Commodity Price Uncertainty is the No. 1 Concern for Global Energy Leaders, New Report Finds

wind power

New technologies such as renewable energies and energy efficiency rank high in impact on priorities for global energy leaders, according to the World Energy Council’s eighth and latest annual report, The World Energy Issues Monitor 2017: Exposing the New Energy Realities. The report surveyed more than 1,200 energy leaders (CEOs, ministers, experts) in 95 countries on the issues that keep them “up at night.” One of the biggest, as shown in the upper right quadrant of the chart below, is commodity prices.

Source: The World Energy Issues Monitor 2017

The report calls commodity price uncertainty the “global number one insomnia issue” affecting energy leaders’ decision making. As the world transitions to natural gas, wind, solar and hydrogen from using coal and oil as energy sources, global energy leaders are focused on long-term trends over short-term risks. In the context of this transition, commodity price uncertainty goes beyond being a short-term concern to resource-rich countries and consumers.

Although still a “critical uncertainty,” the question of a global climate framework is perceived to have smaller consequences than commodity prices. This may seem surprising given that decarbonization is what is driving the energy transition, but the World Energy Council argues that the world is moving irrevocably towards decarbonization. In other words, this trend is not wholly dependent upon having a global climate framework.

Unsurprisingly, energy leaders view technology — in particular renewable energy and electric storage — as key to bringing about a decarbonized energy future. Advances in electricity storage, for example, can make electric vehicles a viable alternative to petrol- and diesel-fuelled ones. Indeed, electricity storage is becoming a more important agenda item globally, with especial importance in North America and Europe. Although advances in electric vehicle technology has led the cost of batteries to drop from $1,000/kWh in 2010 to the current $350/kWh, cost remains a primary challenge to the future adoption of these technologies.

A Regional Look

Source: The World Energy Issues Monitor 2017

While coal, nuclear and hydro all fall in the lower-left quadrant in the global chart, there are significant regional differences. Energy leaders in China, India and Indonesia, where coal remains a primary source of fuel, worry about the future of coal — as do energy leaders in South Africa, a major coal producer and consumer. You can see in the chart above that for energy leaders in Asia, coal is in the lower-right quadrant, which marks high-impact, low-uncertainty “action priorities.”

Similarly, there are regional and national divergences when it comes to nuclear power. Nuclear is not a topic of major concern for most of Europe, but this is not so for countries that use nuclear power. They include Belgium, China, Japan, South Africa and the U.K. — as well as North American countries. Liquified natural gas (LNG) is not a topic of concern for most energy leaders in Africa, Asia and Europe, but it is a major one for Singapore, which has invested heavily in LNG storage infrastructure, and for the Middle East and North Africa (MENA), a region that has become more dependent on LNG imports.

The report also looked at how different regions and countries perceived threats. Cyber threats are seen as a low-impact risk by energy leaders in Africa and Latin America. Asia, Europe, MENA and North America perceive cyber threats to be a moderate risk, whereas they are an area of critical uncertainty for Japan, Singapore and the U.K. Threats posed by extreme weather were termed an area of critical uncertainty primarily for Latin America, which has bore the brunt of El Niño, and, to a smaller extent, Asia.

Source: The World Energy Issues Monitor 2017

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