PARIS, France – The Fukushima nuclear disaster in Japan and the apprehensions of protracted debt-triggered economic slump in the Eurozone have been moving global policy leaders to re-think the future’s energy mix.

As the cards are being re-dealt, many believe that green technologies – primarily renewables – would be the trumps. Understandably so as the whole world keenly deal with the worsening climate problems.

But there is a firm word of caution from the energy leaders: To be very careful with the planning processes and in pursuing technology options because blindly following what’s in vogue can be misleading – and at times, dangerous.

The pace of economic recovery, it was similarly emphasized, will generally set investment timeframes. Project deferrals will likely happen as investors face the dilemma whether they should wait until clear signals of economic rebound are there or would they stake capital but with delayed prospects of recovery on their investments.

Low nuclear case

According to Mr. Richard H. Jones, deputy executive director of the Paris-headquartered International Energy Agency (IEA), nuclear will remain a significant component of the future energy mix – that despite a ‘deviation from the course’ earlier set by some countries, primarily Germany.

While other jurisdictions momentarily backpedaled on their nuclear investments, momentum is still expected to build up in the future because the technology remains a low-cost, low-carbon option for the long term. In fact, based on IEA’s assessment, despite the high upfront capital cost for nuclear, its economics still thrive most attractive.

Across technologies, he pointed out that the levelized cost of energy drawn from nuclear still offers better succour for the wallet – it, emerging one of the cheapest among the choices in the mix.

Yet in the World Energy Outlook (WEO) 2011 to be unveiled in London this week, the IEA hints of a “low nuclear case” because of the “rapid slowdown in the use of nuclear power” following the Fukushima disaster.

For countries with sustained nuclear ambitions, including the United States, the obstacle course ahead will include re-thinking of technology improvements – something that is heedful of the tragedy that has befallen Japan’s nuclear path.

Based on data laid down by the International Atomic Energy Agency (IAEA), the low- to high growth forecasts for nuclear reactors to be in use until 2030 will account for 6.2-percent to 13.5-percent in the energy mix. The general trend, however, will be a ‘slow growth’ as compared to the earlier projections.

High-carbon infrastructure ‘lock-in’

Separately, at the B20 Business Summit on the fringes of the G20 summit in Cannes, Dr. Fatih Birol, IEA chief economist, disclosed that based on their updated WEO, “$38 trillion of investment is required to meet projected energy demand through 2035.” The breakdown will be: $16.9 trillion for power generation; $10 trillion for oil; $9.5 trillion for natural gas; $1.1 trillion for coal; and $0.3 trillion for biofuels.

Dr. Birol albeit warned that “investors in energy projects are facing a multitude of risks.” The defining factors for the energy outlook set sharp focus on: worldwide access to energy; fossil fuel subsidies and investment in energy infrastructure.

Although they are jealously guarded by competitors in the technology front, it appears that the role of fossil fuels in the energy mix – primarily “Big Oil” and “King Coal” -- might still be far from over. Experts nonetheless acknowledged that the “high carbon infrastructure lock-in is making the 2-degrees centigrade climate challenge goal more challenging and expensive to meet.”

That as a given, world energy investors are putting faith in technology improvements as well as in “human ingenuity” to level up to the expectations of de-carbonized energy choices – be it with renewables or in bringing to market fossil-fuel based clean energy choices, such as gas.

Conversely, the role of coal in driving economic growth is prescribed for re-examination, fundamentally within the context of an emissions-constrained world.

Ahead of the United Nations (UN) climate negotiations in Durban, South Africa later this month, the IEA bared that carbon emissions have bounced back last year after a temporary decline following consumption reduction during the 2008-2009 economic crisis.

With 7.0 billion people now inhabiting the planet, the investment challenges are similarly getting trickier – not only in terms of meeting growing energy demand but also in providing access to those who are still not quite part of the global energy equation. By 2050, the level of population will explode to unprecedented 9.0 billion.

The IEA thus roped in, in its outlook, “the scale and type of investment needed to provide modern energy to the billions of the world’s poor that do not have it.”

Dr. Birol noted that around 20-percent of global population, or around 1.3 billion people, still lack access to electricity; and roughly 40-percent or 2.7 billion people don’t even have clean cooking facilities. Such scenarios, the IEA chief economist emphasized, must be fully integrated in the scale of future investments required of the energy sector.

The capital outlay components intended to address the woes of the energy-deprived population will be $48 billion, he said, further stressing that “while this is more than five times the current level of investment to expand energy access, it only represents around 3.0-percent of projected global energy investment.

Onward to 2030, the other major concern that deserves its place in the solution front would be on scaling down, or total phase-out, of fossil fuel subsidies. The continued existence of fossil fuel subsidies in many markets, the IEA enthused has been resulting in “an economically inefficient allocation of resources and market distortions” and it similarly triggers failures in intended objectives.

The case for renewables and gas

With unconventional shale gas flourishing in North American jurisdiction, perceptions prevail that the world may already be reaching the “golden age of gas.”

In fact, for the envisaged slowdown of nuclear investments in Japan and with Germany’s shutdown move on the technology, the choices being peddled to these two countries are either renewables or gas.

It is worth noting though that in Germany’s case, it has already gone too heavy with its renewable investments (primarily for solar and wind). Yet, despite its ambitious touch on RE, supply reliability remained its major concern. For the replacement of capacity to be voided by its scrapping of nuclear as a technology choice, the country must either embrace gas as alternative, or revert to coal to ensure its longer term energy supply, experts surmised.

Mr. Jones noted that in contrast to the ‘gas revolution’ overwhelming the United States, “shale gas is not much of a European story.” Hence, this will pose some challenges as to where the supply would be coming from if Germany’s or other European countries’ preference would be gas.

There are already projections of “possible delay in oil and gas sector investment in the Middle East and North Africa (MENA) region”, and their impacts on energy supply are cautiously being re-assessed.

Russia is another energy market being monitored vigorously, as it is viewed that developments in this domain will have “implications on global markets.”

Meanwhile, renewables continue to present ‘exciting twists’ in the energy future narrative. Sustainability and subsidy issues, however, may persistently hound pace of developments.

The ‘solar energy bubble’, particularly in Spain and Germany, might in part be a harbinger of things to come. Energy planners however are willing to place higher bets on the more sustainable RE sources, such as hydro and geothermal, as compared to the intermittent ones – which they likened to “separating the men from the boys.”

Asia’s renewable energy story is also being closely watched – with China already surpassing the US on that investment sphere; while Japan is also prodded on more RE deployments at its energy mix, in addition to liquefied natural gas.