Fatih Birol took office as the new Executive Director of the International Energy Agency (IEA) on 1 September 2015, ushering in a new era for the global energy authority.
Well known and respected internationally for his work in the energy field, Dr. Birol joined the IEA in 1995. Most recently prior to his elevation to Executive Director, he held the positions of Chief Economist and Director of Global Energy Economics, with responsibilities that included directing the flagship World Energy Outlook publication. He is also the founder and chair of the IEA Energy Business Council, which provides a forum to enhance co-operation between decision-makers in the highest levels of government and industry. Dr. Birol’s selection as IEA Executive Director marked one of the rare occasions that the head of an international organisation has been selected from within its ranks.
Earlier in his career, Dr. Birol served in the Secretariat of the Organization of the Petroleum Exporting Countries (OPEC), an experience which gives him a unique perspective on the producer-consumer relationship. He has also been a member of the UN Secretary-General’s High-Level Group on Sustainable Energy for All and was named by Forbes magazine among the most influential people on the world’s energy scene. He is the recipient of numerous awards from governments from all parts of the world.
A Turkish citizen, Dr. Birol was born in Ankara in 1958. After initially studying power engineering at the University of Istanbul, he went on to receive a MSc and PhD in energy economics from the Technical University of Vienna and a Doctorate honoris causa from Imperial College London. He is an honorary lifetime member of Galatasaray Football Club.
Dr. Birol is the seventh Executive Director to lead the IEA, which was founded in 1974. He succeeded former Dutch Minister Maria van der Hoeven.
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Stories of Change Project
Fatih Birol interview
RH: Roger Harrabin = Interviewer
FB: Fatih Birol, Head of International Energy Agency = Participant
RH: I’m now with Fatih Birol, who’s the incoming head of the International Energy Agency. I’ve known Fatih for a long time because he’s been chief economist. Fatih, can you say when you first became interested in energy?
FB: I was interested in energy when I was studying in Vienna, which means early 1990s.
RH: What brought it to your attention?
FB: I come from a country at that time about 20% of the population didn’t have access to modern energy sources. It was the main driver for me. But starting from there, the issues of developing countries and energy was important driver. But by that time I had a wider interest in the global energy issues.
RH: OK. So you’re now taking over the International Energy Agency. Could you give me an assessment of where you think we are in terms of coming up with technological solutions that will meet our ambitions on climate change?
FB: The energy is at the heart of the climate change problem, because more than two thirds of the emissions come from the energy sector, by far the most important sector. Therefore we have to find solutions within the energy sector if we are serious to address the climate change. And when I look at the energy technologies, I see that on one hand the cost of clean energy technologies are coming down; they are becoming more competitive. On the other hand, there are two other drivers which are also pushing the clean energy technologies in addition to our climate problem. These are: one, is the local pollution in the cities in major emerging countries, which do require clean energy technologies to address those problems; and finally, the energy security is important issue, and some of the important fossil fuel carriers are more and more intertwined with the geopolitical developments in the world. So from energy security point of view as well the clean energy technologies are becoming important options. So climate, local pollution and energy security all showing the same direction.
RH: We’ve seen a boom in renewables, as you say, but they are still absolutely tiny compared with the totality of energy production, which is still completely dominated by fossil fuel, and a very, very daunting challenge to reverse those statistics as the century progresses.
FB: You are right. It is ... today about 80% of the global energy comes from fossil fuels; the rest from renewables and nuclear power.
RH: Sorry, and just to gloss on that: that’s electricity we’re talking about?
FB: No total energy.
RH: Total energy.
FB: More than 80 percent of our total energy comes from fossil fuels, namely coal, oil and gas, and the rest from renewables and the nuclear power, but when we look at what is happening today, we see the share of renewable energy is growing very strongly. Just let me give you an example of 2014, what happened last year. About half of the all new power plants came online are renewables, 50%. And many countries are pushing their renewable energy sources, namely hydro-power, solar, wind, biofuels and others, and the countries who would like to address the climate change make their pledges, and most of those pledges are based on the expansion of renewable energies in a big way.
RH: You’ve looked at the figures, compared what countries are pledging with the general aspiration to stay within the two Celsius target. What are your findings on that?
FB: The current pledges are making major impact on the energy industry, making important inroads in terms of decarbonisation of the energy system, but they themselves are not enough to bring us to a two degree Celsius target, which is a must if we want to have a planet which is more or less similar to what we have today. Therefore we need to go beyond that, and Paris is a very important stop for making it possible. But in Paris we need to see that the energy sector, policymakers, energy industry, get the right signal from Paris that the way forward is in the direction of decarbonisation. Otherwise we may see that the investments do not go in the right direction and this may have lock-in implications for our energy sector.
RH: When you say lock-in, you mean that we’ll be committed to technology, expensive technology, that will continue polluting years into the future, long after we’ve wanted it to be cleaned up?
FB: Exactly. Today, for example, in Asia, about 50 percent of all power plants under construction are inefficient coal-fired power plants. When they are built, they’ll be with us 40-50 years and it will be very difficult to shut them down once they start to operate.
RH: Well, how are you going to stop them building … in a poor country, how are you going to stop them building inefficient coal-fired power plant?
FB: It is very, very simple. This is the thing. If their efficiency was improved by only two percentage points, the emission savings coming from there is equal to the European Union’s reduction of emissions targets, just only that. And the important thing is here, going from inefficient to efficient coal-fired plants, the cost of capital, the increase, is less than 10%, which is nothing. So therefore if the countries do not want to go to other fuel types, at least they should use the efficient coal-fired power plants, and if they move from inefficient to efficient coal-fired plants the difference in terms of cost is minimal compared to other mitigation options that we have somewhere else in the world.
RH: Well, who should pay for that extra 10%?
FB: It can well be… we can all have a mechanism in order to provide incentive, and to reduce the emissions by improving efficiency there, and the global mechanism should make so that instead of countries making more expensive abatement measures in their own countries, for example, developed countries can well play a part to increase the efficiency and therefore reducing the CO2 emissions.
RH: So rich countries could pay poor countries to help them buy more efficient coal plant?
FB: I wouldn’t say pay per se, but they can provide assistance by providing them the right technologies and the right economic framework.
RH: Sorry, sorry, let me stop you there. There’s some money exchange here at some point: somebody has to pay the extra 10% cost. Whether it’s by subsidy or whether it’s by export credit guarantee or whether it’s by direct grant, somebody has to pay. Who’s gonna pay?
FB: There’s already an agreed finance in the UNFCC process, about 100 billion US dollar, and this may be even bigger if it is agreed in Paris, and bulk of this money will of course come from the developed nations, and this will help other countries to make the technology transfer.
RH: But environmentalists will riot if you suggest that that clean development money is used to fund new coal-fired power stations, even though they may be more efficient.
FB: No. This is up to the countries to decide how they are going to improve their efficiency. This can be by improving the efficiency of the refrigerators or it can be improving the efficiency of the power plants or, it should be, improving the share of renewable energies. Today, renewable energy investment’s about 275 billion US dollar. We foresee that this needs to go to 400 billion US dollar in order to be able to reach a peak of emissions in 2020.
RH: Sorry, I really don’t feel I got an answer from you on this. Somebody has to pay the extra 10% cost to make a coal-fired power plant more efficient. Are you proposing that the UN funds set aside for climate change are used for that? If so, there will be massive resistance from environmentalists. And if not, what are you proposing?
FB: I propose that there should be a fund – there is a fund already – and this fund should be used in order to improve the efficiency of the energy use in those countries. And plus...
RH: By whatever means, including coal?
FB: This will depend on the countries’ choice. I cannot sit here and tell the countries, who have no access to electricity, to say… to do this or that. It’s up to the countries. It should be improved energy efficiency and, plus, increased share of renewable energies in the energy system.
RH: OK, let me ask you now more broadly about… What technologies do you think are going to figure most strongly as we move forward through this century?
FB: I think there are many technologies which will help us, but two of them are crucial. One is renewable, and when I say renewable I say wind and solar, in addition hydro, to increase this share. But the second, more important than that, which never gets enough attention, is the efficiency improvement. Because many efficiency improvement policies can be put in place very easily by putting the right policies, right measures, right labels. And this could be a major, major game-changer for the energy industry, because it will have implications for the growth of demand and the pattern of demand. So these are two major policies I see.
RH: The IEA and other bodies have been saying to countries for decades, ‘You’ve got to make your industry more efficient and your appliances more efficient.’ In some sectors it’s happened, like cars for instance, and white goods. In others it just really hasn’t happened. Even though it may be economically rational to do so, it always looks like a low priority for a business. So there’s one thing you saying, ‘You should do it,’ and another thing countries actually managing to achieve it in their industrial sectors.
FB: First of all, I think, while we all acknowledge the momentum in the renewable energy, we may be missing what’s happening on the energy efficiency sector as the… It is not so easy to observe and track. Many countries are pushing an energy efficiency button on the household appliances, on cars, on trucks and on industry, and their results will not be seen very quickly, but we are already seeing some of the results, for example in Europe. We are seeing that European electricity consumption remain stable although the European household appliances increase substantially. Or in what we see in China; in China we see a major improvement in the use of energy in the industry sector. So these are good signals, and I believe many countries, will push energy efficiency more strongly, not only because of climate change but also for reducing the cost of energy and addressing the local pollution in their countries.
RH: What do your projections suggest will be the relative comparison between renewables, clean power and fossil fuels by middle of the century?
FB: Middle of the century, OK. So it will depend on the decisions of the countries, and Paris will play a crucial role here, but what I would like to see, and which could be helpful, is that today more than 80% energy comes from fossil fuels, and I hope in the realistic terms, in the next 25 years this comes about half of the total energy supply, and other half comes from the clean energy technologies. If we can achieve that, we will still have hopes for a two degrees target. We should be very careful what our suggestions... whether they are realistic and pragmatic and can be easily adapted, especially given the sensitivities and the priorities of the emerging countries. The world is not only consisting of the rich OECD countries. There is a huge growth coming mainly from the emerging countries, which have a lot of different priorities.
RH: One thing you’re pinning a lot of hopes on is carbon capture and storage, where a power station will take the CO2 out of the exhaust gas, pump it into rocks underground. It’s a huge technology, very expensive. It’s been talked about for decades now. We’ve barely got a handful of plants up and running. In Norway, where they’ve been looking into it at great length, they’re despairing that they can’t bring the cost down and that more companies aren’t wanting to invest in it. In Germany, people have said they won’t have carbon dioxide pumped into rocks underneath their homes. I’m just wondering how realistic it is for your scenarios to be so heavily dependent on a technology which we might not be able to produce at scale or affordably.
FB: Carbon capture and storage is technology which is already with us. However, it has three major challenges. One, there are still some discussions about the technology. Second, there are discussions about challenges in terms of the regulation, regulatory framework. And third, perhaps most importantly, there are serious challenges in terms of its economics: the cost compared to others. This is a fact, and today we see very few demonstrations, and I can tell you that the appetite for CCS is not growing at this stage where we are. On the other hand, we have huge fossil fuel resources worldwide and they are cheap. But they are, at the same time, a cause of our climate change problem. We will see whether or not this CCS will prove technologically sound and safe, if we can build the regulatory framework and if we can make it cost-effective when compared to other energy sources. If all these conditions are maintained, then CCS can have a future. Otherwise it’ll be very difficult for CCS to play a important role in the next years to come. What we say is that the zero-emission technologies, this can be renewables, this can be CCS or this can be even nuclear power. So if CCS proves to be not showing successful outcome, this gap may be filled by either nuclear power or renewables. So CCS... the development on CCS is yet to be seen where we are going to head.
RH: Nuclear power is also struggling to gain support outside China. In Europe it’s moribund; in the USA it’s moribund. Your hopes for keeping within the two Celsius limit are pegged on technologies that people seem not to want and we can’t be certain we can produce at scale. I wonder how realistic your projections are.
FB: I don’t know whom you mean with people, but I know that in China and India, where the largest chunks of people live, they have very strong nuclear programmes. In United States today six nuclear power plants are under construction. But I agree, in Europe it’s a different story. So for nuclear we have to: a) assure the people that nuclear can run with all the safety measures taken; and second – another challenge of nuclear power – the cost of nuclear is today high and we should see whether the cost of capital for nuclear will be comparable to the other technologies. Once again, in our scenarios we do not pick up the technologies, but what we say is about half of the future energy need to come from zero-emission technologies. These can be renewables or this or that. It’s up to the countries to choose. But I wouldn’t be dogmatic. I wouldn’t exclude any technologies if they are safe, if they do not emit CO2 emissions and if they are cost-wise comparable to the others.
RH: Finally, a brief question. You are concerned, as an organisation, about us keeping within the CO2 limits. Are you optimistic that we can do it?
FB: I am becoming more optimistic compared to a year ago. There are two reasons which make me optimistic. One, some of the data we are getting from the emissions seem slowing down of the emissions mainly as a result of renewables playing a more important role in the global energy mix, and efficiency policies are bearing fruits. This is one: the data is getting… encouraging data. And the second, more and more countries are committed to address the climate change – the governments – ranging from the developing countries – Ethiopia, Gabon – to United States, Russia, Canada, Mexico and others. This political momentum plus the data make me optimistic for the next years to come.
RH: OK. Fatih Birol, thank you very much.
FB: Thank you.
<End of interview>