Getting energy investments right
Energy leaders, experts, companies and politicians are gathering this week in New York for the Sustainable Energy for All week to shape the future sustainable energy system of the world.
The task is gigantic. To avoid a 2°C or higher rise in global temperature, the investments needed in renewable energy, energy efficiency and carbon abatement are estimated at around one trillion dollars per year for the next 40 years. Clearly this cannot come from public funds alone – private investments will need to be mobilized massively.
It is therefore crucial that we invest in the right energy sources, in the right place and at the right time. This is not the case today. For example, wind production is on average 7% below forecast and 65% of wind farms are underperforming. The windmills are not always positioned on the best available sites. Estimates show that getting the resource assessment wrong can lead to significant loss of revenue.
This is an issue the United Nations Framework Classification for Fossil Energy and Mineral Reserves and Resources 2009 (UNFC) can address. It is unique among the major international resource classification schemes in that it is the only system that includes consideration of commercial, social and environmental impacts equally with project feasibility and uncertainty. UNFC allows investors to invest in energy projects based on principles of sustainability and concern for the impact on the local community and the environment. It can help increase predictability and thus drive forward the investments needed for a low-carbon future.
Not surprisingly, more and more countries are joining the UNFC. Countries with significant primary energy resources such as the Russian Federation and China are looking to its application as a way to manage their natural endowments more efficiently.
As the name indicates, the UNFC started with traditional fossil fuels and minerals. It is broadening its reach and coverage. Work is being completed to cover uranium and thorium extraction projects, and comparable work is underway for renewable energy projects, starting with geothermal energy, and for underground storage projects. This could be a game changer in assessing the potential of renewable energy projects, thus helping investors devise solid financing plans.
In the end, the world will have access to a classification system that will bring all primary energy resources under one framework, and countries will be better placed to manage, develop, and steward their natural endowments. It will help companies to invest. It will help citizens and consumers to get the best available energy source in the transition towards sustainable energy for all. Join the UNFC.
If you wonder why the animal accompanying my blog is a cow, it is because cows are fascinating animals; the cows of our host country, Switzerland, are famous for their quality; and because I am still a farmer, and miss the cows I had in Denmark. Now I got one back.