Energy Sourcing: An Uncertain Road Ahead

MBA 4th Annual Global Energy Day

31/01/2014 Barcelona

IESE Global Energy Day

Predicting where the tectonic changes in the energy industry will lead is almost like taking a shot in the dark. This is one matter that key players from the sector, irrespective of their take on the hotly debated topics making headlines, agreed upon at the IESE Global Energy Day, organized by the MBA Energy Club.

On the table for discussion were the U.S.’s potential to become an exporter, changing government regulations regarding renewables versus shale exploration, or the long-term impact of energy policy priorities post-Fukushima.

Eduardo Herraiz, E&P Development Manager, Gas Natural Fenosa explained that the U.S. indeed has the capacity to develop 300 million tons of liquefied natural gas (LNG) when the world demand is estimated to be at 250 million. Yet with LNG and shale exploration the political hot potatoes of the day and strong competition from Australia and Qatar, "I wouldn’t bet on the U.S. becoming an exporter anytime soon, even if our industry is indicating it will," responded Emilio Estrada, Spain Vice President and Operations Director, BP.

Renewable energies, once touted for their promise to resolve energy needs without aggravating climate change, are now the focus of skepticism. The high cost required to further develop them and changes in government subsidies have had a significant impact on this sector, which includes "an unfair misperception about the cost of technology," according to María Paz García Alarjin, Energy Manager EDP Renováveis. "If technology is being developed in the world, it’s in renewables," she continued, adding that, "not all technologies are the same across renewables and we need to see the big picture and understand the underlying issues regarding this type of energy."

Ms. García defended wind as part of the solution. Together with other sources such as hydro energy and biomass, certain renewables have the potential to be more price competitive. "We should identify and push the renewable energies that have already demonstrated a high potential to be competitive," Eduardo Villegas Ortega, Mexico Office Principal for Schlumberger Business Consulting told the audience. Most importantly, he underscored the need to find balance between fossil and renewable energies.

Other panelists agreed that a balanced energy portfolio is what counties should aim for. This is certainly no easy feat in many regions where public opinion and regulation are often at odds with the energy industry’s objectives, said Estrada. "Our legislators might have the right intentions, but they don’t understand our industry," he explained. "It should be about giving the different players in the market the right incentives."

Alejandro Rubino (MBA ’14), the IESE Energy Club’s co-president closed with a discussion of Japan’s approach to energy policy following the Fukushima tragedy. The four panelists praised Japan for its long-term approach to its energy needs and how it has diversified its energy mix in an intelligent way.

Fukushima is representative of the unpredictability in the industry; when market forces, special interests, and regulation come together with acts of God in a highly interconnected world, key players end up involved in a chess game anticipating the next industry shift. Organized by IESE’s MBA Energy Club and sponsored by Schneider Electric, BP and Gas Natural Fenosa, the "Energy Sourcing: Future Scenario" session panelists concurred that complexity and uncertainty will continue to define the industry in the years to come.