How Progressive Are We On Energy Transition?

BACKGROUND:

Despite the boost on investment in renewable ($495 billion in 2022), it is estimated that it falls short for global net-zero carbon emissions.  Where have we gone wrong?  Renewables undoubtedly is helping to meet the growing energy demand but, not been accounting for fossil fuel reduction which has been believed to impact both climate and society.  International Energy Agency (IEA) did recognize the severity of the situation while projecting forecast reductions on reduced fossil fuel use from mid 202os.  However, the Ukraine-Russia conflict – compounded by Israel war, has re-opened discussions on fossil fuel use for immediate use and emphasizing the energy transition as well, towards secured long term energy future.  Maintaining growth in Gross Domestic Product (GDP) while achieving fossil fuel cuts is, indeed challenging.

ENERGY TRANSITION:

Energy transitions have inherited technological risks perhaps due to governmental policies – price caps and permission concerns have diffused in governmental auctions in Europe.  Similarly, lack of continuity in tax credit schemes (key to funding) in the US saw a stop-start affair of the renewables.  Europe and the Middle East do not see the scale needed at the moment and the Governments doing more to accelerate planning permissions, subsidies and innovative funding.

What’s beyond government-dependent factors is the absence of quality transition plans depriving decisions on fund allocations.  While there are many national and regional strategies, the required infrastructure to render them successful is what is missing which, is what private sector demands to decide investment sections and supporting infrastructure to drive the market.  Though concerned partners understand the desired strategies, general public is unfortunately not educated on this transition – awareness among at least 95% is low.  Is it time for education to allow people to make choices best for the planet?.  The companies who have prioritized energy transition plans have been deriving considerable benefits as for example, Danish multinational power company Orsted – their predecessor turned to renewables and currently, the company is world’s largest offshore wind farm developer.

Each country with their goal needs to find a breakthrough.  This calls for a road map not only for the public sector but even private sector leaders to overcome barriers not only towards decarbonization but also, for the projects of the organization to ensure greater stakeholder engagement.  This will facilitate an understanding whether the community be better or more resilient and how the economic activity be improved. What then could be the start towards road map?

CURRENT STATUS:

Consensus on embracing circular economy model has emerged after a long research on strategies to combat climate change.  It further warns against exponential growth economy as it is drawing on energy that is pegged to GDP (about 1% loss) which hints at materials use with hundred percent correlations.  Resource extraction growth of materials on our earth over millions of years further warrants that they cannot be replicated.  New materials of growth demand energy to extract, manufacture, assemble ship, store and distribute which in itself is a problem.  This needs an immediate address now lest we will bump into more serious challenges upon reaching ‘Limit’ on the earth’s resources that we have been enjoying.

Low cost and high bankability has pushed renewable technologies (onshore wind and photovoltaic solar power) in a great way.   This has resulted in the minimal coal plants that operate more cheaply than wind and solar. Banking on renewables in principle poses minimal risk to investors. Another problem that hinders low carbon project is the transmission capacity warranting the lawmakers to take a different approach to its regulation and to be speculative in projects to be funded – the impact of slowing the project development would be massive.

While there are potential pathways for decarbonization, clarity as to which one of them could be most effective / efficient is still not clear.  Considering the options for vehicle fleet decabonization – battery electric vehicles; fuel cell electric vehicles powered by hydrogen or replacing fossil fuels with renewable, any one of them could be a solution depending upon the market design.  The disadvantage is the infrastructure (becoming apparent) to support may fail to click.  Suggestion made in this regard is that the policy makers and business leaders to look beyond individual technologies that promotes adoption and cost reduction.  There seems to be growing concern to contemplate even use of green hydrogen aggravating the chances of missing the climate targets.

Low carbon hydrogen projects (early stages at least) may get off the ground when created as part of wider industrial hubs where the gas can be used on location avoiding investments in storage and transport.  Lack of such synergistic approaches is more likely to create a chicken-and-egg situation.  Industrial clusters exploiting decarbonization opportunities may find it hard to embrace new technology approaches without the incentive offer.  The best example stems from Norwegian government’s support for electric vehicles – tax incentives for electric vehicle ownership and investment saw almost 86% of all new vehicles in 2021 against 19% in Britain and just 5% in the US. Upcoming technologies in the new energy space though is encouraging in the investor market of UK and Europe, larger investor involvement to continue funding exploration of newer technologies could drive the energy transition desired towards meeting climate targets.

While the fossil fuels generation depended on coal/gas and oil reserves, low carbon economy banks on raw materials such as polysilicon for solar panels, rare earth metals for wind turbines and electric vehicles and lithium for batteries which have a strong bearing on stocks, supply chain and social impacts related to them. While debating on the raw materials, we cannot afford to forget water which is another vital resource – in fact, US alone used an estimated 58 trillion gallons for primary energy in 2014.  In addition, irrigation for ethanol, evaporation from hydel reservoirs was sources of fresh water loss followed by losses from oil and gas as well.  Although wind and solar demand comparatively less water, emerging low carbon fuel from waste is likely to be made using renewable energy to power the electrolysis will require large amounts of high purity water.  Biofuels from waste could be an option to power the electric grid and surplus energy for water purification may be meaningful.

In a nutshell, energy transition points to principally three options: firstly, prioritize simple, speedy actions; secondly, turning strategies into realistic / actionable plans and lastly holistic thinking.

COP 28 DIRECTIVE:

The recent COP 28 meeting concluded a final agreement on global transition away from fossil fuels, emphasizing the shift away from fossil fuels, for the first time.  The leaders made commitments towards accelerating growth on goals set out in Paris agreement.  For the first time, the opportunity to create a blue print of what a COP of the future should, has been spelt out for an innovative, multi-stakeholder led process to make real-world impact.  It was also realized that the ninety percent of GHG abatement through proven technologies need to scale exponentially to limit global warming to 1.50C.  More significant was the climate finance which should be extended beyond governmental perspective to everybody including philanthropies, the banks, the venture capitalist investors.  This is believed to usher a new climate economy.

CONCLUSION:

As indicated in one of my earlier contributions on the journey from Kyoto protocol (1997) to the recent COP 28 bridged by COP 21 (Paris agreement), one finds a reemphasis of the agreement of the latter re-affirmed.  Presuming that the commitment would be treated much more seriously, the transition from fossil fuels has already sprung up greater challenges as has been outlined above.

Whenever we toss on new technology of potential, we tend to forget the intricacies which surface later.  Raw material exploitation for solar and wind do account for the abatement exercise of lowering the fossil fuel consumption. Water, another source of human sustenance is already in short supply which is an aspect that is worth considering.  This opens up another challenge of integrating water resource recovery facilities into the energy system which may call for further investments.