ｃIEEJ 2018
IEEJ：June 2018○Special Bulletin
A Japanese Perspective on the International Energy Landscape (380)June 13, 2018

At the 41st IAEE International Conference
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
From June 10 through 13, the International Association for Energy Economics (IAEE)
held the 41st IAEE International Conference in Groningen of the Netherlands. The IAEE is aninternational academic society functioning as a platform to analyze and consider energy andenvironmental issues from the main viewpoint of economy and others including politics, geopolitics,technology, society, etc. Its annual International Conferences have been held at various sites in theworld, including Groningen for the latest one. Although I had frequently attended these meetings,my participation in the latest one was the first in recent years. Next, the IAEE International
Conference is scheduled to take place in Montreal in 2019, in Paris in 2020 and in Tokyo in 2021.
Under the general theme “Transforming Energy Markets,” the latest IAEE International
Conference included three plenary sessions, six round table sessions, six dual plenary sessions and91 concurrent sessions, attracting 650 people including 450 presenters on a registration basis. In thefollowing, I would like to summarize my comments based on the most impressive points to me at theJune 11 and 12 sessions I attended.
First, the fact that the conference took place in Europe, the Netherlands and Groningenmight have set the tone for the discussions. In Europe, the Netherlands and Groningen, a great matterof interest involving energy is a low-carbon or decarbonized society. Energy transition toward a
low-carbon or decarbonized society has become a keyword. I felt that a major part of the conference
demonstrated this matter of interest. Conversely, energy security, a keyword that should have beenused in meetings in Japan or the rest of Asia, was impressively absent from titles for major sessionsof the conference.
Given that the conference was a meeting of an international academic society on energy
issues, participants naturally centered on academicians. However, I felt that academicians’ share ofparticipants in the latest meeting might have been higher than in the past meetings where moregovernment and industry officials participated. As a result, arguments were frequently made fromacademic angles, giving me stimuli that are different from those at usual international energy
conferences. At the same time, I felt that if feedback from policy and business realities wereenhanced, the discussions at the meeting would be more significant.
Second, discussions on energy transition initiatives toward a low-carbon or decarbonizedsociety in Europe or the Netherlands were rather optimistic, although various problems were pointedout. European countries have set their respective ambitious GHG emission reduction targets for 2030
and 2050 and are nominally determined to make full efforts to achieve their targets. In Groningen
where the latest meeting was held, gas production has been reduced substantially due to an
earthquake problem, requiring the Netherlands to replace its mainstay energy source which havemade great contribution to the Dutch economy. In this respect, however, no pessimistic views weregiven on the future course of energy transition in Netherland.
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IEEJ：June 2018○

The largest factors behind optimism about energy transition include actual progress in thesubstantial expansion of renewable energy such as wind and solar photovoltaics and a rapid fall in
renewable energy power generation costs that has brought about the expansion. Also supporting theoptimism are expectations placed on the diffusion of advanced technologies such as electricity
storage systems, and information and communications technologies. The conference included asession focusing on the impact of enhanced climate change countermeasures on international
economic and industrial competitiveness. Impressively, a dominant view in the session was thatclimate change countermeasures should be taken not as a threat to economy or industry but as anincrease in business opportunities through the development and diffusion of new technologies. Asfor employment, I noted a surprisingly optimistic view that job losses in industries declining onenergy transition may be covered by newly prospering industries to avoid any serious employment
problem.
My personal impression was that these optimistic views reflect excessively optimistic
expectations on technological and social advancement in a manner to project present nominal
phenomena into the future. Given that time constraints limited discussions, I wanted to learn backup
data for analyses of energy transition’s effects on economic and industrial competitiveness andemployment and how these data were realistic.
In a session on disruptive changes’ impacts on the energy industry, a participant
interestingly noted that massive renewable energy expansion and the advancement of various
technologies have shaken power industry business models amid progress in decarbonization andpower and gas market liberalization, throwing the industry into a wave of realignment. Impressively,
another explained that the three Ds – decentralization, decarbonization and digitization – havebrought about great changes for power and gas companies and that in this context, Germany’s largest
energy company EON has been forced to change through spinoffs and asset swaps. The explanation
indicated that market changes could pose severe and complex problems to an incumbent industry.
In a session on electricity market liberalization and market design as well, interestingarguments were seen. Market liberalization has originally been designed to introduce competition toincrease market efficiency and consumer benefits. A hope or belief underlying arguments for market
liberalization is that price signals from a fully functioning market would lead to the optimum
allocation of resources and the maximization of utility. Dominant arguments in the session weresupported by the recognition that market participants should identify the significance of market
liberalization, take a positive view of ongoing liberalization initiatives and appreciate market
solutions as the best or better than command and control. Interestingly, however, a discussion at thesession pointed out that most liberalized markets have failed to reflect costs of “reserve” for supply
and demand stabilization with short-term prices determined through competition or to guarantee thesecurity of long-term investment. An impressive notion was that capacity market or capacity
mechanisms considered as solutions to the above mentioned problems related to market
liberalization have actually brought about mixed results in terms of effectiveness and success,indicating that the mechanism is still in a process of repeated trial and error. Toward the energy
transition facing the world, we will be growingly required to analyze and consider expectations,
opportunities and challenges in a well-balanced manner.

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