On 31 May 2023, Penningtons Manches Cooper’s energy and natural resources group held its inaugural ‘energy trilemma’ breakfast seminar in the firm’s Singapore office. This was the first of a planned series of seminars for clients and contacts on issues related to the energy transition and sustainability, security of supply, and affordability.
Partners John Zadkovich and Nick Dingemans were joined by senior representatives from energy companies, equipment manufacturers, lenders, investors, and energy advisors. The roundtable discussion focused on key issues relating to the energy trilemma.
The term ‘energy trilemma’ was created by the World Energy Council in 2012 to describe the need to effectively balance the three competing elements of healthy energy systems – energy security, energy equity, and environmental sustainability.
Some of the main takeaways from the discussion were as follows:
Ukraine has been a wakeup call and the energy trilemma is prioritising security – for now
Governments have traditionally put energy security at the heart of policy, as a government that cannot adequately and reliably meet energy demand typically suffers in the next election. In Europe in particular, this risk reduced due to the common market – but the outbreak of war has driven the need to rebalance sources of energy supply.
However, this is expected to pivot – or indeed balance – back towards sustainability and affordability as markets adapt to the Ukraine war with the increase build out of renewables and liquified natural gas import terminals and, most likely, more nuclear power.
The affordability of the energy transition depends on location
Those in developed markets have different views compared to those in emerging markets, where investment capital is more challenging and the existence of power grids is less developed. The need for a just transition between developed and developing economies is clear.
Mines and metals are critical to the energy transition
There is a lack of awareness and education among some generations (and policymakers) as to the critical role of mining in the energy transition.
The role of banks
Banks continue to move away from traditional fossil fuels, but only lend or invest in de-risked renewable projects (and some mining projects), leaving private capital (debt and equity) to fill the void.
Alternative energy sources
Alternative energy sources, such as H2, present challenges, especially from a transport perspective.
CCS/CCUS offers a sound solution to the carbon economy, but concerns remain as to how to make it profitable for private investment, and the need for comity among regulations, especially the advantages of a carbon trading market founded on multilateral treaties. CCS/CCUS technologies are continuing to develop and the ability to ‘blend’ two established technologies may help de-risk investment.
Small modular nuclear reactors and nuclear energy generally will offer some respite to energy needs and creates a lower carbon footprint.
The next seminar is taking place in London, on 21 June. Seminars are planned to be run quarterly, with the next seminar at the start of Q3 2023. This session will consider in more detail the emerging carbon economy and the impact of the energy transition on supply chains. If you are interested in attending, please contact Nick Dingemans or John Zadkovich.