IHS CERAWeek 2016: Energy Strategies after COP

Dan Yergin, Vice Chairman, IHS, and Carlos Pascual, Senior Vice President, IHS Energy, co-chaired the Monday afternoon panel titled "Energy Strategies after COP." The panel discussed the challenges of meeting the Paris December 2015 climate agreements. In addition to identifying solutions provided by power suppliers to reduce utility emissions, the panel outlined how digitization and smart grid technologies will transform traditional residential consumers into more professional power purchasers, with the ability to shed load and smooth demand, making the grid operate more efficiently. Finally, the panel discussed how governments can provide a stable framework for decisions on carbon policy.

Tord Lien, Norwegian Minister of Petroleum and Energy, expressed optimism that climate change can be addressed, but noted that the solution needs to balance the triple bottom line of environmental, economic, and social needs. Approximately 2 billion people lack access to high-level energy, and climate change strategies must incorporate the dual goals of alleviating energy poverty while reducing emissions. Mr. Lien said replacing European coal-fired generation with natural gas was the most cost-effective way to reduce carbon emissions in the short term. Long term, Mr. Lien expected that a tax on carbon would be the most economically efficient way to reduce carbon emissions.

Jean-Pascal Tricoire, Chairman and CEO of Schneider Electric, said the "3 Ds" of decentralization, decarbonization, and digitization of the electric system are necessary to achieve the COP goals. These three Ds will enable the grid to maximize its efficiency and reduce emissions. In particular, digitization could end the current "one size fits all" approach toward providing the same high reliability and low cost to all consumers, allowing consumers to choose the level of reliability they would like to purchase. For example, home consumers do not require the same level of reliability that a datacenter would. The industry's challenge is to provide the best of the interconnected world while providing customers with the products they desire.

Theodore Craver, Chairman and CEO of Edison International, said investment in the intelligent grid can achieve much greater efficiencies and reduce the carbon footprint of the power sector. The cost of this investment will greatly depend on how fast it is implemented. Gradual implementation, focusing on the areas with the most potential for distributed generation and bidirectional power flows, allowed Edison International to reduce prices 8% over the past year while making significant investments in transmission and distribution. The challenge will be in coupling the distribution grid with modern communications systems-namely, the internet-without sacrificing grid security. The current distribution system operates on an electromechanical basis separate from the internet, and incorporating modern analytics and interactivity based on the internet will increase the grid's vulnerability to hacking.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.