Climate policy paths

Emily Dahl: From MIT’s Energy Initiative, welcome to the podcast. I’m Emily Dahl and I’m here at the UN Climate Change Conference, COP24, talking with GE Power vice president and chief marketing officer Rob McKeel, and MIT Energy Initiative senior researcher Sergey Paltsev, who is also deputy director of the MIT Joint Program on the Science and Policy of Global Change. Greetings to you both and thank you for joining me. Sergey, you’ve just presented here at the conference on new research that can help policymakers make decisions about optimal technology and policy pathways to meet and exceed their country’s commitments to reduce greenhouse gas emissions under the Paris Agreement. Can you tell us a little about the research?

Sergey Paltsev: We had this wonderful opportunity to analyze 10 countries in Latin America and 10 countries in southeast Asia and elaborate on their potentials for technology and policy options to reduce the emissions. As we just have heard during the COP sessions, there is an urgent need to accelerate the actions. We were very fortunate that we had an interest from GE, where we were able to explore our tools and our expertise in the policymaking, with the current state of the technology development which can be applied to these regions. What we have done, we looked at the individual countries, country by country. We were quantifying their national determined contributions which was admitted for the Paris Agreement process. We elaborated on what is the best way for an individual country and for the region itself. We have developed publicly-available, Excel-based simple tools that country representatives can easily pick up and check our assumption and compare our results versus the assumptions that they can test as alternative scenarios. We also created four economy-wide models—two countries in every region, for Argentina, Columbia, Indonesia, and Vietnam—which are showing the cost of meeting these targets and showing the sectoral impacts from imposing different policies. Then we went in extensive dialogue both with the countries and GE on trying to understand better the role of digitalization in pushing up renewables and making the power sector more efficient. We were happy with the outcome of these two reports, which are now publicly available at the MIT website. We are hoping that these reports are going to be useful, not just for the policymakers and industry decision makers in these two regions but also in other parts of the world, like Africa, like east Asia, where there is an urgent need to understand how to speed up the energy transition and what kind of policies will be able to enforce that and strengthen the response.

ED: Great. Rob, GE provided support for this research and developed the idea with MIT researchers. Why is it important to GE to have analysis like this?

Rob McKeel: First off, we’ve had a long partnership with MIT and have collaborated on many topics in the energy space throughout the years. We first came to MIT with this idea because we needed to look at how countries around the world were really going to make a transitionary path towards their carbon reduction goals. It’s important to think of it as a transition versus an abrupt change because the amount of capital required to make such an abrupt change is not readily available for many countries around the world. Likewise, we know it’s important for the world to reach the carbon goals. We think it’s very important for everyone to do everything they can to reach the carbon goals. We wanted to give countries around the world a pathway that they could look at with multiple options to meet those goals. The options aren’t just options around technology but options around policy, procedure, and other areas outside the energy space which will be very important to make sure they reach as they go forward. MIT was the obvious partner for us and we think the results of the study have been very, very enlightening for ourselves and for countries around the world.

ED: When you were talking about the options for different countries, Sergey, as you and your team have examined what Latin American countries and member countries of the Association of Southeast Asian nations have been doing, or could be doing, what are a few of the low-carbon pathways that you’ve found most interesting?

SP: Even though the report is for this region, what we found out is that every country has its own individuality. That’s an obvious outcome of this study but it has to be stressed again and again that, unfortunately, there is no universal recipe which is going to work exactly in the same way in different countries. In terms of the pathways, it is interesting that there are a lot of lessons in how the policies, in terms of increasing the uptake of renewables in Latin America has done, can be applied to the ASEAN region, which is still in the early stages of pushing a renewable agenda much more. We have learned the lessons, for example, from Argentina, where they tried to do feed-in tariffs and almost tried to replicate what Germany has done. But not with very successful results. They have changed the rules and they opted to something called RenovAr where they’re pushing the renewables through the optioning. They have learned how to set up the rules to make sure that those projects are getting into fruition and what kind of support is needed to make sure those projects are getting into effect. That type of support, those type of lessons, are very valuable for the countries in southeast Asia. In terms of the big differences between Latin America and southeast Asia is in their current energy mix. Latin America relies very heavily on hydropower. Speaking of climate change, recently they had some issues where the water availability was making their hydro generation a little bit more questionable. As a result, they opted for developing a natural gas facility to make sure that they’re providing stable electricity. The situation in ASEAN is very different because, while the hydropower, even though in some countries is substantial, is not as substantial in comparison to the countries in the Latin American region. As a result, a lot of countries in southeast Asia are still relying on coal. They actually have a lot of projects where they’re going to develop even more coal power plants. For example, in a country like Vietnam, we see a substantial increase in coal-based generation because they are trying to make sure that the industrial sector is developing very rapidly. As a result, we see a lot of need for additional power and a lot of need to provide that power in a substantial fashion. Renewables are still not providing them the full solution and as a result they are opting for something which is much cheaper and much more affordable at the current settings. When we have done this study, we also elaborated on the price structure which is driving some of these results. What we found out was that in many countries, the prices do not really reflect the true cost. We see that the prices of electricity, the prices of coal generation, supported by the government, due to different reasons and there are different misincentives for alternative types of generation. For these countries, we are advocating that should be adjusted to make sure that every technology is competing at the fair rules and there is a level playing field for all of the technologies. Which is going to help to bring natural gas, which is going to help to bring renewables, because they are going to be priced accordingly. What we found out was that in countries like Malaysia and the Philippines, while there is a lot of room for much bigger intake of natural gas, the infrastructure has to be developed. Also, the rules for accessing that infrastructure has to be developed. In many of the countries in the region, there is a national monopoly which is in control either of the pipeline or the distribution system. What is important is to create the market incentives and the third-party access which is going to ultimately reduce the cost of the energy, which is ultimately going to make the system more energy-efficient, which is also going to help to achieve the goals of emission reduction in the most efficient way.

ED: You were just talking about affordability as a part of that. When we’re talking about this grid of the future and how digital technology and smart grid technologies play into that, is this something that only highly developed economies can afford? Or can developing countries benefit as well, as they make the energy transition?

RM: I think the digital technologies will benefit both developing and developed countries. Those countries that have island nations or very distributed resources, technologies like microgrids and these types of solutions can really benefit them to give them energy security and reliability. Mature countries that have large-scale energy management systems can tap in to all of the information from those energy management systems and use that information to provide more efficiency and productivity in their infrastructure. And likewise, use that to manage their overall use of electricity and make sure they minimize losses in their networks and systems. Also, countries around the world can invest in asset management technologies that make sure that whatever the asset is—whether it’s a steam turbine, nuclear plant, gas turbine, wind turbine—that they’re getting the maximum out of those that they can. I’ll just give one quick example. In our renewables business, we implemented some technology in our wind turbines. The wind turbine that sees the best wind, it’s generating the most efficient electricity from the wind it’s receiving, will communicate its direction and position to all the other wind turbines in the farm. They’ll all adjust themselves until they maximize the wind use across the entire farm. This uses software technology to create efficiencies in the system. Likewise, in our gas turbine space, we implemented technology that allows customers to look at the gas prices and to maximize the use of their turbines to run the turbine a little harder when gas prices are high, and bank life in the gas turbine when gas prices are low. There are lots of ways to apply digital technology, whether you’re a very developed country or whether you’re a developing country.

SP: Actually, that is very relevant to our study. A couple of the countries in the regions have a lot of islands in their constituency. For example, if you’re looking at Indonesia or the Philippines, then these solutions, which are specific for individual islands, are crucially important in order to provide the stable power generation and access to electricity. Because in Indonesia, a substantial amount of the population does not have access to power. One of the goals and one of the recommendations which we are trying to provide is how to make that universal access to electricity in the best possible way. Digitalization plays a very important role, both for new assets, but also to make the existing assets more efficient, and to use them in such a way as to increase the efficiency but also to decrease the cost of running the generation. Because ultimately, that is going to reduce the required fuel in order to produce the same amount of power.

ED: What are some of the takeaways from the studies for policymakers in other regions of the world, as they’re working to address climate change and meet their nationally determined contributions?

SP: When we developed this study, our hope was to have the pilot showcase which can be used by the industry leaders and policymakers in other regions. The design of the study was such that we started almost a year ago, with two meetings. One with the representative from energy ministries from Latin America and another meeting with representative from energy ministries from ASEAN. We outlined what we are trying to do, how we are trying to do that, and we asked for their inputs to what we are going to do. The crucial feature of our study is open-source and public access to the information. Even though the countries were willing to share their own data, we were saying that we can only use the data which is in the public domain. Our message to them was, if you want to see how the outside world or the rest of the world sees your country, you need to provide that data into the public domain, and then we will be able to do a much more objective study. As a result, we opted to use only that data which is publicly available from the International Energy Agency, from the International Monetary Fund, and from other sources, in order to increase the transparency, in order to increase the understanding of where the current emissions are and what are the projections which can be made based on these publicly available tools. We also hope the tools, which we developed for selected countries, can be used as an example for other countries. For example, if some country in Africa would want to do the same thing, they can learn what we have done and apply it for their own settings. In this way, we are hoping to increase the capability of the researchers in those particular countries to do their own analysis rather than to rely on an institution like ours or others.

ED: And for GE, how do you envision using this data?

RM: As we read the report, a couple of things jumped out at me. One, it’s very important for countries to have a very clear energy strategy. The reports as written outline a lot of options that countries can use to form that strategy and give them insights into different policy and technology choices they can make as they go forward. The second piece I thought was enlightening from the report is, everyone has a renewables-or-nothing approach and it chose more of a bridge approach, utilizing the full energy mix to allow countries to transition at the right pace. Sergey has very deftly communicated that it’s not important to make a complete progress as much as to make progress. To get started down the path and change the trajectories for some of these countries that right now are on a current path to increased carbon usage versus actually decreased carbon usage. It’s not trying to solve the entire problem, it’s solve the problems that you can. The tools in the report and the tools that come with it give countries some options and avenues to start solving those problems.

ED: Thank you both so much for joining me.

SP: Thank you very much for this opportunity.

RM: Thank you so much.

ED: If you have any questions, comments, or feedback on this podcast, please tweet us @mitenergy. And of course, feel free to subscribe and review us where you get your podcasts. From MIT, I’m Emily Dahl, and thank you for listening.