Diversity, competition, and efficiency will be the key factors if the world is to balance energy security, employment, and economic development with combating global climate change, BP PLC Chief Executive Tony Hayward said in a Washington address.
The factors aren't new, but their significance should not be underestimated, he said at the Peterson Institute for International Economics. "What's different in the 21st century is that energy security has become a defining issue. It is one element in a complex matrix with strategic, economic, and environmental dimensions," Hayward observed.
BP's projections suggest that the world will need 45% more energy in 2030 than it consumes now, and double current demand by 2050. That projected growth would require investing more than $1 trillion/year, he indicated.
Diverse sources will have to help meet the additional demand, Hayward said. Renewable energy's share will certainly increase, but it will be necessary to realistically understand how much it can actually contribute since all of the world's wind, solar, wave, tidal, and geothermal power presently account for about 1% of total consumption. "And given the practical challenges of scaling up such technologies, the International Energy Agency can't see them accounting for much more than 5% of consumption in 2030, even with aggressive policy support," Hayward said.
Role for hydrocarbons
Nuclear energy and biofuels also will play a part, and carbon capture technology could be commercially deployed by 2030, according to Hayward. "But there will still be a major role for hydrocarbons. Indeed, the IEA analysis indicates that even in a low-carbon scenario predicated on keeping the atmospheric concentration of carbon dioxide to less than 450 ppm, hydrocarbons will remain dominant," he said.
Citing rising abilities to develop and produce hydrocarbons in conventional and unconventional reservoirs, Hayward said, "Our analysis indicates that the world has sufficient proven reserves for over 40 years of oil and 60 years of gas at today's consumption rates."
Supplies will need to be diverse in form and geography, he added. BP has invested more than $4 billion and continues to invest $1 billion/year in its low-carbon business. It also plans to invest heavily in Canadian heavy oil.
"We believe both will be part of a broad and sustainable mix that embraces oil, gas, coal, and renewables, producing and using them all with innovation and efficiency," Hayward said.
He called on increased access to hydrocarbon resources despite some policymakers' emphasis on addressing global climate change. "That means opening up areas that have previously been closed to exploration and allowing competition," he said. "Offering access to a range of potential operators encourages the most efficient solutions and often involves partnerships that develop new and innovative combinations of skills."
But addressing climate change also will be critical, he added. "BP has been calling for action for more than a decade, preferably via creating a price for carbon through market mechanisms," said Hayward. The company factors a carbon cost into its investment choices and engineering designs as a way of making sure its designs are competitive not only today but in a future, more carbon-constrained world.
"What's different in the 21st century is that energy security has become a defining issue. It is one element in a complex matrix with strategic, economic, and environmental dimensions."
"Whatever your position on the science of climate change, the fact remains that the world is going to use a lot more energy in the coming decades. I believe we need to take urgent action to mitigate the effects of such an increase," Hayward maintained. "Around the world, millions of people are leaving poverty behind and enjoying a much better standard of living. Looking at the scale of this transition, it's just not sustainable to carry on without taking action to start building a less carbon-intensive future."
He called the lack of both a global treaty and US legislation on climate change "unfortunate" but asserted, "The key to progress is alignment, rather than agreement–moving in the same direction, but not necessarily in lock-step."
Investment will flow if policymakers provide a clear and stable framework for investment in both low-carbon energy and fossil fuels. "If they don't, they run the risk that spare capacity will dwindle, and complacency will give way to panic," he warned.
Hayward said energy efficiency could be the top priority because it produces results without requiring as much investment.
And he called on increased use of natural gas in the generation of electric power. "It offers the greatest potential to achieve the largest CO2 reductions–at the lowest cost and in the shortest time. And we can do all of this using technology we have available today."
More headline-grabbing approaches aren't as efficient in cutting CO2 emissions, he said. "For example, with today's technology, carbon capture and storage to make clean coal is very expensive. Offshore wind is, too, especially when compared with onshore wind, which is now an attractive business for BP in the United States."
Creation of a low-carbon economy, Hayward said, "will require the wholesale reengineering of the global economy" and "very significant investment by industry, which in turn requires a clear and stable regulatory regime."
Without a credible and enduring framework, it won't be possible for industry to invest at the scale necessary to maintain and enhance the world's energy supplies, he warned.