Top critical issues affecting global energy
High energy price volatility has for the first time replaced global climate framework as the number-one critical uncertainty driving the world energy agenda, according to the 2014 World Energy Issues Monitor, recently released by the World Energy Council (WEC).
Global climate framework uncertainty, while still is a key uncertainty, is now perceived by energy leaders to have less impact than in the previous three years of the study. Meanwhile, carbon capture, utilization and storage (CCUS) continues to be viewed as a technology with only a limited impact on the energy sector, continuing the clear trend over the past three years.
“The fact that both climate framework and CCUS are perceived to be issues of less impact is bad news not only in terms of emissions mitigation, but also for the development of robust and resilient energy infrastructure,” said Christoph Frei, WEC secretary general, at the launch of the report at the Africa Energy Indaba.
“Our energy systems are in a state of massive expansion and transition, and the signals we see today provide clear evidence of the urgent need for more robust, coherent, long-term frameworks within which to plan and implement future investment.”
Energy price volatility goes beyond merely oil and gas prices and their regional differentials. It is also being influenced by the coal-to-gas substitution in the U.S.; the increasing use of coal in Europe, which has driven up emissions; the collapse of solar module prices; and Australia re-directing its interest from North America to Asia while North American infrastructure companies are signing more deals with Asian customers.
The WEC study further finds that energy leaders are increasingly concerned about the sector’s ability to access the capital markets for funds towards energy infrastructure, when set against a continued recessionary backdrop.
Meanwhile, renewable energy and energy efficiency continue to keep energy leaders busy, with growth shifting from Europe and North America to the Middle East where demand is rapidly rising. Large hydropower is back on the agenda with significant unrealized potential in central Africa, Latin America, Russia, and Canada.
The 2014 World Energy Issues Monitor is the culmination of a six-month study capturing the views of over 800 energy leaders including ministers, chief executives and the heads of the WEC’s national members committees covering 84 countries. The report, which highlights strong regional variations, looks at the global energy agenda and analyses the trends and outlook in six world regions plus 24 countries.
In Africa, the top critical uncertainties are climate framework, high energy prices, and commodity prices. As a change from last year, national governments and regional institutions are taking actions in energy efficiency and regional interconnection, while investment cooperation with China and India is viewed with increasing importance.
Electricity supply remains a critical concern in Africa, with growing demand, lack of required investment, and increasing power shortages across the continent. Renewable energy remains a high-priority issue.
The study finds that in addition to energy prices, the top regional critical uncertainties are:
- Africa: climate framework, commodity prices
- Asia: renewable energy
- Europe: global recession
- Latin America & Caribbean: commodity prices, capital markets
- Middle East & North Africa: energy efficiency, renewable energy
- North America: nuclear energy, capital markets
The 2014 report includes assessment of six world regions and 24 countries: Bulgaria, Colombia, Estonia, France, Germany, India, Indonesia, Italy, Japan, Latvia, Lebanon, Lithuania, Mexico, New Zealand, Nigeria, Poland, Portugal, Romania, Serbia, South Africa, Spain, Switzerland, Turkey, and the United Kingdom.
The report highlights 37 issues and their perceived impact, uncertainty, and urgency for global energy leaders and experts.
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.