Istanbul’s Grand Bazaar
Flying into a fast-growing economy from one struggling out of recession is a bracing experience; discussions of resource scarcity are turned upside down and the focus is on how to move fast enough, not how to navigate uncertainty. But for energy leaders gathered in Istanbul, Turkey ahead of the World Energy Council’s Summit tomorrow, the challenges of growth and the challenges of transition are remarkably similar.
Turkey’s economy has received accolades as it has accelerated over the past five years despite continued turmoil in European markets, and the country’s profile in the energy sector has expanded alongside demand prompting interest from investors, governments and infrastructure firms. But the country’s economic capital, long a crossroads for multiple regions, is also a window onto the needs of fast-growing economies in the Middle East, Asia and Africa while looking back on the lessons of Western economies navigating their own transitions.
While the motivations differ for ministers, business leaders and stakeholders coming from 39 countries to Istanbul this week, all global energy markets are balancing the requirements of the three-legged “trilemma” identified by the World Energy Council ahead of its roundtable meetings here. “Trade offs between energy security, social equality and environmental impact mitigation” is how the WEC describes the global energy trilemma, leaving open room for diverse needs and opportunity sets.
From Trilemma to Trifecta
The emphasis on price and security is universal for both developing and developed economies, while political pressure is building on addressing currently varied policy approaches to energy access and environmental impacts from energy infrastructure and investments.
The evolving role of oil and natural gas in the world energy economy is central to the summit’s attendees and their outlooks for the future. With oil prices high on global supply tightness and expectations of demand growth, delegates and speakers from oil producing countries have special authority to address the potential for expanded availability.
At the same time the growing role of natural gas for generation and potentially transport amid concerns about its supply security in Europe and Asia, the environmental impacts of developing reserves in the US and Europe, and the wisdom of relying on a fuel known for its price volatility all complicate the picture of low current prices naturally propelling markets to increased natural gas dependence.
The summit comes at an awkward time for other fuel sources, with both renewable energy and nuclear power facing political, regulatory and infrastructure challenges unlikely to be overcome quickly or easily. Slipping central government support for renewable energy in developed countries facing budget crunches and disappointed with the results of investments to date has already undermined the position of solar and wind energy producers. Those same producers face the age-old energy industry conundrum of slipping demand for their product just as expanded supply pipelines come onstream and keep prices for their goods under pressure; how this newly scaled-up industry handles the commodity cycle for its products could determine its near-term future.
In nuclear power, and to a lesser degree for its fellow baseload generation source coal, the fuel’s reliability and price points are less of an issue than public perception of safety and environmental impacts. While the US and UK have continued to press forward on some nuclear projects and emerging economies continue to circle nuclear projects, the industry’s core markets in Europe and Japan continue to evaluate their options for moving to a largely post-nuclear future following the Fukushima disaster in 2011. For coal, consumption continues to rise in some emerging economies but air quality issues are again weighing on the fuel’s attractiveness in traditional markets, compounded by the availability and price competitiveness of natural gas.
For a deeper discussion of power generation fuel competition, read here.
The view from Istanbul’s waterfront gathering may be at the highest level, as delegate and speaker conversations linger on strategies and overviews, but the tone set at meetings like this determine the outcome of investment approaches and policy for decades to come. More investment in energy now seems to be a global inevitability, the challenge – and the opportunity – is in figuring out the details of a new global and local energy mix.