In our sixth year of writing and publishing The Energy Regulation and Markets Review, we have seen dramatic changes in global energy policies. Notwithstanding President Trump’s announcement that the United States will withdraw from the Paris Agreement, and the referendum in the United Kingdom to leave the European Union, there have been continued efforts to reduce greenhouse gases (GHGs) by the signatories to the Paris Agreement. There is still a significant need to invest in infrastructure, and we have seen significant investment throughout the supply chains in the oil, gas and power sectors globally. The Fukushima nuclear incident continues to impact energy policy, and we continue to see extensive liberalisation of the energy sector.

I CLIMATE CHANGE DEVELOPMENTS

With respect to climate change efforts, the Paris Agreement entered into effect on 4 November 2016 and, thus far, 148 countries have ratified the Agreement. President Trump has recently announced that the United States would be withdrawing from the Paris Agreement, but we continue to see significant carbon reduction efforts, such as increased development of renewable resources, as well as energy efficiency and demand reduction measures, globally, including in the United States.

In Europe, the European Union adopted ‘A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’, and it is expected that there will be a large amount of European secondary legislation to increase the amount of renewable resources. While it voted to exit the European Union, the United Kingdom continues to invest heavily in offshore and onshore renewable projects, and has been particularly active in the battery storage sector to round out intermittent renewable production, offset demand and arbitrage energy prices. President Macron has stated his intent to have France fulfil its goals of closing all coal-fired power plants within five years and doubling the capacity of wind and solar renewable generation. Denmark continues to seek to have renewable energy meet all of its electricity demands by 2050. The Netherlands has a goal of reducing GHGs by at least 25 per cent by 2020, and is closing at least two coal-fired power plants. Germany undertook significant steps to increase reliance on renewable energy resources.

China released a plan to have 15 per cent of its energy supplied by non-fossil fuels, 20 per cent from natural gas and no more than 58 per cent from coal by 2020. Korea’s goal is to cut GHGs by 37 per cent by 2030. India announced a goal to have at least 40 per cent of its installed electric capacity powered by non-fossil fuels. Japan and Australia are working to improve energy efficiency and conservation and to increase reliance on renewable energy supply. The United Arab Emirates continues its efforts to reduce its carbon footprint, announcing a goal of having 25 per cent of its capacity from renewables by 2030, and 75 per cent by 2050. Australia is adding significant new renewable resources. Even the United States is seeing significant investment in renewable energy development. While the Trump Administration is seeking to reverse the Obama administration’s Clean Power Plan, individual states are moving forward to achieve reduced reliance on fossil fuels and greater reliance on renewable energy, including California and New York, which are seeking a 50 per cent renewable portfolio standard goal by 2030, and Hawaii, which is seeking 100 per cent reliance on renewables by 2045.

II INFRASTRUCTURE DEVELOPMENT

For many countries, reliable energy supply is the primary concern, regardless of fuel source. Rural electrification and system reliability remain priorities in Indonesia, Mozambique, Angola, parts of Nigeria and Central and West Africa and we are seeing significant efforts to pursue electric generation projects in those regions. Iran is seeking approximately US$200 billion in investments for its oil and gas industries over a five-year period, and Iraq is seeking approximately US$18 billion in foreign investments over a three-year period. Turkey is aggressively diversifying its energy industry and building infrastructure, including the TANAP pipeline from the Caspian Sea to Europe, and is pursuing shale gas opportunities. Malaysia is constructing a 2,000MW coal plant to meet its growing energy demands. South Africa has taken steps to add 863MW of coal generation, and is seeking to add over 3,000MW of natural gas-fired generation. Denmark has a new North Sea Agreement to secure future exploration and production of hydrocarbons from the North Sea, and Cyprus, Mozambique, Lebanon and Mexico are establishing mechanisms to license offshore oil and gas exploration and production.

III NUCLEAR POWER GENERATION

Six years after the Fukushima disaster, Japan has shut down 45 out of its 48 nuclear power stations pending new detailed safety reviews. Germany continues to phase out all nuclear generation, and has agreed to assume the responsibility for nuclear waste management following shut-down, decommissioning and dismantlement by existing owners. France is seeking a reduction of nuclear power generation to 50 per cent of total electricity production within five years. Switzerland and Korea are planning to limit the life of their nuclear generation units. On the other hand, Turkey is continuing with development of the Akkuyu nuclear power plant, and the United Arab Emirates is still proceeding with construction of the Barakah nuclear power plant, both of which are expected to be operational in 2020. The United Kingdom continues to push forward with the Hinckley Point C new nuclear facility. South Africa is facing substantial resistance to its efforts to develop 9,600MW of new nuclear generation capacity. In the United States, the early retirement of certain nuclear plants has been driven by cost and power market considerations, rather than safety concerns. Some nuclear owners in the United States have sought state subsidies in New York, Illinois, Ohio and Pennsylvania, among others, in order to avert premature retirements. Illinois and New York have implemented legislative and regulatory payment programmes for nuclear facilities in those states, but they are currently being challenged in federal district courts on constitutional grounds.

iV LIBERALIsATION OF THE ENERGY SECTOR

We have seen significant energy sector regulatory reforms in many countries. Australia is continuing to move towards retail choice, and is seeking to implement a new energy market operator and market rule-change committee. Italy is seeking to develop more competitive retail markets. Spain has been engaged in regulatory reforms to reduce its ‘tariff deficit’ and re-establish the correlation between costs and rates. Portugal continues to work on liberalising its electricity and gas markets. Japan is actively working on developing competitive retail electric and gas markets and is seeking to unbundle electric transmission and gas transportation sectors to improve competition. And we are seeing continued efforts to partially privatise state-owned energy companies in the United Arab Emirates, Turkey, Brazil and Colombia.

I would like to thank all the authors for their thoughtful consideration of the myriad of interesting, yet challenging, issues that they have identified in their chapters in this sixth edition of The Energy Regulation and Markets Review.

David L Schwartz

Latham & Watkins LLP

Washington, DC

June 2017