NS4054 Fall Term 2015

North America Energy Trilemma

Overview

World Energy Council Trilemma Framework• Energy Security

• The effective management of primary energy supply from domestic and external sources

• The reliability of energy infrastructure and

• The ability of energy providers to meet current and future demand

• Energy Equity

• The accessibility and affordability of energy supply across the population

• Environmental Sustainability

• The achievement of supply and demand side efficiencies and

• The development of energy supply from renewable and other low-carbon sources

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The Energy Trilemma II

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The Energy Trilemma III

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Decision Tree Approach

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Energy Trilemma Top Performers

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U.S. Trilemma Balance I

• In 2014 the U.S. moved up three places in the index.• The U.S. balances the three dimensions of the energy

trilemma in a fashion typical for a “fossil fueled” country.• Strong performance on energy security and energy equity

are partially offset by country’s large environmental footprint.

• A further diversified electricity generation system and greater oil stocks lead to improved energy security situating.

• Recent development of sources of shale gas will likely help the U.S. become a net energy exporter in the near future.

• Country maintains the global first place ranking on energy equity – some of most (relatively) affordable energy in the world 7

U.S. Energy Trilemma Scores

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U.S. Trilemma Balance II

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U.S. Trilemma Balance III

• Performance on the environmental sustainability dimension lags but shows improvement

• Slightly lower levels of energy and emissions intensities• CO2 emissions from electricity generation are also

reduced but remain high • U.S. predominantly conventional thermal energy mix• Overall – country’s performance is constant and

improving

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U.S. Electricity Diversity

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U.S. Outlook

• Important energy policy developments in the U.S. that will impact on balance in the three dimensions of the trilemma include

• The Environmental Protection Agency (EPA) regulations on coal leading to the projected closure of more than 200 coal plants in the next few years

• Accounting for more than 10% of the U.S’s current energy production

• Possible regulations on unconventional gas production • The extension (or not) of the wind production tax credit,

which can cut the cost of developing a wind project by nearly one third.

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Canada: Trilemma Balance I

• Canada ranks sixth in the overall energy ranking• Although one of the top Index performers overall,

Canada’s weaker environmental sustainability ranking continues to undermine its overall score

• Canada is one of the largest energy exporters in the world

• The country ranks exceptionally well on the energy security dimension with

• A favorable energy export-to-import ratio

• A significantly diversified electricity generation mix away from fossil fuels and

• A low economic dependency on fuel exports

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Canada: Trilemma Balance II

• Energy equity is also high with plentiful, relatively affordable energy.

• Environmental sustainability remains Canada’s weakest energy dimension

• Country has relatively, although decreasing levels of energy and emission intensity due to

• long distances and • a higher reliance on energy intensive resource

development industries than most countries• Emissions per kWh generated stay at relatively low levels

because of the hydro heavy electricity fuel mix• Contextual performance stable and strong

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Canada: Energy Trilemma Scores

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Canada: Trilemma Balance III

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Canada: Diversity of Electricity Generation

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Canada: Outlook I

• Canada’s high and improving position in the index reflects

• The country’s extensive and diverse energy resource base and

• Public and private commitment to develop those resources

• The two main challenges Canada faces are

• Balancing resource development with environmental protection and

• Developing diverse markets for Canada’s energy resources

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Canada: Outlook II

• The most recent energy policy developments include

• A strong focus on developing markets for oil and gas beyond North America

• A faster energy infrastructure approvals process, and

• More stringent environmental standards for fossil fueled power generation, both federally and provincially

• These initiatives should support continuing improvement in Canada’s energy balance

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Canada: Outlook III

• The three key issues policymakers need to focus on are

• Managing the environment/climate impacts of energy resource development

• Market diversification and

• Ensuring an appropriate sharing of the benefits from resource development most notably with Canada’s aboriginal population in whose territory most resource development and delivery projects are being developed.

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Mexico Trilemma Balance I

• Mexico continues the positive trend of previous years and moves up three places in the latest Index

• Like other highly industrialized countries, Mexico shows

• a strong performance in energy security,

• decent levels of energy equity, and

• an environmental sustainability ranking that lags behind• The net energy exporter’s energy security remains stable

with no notable changes• Energy equity is improving as prices for electricity and

gasoline are mostly stable, compared with sharp increases in other countries

• Mexico still generates 81% of its electricity by burning fossil fuels, and struggles the most with mitigating its impact on the environment 21

Mexico: Energy Trilemma Scores

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Mexico Trilemma Balance II

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Mexico: Electricity Generation

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Mexico: Outlook I

• The most recent policy development is the reform of the energy sector.

• The government approved the constitutional changes and respective legislation allowing the full participation of the private sector though competitive markets in most of the activities involved

• Thus the Mexican energy sector will have the challenge to manage two transitions simultaneously:

• The transition from a monopolistic structure to a competitive market scheme and

• From a high carbon to a low carbon economy

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Mexico: Outlook II

• One of the new laws establishes a cap-and-trade scheme for the energy sector bringing it in line with the 2012 General Law on Climate Change

• Mexico is the second country, after the UK which has enacted a law that frames the actions to be taken as far as climate change is concerned

• The three explicit goals are

• By 2020 there should be a 30% reduction in GHG emissions with respect to a business as usual projection

• By 2024, 35% of the electricity generation has to come from clean energies (non GHG emitting technologies) and

• By 2050 an aspirational goal of 50% reduction in GHG emissions with respect to a business as usual projection

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Mexico: Outlook III

• The greatest challenges policy makers need to focus on to meet the above targets are

• The continuation of a renewable energy program and the re-initiation of a nuclear program

• Continued increase of production of both oil and natural gas on and off-shoe as well of the development of shale gas resources, and

• Improved energy efficiency conservation including decreasing energy intensity

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Profiles of Energy Investment Challenges

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