.
3
SUMMARY
The IEA launched a District Heating Initiative for transition economies in 2002, which involved two
international conferences, discussions and briefs on national district heating policy and the publication
Coming in from the Cold - Improving District Heating Policy in Transition Countries in English and Russian.
District heating can play a significant role in improving energy security and reducing or stabilising
carbon emissions in Central Europe and the former Soviet Union.With a stronger policy framework, 4
improvements in heat generation using available technology could save 80 billion cubic meters (bcm)
of natural gas per year. This nearly equals the annual gas consumption of Germany. Improved
efficiency in distribution systems and buildings would yield even greater savings. Reforming district
heating in major energy producer or transit nations like Russia and the Ukraine can therefore have
broad benefits for energy security in the region and Western Europe.
Nevertheless, many district heating systems in transition economies face serious problems because
of inadequate policy frameworks. Key challenges are the imbalance between supply and demand, 5
inefficiency, the lack of customer focus, the loss of market share and huge investment needs.
To address them, clear and coherent policy is needed.
There are two policy approaches for balancing supply and demand and addressing other problems
of district heating: introducing competition or improving regulation.There are, however, important
prerequisites, such as social support programmes, eliminating producer subsidies, enforcing
payment discipline, installing meters and controls and promoting demand-side energy efficiency.
To make district heating sustainable, governments need to integrate it not only into their energy
policies, but also into their general national policy agendas because there are important links
between district heating and economic, environmental, social, housing and privatisation policies.
Well-designed and implemented district heating policies can help unleash reforms in many sectors,
from electricity to natural gas to social welfare.
REFERENCES
Coming in from the Cold - Improving District Heating Policy in Transition Economies,
IEA/OECD, Paris 2004 (also available in Russian)
Conference on District Heating Policy in Transition Economies, Prague, 22-23 February 2004
Workshop on District Heating Policy in Transition Economies, Paris, 16-17 December 2002
69
1
ENERGY REFORMS IN
THE BLACK SEA/SOUTH EAST EUROPE REGION
KEY MESSAGES
■ An efficient energy infrastructure is vital for economic recovery and for the stability of the
2 Black Sea/South East Europe region.
■ Based on the experience of Central Europe and the Baltics, South East European governments
must devise sound new energy and environmental policies and progressively separate their
policy functions from regulatory enforcement and the operation of energy companies.
■ They need to establish the necessary institutions to design, implement and monitor policies and
promote good governance, essential to effective reform.
■ The donor community should continue to support market reforms, especially through
3 institutional capacity building and should only fund large rehabilitation projects once economic
assessment instruments are operational.
SUMMARY
In the transition process of Central Europe and the Baltics, the role of governments has proved to
be essential in developing energy policies and long-term strategies and in creating the appropriate
4 institutions to implement sustained and gradual market reforms and sectoral policies for energy
security and efficiency. Unfortunately, this process has not yet spread into the Black Sea region and
South East Europe, in particular in the Western Balkans and South Caucasus.To date, international
donors have focused mainly on large-scale electricity infrastructure projects, early market
liberalisation and integration and cross-border projects with insufficient commercial support.
A comprehensive country strategy is needed to achieve effective reform. It must include energy
demand forecasts based on reliable data and least-cost plans for investment. Regulatory reforms
5 and a demand-side approach by independent and strong institutions are needed to address the
imbalances and high energy intensity of the final consuming sectors and create market conditions.
The restructuring of the energy sector should orientate companies towards customer services and
prepare conditions for competition. Regional co-operation and country ownership of the reform
process are vital to ensuring effective and sustained reforms as well as convergence among these
countries to permit regional integration in the medium term and to develop new oil and gas routes
from the Caspian and Gulf regions to Europe.
REFERENCES
Natural Gas in South East Europe - Investment,Transit,Trade Seminar, Istanbul, May 2004
Energy Policies and Statistics in Transition Economies Seminar, Sofia, October 2003
Caspian Oil and Gas Scenarios Seminar, Florence, April 2003
Institutional Aspects of Energy Market Reforms - New Energy Policies for South East
Europe Seminar, Rome, March 2003
Oil and Gas Transit Projects in Economies in Transition - Overview of the Black Sea
Region, IEA Paper, 2003
Energy Policy in South East Europe: Developments and IEA Contribution, IEA Paper, 2003
Regulatory Authorities in South East Europe, IEA/ OECD Paper, 2003
What Energy Policy for South East Europe? - Article in Public Service Review, EU 2003
70
1
CHINA'S QUEST FOR ENERGY SECURITY
KEY MESSAGES
■ China is the world's second largest energy consumer and became the second largest oil
consumer in 2003. It is the largest oil importer outside the IEA, and relies on imports for 40 %
of total demand. A strengthened energy security co-operation benefits both China and IEA 2
member countries.
■ Energy security is at the top of China's energy policy agenda. In addition to its worldwide effort
to diversify its sources of oil and to acquire upstream interests, the Chinese government
decided in 2001 to build emergency oil stocks.
■ Energy security co-operation is at the core of the IEA's relationship with China.
3
SUMMARY
China is the world's second largest consumer of oil after the United States.A net oil importer since
1993, China now imports 40% of its oil, of which some 60% comes from the Middle East. IEA data
show that Chinese oil demand has grown by an average 13% a year in 2003 and 2004.This, together
with its economic growth rate, ranks China as the fastest growing oil consumer in the world.
4
The IEA projects China's total oil demand will more than double from 6.4 million barrels per day
(mb/d) in 2004 to over 13 mb/d in 2030. Most of China's additional oil will have to be imported
and net imports under this scenario would rise from 2.3 mb/d in 2004 to 4.5 mb/d in 2010 and
10.5 mb/d in 2030. This would increase China's dependency on imported oil from the current
level of 40% to about 75% within the next twenty five years.
Although Chinese projections of future oil import dependency are lower than those of the IEA, 5
Chinese policy-makers and researchers recognise that the country's oil import dependency will
rise irreversibly.And this will occur within the regional context of Northeast Asia, where Japan and
Korea already import virtually all their oil, mainly from the Middle East. Consequently, oil supply
security has become a top energy policy issue. In March 2001, the Chinese government decided to
build emergency oil stocks under the country's 10th Five-year plan for the period 2001-2005.Work
on this has begun. China also recognises that no country, however powerful, can ensure its energy
security alone and acknowledges the importance of international co-operation.
Energy security is at the core of the IEA's co-operative relationship with China.A number of activities
have been successfully completed, aimed at assisting China to develop its emergency oil stock systems
and eventually developing links between China's energy security system and the IEA's global scheme.
REFERENCES
Joint IEA-China Seminar on Energy Modelling and Statistics, Beijing, 20-21 October 2003
Oil Stockpile Site Visits (France,The Netherlands, Germany) with a delegation of
10 Chinese experts, October 2004
Emergency Response Simulation Exercise (ERE3), with participation of 4 Chinese experts,
November 2004
71
1
CHINA'S CHALLENGES IN DEVELOPING
ITS GAS MARKET
KEY MESSAGES
■ China has developed an ambitious plan to grow its gas market. It faces a number of important
2 challenges that go far beyond the gas sector; they require policies affecting the national energy
sector as a whole.
■ China has taken significant steps to expand gas use. The West-East pipeline is now operating
commercially (one year ahead of schedule) and 2 LNG import terminals are under construction,
with a host of others under consideration.
■ The bottleneck lies downstream. In most parts of China, gas will find it hard to compete against
3 coal in power generation. In local gas distribution, much needs to be done to create a gas
distribution network, to improve the financial health of local distribution companies and to
introduce commercial marketing and management.
■ Strong policy drivers will be needed. They include reform of gas pricing and taxation policy,
strong application of environmental regulations and the associated economic instruments, a
favourable legal and regulatory framework, effective mobilisation of financing sources and a
clear gas policy statement.
4
SUMMARY
Natural gas is increasingly viewed as the fuel of choice in China, as coal, which provides 70% of the
country's energy needs, causes serious local air pollution. The target is to double the share of
natural gas in China's total primary energy supply by 2010 from the current level of 3%, and to build
a well-interconnected national gas supply network by 2020 from today's fragmented system. Some
major gas infrastructure projects have been launched to support ambitious gas growth targets in
5
the country for the next five years and beyond.
But meeting these targets is problematic: China is not endowed with abundant gas reserves. Its
available gas reserves are located far from demand centres, requiring the construction of long-
distance pipelines. Gas prices are relatively high compared to international prices and China does
not have any domestic manufacturing capacity for gas turbines or combined-cycle gas turbines
(CCGT).The skills and knowledge on how best to develop the gas market are also missing. On the
contrary, coal is cheap as China has abundant coal reserves. It also has considerable manufacturing
capacity in coal-burning technologies such as coal-fired industrial boilers or power plants.
To develop a sizeable gas market, China must take some strong energy policy actions, starting with the
reform of gas pricing and taxation policies. It also needs to establish a set of indispensable elements
for the development of a modern gas industry. These include technical norms, standards for health,
safety and environment, training of technical and commercial gas professionals and gas technology
research and development ability. Financing sources must be mobilised, a legal framework established,
foreign investment is needed, environmental protection must become a real driver for gas market
development and China needs to develop a coherent gas policy within the country's energy policy.
REFERENCE
Developing China's Natural Gas Market - The Energy Policy Challenges, IEA/OECD, Paris 2002
72
1
INDIA'S QUEST FOR ENERGY SECURITY
KEY MESSAGES
■ India is becoming a major player in the international oil and gas industry and is willing to take
on the political and financial risks inherent in overseas investments.
2
■ Even with equity-oil contribution towards meeting domestic demand by 2020, India will remain
an influential force on the international oil market.
■ Strategic oil stocks for 15 days of import coverage are supposed to be in place by late 2007.
SUMMARY
India currently imports 70% of its oil and this share is expected to pass 90% by 2030. India began 3
importing gas in 2004 and is projected to reach an import dependency of almost 40% in 2030. India
has adopted a four pronged approach to energy security. It comprises import source diversification
and acquisition of equity oil, strategic oil stocks, increased domestic exploration and production
and fuel diversification.
Since 2002 several major gas finds have been made that have the potential to fundamentally alter
India’s gas supply and demand balance and to supplement the countries dwindling oil reserves.At the 4
same time, Indian oil and gas companies are encouraged to invest overseas and to build strong
relations with strategically important countries. India aims to produce 20 million tons of equity oil
by 2010 and 60 million tons by 2025 when domestic consumption could reach 250 million tons.
Since 2001 India has closed 14 overseas upstream deals in nine countries, seven of which in 2004
alone. In addition, India has agreements on energy cooperation with several countries, and a number
of mega-deals are under discussion.The country apparently seeks niche markets where it can leverage
its expertise and where global oil companies more sensitive to political considerations fear to tread. 5
Energy security is also emerging as a new cornerstone of India’s foreign policy. By improving ties
with resource rich countries, India hopes to enhance its energy security while at the same time
cementing its status as a regional economic powerhouse and its standing in the global political
landscape.
In early 2004, the Indian cabinet approved a plan for the establishment of strategic oil stocks to
provide an emergency response mechanism against short-term supply disruptions.The government
had consulted with the IEA since 2000 in preparation of its proposal and has declared its intention
to adopt IEA standards for strategic oil stock deployment.
REFERENCES
IEA-India Joint Workshop on Emergency Oil stocks, New Delhi, India, January 2004
Asian Oil Outlook and Challenges at the Roundtable of Asian Ministers on Regional
Cooperation in the Oil Economy, Presentation by IEA Deputy Executive Director,
New Delhi, India, January 2005
73
1
GAS IN INDIA
KEY MESSAGES
■ Gas has emerged as the most dynamic energy sector in India, and the medium to long-term
outlook is positive.
2
■ Significant challenges lie ahead to translate the huge potential of India’s gas sector into reality.
■ The challenges faced require a strong commitment by all sector players.
SUMMARY
India has recently entered a new era in its gas industry with large discoveries of indigenous gas and
3 the arrival of the first liquefied natural gas (LNG) tanker in 2004.The importance of gas in India’s
energy mix is expected to increase sharply from 7% of total primary energy supply (TPES) in 2000
to 13% by 2030. In the same year, import dependency on gas will reach almost 40%. In order to
meet the projected consumption, investment needs of about $44 billion between 2001-2030 are
projected. Over 60% of India’s gas will be consumed by the power and fertilizer sectors.
Compressed natural gas (CNG) consumption for vehicles is expected to reach 5% of total
consumption in 2010 and India has ambitious plans for a city gas project.
4
India will continue to depend on importing LNG in the short- to medium term to close its demand
gap. Capacity of India’s only operating LNG terminal is expected to double in 2005 and two more
LNG terminals are expected to become operational within the next two years.
India is theoretically well placed to import gas via pipeline from either its Eastern or Western
border. Initial negotiations are underway for two pipelines, one from Iran via Pakistan and the
5 second from Myanmar via Bangladesh. India needs to almost triple its existing pipeline capacity over
the next five years in order to connect the new LNG terminals with consumers and to allow gas
transport from the recently discovered sites.
India is facing three major challenges on its way to become a sophisticated gas economy: lack of
sufficient transmission infrastructure, lack of a coherent legal and regulatory framework, and
questions about the affordability of gas. This could be an obstacle to stimulate further private
investment and to move ahead with cross-border gas deals.
Questions about the ability-to-pay for gas in different sectors of the economy and the urgent need
for pricing reform in the gas and power sector are major concerns. The key challenge for rapid
development of the gas sector is the capacity of Indian power generators to pay market-based gas
prices which in turn depends on vigorous implementation of power sector reform.
REFERENCES
World Energy Investment Outlook 2003, IEA/OECD, Paris 2003
Special Address: Inaugural Session delivered by IEA Executive Director at Second Asia
Gas Buyers’ Summit, Mumbai, India, February 2004
74
1
WORKING WITH SOUTH EAST ASIA ON
OIL SECURITY AND EMERGENCY PREPAREDNESS
KEY MESSAGES
■ SE Asia is becoming increasingly dependent on oil imports, predominantly of Middle East origin.
■ ASEAN’s reliance on tortuous and congested transit routes such as the Straits of Malacca and
2
the highly contentious South China Sea, compounded with the region’s limited oil emergency
preparedness makes it particularly vulnerable to oil supply disruptions.
■ Some ASEAN nations are institutionalising comprehensive oil emergency response systems.
Others are moving slowly in this direction.
■ ASEAN interaction with the IEA is positive and close.The IEA recognises the long term nature
of this work. 3
SUMMARY
Having engaged with the 10 countries of the Association of SE Asian Nations (ASEAN) on oil
security and emergency response since 2000, the IEA undertook an intensive three part
programme with ASEAN and the ASEAN Council on Petroleum (ASCOPE) over 2003-2004,
with very positive results. The intensive engagement and hands-on interaction resulted in close
exchanges on response systems and strategic stockpiling, and hands-on ASEAN visits to European 4
emergency operations centres.ASEAN is active in the Joint Oil Data Initiative, and the foundations
are laid for ASEAN statistician’s training and IEA-ASEAN crisis consultation.
ASEAN recognises the risks of oil supply disruptions and is fully aware of the negative impacts they
could have on its fast developing economies.This realisation has resulted in policy changes in some
countries. In Cambodia, a ‘Law on Petroleum’ is being formulated which will likely include mandatory
emergency supply provisions, and the Philippines and Thailand are implementing comprehensive
strategies involving central operations centres, mandatory company stocks and feasibility studies of
5
strategic stockholding options.ASEAN is also developing an interim Standard Operating Procedure
for regional crisis consultation and co-ordination and an Energy Security Communication System.
Furthermore, feasibility studies into strategic stockpiling options for Myanmar and Vietnam and
possibly others are planned.
While some ASEAN countries may not emulate the IEA response systems, they have close
interaction with the IEA and will enhance their systems as their economic development and import
vulnerability increases. An ongoing programme of IEA-ASEAN engagement is being developed,
including an “International energy data and emergency oil data methodologies” statisticians’ training
programme and a network for crisis information exchange and response harmonisation. Other
activities include bilateral/regional workshops addressing specific ASEAN priorities and ASEAN
participation in the IEA’s “Emergency Response Exercise 4”, 2006.
REFERENCES
Oil Security and Emergency Preparedness Workshop and Associated Site Visits, Paris,
September 2003
Oil Supply Disruption Management Workshop, Siem Reap, April 2004
Emergency Response Exercise 3, Paris, October 2004
See: http://www.iea.org/Textbase/subjectqueries/nmc/southeastasia.asp
75
1
ELECTRICITY AND GAS SECTOR REFORMS
IN BRAZIL
KEY MESSAGES
■ Over the past 15 years, energy policy reforms in key Latin American countries have achieved
2
mixed success, often influenced directly by domestic political, social and economic instability.
■ In Brazil, enormous challenges remain to ensure secure, clean and affordable energy access.
■ The creation of a stable investment environment is important to guarantee the expansion of
Brazil’s energy sector, as well as the implementation of demand-side policy measures to
promote an efficient use of energy.
3
SUMMARY
In the 1990s, the Cardoso administration introduced liberal reforms including privatisation,
unbundling and the establishment of independent regulators. At the same time, however, the
Cardoso administration had to face macroeconomic instability, implementation delays and a
prolonged drought leading to an electricity crisis in 2001.
4 In March 2004, Brazil’s Lula da Silva administration approved the New Electricity Model in its
attempt to strengthen supply security, increase competition and rationalise regulation in order to
attract more investment. This model requires the total unbundling of generation and distribution
and establishes two contracting environments: one is regulated (a “Pool”) and the other one free.
Furthermore, the New Electricity Model tries to clearly define the attributions and responsibilities
of the existent institutional agents. It restores planning and granting powers to the Ministry of
5 Mines and Energy; and it creates three new bodies: the Energy Research Enterprise, the Power
Energy Trading Chamber, and the Electricity Sector Monitoring Committee.
The Brazilian government is working on a New Natural Gas Model. However, its main features are
still unknown. Currently, there is no specific Natural Gas Law.
Despite controversy, a reform of the regulatory agencies is also underway. This reform involves
sectors such as oil, natural gas, water, telecommunications and transport, and the respective law
would require the conclusion of management contracts between the regulator and its relevant
ministry.
The Public-Private Partnership Law was published in December 2004. This makes joint public-
private investments in infrastructure possible, in sectors such as energy, telecommunications or
transport.
REFERENCES
Electricity and Gas Sector Reforms in Brazil Seminar, Rio de Janeiro, Brazil,
September 2004
76
1
TOWARDS AFRICAN ENERGY INFORMATION
SYSTEMS
KEY MESSAGES
■ In July 2001, African Heads of State agreed in Lusaka, Zambia, to create the African Energy
Commission (AFREC).
2
■ In 2004, although AFREC has still to be formally ratified, the Commission was established in Algiers.
■ One of the priority missions of AFREC is to build an African energy information system to feed
the analysis of the energy situation in Africa.
■ To complement the top-down approach of AFREC, several bottom-up programmes on national
energy information systems have been launched.
3
■ One of the programmes, supported by the Institute of Energy of Francophonie (IEPF), has
now entered a second phase in which three additional countries have been selected for the
establishment of a national energy information system.
SUMMARY
Regional energy networks around the world are helping to integrate gas and electricity, harmonise 4
prices and regulatory regimes and to improve investment regimes in order to attract foreign
capital. These networks are underpinned by well-functioning and effective energy information
systems. Africa is the only region with no such regional network. This is even more significant for
Africa, given the size of national markets and the need for regional co-operation to ensure energy
security and to attract needed investment.
Recognising the importance for a region to have well established information in order to sustain
development, the IEA has supported several initiatives whose aim is to ease the implementation of 5
energy reporting systems at the national, sub-regional and regional levels. The IEA, together with
the WEC, have extended their 2002 data collecting to 2003 and to 2004. The data have been
processed and filed in a database on Africa.The IEA has trained statisticians of AFREC who should
take over the database on Africa.The database prepared by the IEA will be used as a starting point
towards a comprehensive energy information source on Africa.
The IEA is also associated with the IEPF’s initiative to establish a national energy information
system in selected countries. After the success encountered in phase 1 of the initiative, the IEPF
has launched phase 2, covering Niger, Senegal and Togo.The aim of phase 2 is to have information
systems up and running by 2006. Initial discussions for a phase 3 with up to ten additional countries
have started. On a sub-regional basis, the IEA has trained statisticians for the Union Economique
et Monétaire de l’Ouest Africain (UEMOA). UEMOA would like to establish a sub-regional energy
information system, a mid-way between the top-down approach of AFREC and the bottom-up
approach of the IEPF.
REFERENCES
IEA-WEC energy database on Africa
77
1
AFRICAN ENERGY - IN-DEPTH REVIEW OF
ANGOLA'S ENERGY SECTOR
KEY MESSAGES
■ Greater access to affordable, clean and modern energy in Africa will help alleviate poverty,
2
underpin economic development and promote political stability.
■ The IEA can play a vital role in promoting sustainable energy strategies and policies in
developing Africa to facilitate both the development of domestic energy markets, and to
provide stable conditions for optimising the exploitation of indigenous natural resources.
■ Angola is a unique country, new territory for the IEA and an excellent starting point for the
IEA to realise some of these objectives.
3
SUMMARY
The Deputy Prime Minister of Angola has shown strong enthusiasm for the IEA to conduct an in-
depth review of its energy sector.With his political backing and a mandate from key IEA member
countries, the IEA intends to help the government of Angola to formulate a resilient energy strategy
and implement an energy policy framework that will move the country towards realising its
4 economic ambitions. To kick-start such a process the review will aim to identify some immediate
short-term energy targets for development assistance and provide a long term energy strategy
consistent with IEA shared goals and international energy security.
The IEA completed an analysis in 2002 showing the inextricable links between energy use and
poverty which clearly demonstrates that affordable, secure access to electricity and other modern
energy sources are a necessary ingredients for economic and social development. Such a study
5 would identify a strategy to achieve global rewards benefiting Angola and its people that could
be extended to other African countries. It would also strengthen international energy security by
encouraging economic growth and political stability in a major energy producing country.
This study will reinforce the thrust of the G8 Heads of State meeting in Gleneagles, Scotland,
hosted by Prime Minister Blair later this year, where climate change and Africa will feature
prominently. A successful study in Angola could be used as a blueprint to work with other African
states facing similar challenges and go some way towards addressing these aims.
The IEA published an energy policy review in 1996 Energy Policies of South Africa and intends to use
some of South Africa's successful policy experiences as appropriate to Angola.
REFERENCES
Energy Policies of South Africa, IEA/OECD, Paris 1996
In-depth Review of Angola's Energy Sector, IEA/OECD, Paris 2005
78
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■ Security of Supply and Energy Markets

■ SECURITY OF SUPPLY AND ENERGY MARKETS 7

■ ENERGY DIVERSIFICATION AND EFFICIENCY 21

■ ENVIRONMENT AND CLIMATE CHANGE 53

■ ENERGY IN THE WIDER WORLD 63

■ WORLD ENERGY OUTLOOK 2004

■ WORLD ENERGY INVESTMENT OUTLOOK 2003 3

■ EMERGENCY RESPONSE STRATEGIES AND MECHANISMS

■ GLOBAL OIL MARKET SECURITY

■ ENERGY POLICIES OF IEA COUNTRIES - 2004 REVIEW 4

■ THE OIL MARKET REPORT WEBSITE

■ THE IMPACT OF HIGHER OIL PRICES ON THE GLOBAL ECONOMY

■ THE JOINT OIL DATA INITIATIVE (JODI)

■ SECURITY OF SUPPLY IN ELECTRICITY MARKETS

■ SECURITY OF GAS SUPPLY IN OPEN MARKETS

■ THE FUTURE OF GAS FOR POWER GENERATION 3

■ POWER GENERATION INVESTMENT IN ELECTRICITY MARKETS

■ DEMAND RESPONSE IN LIBERALISED ELECTRICITY MARKETS

■ SAVING ELECTRICITY IN A HURRY 4

■ COAL AND SUSTAINABLE DEVELOPMENT

■ RESEARCH, DEVELOPMENT AND DEMONSTRATION TRENDS

■ RENEWABLE ENERGY COST DEVELOPMENTS

■ RENEWABLE ENERGY POLICIES IN IEA COUNTRIES

■ RENEWABLE ENERGY MARKETS

■ NATURAL CYCLES OF RENEWABLES AND THE CASE OF

■ BIOFUELS FOR THE TRANSPORT SECTOR

■ IEA ENERGY INDICATORS

■ ENERGY EFFICIENT DOMESTIC APPLIANCES AND EQUIPMENT 21

It is difficult to determine the impact of private-sector spending on renewable energy markets,

■ ADVANCED ELECTRICITY NETWORKS

■ CO2 CAPTURE AND STORAGE TECHNOLOGIES 3

■ EXPERIENCE CURVES FOR ENERGY TECHNOLOGY POLICY

■ TRENDS IN ENERGY USE AND EFFICIENCY -

■ ENERGY TECHNOLOGY INFORMATION

■ INTERNATIONAL COLLABORATION IN ENERGY TECHNOLOGY

■ OIL AND GAS SUPPLY TECHNOLOGIES AND ENERGY SECURITY 5

■ IEA R&D COLLABORATION ON FUSION POWER AND ITER

■ COAL TECHNOLOGY ROADMAPPING

■ TRANSPORT TECHNOLOGIES TO REDUCE OIL CONSUMPTION

■ SAVING OIL IN A HURRY

■ WORLD ALTERNATIVE POLICY SCENARIO

■ CO2 EMISSIONS FROM FUEL COMBUSTION 3

■ DEALING WITH CLIMATE CHANGE:

■ GREENHOUSE GAS EMISSIONS TRADING: AN ENERGY VIEW

■ ENERGY SECURITY AND CLIMATE POLICY INTERACTIONS

■ EMISSIONS REDUCTIONS THROUGH PROJECT-BASED ACTIVITIES

■ THE PRODUCER-CONSUMER DIALOGUE

■ ENERGY AND DEVELOPMENT 3

■ RUSSIAN ENERGY POLICY DEVELOPMENTS

■ RUSSIAN ELECTRICITY REFORM

■ ENERGY EFFICIENCY IN TRANSITION ECONOMIES 4

■ ENERGY REFORMS IN THE BLACK SEA/SOUTH EAST EUROPE

■ CHINA’S QUEST FOR ENERGY SECURITY 5

■ CHINA’S CHALLENGES IN DEVELOPING ITS GAS MARKET

■ INDIA’S QUEST FOR ENERGY SECURITY

■ WORKING WITH SOUTH EAST ASIA ON OIL SECURITY AND

■ ELECTRICITY AND GAS SECTOR REFORMS IN BRAZIL

■ TOWARDS AFRICAN ENERGY INFORMATION SYSTEMS