Editorial

There is nearly a one-to-one relationship between the installation of renewable energy capacity and the need for ‘fast reacting fossil’ (FRF) energy capacity, thus demonstrating again¹ the key relationship between the deployment of renewables and FRF technologies in the move towards a cleaner energy supply. A recent study by the well-known National Bureau of Economic Research indicates that ‘all other things equal, a one per cent increase in the share of fast reacting fossil fuel technologies is associated with a .88 per cent increase in renewable generation capacity in the long term’.²

The study was based on the historic interplay of renewable energy and fossil fuel deployment in a sample of 26 OECD countries from 1990 to 2013. In the context of the study, FRF technologies included gas-generation technologies.³

The results of the study support the assertion that ‘to date FRF technologies have enabled renewable energy diffusion by providing reliable and dispatchable back-up capacity to hedge against variability of supply’.⁴

In the words of the study’s authors, ‘Our paper calls attention to the fact that renewables and fast-reacting fossil technologies appear as highly complementary and that they should be jointly installed to meet the goals of cutting emissions and ensuring a stable supply’.⁵

The study's results include a number of important observations that policy makers should take account of, including:

• The close relationship between renewables and FRF technologies ‘must be appropriately recognized and internalized in the policy debate to avoid serious challenges to the security of electricity supply’;⁶

• Technologies based on FRF ‘provide the unremunerated positive externality of long-term flexible capacity for [renewable energy] backup’;⁷

• Policy debate that merely seeks to juxtapose renewable energy in place of fossil technologies will lead ‘to an underestimation of the costs of renewable energy integration, and does not contribute to stressing the importance of funding and developing solid alternative options, such as cheap storage technologies’.⁸

The National Bureau of Economic Research study was released at a propitious time since the deployment of renewable energy continues apace and yet the debate about the use of natural gas lingers on.

To put this in broader perspective, the G20 countries generated nearly eight per cent of total electricity from renewable sources in 2015 in comparison with 4.6 per cent in 2010, according to data recently compiled by the Bloomberg New Energy Finance research group on behalf of the Financial Times.⁹ Moreover, the data revealed that in seven G20 countries ten per cent of their electricity came from renewables in 2015 in contrast to three per cent in 2010.¹⁰ Making these figures all the more impressive is that hydropower, long the main contributor of renewable energy, is not included in these percentages.¹¹

Not surprisingly, taking its Energiewende efforts into consideration, Germany now derives more than 35 per cent of its electricity from renewables.¹² Nineteen per cent of all electricity generated in France, Italy and the UK comes from renewable sources while Brazil's percentage is 13 and Australia's is 11.¹³ On the other hand, the US and China trail far behind with the former at about eight per cent and the latter at less than five.¹⁴

Ironically, the challenge of addressing the intermittency associated with renewables involves fossil fuels ‘and more particularly, installing a large number of fast-ramping natural gas [generating] plants, which can fill in quickly whenever renewable generation slips’ as The Washington Post has recently reported.¹⁵

Notwithstanding the enormous growth in renewables, coal-fired generation is the single most important type of fuel for generation at 30 per cent.¹⁶ However, this number has decreased significantly since 1970 when it was nearly 40 per cent.¹⁷

At some future point, the issue of energy storage may have been solved, or at least addressed in a significant way. When that happens, then there may be the potential to phase out gas generation that serves as a back up for renewables. In the meantime, however, make no mistake about it – the intermittency associated with renewables must be considered in the context of electricity security. Gas generation remains the best on offer at the moment.

In this issue

This issue includes three thought provoking articles beginning with ‘Developing law for bioeconomy’, authored by researchers Suvi Borgström and Volker Mauerhofer. In bioeconomy the economy's services, material and energy are derived from renewable biological resources. This article discusses the key issues in developing bioeconomy that call for regulatory intervention. Further, it explores the need for development in regulatory approaches, strategies and structures for enabling the transition to and sustaining bioeconomy and explains why, in theory, regulatory systems based on integrative, adaptive and proactive law approaches are a promising way to meet that need.

Next, Colin T Reid, professor of law at the University of Dundee, Scotland, explores the impact of the United Kingdom's decision in June 2016 to leave the European Union and the impact on UK environmental law. Among other things, Professor Reid notes that while the UK's freedom of action will continue to be restrained by existing international law obligations, the biggest changes are likely to be the loss of the stability provided by the slow processes of making and changing EU law and the loss of means to call to account the UK Government (and devolved governments in Scotland, Northern Ireland and Wales) over their performance in meeting their environmental commitments.

Paul J Smith, a professor at the US Naval War College, considers ‘Energy security and the US-China dyad: is sustained energy cooperation possible?’ Professor Smith argues that despite some compelling negative indicators – such as a growing military competition emerging between the two countries – energy cooperation is likely to continue between the two great powers.

This issue also includes several commentaries. Ben Holland, a partner at Squire Patton Boggs, writes in ‘Enforceability of take-or-pay provisions in English law contracts – resolved’ about the resolution by the UK Supreme Court, the highest court in the United Kingdom, of a concern that certain take-or-pay provisions could be held unenforceable under English law. The decision clarifies that take-or-pay provisions should be enforceable, and not considered as an unenforceable penalty. The commentary is the third in a series over the last seven years that have commented on the enforceability of take-or-pay provisions under English law. They have significant importance given their wide use in long-term energy projects across the globe.

Trevor Witton, former regional advisor for the Middle East and North Africa region at BP plc, looks back in ‘The Concession and oil in Iran: the evolution of a concept’. The ‘Anglo-Persian’ Concession agreement secured by William Knox D'Arcy in 1901 covering mineral exploration rights in Persia (now the Islamic Republic of Iran) is, he writes, a remarkable story of grit and farsighted commercial and legal acumen. The commercial principles and the legal tenants that underpin this historic Concession are reviewed and parallels drawn with modern day exploration agreements.

This issue concludes with two book reviews. Catherine Banet, associate professor of law at the University of Oslo, reviews ‘EU Environmental Policy – its journey to centre stage’ while Matthew Secomb, partner at White & Case, considers ‘The leading practitioners’ guide to international oil & gas arbitration'.

Looking ahead

One of the key responsibilities of the Journal is to look over the horizon in an attempt to forecast what the major issues will be in 2017. What will energy and natural resources lawyers be talking about next year? What new challenges will need to be tackled, and how will lingering ones be addressed? In this regard, I encourage all of the Journal's readers to contribute your thoughts and ideas by sending them to me at my e-mail address below. We will do our best to take account of the challenges and opportunities that our readers will face in 2017.

Notes

1 April Lee, Owen Zinaman, and Jeffrey Logan, ‘Opportunities for Synergy Between Natural Gas and Renewable Energy in the Electric Power and Transportation Sectors’ Technical Report NREL/TP-6A50-56324, National Renewable Energy Laboratory and the Joint Institute for Strategy Energy Analysis, December 2012, 1, http://www.nrel.gov/docs/fy13osti/56324.pdf. As noted in this report, ‘Natural gas and renewable energy have been touted as key elements of a transition to a cleaner and more secure energy future’. 1.

2 Elena Verdolini, Franesco Vona, David Popp, ‘Bridge the Gap: Do Fast Reacting Fossil Technologies Facilitate Renewable Energy Diffusion?’ National Bureau of Economic Research, Working Paper 22454, July 2016, 3, http://www.nber.org/papers/w22454.

3 Ibid 3.

4 Ibid 26.

5 Verdolini (n 2) 26.

6 Ibid.

7 Ibid.

8 Ibid.

9 Pilita Clark, ‘Renewables jump 70 percent in shift away from fossil fuels’ Financial Times, 14 August 2016.

10 Ibid.

11 Ibid.

12 Ibid.

13 Ibid.

14 Ibid.

15 Chris Mooney, ‘Turns out wind and solar have a secret friend; Natural gas’ The Washington Post, 11 August 2016, https://www.washingtonpost.com/news/energy-environment/wp/2016/08/11/turns-out-wind-and-solar-have-a-secret-friend-natural-gas/?utm_term=.c2b6ba96761e.

16 International Energy Agency, ‘Key World Energy Trends 2016’, 9, http://www.iea.org/publications/freepublications/publication/KeyWorldEnergyTrends.pdf.

17 Ibid 9.