Davos Annual Meeting 2010 – Rethinking Energy Security

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Davos Annual Meeting 2010 – Rethinking Energy Security

Good afternoon ladies and gentleman Thank you for coming here and participating in this discussion group My name is Armen Sarkissian I’m former professor of physics and mathematics, former Prime Minister, now a free man and I represent here the energy security council, the Eurasia House in London and also Eurasia Center at the Judge Business School in Cambridge University And the theme that we’re going to debate and discuss today is quite an exciting one It’s rethinking energy security If you were going to do this, let’s say 30 years ago, basically linking energy security supply and the demand with economic growth, it could have been probably quite a simple issue because it will be two dimensional energy security and energy supply, and here you would have something like economic growth Probably for economic growth, you need more energy and how to find it Today at the beginning of the 21st century, I think this issue has become specifically today much more complex because we have to think also about the climate change, so we have to handle economic growth, energy security, and also to handle climate change, but the issue is not only three dimensional It’s also probably four or fifth or sixth or seventh, because the fourth will be food, the fifth will be water, and everything is around energy because energy in many cases is the cause of damage to climate, but its coal can be also the source of the solution So, we are here today to think how we are going to live further and the issue is here to find an optimized way of living Basically addressing energy security, addressing economic growth, damaging less and less the climate, and also resolving issues like the food and water and etc So it’s about harmonization and optimization rather than just single linear growth So it’s a complex thing and the question is what do we think about that today? What do we think about the link between economic growth, energy security, and climate and further Are there any aspects of solution that they are missing? Because in order to resolve this issue, we need a basis for that We need a basis of discussion We need a basis of exchange, of interaction, cooperation, coordination, maybe even governance So these are my main questions that I’m going to address first to our very impressive panel and then to the audience as one And let me start with our panel and it starts with Mr. Fatih Birol who is the Chief Economist of International Energy Agency And then next is Mr. Robert Hormats who is the U.S. Undersecretary of State for Economic, Energy, and Agricultural Affairs, exactly the right person to answer the question Third is Mr. Lars Josefsson who represents business and is the president and the CEO of the Vattenfall from Sweden And then we have Mr. Jim Leape, who is the Director General of WWF, represents the interests of all of us here and those who are outside nature

And then I have my good friend from Judge Business School He was my guest in Judge Business School, Mr. Anand Sharma, who is the Minister of Commerce and Industry of India So, I would like to start with Mr. Fatih Birol and then go to our politicians representing one on the West United States and rising power India, and then I’ll go to business and then we’ll see what’s up So Fatih, may I ask everybody three to four minutes initial remarks and I’ll just remind everybody that this session is on the record Thank you Thank you, Armen Now, as Armen said, energy security and climate change are the twin challenges of our time and there are many interlinkages between those two Sometimes when you take a decision to adjust the climate change, it does have to address the energy security and vice versa, but there are some exceptions too And as Armen said it is a very complex issue, so I would like to focus on one issue only here which I think is crucial It is oil Now, first of all on the climate change side, when we talk about climate change, we automatically go to coal and then go to the other fields, but let me remind you that today oil is responsible about 40% of the CO2 emissions which is almost the same for coal Second, after this let me come to the security side When you look at the oil supply station in the next few decades, the teacher doesn’t look very comfortable From a point of view of geology especially in non-opaque areas, decline in production, increasing decline rates Second from the investment framework, there are less and less areas that investment can be done in a free form and we think oil under the ground will be more and more complex And it is not exaggeration to say that oil and geopolitics will be more and more intervolving in the next years to come On the base of these facts, I think we have all the reasons to expect that we will see higher prices and volatile process with the current policies in place, and higher volatile prices mean, I would say bad news for the global economy So, what can we do? I think the solution, at least one of the solutions or the key solution is on the demand’s side We have to slow down the oil demand growth and there, it is the mobility sector, transportation sector Today, worldwide view, we consume about 86 million miles per day and with the current policies in place, this will increase substantially mainly coming from China, India, and other developing regions And this is mainly driven by the cars, car ownership levels, and the others If we want to slow down the oil demand growth, we have to look at, using alternative fuels such as biofuels and perhaps more importantly, to look at the advanced car technologies namely electric vehicles and plug-in hybrids Looking at the demand side responses, this would slow down the oil demand growth and it will make the oil markets less tensed, more comfortable, and perhaps avoid higher prices to come in the next 15 to 20 years because with the current policy in place, we are pushing the limits of conventional oil and all the burden of increasing the oil production will be under shoulders of very few number of countries in the world which may be risky So, perhaps just to finish my four minutes, what we have done in the IEA is we look if the world energy system

would respond to the call of the world leaders namely limit the global temperature to increase about 2 degrees Celsius, what needs to be done in the energy sector, what kind of transformation we need And one of the implications is again on the mobility sector and just to make it very simple, in order to come with such a trajectory in 2030, every second car sold needs to be from advanced car technology, electric vehicles or hybrid vehicles and such a trajectory would limit the world oil demand in 2030 around 90 million miles per day which is perfectly in line with our resources and energy resources we have It wouldn’t put too much pressure on the producing countries It wouldn’t lead to higher price environments and the price levels that we are going to see may be would for the global economy both for producers and consumers So my suggestion is, Armen I have to sum up, in order to ease the tensions on the oil supply security in the next years to come, a key option would be to look at the mobility sector and have, if I may say so, a revolution to go for low-carbon technologies Thank you Well, thank you Fatih I think it’s a good start because at the end, you showed some light at the end of the dark tunnel So we’ll start with optimistic note I would like to go now to Robert Hormats and ask him about your representing the biggest economy in many aspects And of course, Fatih spoke about only specific part of it which is the transportation and oil Could you please make your presentation around United States, but also a bit wider please Not only transportation please Sure, thank you very much First, it’s a pleasure to be here Let me make a few broad points and then focus on one particular One from our point of view If you look at energy security in the current environment, it is really a function of the diversity of suppliers, of types of fuel, and of modes or vehicles of transportation If you look at diversity as a critical element in energy security, putting in that sort of framework, I think gives one an understanding of the kinds of issues one has to look at More variety of the kinds of fuels available, greater diversification of suppliers of fuel, and various modes of transportation All of them to the extent there is diversification, there is also a greater chance of security The second point relates to natural gas which is a very interesting new development, perhaps the most dramatic new development on the energy seen over the last several years We’ve seen in the United States really transformation in the natural gas area as a result of the fracking, which is the way of getting natural gas out of shale including shale that was not available or gasses not available in shale for great many years and also horizontal drilling When you add the two together, these technologies produce the surge in the capability of North America to produce natural gas and they are also applicable to many other countries, and we’re seeing that around the world as these new technologies become adopted because other countries also have unconventional shale The United States has pioneered this, but there are many other parts of the world that can use similar technologies China is one, India is another, but there are many others outside of North America and Western Europe as well That’s our second point So, that’s something that is both transformational at the moment and additional natural gas can serve as a bridge fuel from a high carbon, high emission world to a world where we depend more and more on renewables, but this natural gas surge can be a bridge from one to the other Another interesting element that I think is important, it doesn’t get as much notice or at least not as much in North America is the new finds that have taken place in other countries that are not traditional exporters of energy, Papua New Guinea is one example Uganda, Ghana, Vietnam, Cambodia,

a number of other countries are going to be over the next several years able to top large new reserves of oil or natural gas, and we have an opportunity here We have an opportunity to help them with respect to energy governance, governance of the energy sector and make sure that the bidding for the allocations of drilling rights for instance is done in orderly way Make sure that the money is used effectively with a sufficient amount of transparency Because if there is proper energy governance and proper use of reserves and resources, it can make a very big difference in the way these energy resources are used for the benefit of the country and it can create a great deal more transparency and therefore, great deal more confidence about investors coming into those countries to invest and we have experiences from countries that have done this well And we have the experience of countries that have not done very well We can learn from those who have and provide the sort of technical assistance to help these countries develop their energy governance and their reserve management That seems to me very useful in terms of thinking ahead about energy security and more importantly from some of these countries perspective, how the money, how the resources are used so you don’t get the Dutch disease You don’t get the kinds of things that can distort energy allocation, energy resources, and use them in a negative as opposed to a positive way The last point goes to the question raised of water which I think I’m glad you raised it because it seems to me a great deal more work has to be done on the link between energy and water, and water and food, and energy, water, and the environment because they’re all really part of the same hole And one of the things about almost all of these new energy technologies including renewables is that many of them are water intensive and particularly this new natural gas extraction technology is very water intensive because you have the jam the water in, crack the rock, and that freeze up the natural gas But other types of production, it does not seem as if it would take a lot of energy Thus, particularly if you look at energy as sort of a battery when you have windmills pumping energy up and down is part of the way you store the pumping water up and down, it’s part of the way you store the energy So I think that one of the things when we talk about security, it may turn out that there will be almost certainly a lot of energy security issues Water security issues are going to be another very important topic on the international agenda, and a group such as this group and others at Davos tend to look across sectors and try to look into the future, not to be trapped by the past out of focus on this because it’s going to be an issue of growing importance from both an environmental and national security perspective Well thank you very much, Robert Thank you especially that you also touched the issue of sharing with your experience internationally with energy and energy security governance That’s one of the main important points that we have to debate Our next panel is Anand Sharma I think what we have seen recently, the way I saw Copenhagen, was a success, failure, or the beginning of something I don’t want to debate that here, but one thing I saw there what an activity and energy from emergent market, so that was very very good sign We are not only the fastest growing markets or industries or countries, China and India and others, but you’re also taking care of climate and environment So please your main comments Thank you, Armen See this issue of energy security in my view has to be taken in the national context and global context And truly the needs differ from country to country, as well as from continent to continent There’s a huge gap between the developing and the developed countries, and as the economies will grow in the coming years and the kids, particularly what you referred to is the emerging economies The energy requirement and energy consumption is bound to increase Therefore, how to access clean sources of energy, clean development mechanisms, sharing of technologies, investing in innovation, and development of technologies There has to be a larger global partnership to address this Also the issue of energy security as you said and Birol said

about linking to climate change Climate change is one of the issues This is not something which has happened overnight and we have woken up to it We know when Kyoto Protocol took place It has been causing concern and no hesitation to see that it is a shared global concern, but the responses have to be correct, appropriate, and timely because the situation has been brought about by unsustainable methods of production and consumption over a long period of time And the emerging economies like India even today, our global share of energy is very little compared to the fact that we are home to close to 20% of the world’s population and also energy security in our view is linked besides climate change to food security, power security, and development We cannot address one or two and leave the other aside We live in a world, the 21st century after the first decade that one billion people are denied food security and one and a half trillion people do not have energy security In that one and a half trillion, 500 million live in India who do not have access to commercial energy Therefore, universal access to energy to sustain the developmental aspirations has to be addressed There’s minimal energy which citizens in any country would need even if they do not have the capacity to pay That’s what we call energy security or a lifeline In addition to that, what would be the safe energy and reliable source of energy? In my country, half of the population, they depend on kerosene The supplies also are not regular and what about the large of number of women who have to cook and collect firewood So these are complex issues and accordingly global responses have to be well coordinated, current, and pragmatic Before I end this… I would only like to say that for a long time to come, the dependence on fossil fuels is going to remain as Robert was saying that new sources of energy and cleaner sources of energy including the gasses have to be accessed including the renewable sources of energy whether it is the geothermals, the solar, the wind, in which we too are investing in a big way, and also the nuclear energy That alone can reduce the dependence on fossil fuels because there are only 30 countries which have adequate hydrocarbon reserves, oil, and gas 170 countries of the world are not importers of oil and gas But while looking for these renewables and to reduce the dependence on fossil fuels, one thing has to be bold in mind which has been for me a matter of grave concern in recent years that of biofuels particularly the diversion of food for fuel, green for fuel It’s a very dangerous approach While we have to ensure energy security, we cannot support the need of food security in the global context Thank you Thank you, Anand Thank you for your representation because you emphasized on the example of India which is a sort of a smaller planet, the complexity of the issues and how vital they are for individuals And also thank you for the point that you made about this very, very sensitive link between energy and food and where we are if we don’t harmonize Can we basically sacrifice one for the other, or vice versa. Lars, you represent business and I think it will be interesting to hear your point here and what is that you will be expecting being a part you’re also from the governments What sort of support you will need from the governments to do your job better and cleaner Thank you I will come to that of course First I’d like to underline what we just heard that we can never forget but one and a half billion people

do not have access to energy and of course that is not energy security at all And to unlock that, it’s food related but it’s growth related and job related that has to be done And of course, energy security is a question of affordability but also acceptability What forms of energy do we as citizens of society accept? It’s also of course a question of accessibility The challenge of growth, energy security, and climate change was touched upon and I think in many cases as Fatih said they would go hand in hand and work together And looking at the climate change issue, the requirement to me it’s nothing less that we have to rebuild the entire world economy, the infrastructure of the world because it’s not sustainable Of course, this is a monumental task The good thing about it is that, that is a job creator and a source of growth as well The direction Fatih was also hinting on that, that the transportation of the world has to be made sustainable And that is representing of course the part of the energy industry which is producing electricity I could enjoy saying that if you were to use electric which is of course good for our business And why is that? Well, when we look at all the sectors of our economy, it’s probably the easiest thing to make the electricity sector low carbon and sustainable, and that is certainly a direction that I expect the world we’d take for that reason It’s also energy efficient which also means that it would support the affordability Of course coming to business and what do businesses require? Well, if we’re going to rebuild the world, it’s almost rhetorical to say that it would need massive investments and these investments will have to come from the vast majority from private capital and private funds And I think that cannot be said enough that these investments, these funds will compete with other investment opportunities and there are a few things which the people supplying capital would be looking for And one is transparency and other thing is longevity That is the long term nature Can we trust the rules of the game going forward? And it’s also continuity and if you have secured these three, then that would be made return investment calculations and then these returns will be measured against other returns And if we in the world, the policy makers, decision makers of the world can get this equation right, these investments will be forthcoming and then we will be rebuilding the world, we will be creating millions if not billions of new jobs, and we will sort out the energy security question, the growth question, as well as the climate change issue So I think the good thing in that is that it is actually doable, that is we can do it. In fact, we know what to do The conditions, the rules of the game needs to be set to enable it and that I think is a positive note that we actually know how to do it We also need to set this free It did not happen in Copenhagen There’s still work to be done, but I think we will keep working at it Thanks Well, thank you very much Since your last sentence was about Copenhagen, I think it’s the right time to ask Jim Okay, so there’s a lot to talk about here

and I will try and cover all of it, but let me just try and highlight a few things and then talk about solutions One is we talked about energy security largely in terms of oil and that makes sense in a lot of respects And we’ve noted here that the security, the growth of the economy, and climate change come together here as convergent interest I think that’s a really important starting point But it’s also important to recognize that the solutions are not automatically convergent When people look at the challenge of energy security, they tend often to default to coal If they’re talking about oil security, coal which is in many cases more abundant or the so-called noncoventional fuels like Well… is not only expensive, but of them, coal… are from a climate perspective devastating It’s not to say we’re gonna stop using coal tomorrow, it’s not to say that some emergent economies won’t have to continue to develop some of their coal resources, but coal cannot be the solution to energy security if we’re at the same time going to protect the climate And similarly with nonconventional fuels like… has a carbon penalty in terms of production about three times conventional oil production and also hugely expensive and environmentally damaging in many other ways So the default has sort of natural tendency of the system to go to coal or to go onto other kinds of oil nonconventional production is seriously dangerous for the climate Now, the good news is there are, I think a couple of speakers have already suggested, convergent solutions here I mean it is in fact possible to meet the challenge of energy security and get the 2 degrees And I agree that gas can be a transition fuel in that strategy, but it means that we really push hard now I mean, that I mean now on efficiency gains that are there to be had at a profit and on moving strongly towards the renewables as the basis of the energy economy I’m thinking less biofuels than solar and wind, but clearly renewables need to be at the very heart of the new energy economy Now, that meets one of the criteria that Robert sets Renewable sources can be in fact very diverse in terms of suppliers, diverse beyond all imagining every house can be a supplier in a renewable energy system, but for a climate perspective, they have to lie at the very heart of this Because if the scientists tell us that if we’re gonna stable O2 degrees, total global emissions have to peak in the next decade and begin to decline, and that’s a very hard thing to get to I mean that means moving very fast Now, let me then say just a couple of things about what has to happen for that to occur Most important on the policy fronts as Lars already suggested is price We have to stop subsidizing the bad stuff We have to stop subsidizing oil production and coal production and so forth And we have to start figuring out how we encourage the economy to move into the things that will be part of the future And so that means eliminating fossil fuel subsidies and it means finding a way to put a price on carbon that drives the whole market in the right direction It means moving ahead on efficiency as I’ve said It means really cracking the problem of transportation and I agree here again with Lars Transportation needs to go electric in a big way because we can produce electric power with renewable sources, and as I said it means going strongly with renewables Now, let me take that back into Copenhagen Many of the things I’ve talked about can happen at a national level and need to happen in a national level There’s no need to wait for a global deal for countries to move aggressively in this fear and that’s industrialized countries who need to bring their emissions down on the order of 80% by 2050 a lot, but it’s also emerging economies who need to find a way to get on to a low-carbon development path to meet the energy needs and economic and development aspirations of their people, but in a way that’s much lower carbon in the current model and I agree that’s gonna take a global partnership both in terms of technology and in terms of finance All of those things are things that can move, but ultimately we need a global deal and the good news about Copenhagen was in the runup to Copenhagen, you saw finally all the major meeting countries putting targets on the table and in the closing days of Copenhagen, you saw heads of states working together to try and figure out a way to move forward That’s the good news Bad news is they didn’t come close to moving forward as boldly as we need to move if we’re gonna stable O2 degrees and that’s the challenge that lies ahead in the months to come Well thank you very much Just to continue where you stopped, I would like to go back to Robert and ask him first of all his reaction on coal in United States Secondly, United States is a leader today in high technology

and the government of the president has announced the very impressive basically approach to encourage renewables And the good news is that you’ll see a lot of activity in United States on gas and I personally am very much involved also in a lot of venture capital funds and firms that are involved in California as well on renewables The question that stands here is, is the money Robert on its way as it comes or it’s going to come because giving a vision, showing the way, encouraging people and I think the government eventually have to come also with the money as well Well, the answer is that it is coming There was 80 billion dollars in the recovery act A lot of it is for renewables This is not only underway, but large portions have already been spent, not all of it You can’t spend 80 billion overnight, but it is being spent at a fairly rapid pace and it is helping to develop a lot new technologies First of all, some of it for substantial amounts for search, but also the fact that, that money is out there is inducement to research and development because people know that if they come up with new products, then there’s going to be this government supported market for them So, the answer is this is an enormous commitment of President Obama It’s an enormous commitment of the United States We haven’t seen anything like this in the past of this order of magnitude and it will be a substantial amount I would say also the other countries, China is developing putting a lot of money into similar kinds of technologies and the more countries that do this, the better It’s not a zero-sum game here if other countries invest in new technology, would come up with new a breakthroughs, that are useful for the United States if we do it and you bring the price points down and the quality of the technology up, that’s very useful Electric transportation is a critical element I totally agree That is where, there’s a lot of low hanging fruit there which can be derived Let me make one more point that the question of subsidies which was raised and Lars talked about and I think that is an extremely important element of the solution The United States and other countries in a group of 20 came up with, in Pittsburgh, a commitment to reduce and ultimately eliminate subsidies for hydrocarbons This to me is extremely useful First of all, these subsidies are distortion of use of money Second, they give hydrocarbons an edge over other technologies because they’re subsidized and many of these others are not subsidized or at least not substantially subsidized And third, it puts governments on the right side of that issue So that the extent you come from countries that are not sufficiently bold in reducing their energy subsidies for hydrocarbons, it is a very valid thing for civil society to weigh in very heavily with their leaders and urge them to do it It’s good for the environment, it saves you tax payers’ money, and it also induces more nonconventional fuel production because it’s not as much of the disadvantage in terms of government support That’s a little plug for civil activity Thank you Robert I’ll come back to Anand and the question is about we heard there are words about global deal, global partnership on climate Do you think that we need also global partnership or framework or closer cooperation on energy and energy security, and energy, food, energy, water as well Do you we need more cooperation or institutional or maybe we need another – Is the G20 the right platform or maybe you wish we’d create something like E20, the energy 20? Isn’t that too many 20s? It’s not a question of multiplicity of multilateral platforms, but what is effective and what is functional We are living in a different world, in the century that we have left behind and even the first decade of the 21st century where both the political and economic partnerships are taking place When you look at the expansion of economies and also industrial production particularly in the emerging major economies, it is clearly acknowledged therefore that G8 or the exclusivist platforms could not find solutions or address the contemporary challenges, and that’s where G20 has emerged as a credible platform, which has a representative character But when I was referring to partnership,

it’s very clear that the partnership has to take a macro view, look at the real picture globally even in by all what we have heard today Maybe trillions of dollars being invested between now and 2030 in new technologies for accessing cleaner sources of energy, still these are factually numbers that 1.3 billion people may still be denied access to commercial energy or energy security So, without a partnership, this cannot be addressed and partnership has to be well encompassing both for the development of technologies, sharing of technologies, pulling of resources, and sharing of resources because there are many countries who cannot be held responsible for what has happened, but at the same time, they’re too poor and vulnerable They do not have the resources Mitigation-adaptation is beyond them and the larger issue often businesses also invest and the governments invest in the new technologies, how they should be transferred or shared I feel that the intellect of the world should be used for the larger good of the humankind If conscious of the challenges which we are discussing of energy security and climate change, if only the mercantile interests determine decisions, the humankind would be left gasping This issue I’m afraid was not addressed adequately at Copenhagen It has not been adequately addressed now The other areas where – that you can say that they are countries which can afford and the debate that whether some of the emerging economies can China, India, Brazil with some other countries will be also in a position to develop technologies, but the issue would remain As I said right in the beginning, unless and until developmental challenges are addressed; and also poverty Poverty remains the biggest polluter and it will Well, thank you very much, Anand I think what you were expressing here is very important The importance of the partnership dialogue, maybe institutions For the moment we have for World Economic Forum at the Davos here and we have this dialogue, maybe we can build up something out of our dialogues and on the basis of World Economic Forum Before opening basically our panel for your questions, I would like to go back again to Fatih and with the question where you addressed the very important part which was oil, and the future of oil and gas will depend also not only on the future findings and exploration, but how much money will be invested and endorsed With the vision that you have that we should dramatically address the issue of using less oil and the pressure of the climate change Where the private companies are going to find the investment, because in many cases, there would be some cases that the oil and the gas are close to the surface in the geographically nice area, but in many cases, they are in a very, very difficult ones with huge investments How do you address that, Fatih? You’re right, Armen It’s a big challenge But let me first with one world tell you I’ll focus on oil rather than coal and gas Coal, I don’t need to talk about because there is no energy security problem per se But in terms of gas, in fact, in the next four or five years, we are going to see a gas glut rather than the scarcity in terms of gas mainly as a result of the silent revolution taking place in the United States and it will measure implication for everybody and also for the gas exporters If there’s a geopolitical incident, I don’t know in terms of gas security but under normal market conditions, we shouldn’t have major problems and in terms of oil, now resources are there but I think the private companies especially many IOCs have major difficulties to access those resources and as such I think some of them need to look for new business strategies to redefine their businesses because the oil they have under the hands and ownership is declining,

and declining rapidly So, they have to find new business areas It can be energy, it can be renewables, and the others Two more things One, I think a major reduction in the CO2 emissions compared to business as usual case will come from China, but this will not be driven by climate change concerns, they will be driven by energy security concerns China will push the button for main alternative technologies, more efficiency, as I mentioned more electrical vehicles, and more renewables and so on, not mainly to reduce the CO2 emissions but improve the energy security and lessen their vulnerability with the high energy prices I can tell you that the $147 last year traumatized many countries in the development world and they wouldn’t like to see such a development One last word about Copenhagen Armen, you mentioned we should be optimistic or pessimistic about what happened in Copenhagen, at least I can tell you I would personally say that I need to be in a very optimistic mood to say that I am indecisive about the outcome of Copenhagen I think as energy sector, we did not get the right signal in order to make a transformation there and if it continues, which seems very likely in the political context, we may definitely lose a decade as there will be many lot investments which should be done in the mean time without taking to consideration the climate change and those power plants inefficient, for example, coal fired power plants will be with us 50 to 60 years and we’ll look in the emissions for many years to come So, we are facing a major risk of losing time very crucial years Well, it’s nice to hear from you Your evaluation about let’s say one of the biggest emerging countries like China because I saw recently their plans for the next 2025 to 30 years on using wind energies It’s quite impressive if they will do what they say, usually they do what they say Basically, probably in two decades, we will end up in China producing from wind energy which will be equal to the whole energy volume of United Kingdom which is huge And if I may allow Chairman Lars, because we don’t have much time, we’ll go to our floor because I’m sure that there’ll be a lot of questions and then you’ll be having the opportunity to answer them, please Could you please say who you are and make the question sharp and to the point Go ahead, you have the microphone We need the microphone Okay, I got at least So, Stein Hisco is my name I’m from Næstved in Denmark and now I go to these kind of sessions very often and then I hear biofuel being more and more in the background whereas electric cars are coming to the forefront but still according to the MacKenzie Abatement Code, the cost of abatement for electric cars is not even on the chart because the price is much higher than 60 euro per ton abated, whereas you will find first and second generation on the chart I would like to have the panel address this apparent situation, why is it that everybody is talking about electric cars It is very expensive whereas the second generation bioethanol is ready for deployment now at a very reasonable cost Who do you want to answer the question? Lars? Yeah, maybe last would be Lars and maybe also Jim please Yes, please, Lars? Okay, thank you I think from an economic and climate change point of view and the efficiency point of view, I believe that biofuel will not be the winner Just for one thought and that is extra biofuel may use biomass to produce electricity in that concept in order to fuel the transport sector and this is for these reasons that we see these key trends at the moment So Stein, just to quickly answer that

I don’t mean to dismiss biofuels altogether There have been a lot of concerns in the first generation about complex with food and of course with water and other concerns If there are possibilities out there that could alleviate those concerns and so there may be a role From our perspective, the appeal of electrification is that you can see electrification on a very large scale in a way that can be completely green in terms of carbon because of the prospect of shifting the power sector entirely to renewables Our sites are on a zero carbon power sector in Europe by 2050 and that seems an entirely doable proposition and then electric cars become quite an appealing part of that picture Well, thank you Please I’m Barbara Judge, Chairman of the U.K Atomic Energy Authority So I wonder when we’re talking about energy security, energy independence, climate change, why nobody has mentioned nuclear as part of the mix We’re spending so much money proving the technology of renewables which are very worthy, but doesn’t nuclear have some part to play in the energy security discussion when it doesn’t emit carbon? Well it’s a very important point that you have raised I did in past referred to the nuclear energy besides other nonrenewable sources of energy In my country in India, we have an ambitious program to expand nuclear energy generation Given installed capacity of 5000 megavolts, we are not installing new reactors By 2020, it should be more than 20 gigavolts nuclear energy in India and we want to take it to at least 65 gigavolts by 2030 if not earlier, and to 250 by 2050 So, it’s only ruled out Besides, we also have an installed capacity already of nonconventional abundant solar of 15,000 megavolts and we have just commissioned solar mission which will kick in by 2020 again, 20,000 megavolts so 20 gigavolts So, we are focusing in a big way on nuclear energy because in my understanding, I’m not an expert, it is the cleanest and the most renewable sources of energy Well, Robert would you like to add something? Yes, generally, we have not ruled out in the United States more attention to nuclear either I mean this is – you know, I have to tell you we haven’t built a nuclear plant in some time, but there have been expansions of existing plants that tends not to get fully understood and I think over a period of time, this is gonna receive new attention in part because of the desire to meet the Copenhagen goals and in part because it does have a number of attributes There are obviously issues… wastes and things of that sort, but this has not been ruled out in the United States at all as a future option because of the urgency of increased domestic production of energy and also because it does meet some of the objectives of a cleaner energy environment down the road Okay, Jim is smiling I don’t know it’s a smile of support or not So, we don’t think expansion of nuclear power is part of the solution The reason for that is two fold One is its huge diversion of capital It’s hugely expensive and almost every nuclear plant ends up running way over the initial projections and it’s already huge and that’s even despite big subsidies Not at least a liability But the second and for me actually more important is to support nuclear power, you have to believe two things You have to believe that we can control the risks from accidents, from waste and proliferation and that we will successfully control those risks and I think that’s a doubtful proposition May I disagree with this just for a second? Just to Jim, you agree with electrification of the mobility with the cars I think it … check very carefully if one energy electrify the cars and the supply side, power energy aside, we have on the renewables Is it compatible or not? I think it’s not compatible 100% electricity generation from renewables and in addition to delivering electricity to the household industry and so on, you are going to feed the transportation system

One has to think twice about that Okay, can I just quickly We have of course talked twice about that So, for us, I mean let’s not forget efficiency All right there are huge gains in the power system to be gained – that we had from efficiency, investing in efficiency and then beyond that renewables and for us doing the numbers, we think you can get there and that’s better than putting… a lot with nuclear Okay, not as a Chairman but as a former professor of physics, let me also not agree with Jim because I do know the technology is very safe and most of the disasters that we’re having including the churnable were not technological disasters, they were human errors and then the other thing is that of course it’s very, very complex Then there are two or three panels here addressing this issue I think if we go ahead only with the nuclear, we will not be there Of course, there are issues of nuclear fuel management which in America is combined with the wastes, but there’s also the waste in European understanding which is basically the dirty water with the dirt and everything, so there are issues of nuclear management, nonproliferation, management of the fuel, management of the wastes, but I do believe that they will like it or not, the technology is there We cannot stop it It’s better we take care of it properly and develop it Okay very quickly, this is why I was smiling before Eventually, we’ll know why you are smiling But this is my point It’s the human systems that you’re counting down, not breaking down And I think our experience with that is pretty checkered and that’s the risk in India Just you could mention here, that when it comes to the human factor and the risks, there have been enough accidents, enough casualties in other power projects including thermal projects, hydro projects worldwide Fantastic sir I think this is a very, very interesting topic and I’m inviting all of you to come and to participate We have three another one sessions during these days where energy security council is involved on nuclear Please, your question My question not only to the panel, but everyone in this room is what are you doing today to learn about green roofs? Because green roofs go to every problem we’re talking about Sustainable development is long, long term survival of the planet That’s about the environment It’s about nature and nature’s ability to heal itself The environmental issue is land, water, air, and biodiversity By one solution, the requirement of all governments anywhere to require all buildings to have a green roof, we actually begin to address everyone of these issues The sterilization of the world is occurring with urbanization everywhere Excuse me As a chairman, I have to ask you to put down your note and just repeat the question The question is what are you doing, every individual here, to learn about the benefits and value of green roofs and having one environmental policy by all governments that all new buildings have a green roof on Thank you very much for the question What I’m going to do, I’m going to ask two or three people to address questions because we don’t have much time and the panel to answer them Your turn, please question So we have one question to everybody Second question please KR Sridhar, CEO of Bloom Energy in California. So, we talked about the 1.5 billion who are out of grid and out of luck And then we talked about the massive capital needed to put transmission distribution infrastructure, shouldn’t we be thinking about distributor generation as a leap forward path similar to what happened in computing, similar to what happen in telephoning for electricity And as we’re redesigning, rethinking, is that a solution that we should be strongly considering also looking at the security perspective because any centralized facility by nature is subject to natural and manmade disasters Thank you. Who is that to address the question? To anybody? Anyone in the panel Thank you Third one here please and we’ll go to the panel whoever wants to answer Arnold Goldman from BrightSource and addressing to the panel in contrast to green roofs and distributed power, I think addressing specifically to transportation, dealing with ecocities like even New York is using about one-half

of the amount of energy the rest of the United States and if you design higher cities, they don’t have so much roof, the urban sprawl is probably the biggest cost of transportation over the last 50 years of increases Address that on one side with ecocities and building differently, not to distribute power and in nondistribution of power and you dealing with large solar and large renewables as Jim has been saying, I didn’t hear and I think it’s critically important that resources like nuclear and coal actually don’t become out of the equation but we look at as backup fuel and having switching stations so that you can put in reliably these renewable resources on large scale Thank you So it’s more a statement rather than a question No, it’s a question Both are being investigated Fine Anybody would like to answer Can I start with distributed power question? So distributed power, yes big time and for me, one of the exciting things about renewable energy technologies is that they allow this distribution on a scale we haven’t imagined before and that gives you a lot of stability in the system and a lot of benefits And that’s true with the household level. Right? You’ve certainly had the prospect of buildings and houses that are now net energy providers You need smart grids and even super grids to make all of that work, but still lots of potential there It’s also true at intermediate scales I now work with a professor in India, for example I hesitate to use this example, so I’m gonna be out of my depth in a second But who argued strenuously for medium-scale biomass gasification as a technology for electric power production that in some ways much more reliable than long distance transmission of centrally-produced power and whether or not those specifics pan out, I think distributed power has a lot of possibilities Well, thank you. Robert? Just one quick point You pointed a question of the vulnerability of the grid I do think that is an issue at least in countries with very sophisticated smart grid systems or those countries that are planning them Because we’ve seen in the eastern… with the very network energy that we have and one little thing goes out in Cleveland I think it was several years ago The whole East Coast went dark and I do think that we’re gonna have to be very careful when we do what I think is a wise thing which is to have a smart grid and a network grid and Europe’s gonna be doing more of this to have much better safe guards to avoid these sorts of catastrophes It’s a national security issue of someone who decides that’s the preferred way of disrupting the American economy to interrupt those grids or sabotage them, but it could also be human error It could also be mechanical error, but I think this is gonna require a lot more attention because the first major blackout that occurs on the smart grid system, there’ll be a lot of criticism as to whether this new technology creates more opportunities or more vulnerability So, it’s a very good point that you’ve raised Thank you. Fatih? Okay, I think I also agree that distributed generation could be a very good option but in addition to energy security for economic reasons Last mention, our study, 1.5 billion people who have no access to electricity and it’s mainly in India, Africa and said major issue by the way and I agree with Mr. Minister that it is part of energy security issue For example, in… Africa where we have 800 million people, the amount of electricity used there is equal to the electricity used in New York City where you have 8 million people 8 million versus 800 million and the same amount of electricity is used, but the bulk of this access to electricity problem is becoming here rural area issue This is about three-fourth of 1.5 billion people are more and more in the rural city It’s not because electricity is increasing in the cities, but people are going to the cities from rural areas So, this is more and more becoming rural issue and in order to evolve transmission distribution investments which is half of the total power generation investments, I think it’s a very wise issue In terms of cities, I think city planning is very important Just to leave you with a number, today about 75% of this CO2 emissions are coming from the cities and only 25 comes also to boundaries of the cities which again tells us how important it is to have right urbanization policies Thank you. Lars? I just want to make a very brief comment I now noticed we come to the point which we do in many discussions that there’s a tendency that we all have to try and pick winners I would rather say that this is maybe an unnecessary discussion

because the problem we’re facing is big that we’re gonna need them all The most important thing is actually what I said initially that we do create a framework which will make investments in a transparent world where actually the price signals will determine what will actually win in the market that day and that is so important because the monumental task we have, we’re gonna do whatever we can to solve it and we’ll not have the luxury of saying I like that, I don’t like that Well, thank you very much Let me just add to this distribution on the spot and nuclear I’ve seen recently very interesting designs of new generation nuclear power plants that are good news coming from the military side They are small 200-mega watts one that were based on submarine reactors and they could be basically blocked in huge areas instead of having transmission Now, please your question? Thank you, Chairman I’m Yao Zhu Dong from Beijing and my question for the English speaking panelist and you addressed about this energy security issue, but it seems to me are very quite different Some people talking about enough supply or plenty of supply Some people talking about cheap supply, or some people talking about usage of this energy that means no emission of the CO2 Some people talk about safe transportation So, I wonder and you’re talking about energy security or you’re talking about energy safety And I cannot tell the difference in English, but it seems to me they’re very different When you worry about exploding of battery, that’s safety It’s not security issue. So here, the first question relates to a second question to Minister Hormats and USA is the only global power and so from American perspective and in the terms of the global security or safety, which one is the more urgent? The urgency of the supply of the oil, I mean the secured supply to the countries or the safe usage of the oil and which one is the more urgent for the global interest Thank you Thank you for your question So we have two questions Your question please? Julia King, Vice Chancellor of Aston University What I want to put to the panel I think it had been partly covered, but I think it’s worth emphasizing which is how do we get governments to recognize the impact of city planning which cost them nothing versus all this new technology, be in Hong Kong, in Calgary which have similar GDP per head Less than 20% of journeys to take them by private car in Hong Kong More than 90% of journeys would take them by private car in Calgary and the big issue there is the North American development of all these little satellites, none of which have a high enough population density to support public transport Thank you Third question We don’t have much time Unfortunately, we are going to take last questions from you and then try to answer Scott Price and I’m a member of parliament from Canada and my question is about the role of CO2 sequestration and the potential for CO2 sequestration given either the consensus I believe that we need all forms of conventional and alternative energy, and it’s gonna take a broad mix There does seem to be a role for new technologies and particularly new, clean, onventional technologies And your question please? Further down, please Andrew Doman from Russell Investments I have a different sort of question I’m worried about the volatility of the price of oil and I think we understand that that’s due the inelasticity of supply and also the inelasticity of demand But this has major effects on implications for a potential shock to the world economy What steps are we taking to increase the flexibility of supply or the flexibility of demand to try to mitigate or smooth out those effects? Well, thank you very much for the questions and it goes to the panel now and we’ll start with… and leave now the last question to the panel’s… We spoke about cooperation need, or partnership, cooperation, coordination So how far do we think in what sort of cooperation, coordination, partnership you would envisage in energy security That’s my last question And we’ll start with answering your questions

and my questions starting from Fatih. Fatih, please So, we answer all of them? You answer whatever you like Fatih Perhaps I can just answer with one or three things It’s CCS, carbon capture and storage I think it is a crucial technology and very promising technology, but a promising one It is not yet there and neither financially nor technologically and no legal forms are proven and running up at a scale which we could link our hopes 100% So, we, as I think, that it is a very important technology but much more needs to be done in order the CCS to be viable especially in the electricity generation sector plus in the context of enhanced oil recovery for the oil production A crucial technology and we cannot afford to miss the chance Volatility of the oil prices I’d try to mash it into the clear remarks I think with the current policies, I think after the economy rebounds, we may well see a high and volatile price environment which is a very bad news I think for everybody, even for the producers Because higher prices than what we see now may well be a risk for the global economy and global economic recovery which in turn may be a bad news even for the producing countries as they need also class with healthy economies and one of the ways as I suggested is to improve the flexibility on the demand side When we say on the demand side, it is the transportation sector because more than 95% of the growth in the oil demand comes from the transportation sector So, therefore, alternative technologies there including more efficiency, more biofuels I said in the beginning are produced… but especially second generation biofuels, but most importantly advanced car technologies are key in order to enhance the flexibility And finally, in terms of security, I think there’s an organization which looks after the energy security issues at least this is the intention of the agency which I’m working for and today, we have about 28 member governments plus we are working with many governments including China and India in order to enhance the security concerns, but perhaps when we’re talking about the cooperation and when we’re talking about the climate change, one word on the Copenhagen, we have seen that UNFCCC process which has been very successful up to Copenhagen We saw some limitations of the UNFCCC process I think it may not be a bad idea if there are some other type of formations which would have support UNFCCC process in order to have a deal soon, if not, very very soon Well, thank you, Fatih But I would like to urge our panel to be sharp and to the point because I’m getting signs that we don’t have much time, please Alright, let me try answer these two parts of this group of questions One, the volatility of prices One of the problems is that demand tends to be price elastic, that is to say if prices go up, demand tends to go down if they go up and off Supplies tend to be price inelastic or at least only very slowly price elastic That’s one element of the problem The other part of the problem is that you could improve in my judgment or reduce to a degree volatility if more countries or big countries in particular had strategic petroleum reserves as you know one of the IEA, there is a very, very good formula for that Some of the large consuming countries do not yet have huge reserves or at least not one sufficient to the size or adequate given the size of the country’s demand, and the other part is more transparency of information would be very helpful A lot of countries including big demand countries don’t publicly provide information on the requirements on their purchases in the market The IEA has been very effective in urging this, but countries that don’t do that actually lead to market uncertainties and those market uncertainties tend to be negative in terms of volatility The second question part that I thought was very interesting, our colleague from China raised the question of what the American preference was. I think we tend to look at this in the following way There are two issues One, you mentioned the amount of supply The available supply and the other is the risk factor They’re not entirely separable Obviously, as I mentioned at the outset, he more supplies, more alternatives That is to say diversification of supply and transportation and fuels,

helps to produce more long term security but also making sure that those within that overall framework, there is a reduction in the vulnerability that is to say avoidance of large scale disruptions of delivery either by contrast decisions of governments or by technological mistakes or by human error. In particular, in the last several years, we haven’t had the latter two where there have been disruptions These have been contrastly done by individual governments for relatively short periods of time which has tend to have a disruptive effect particularly on natural gas So, that’s my take on that issue Thank you, Robert. Lars? A very, very briefly in interest of time, on CCS, my company, Vattenfall has a pilot plan running that lasts one and a half years, and we’re very encouraged by the results, very good We believe it will be fully commercial by 2020 There is of course a price penalty The cost versus conventional code, probably up with about 30 to 35% which seems cheap in front of the challenge that we have And on your question, how can we sort this out? I think what happens out there in the world is a consequence of course of policies, of technology, and available capital And all of these policies at least today are national which means that we have outcomes differently in different countries The world have now tried to create global rules of the game, so far not succeeded and which is probably due to the fact that this geopolitics and it’s actually the power game of the world where the big countries rule And maybe that would be an interesting experiment to try and count the world in a different way We have business on one hand, we have… on the other hand, we have the labor moment on the third hand, and maybe I think we all agree on the goal And maybe it would be interesting to see if we agree on the goal, can we actually find a common practical way to get to the goal beside the political roles Thank you, Lars. Jim? So, okay, four questions On city planning, absolutely huge and London is showing what can be done in existing cities China has enormous opportunity to build new cities in a way that it’s low carbon because China is building cities at a fantastic rate CCS, it will surprise you after my nuclear answer that we support The development of CCS is a technology, still not proven The important thing there is that not be a reason to take the foot off the pedalin developing renewables and driving efficiency Right? It can’t let us off the hook, but it can in fact mitigate the coal that has to be built Third on volatility of oil, price is the best possible thing of course is to really push hard on efficiency and renewables, so you’re not so dependent on oil and not so hostaged to that market and cooperation energy security the best thing from our perspective would be to start with the global deal on the climate Thank you very much. Anand? Planning is important for any country and in India, we are investing in clean development technologies and in the next two decades, we will be investing 700 billion dollars, if not more because as the economy expands, we will be moving from the present cities of generation and consumption to become the third largest consumer of electricity in two decades after U.S. and China At the same time, the technologies of CCS, it is yet not proven It would take time and it’s also the universal application and it takes me back to what we have been discussing that how would this partnership development to make these new technologies available Because every country is not investing in each of these technologies, there should be some distribution, some understanding reached Those countries which are at the advanced stage of developing certain new technologies should be given support and the others who are focusing their energy on different kinds of technology should be given support There has to be a pulley There has to be coordination and lastly on the oil, the volatility of the oil prices does impact economies particularly the vulnerable economies and we have seen in the last two years how unreal those prices were because of the future and speculative buildup Again, we see that trend returning and the world has not fully emerged from the economic crisis

which is the worst in the last seven decades and if we have that kind of inflation and the skyrocketting fuel prices and food prices, we are heading towards another problem this year Whatever return to growth we are seeing, it should not be judged from the rising oil prices that the countries have resources to spare The growth is weak, the recovery is weak, and it is more stimulus led and stimulus inspired Well, thank you, Anand And let me try not to wrap up just three points on that definition of energy security The council, energy security council spent two days debating what is energy security Now, we have a formula and I’ll be happy to provide that to our Chinese friend, what’s the definition of energy security What we have learned today that the world that we live 30 years ago was black because we were burning oil and coal It’s a bit grayish today We know that we want a world which is green and we know more or less how to get there, and I’m sure that the orange color of nuclear is one of the solutions that we have to add to gray in order to get to the green and the final point I think what I learned here that it’s clear that we need more cooperation, coordination, and partnership, and to push the public because at the end of the day, energy and energy security is the core of climate and it’s the core of food and water And maybe we should push for new international organization and the core of that would be what Fatih is representing, International Energy Agency, but with a wider basically presence and why not to another world energy conference where people will focus on that because we have been on focusing on climate because of Copenhagen a lot And the last thing, I would like to thank everybody for coming and participating And may I ask you to thank our panel for their hard work