SPEAKERS
Jone-Lin Wang CERA Managing Director and Group Head	Lawrence J. Makovich CERA Vice President and Senior Advisor (Chair)

Power Day 2—and CERAWeek 2008—closed at lunch with CERA’s Electric Power Insights. James Lang, CERA President and Chief Operating Officer, thanked the attending delegates and gratefully acknowledged Alstom, Global Energy Partner, and Lazard, Global Financial Partner, which helped made this week possible.

Lawrence J. Makovich, CERA Vice President and Senior Advisor for Global Power, posed questions on the energy issues raised during the week. Panelists Jed Bailey, CERA Managing Director, Emerging Markets Group, discussed emerging markets; Matt Brown, CERA Director of European Power, provided Europe’s perspective; Jone-Lin Wang, CERA Senior Director and Head of Global Power Group, added the North American view; and Chi Zhang, CERA Director, China Energy, discussed the Chinese outlook.

Panelists noted a lack of global convergence on a carbon dioxide (CO₂) solution. Policies in most Asian, African, and Latin American countries, without Kyoto targets, will lag the world trend. For Europe’s live cap-and-trade on carbon emissions (carbon prices currently at €20 per ton), convergence may begin in 2011 when aviation is added and passengers into Europe pay higher fares. In North America the patchwork of state policies must first converge; US federal policies are not expected before 2015. Chinese awareness is growing, behind other concerns—sulfur, energy efficiency, and technology adoption.

Rising capital costs exhibit different regional influences. Fuel prices have more impact in emerging markets; balancing capacity choices and rising fuels costs is a country-by-country issue. In Europe CCGT costs increased 30 percent and coal prices 120 percent, with a concomitant pullback on the coal renaissance and the first signs of a demand slowdown that may affect investment. North America’s budding but capital-intensive nuclear renaissance may feel the pinch. Coal-fired power plants have been canceled, affected by CO₂ issues and doubling plant costs. China’s equipment manufacturers are still improving economies of scale and productivity, moving into India, Africa, and perhaps Russia.

Efficiency could play a major role in emerging markets, with opportunities to leapfrog development if technologies can get to where they are needed. Europe must use residential demand-side management to reduce demand by 20 percent by 2020. In developed economies efficiency efforts both carry a cost and require behavioral changes. Regulated prices in China, in its current stage of industrialization, mean that electric consumption is growing faster that economic growth.

Europe may test whether power price increases due to carbon costs are tolerated, through some kind of future trade barrier on imported goods that must surrender equivalent amount of CO₂ allowances. In Europe there is a real belief that a competitive economy must be low carbon. Chinese policy looks to the Clean Development Mechanism as a promising avenue.

Plug-in hybrids might not meet global needs: emerging markets have underdeveloped power sectors; European drivers travel shorter distances. Plug-ins may work for areas with congestion charges, such as London; the Chinese transportation sector envisions an electric superhighway, tapping into remote hydro and coal resources, and countering growing oil imports.

Among the week’s intriguing topics, panelists cited high interest in coal, nuclear as a CO₂ solution, developing liquefied natural gas markets, and a sense of resignation to a macroeconomic slowdown for a year or so. One panelist noted that despite the talk of efficiency, there was only one compelling story about actual activity, perhaps indicating a lack of effective policies or programs. Looking ahead, panelists cited likely future CERAWeek topics of global warming and CO₂ control, frustration at the slow progress in dealing with them, and a return to regulated electric power, among other ideas.