Transition to Secure Global Energy Architecture Needs $38 Trillion by 2035

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resource (Sugar Land, Texas)--The World Economic Forum (WEF) (Geneva, Switzerland) reports that the global energy industry will need to invest a massive $38 trillion to build an energy supply infrastructure by 2035 that will match the 40% increase in energy consumption over the same period.

The energy systems of 124 countries currently are not ready for a transition to a sustainable and secure energy architecture that will be required to harness economic growth. The existing energy architecture was inadequate for balancing economic, environmental and energy security needs. A country-specific approach was needed to enable effective transformation. The way energy is produced, distributed and consumed is currently undergoing a fundamental change of almost unprecedented proportion, says the report, produced in collaboration with Accenture (NYSE:ACN) (Dublin, Ireland).

Countries which are managing the transition to new energy architecture will have to deal with tradeoffs and difficult choices, ranging from Germany's nuclear shutdown following the Fukushima disaster, to Nigeria's removal of energy subsidies, to France's ban on hydraulic fracturing.

Petro-states continue to struggle to maximize the value of their assets in a sustainable manner that supports economic diversification, says the report.

Countries in the developing world are focusing on economic growth and development, often at the expense of environmental sustainability, while a number of nations continue to struggle to supply citizens with basic energy needs. It is estimated that 1.3 billion people worldwide are still without any access to electricity.

"Never before have we experienced such pressure for change in the way we source, supply and consume energy," said Roberto Bocca, WEF's senior director head of energy industries. "Decision makers must understand how they are being impacted by the changing dynamics and how they can effectively desire change, especially as the choices they make will determine the speed, direction and cost of the transition."

In-depth studies on India and Japan highlight practical applications that can lead to new energy architecture. The study on India underlines the challenges posed by supply bottlenecks, which present a considerable risk to the nation's growth and suggest that India consider creating a unified energy regulator to support the expansion of its renewable sector; promote the development of decentralized distribution and generation to expand energy access; and rationalize energy prices through the gradual phasing out of subsidies.

The study on Japan underlines the crisis of confidence currently faced by its energy sector and suggests that the country consider establishing a fully independent regulatory agency; complete a full cost-benefit analysis of market liberalization in the electricity sector; and support the development of a pan-Asian energy infrastructure.

"The scale and complexity of the energy industry demands a patient and incremental approach to managing change," said Arthur Hanna, the managing director of energy industry for Accenture and a member of WEF new energy architecture council. "Our approach helps nations take stock of their energy architecture challenges and identify practical and cost-effective solutions."

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