Bottomline Decisions; Concerns about Reliable Supply Will Always Trump the Call for Cleaner Energy

Article excerpt

Byline: Christoph W. Frei (Frei is the associate director for energy industries at the World Economic Forum.)

Securing supply tops the energy-policy agenda. That is the message coming loud and clear from more than 60 energy-industry leaders, including big-company CEOs and senior government officials, recently surveyed by the World Economic Forum. Geopolitical unrest from Iraq to Nigeria and Russia to Venezuela, cuts in estimated reserves at Shell and concerns about a decreasing rate of new oil discoveries have driven oil prices to record heights. The 1970s oil shocks had a permanent impact on oil prices and the same may be true today--reason enough to focus on securing supplies and finding alternatives to oil.

The security concern forces tough choices. History shows that policymakers will put price and supply before social and environmental concerns. This follows the basic rules of Maslow's Pyramid, the famous device American psychologist Abraham Maslow invented in the 1950s to explain the motivations of a healthy person. As Maslow put it, a healthy person lacking food, love and esteem "would most probably hunger for food more strongly than for anything else." Sounds simple, but this idea goes a long way toward explaining the current comeback of socially and environmentally controversial energy sources, particularly coal, nuclear and large-scale hydro.

Signs are everywhere. The Bush administration's energy plans will advance research on nuclear technology and clean coal. China plans to increase nuclear-power generation from 1.5 percent today to 4 percent by 2020. France's state-run power company, EdF, has just reconfirmed its commitment to build a forerunner to the European Pressurized Water Reactor. Plans for the Grand Inga Dam, a massive new plant on the Congo River, reflect reviving worldwide interest in big hydro.

Geopolitics drives these trends. Nuclear fuel can be stored very efficiently, coal is found in abundance on all the continents, and hydro is a local resource, so all are shielded one way or another from political turmoil. Similar considerations are forcing a rethinking of natural gas, long the poor cousin in the energy family. Qatar's second deputy prime minister, Abdallah bin Hamad al-Attiyah, says his country was disappointed to discover natural gas rather than oil in the 1980s, and took 20 years to realize its value. …