The COP16 climate change summit in Cancun is unlikely to bring any festive cheer to smart energy technology vendors. However, the expected lack of outcome in terms of a binding international agreement will do little to affect the movements of individual governments in setting energy-efficiency policies that will drive the adoption of smart technology.
As the US lurches to the right politically, climate change will become virtually unmentionable in federal energy policy, but in a highly fragmented market, state regulators and governments will hold the key to the adoption of smart technology. It is here that policies will be set to drive the US toward a smarter world, irrespective of the Republican resistance to climate change-driven policies.
Cancun will not deliver a globally binding commitment to climate change
There is near-unanimous consensus that the Cancun summit will not deliver a globally binding agreement on a new, credible, and meaningful climate change framework. It will certainly offer nations the opportunity to discuss a replacement to Kyoto under a far less intense media spotlight than that shone upon world leaders in Copenhagen, but the best we can hope for is the laying of a more solid foundation for future summits. As delegates arrive in Mexico, it is timely to question whether COP16 matters to the smart energy technology industry and whether a failure to deliver any binding agreement on climate change will affect the future of the industry.
Divergent political will and obstinate politicians are of course the major stumbling block for any ground-breaking consensus in Cancun. However, a failure to meet agreement at the most basic level will have little impact on investments in smart energy technology. Governments the world over are adopting their own energy-efficiency policies, irrespective of the outcome of COP16 and any subsequent conferences. While the drivers for adoption of smart energy technologies might differ, the net result is positive and should give optimism to observers that are hoping for the success of the Cancun talks.
Central governments will continue to drive smart technology adoption in Western Europe and across Asia
The EU has led the global charge to reduce greenhouse gas emissions, but across Western Europe the attitude to renewable energy is by no means homogeneous. Residential smart metering penetration is mandated to reach 80% by 2020, and transmission and distribution companies across the continent are investing in upgrading networks using smart technology. In addition, a commitment to renewable energy, particularly on the Iberian Peninsula and in Denmark, has seen wind generation gain significant penetration.
In Asia, China, which is now the world's largest emitter of greenhouse gases, is also pressing forward with a renewable energy policy that will see heavy investment in solar power. China is also providing subsidies for cleantech companies. It is subsidizing manufacturers of solar film, wind turbines, and electric vehicles, and is offering subsidies to consumers to purchase electric cars. Other Asia Pacific countries are also forging ahead, with Australia, New Zealand, Singapore, South Korea, and Taiwan already having smart meter strategies in place.
As the US lurches to the right, smart energy technology adoption will be driven by individual states
The US is a hotbed of cleantech innovation, but US-based vendors are finding non-domestic markets far more accessible. California-based smart meter vendor Echelon has only a small proportion of its installed base in its home market, and its US competitors Itron and General Electric are also looking overseas for growth. Likewise, smart grid specialist Current has a couple of contracts in Colorado and Texas, but has many more in Europe.
While the US market has benefited from a healthy environment for cleantech equity investments, as well as government-sponsored American Recovery and Reinvestment Act funding and company-specific subsidies, the federal government is fundamentally unable to pass any legislation to drive energy efficiency. With a new Republican majority in the House of Representatives, the country is politically lurching to the right, cementing an ingrained ideological opposition to renewable energy. The American right is increasingly outspoken about its skepticism of the notion that burning fossil fuel has had an impact on climate change, which does not bode well for any summit designed to tackle the issue.
In addition, the US suffers from a highly fragmented energy market, in which even the largest utilities are dwarfed by their European counterparts. Significant investment in smart technology is being earmarked by some US utilities, but many lack the balance sheets to fund these investments, and regulators and end users are becoming increasingly skeptical of the benefits of going "smart."
However, the aging infrastructure that underpins the US electricity grid is creaking under the pressure of modern-day energy demands, and requires new investment. A federal push for energy efficiency is unlikely anytime soon, which virtually kills off the prospect of success at any COP summit. The Republican right must first embrace smart energy technology as a way of solving long-term energy security, which will then allow it to dodge its skepticism about climate change.
However, individual states are far more receptive. California, traditionally governed by a Republican, is heading toward state-wide deployment of smart meters to combat capacity constraints. While the easy dollars will be earned in Europe and Asia Pacific, US investment in smart energy technology will happen regardless of federal government or what happens in Cancun. It will just be a little patchy.
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