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16 November 2007 - The need exists for some $20 trillion in energy sector investments between now and 2030. But obstacles exist to making that level of investment a reality.
A number of those obstacles were discussed during the roundtable session "Who Is Going to Pay the Bill?" by Richard Paterson of PriceWaterhouseCooper of the US and Johannes Teyssen of E.ON Energie in Germany at the World Energy Congress.
Paterson said all of the anticipated energy sector investments have long-term horizons. As a result, one obstacle is political risk. Such risk can be as simple as the potential for assets to be taken unexpectedly by a government or for civil unrest to occur. But he said risk could also extend to include countries that declare their intention to be energy independent "when it isn't possible." Such statements create "confusion in the market," he said. Likewise, an assertion of "resource nationalism" also is counterproductive to encouraging needed investment, he said.
Other obstacles included the lack in some instances of long-term and stable tax and fiscal regimes and cost inflation, which has led in recent months to the deferral of major pipeline and liquefied gas projects. A fourth obstacle Paterson cited was the "not-in-my-backyard" (NIMBY) problem in which local communities oppose nearby construction of virtually any type of infrastructure project.
Teyssen said one obstacle is the lack of a reliable framework that identifies the broad goal of the energy investment: is it to provide low-cost energy or to enhance climate preservation. "As long as private capital doesn't know it makes them nervous," he said.
A second obstacle is the lack of "technical openness" which leads to a general lack of understanding among the public regarding energy alternatives and their relative strengths and limitations. For example, he said that 70 percent of all Germans believe that solar energy alone "will save the world," he said.
Teyssen called for a clearer understanding of whether energy investments are to be considered market-based or regulatory-based. And he said that scarce supplies and manufacturing capacity are leading to rapid cost escalations and constitute a fourth obstacle. Solving the manufacturing capacity shortage may prove challenging.
"It's not so easy to build boilers," he said. "There is an extremely high entrance level" for new players to enter such markets.
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