The energy transition: the future is at stake

My participation in the recent forum on “Energy for tomorrow” organized by The New York Times in Paris has reaffirmed my belief even more strongly in the unstoppable nature of the energy transition we are living through. The transition from an unsustainable economy based on fossil fuels to a renewables-based one is a key factor in an energy system that will continue to drive the prosperity and progress of the world’s population while slowing down climate change and its serious environmental, social and economic effects.

It is possible that the short timescale might not allow us to perceive the real extent of the change from the correct perspective, although I believe that its importance is comparable to the implementation of agriculture and stockbreeding in the Neolithic era, the emergence of cities in the period from the Middle Ages to the Modern Age, or the invention of the steam locomotive in the first Industrial Revolution.

We are beginning a new era and making progress towards a more open, interconnected and sustainable society in which the energy system once again becomes a critical driver. Therefore, our success (or failure) in undertaking the present energy transition will largely determine the success or failure of the economic, social and technological transformations we are immersed in, shaping the 21st century.

How can we make the right transition? How will it get to allow us to reduce negative effects to a minimum and assure a smooth evolution to tomorrow’s world? As with any major question, there is no easy answer. What is increasingly clear, however – and the forum called by the NYT shows it – is that there is a very high level of global awareness among energy operators, economic stakeholders, regulators and social movements that are tenaciously pressing for a new and clean energy system as the result of a joint effort and a long term plan. This is not just the responsibility of governments, markets, companies or citizens, but of every party involved working together. Each and every one of us. A powerful current that we need to channel and manage so that it does not lose its drive during the (also essential) transition from fine words to concrete actions.

In ACCIONA we are so convinced about the irreversible nature of this process that we have turned it into an essential element in our corporate philosophy: we respond to the challenge of achieving sustainable development throughout our areas of activity for the present generation and those who will follow us in the future.

SOME KEYS TO THE FUTURE

In the energy field, I would like to put forward three ideas about the direction that, in my opinion, we need to take along the road to the future.

First, make the best possible use of the potential of renewable energies until we supply 100% of electricity demand in a sustainable way in the next few decades (up to 2050). As well as being clean, renewables are now reliable and competitive. And the good news is that they will be even more competitive, thanks to progress in innovation, the application of economies of scale and the pressure of competitiveness, which increases as more players are attracted to such a promising market.

Second, it is necessary to electrify the economy more, increasing the incorporation of transport and industry – responsible for 40% of CO2 emissions overall – into the domain of electric power. As our power needs turn to electricity more and more, we can’t neglect the importance of supplying this electricity in a sustainable manner. Renewable-based electricity is the only clean and sustainable solution for the power system (which currently accounts for 45% of all emissions).

Third, it is necessary to reform the regulatory framework for electric power markets. The current ones are largely obsolete because they were designed for a centralized system based on fossil and nuclear sources, but they need to adapt to the new situation. This will probably mean, among other things, setting a price for carbon that can internalize the costs of the harmful effects of conventional generation within the market. Another measure must be to carry out an early replacement of the more pollutant, more subsidized and less efficient power plants. In any case, and independently from which measures are taken, the regulatory framework needs to provide long-term stability and certainty to make it possible for the financial agents to deliver the enormous level of investment needed - 13 trillion dollars up to 2040, according to Bloomberg-NEF – to keep the temperature at the end of the century below the catastrophic threshold of +2 degrees.

To sum it up, more renewables, more electrification and better market regulation are three key topics in which we need to work if we are to go in the right direction, the one in which everyone’s future is safe.