Solve the Power Puzzle to Save the Earth, IEA Tells Nations

  • Agency advises power-market changes in shift to clean energy
  • Nations need price on carbon, policies to support investment

Nations worldwide must reinvent the way electricity is produced, traded and consumed to fulfill their pledge to fight climate change and shift from polluting fossil fuel to clean energy, according to the International Energy Agency.

Governments need to redesign their power markets to encourage investment in low-carbon technologies, promote efficiency and keep supplies secure, according to a report by the IEA published on Thursday. As more renewables enter the electricity system and new clean-energy, demand-response and storage technologies become available, regulators need to take action to help unleash the potential, it recommended.

“For a century, a centralized high-carbon power system kept the lights on,” IEA Executive Director Fatih Birol said in the report. “If regulatory regimes, market design and system operation end up lagging behind technology deployment, the result may undermine electricity security and, ultimately, the low-carbon transition itself.”

In order to meet the goal of capping temperature growth at 2 degrees Celsius (3.6 degrees Fahrenheit), the average carbon-dioxide intensity of power needs to decline from 441 grams per kilowatt hour last year to 15 grams by 2050 for the 34 nations in the Organization for Economic Cooperation and Development.

The target of 2 degrees Celsius is a part of the global deal to reduce greenhouse-gas emissions agreed in Paris two months ago. Exceeding the ceiling will trigger the most dangerous disruptions to the environment, according to United Nations scientists.

The European Union is working to improve its electricity markets design and to tighten links among its 28 member states, according to EU Climate and Energy Commissioner Miguel Arias Canete. “We have to keep developing renewables and re-engineer our markets,’’ he told reporters on Thursday in Brussels.

The energy transformation is complex and requires putting a price on pollution and the introduction of policies to support investment in low-carbon technologies, the IEA said. Power-price information should be frequently updated and reflects conditions as close as possible to where the energy is produced or consumed. Governments should also improve and expand power grids and ensure capacity mechanisms, which supplement intermittent supplies of renewable energy.

“There is no definitive answer to the question of what a ‘perfect’ market design will look like once electricity is low-carbon,” the IEA said. “Instead, improvements in market design are likely to be evolutionary, reflecting interactions between technologies and market rules.”

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