WBCSD Electricity Utilities Sector Project UN Commission on Sustainable Development

1. Sustainable Electricity Dialogue WBCSD Electricity Utilities Sector Project UN Commission on Sustainable Development 14th session, New York, 8th May 2006

2. Introductory address • Raymond LEBANSenior Advisor, Prospective & International Relations, EDF, FranceProfessor & Dean, CNAM-Paris University • Wendy POULTONGeneral Manager, Corporate Sustainability, Eskom, South Africa

3. Contents • Dramatic recent changes in the energy context (bad news) • Electricity key to meeting energy challenges (good news) • Debate, consistent public policies & increased international cooperation needed • A dialogue focusing on six objectives for concerted action: • Continuously improving energy efficiency • Diversifying & decarbonising the fuel mix • Investing adequately in infrastructure • Bringing to market promising long-term technologies • Providing wider access to electricity • Building partnerships and developing public dialogue

4. Dramatic changes in the energy context compared to 90’s • Formidable energy and electricity needs • Population growth and development • Energy demand from now to 2030 : + 60% ; Power generating capacity additions up to 2030:+130% of installed capacity) • Scarcer and more expensive fossil fuels • All 2020 forecasts over 40$/b (oil) and 4.5$/Mbtu (gas) • Peak-oil • Increasing threat to security of supply • Obligation to reduce GHG emissions significantly • Business as usual (7GtC now, 15 GtC in 2050) are unacceptable • Transformation is needed

5. Shares of electricity in final energy consumption (%) BAU Pathways to 2050 60 50 40 30 20 10 0 2002 2025 2050 Electricity is key to meeting energy challenges… • Electricity is a highly efficient energy carrier with no environmental impact at the point of use (growing share) • Large part of the required investment is to be absorbed by the electricity sector (development – replacement, T&D) • Wide scale electrification is crucial to meeting the MDGs • Electricity is a major contributor to GHG emissions (40% of energy-related emissions)

6. …provided that we make wise use of technologies • Highly efficient and low-carbon/carbon-free technologies are available • End-use technologies (heat pumps, solar heating…) • CO2-free generation technologies like renewables (including large hydro) and nuclear • More efficient gas and coal technologies • To cut CO2 emissions significantly, we need all options • Optimisation – Creation of success conditions • Promising technologies can be brought to market on time • Carbon C & S - Gen 4 nuclear - Electricity storage -…

7. Debate, public policies & international cooperation needed • Need to share facts on technologies • Advantages & drawbacks - Timeframes - Success conditions • Need to discuss which policies to articulate • Support to R&D, Incentives to invest • Need to boost cooperation between industrialised & developing countries • From “project” to “programme” CDMs

8. The Electricity Utilities Sector Project • In view of the urgency to act on this challenge, the eight project member companies endeavour to: • Promote a better understanding of what are the key challenges, what are the key options and actions needed, and who is responsible for what • Develop an agenda for concerted action on sustainability - to be used as a communication tool with various stakeholders of the industry -> draft manifesto with 6 key objectives • Build a factual platform for discussion: issue briefs on key elements of the debate

9. (1) Continuously improving energy efficiency • Energy efficiency helps address energy security, access, price and environmental challenges • Considerable potential : 40% less demand (over b.a.u) in 2050 is possible • Very significant and long lifetime investments -> quick start needed • Cost- effective technologies do - or will - exist: heat pumps – solar water heating & insulation – reloadable hybrid vehicles ... Source: IEA World Energy Outlook 2004

10. (1) Continuously improving energy efficiency • Policies must addressbarriers to investment • Inadequate pricing • Regulations restricting entry to efficiency markets • « Split Incentive » issue: potential investors do not fully receive benefits • Lack of information, expertise and finance available to customers • Labelling and standard policies will remain crucial in incentivising manufacturers • Broad partnerships in research for new energy efficiency equipment - including utilities - must be made to work

11. (2) Diversifying & gradually decarbonising the fuel mix • Hydrocarbons • Ensure world wide diffusion of efficient generating technologies • Master the links of the CCS chain – reduce costs radically and find adequate storage sites; • EOR important for technological learning • Renewable generation • 2/3 hydro potential not realised (DC notably) • Further incentivise solar, wind and others where they are not already cost-competitive (but scalability until 2030 limited) • Nuclear energy • Already proven, scale-up potential considerable • Waste and proliferation issues to be solved • Issues such as independent safety authorities, licensing, and industrial organisation are crucial

12. (3) Investing adequately in infrastructure • Unreliable and low-quality supply in many countries • Recent blackouts in developed countries: vulnerability of today’s grids, strained by decades of neglectand increased power trading • A real, interconnected grid is needed for • Security of supply • Integrated and competitive markets • Backup between countries • Optimisation of investments and services • Renewable energy integration • Minimisation of losses • Whether future investment needs can be met is uncertain (conditions needed)

13. (4) Bringing to market promising technologies • Accelerate R&D now for longer-term options • Carbon Capture and Storage • Nuclear Gen 4 • 3rd generation photovoltaic • Electricity storage to enhance renewables • Hydrogen • Continuous research in efficiency improvements • Fusion is currently no more than a possibility beyond 2050 • Need for government funding and enhanced international cooperation

14. (5) Providing wider access to electricity • Key lessons for future action • Some current electrification schemes only have a moderate impact on poverty alleviation; only affordable schemes are successful and sustainable over the long-term • Utilities to take the lead but partnerships are key for effectiveness • Financial government support may be required –account for market structure and institutions • Electrification schemes need business development • Local businessesare crucial in sustaining real impact on poverty alleviation • Evaluation of programmes must account for quality of life improvements and socio-economic development as well as financial cost-effectiveness

15. (6) Building partnerships and pursuing dialogues • Electricity utilities are a powerful agent for change and can: • Work with customers to promote sustainable consumption and end-use efficiency • Reduce carbon-intensity in their fuel combustion (increase operational efficiency) • Build the infrastructure needed • Innovate to bring new technologies closer to maturity • BUT… Business cannot act alone

16. (6) Building partnerships and pursuing dialogues • Policymakers: • While designing and regulating competitive markets, keep in mind other drivers for sustainability: incentives for R&D& energy efficiency, signalsfor long-term supply risks, and clarity on who takes overall system responsibility • Creating enabling framework conditions (incl. efficiency standards) including a practical roadmap for reducing CO2 and other pollutants, addressing regulatory barriers to low-carbon or carbon-free technologies • And YOU…

17. Discussants and open discussion • Larisa Dobriansky, Deputy Assistant Secretary for National Energy Policy, US DoE • Li Junfeng, Chair of Academic Committee, Energy Research Institute, National Development and Reform Commission, China • Sarah Adams, Programme Coordinator, Global Village Energy Partnership • Discussion Online dialogue atwww.wbcsd.org/web/electricitydialogue.htm…from today until 4 June 2006