E-Session 5 Business opportunities in the energy sector

Political Economy and Institutions

Based on Figure 1 the business opportunities of oil and natural gas, nuclear power and renewable energy sources are discussed in this paper. Business opportunities have been chosen according to environmentally beneficial outcomes.
Figure 1 Electricity generation by fuel
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Source: Hone, D., Koch, L., & Schmitz, S., 2005, p. 4.

Oil and Natural Gas Gas is seen as the only fossil fuel of rising future importance, and has the lowest CO2 emission of all fossil fuels. Thus gas is also an opportunity to confine the worldwide rise of temperature and to act as a substitute to oil and coal. The global trade of gas will be doubled, with one third consumed by China. Russia will continue to be the worlds biggest gas supplier in 2035, followed by China, Qatar, the US and Australia. (International Energy Agency, 2011) Some countries will be increasingly dependent on imports from other countries and will thus require further development of capital intensive infrastructure, such as liquid natural gas terminals. (Hone, D., et al., 2005, p.4) Nevertheless costs for bringing the oil to the markets rise continuously due to more expensive and difficult access to oil wells in order to substitute the percolation of other wells and meet the rising demand. In the year 2035 the extraction of crude oil will drop to a level of 68 million barrels per day, as opposed to 99 mb/d consumed. Markets where oil extraction is
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BAU (for Business As Usual) refers to the IEA Reference Scenario from the World Energy Outlook 2004 (IEA 2004). As the

WEO does not provide a 2025 data point, we have assumed a mid-point value between those provided by the IEA for 2020 and 2030. Wind and others refers to wind, wave, tidal and geothermal capacity.

Denisa Brandtner

January 2012

E-Session 5

Political Economy and Institutions

currently growing are Iraq, Saudi-Arabia, Brazil, Canada and Kazakhstan. Natural gas liquids and unconventional malls will be used to compensate the decline in oil extraction. (ibid.) Thus, there is a huge possibility for building an LNG terminal in Canada, which so far has only one terminal built since 2009. Canaport LNG can send out a capacity of 28 million cubic meters of natural gas per day, which is a small percentage of the amount needed in Canada and the US. Canada especially poses huge opportunities for the production of liquid natural gas, since it is ranked on the 6th place of worldwide oil producers with a crude production of 3.7 million barrels per day and a share of the world production of 4.3%. The proximity to the US market, as the biggest oil consumer with 20.59 millions of barrels per day and importing 12.22 millions of barrels per day in 2006, gives Canada a huge advantage over other competitors which are most placed across the ocean, which makes the building of terminals more complicated and expensive. With 2.06 million barrels daily crude exports to the US, Canada is already an important partner for the US, but the proven reserves of 175.2 billion barrels make them even more interesting for future trade. (Canaport LNG, 2008; CNBC LLC, 2012; Pearsons, 2000-2012) The small number of competitors in Canada of terminal operators makes it easy for a company to profit from this market. Furthermore is the future of the oil production in Canada just about to start, with its huge reserves and thus, will bring future clients which need terminals built in Canada. (Canaport LNG, 2008) Nuclear Power The safety of nuclear power plants is improving, but concerns about issues with public acceptance about waste disposal still remain. (Hone, D., et al., 2005, p.4) Especially after the nuclear disaster of Fukushima, countries like Germany or France are confronted with increasing anti-nuclear sentiments. Nevertheless China, India, Russia and Korea push the expansion of nuclear power plants and thus, the political landscape experienced no change. Forecasts show that by 2025 many nuclear plants currently operating are replaced and an additional 30% of new capacity is installed. The overall electricity generation derived from nuclear power will rise by 70%. (International Energy Agency, 2011) The Low-Nuclear-Case generating a clear reduction of nuclear power generation assumes that no new power plants are built in the OECD area, only half of planned ones in non-OECD countries and a shortage of life spans of existing plants. (ibid.) Thus, energy produced by nuclear power plants is of growing importance within the next 10-20 years and also places a lot of opportunities for investments and further R&D. Nuclear power plants generate no CO2 emissions at all and thus, can be seen as a solution to global warming. Nevertheless the dangers of nuclear disasters and waste as a byproduct outweigh this advantage. Not only is Denisa Brandtner January 2012

E-Session 5

Political Economy and Institutions

waste disposal one of the most frequently discussed issues but also the most dangerous future problem to be solved concerning nuclear power. Several approached already exist, such as geological disposal, all of them rather temporary than long-term solutions. (OECD Observer, 2012) This Low-Nuclear-Case, where Germany and several other countries such as Switzerland and Japan reduce the amount of their atomic power plants poses an opportunity for reconstruction companies which would be responsible for the replacement of the currently operating plants. (Blick.ch, 2012) Renewable Energy Sources By 2025 the generation of energy from biomass/waste and other renewables is said to be multiplied by 18 compared to the levels of 2002, also through a quintuple rise in subsidies. From there on annual growth rates of wind, geothermal, wave and tidal power of 11% are predicted. Growth rates for solar power should be 20%/year and hydropower could even double. (Hone, D., et al., 2005, p.4) In order to give way for new technologies strong government regulations are needed and end consumers still account for the largest percentage of emissions. Therefore end consumers still have the biggest impact on renewables and can create additional market potential. (Thomson Reuters, 2012) Especially large potential for renewables can be seen in China and the EU, which will account for half of the growth. Despite decreasing costs/electricity unit, renewables will depend on financial aids for the next 10 to 20 years, and will thus, show lasting advantages in terms of supply safety and environmental protection. (International Energy Agency, 2011) The decision of the European Union to announce the nearly Zero-Energy Buildings target for 2020 is a very ambitious goal and gives a huge market potential for all constructors of zero-energy buildings within the EU. Furthermore did the EU announce to have changed all public buildings into zero-energy buildings by 2018, which would mean a lot of reconstruction and further huge potential for production of solar and photovoltaic cells, combined with thermal mass to stabilize diurnal temperature variations throughout the day. Building up zeroenergy houses often starts with the designing process which gives huge possibilities for young innovative companies and also an opportunity to bring new innovative ideas in order to further improve the energy consumption and effectively use all energy created by any machines used.

Denisa Brandtner

January 2012

E-Session 5 SOURCES

Political Economy and Institutions

Blick.ch. (2012). Kann die Schweiz das auch? Downloaded on January 30th, 2012 from: http://www.blick.ch/news/politik/kann-die-schweiz-das-auch-id71620.html. Canaport LNG. (2008). Canaport LNG in our community. Downloaded on January 30th, 2012 from: http://www.canaportlng.com/. CNBC LLC. (2012). The Worlds 15 biggest oil producers. Downloaded on January 30th, 2012 from: http://www.cnbc.com/id/41887743/The_World_s_15_Biggest_Oil_Producers?slide=16 . European Climate Foundation. (2008 - 2011). EU nearly Zero-Energy Building targets announced for 2020. Downloaded on January 30th, 2012 from:

http://www.europeanclimate.org/index.php/news/93-eu-qnearly-zero-energybuildingq-targets-announced-for-2020. Hone, D., Koch, L., & Schmitz, S. (2005). Pathways to Energy and Climate Change 2050. Switzerland: World Business Council for Sustainable Development. International Energy Agency. (2011). World Energy Outlook 2011. Downloaded on January 4th, 2012 from: http://www.iea.org/weo/docs/weo2011/es_german.pdf. OECD Observer. (2012). Sustainable solutions for radioactive waste. Downloaded on January 4th, 2012 from:

http://www.oecdobserver.org/news/fullstory.php/aid/531/Sustainable_solutions_for_ra dioactive_waste.html. Pearsons Education, publishing as Infoplease. (2000-2012). Top World Oil Producers. Downloaded on January 30th, 2012 from:

http://www.infoplease.com/ipa/A0922041.html. Thomson Reuters. (2012). To Green Oil Sands Mining, Solvent Instead of Steam? Downloaded on January 4th, 2012 from:

http://www.reuters.com/article/2011/01/24/idUS65892539220110124. WICONA. (2012). Zero Energy Building (ZEB). Downloaded on January 30th, 2012 from: http://www.wicona.at/sk/Umwelt--mehr/Zero-Energy-Building/.

Denisa Brandtner

January 2012