Finally, the world seems to be taking climate change seriously. The International Energy Agency (IEA) has said that oil and gas majors must stop looking for new reserves now. Climate activism caught ExxonMobil, Chevron and Shell all off guard in one day.
And we now have numerous realistic roadmaps of how to decarbonise our energy system. Many of those are designed to get to zero emissions by 2050, the date by which scientists say we really need to have our carbon affairs in order.
But one published by the authoritative analyst firm Wood Mackenzie last month looks at a nearer target: how the European Union could reduce greenhouse gas emissions to 55% below 1990 levels by 2030.
“While 2050 net-zero targets may grab many of the headlines, near-term goals over the next decade are arguably even more important,” say the authors, principal analysts Tom Heggarty and Dan Eager plus senior research manager Rory McCarthy.
The recommendations are instructive because they relate not just to Europe but also, probably, most regions of the world. In a nutshell, the analysts say that:
Emissions reduction measures need to embrace more than just electricity generation, covering sectors such as industry, buildings and transport. All new passenger vehicles would need to be electric by the end of this decade, for example.
Low-carbon hydrogen has a big role to play. Wood Mackenzie estimates the European hydrogen market will need to grow from 80,000 tonnes currently to up to 35 million tonnes by 2050. “Governments will need to incentivise green hydrogen—and soon,” the authors say.
Electricity generation will have to double by 2050. That’s not just because of economic growth but also because electricity will have to power heating, industry, transport and that enormous increase in green hydrogen production.
Gas may have a short-term role, although “net zero does pose significant challenges,” according to the authors. Gas will need carbon capture, utilisation and storage to remain viable long term, and in our view (not Wood Mackenzie’s) biofuels will be the way forward.
Flexibility will be critical to the energy system. The ability to curtail consumption will be valued and battery storage, which can both absorb from and deliver energy to the grid, will displace gas peakers. This shift may require a “radical market redesign,” the Wood Mackenzie experts say.
As mentioned above, these conclusions are not far different from the outlooks being published for other parts of the world by expert bodies such as the IEA. Surveying these roadmaps, there are a few common themes that emerge:
The future belongs to established intermittent renewable energy sources. While there is continuing interest in breakthrough concepts such as fusion power, the speed at which we are heading towards 2050 means that, in practice, our energy system will be based on wind and solar.
Storage is the key to scaling intermittent renewables. Realistically, lithium-ion battery storage is the only way to deal with short-term intermittency and deliver stable electricity supplies. The batteries will be in stationary storage plants and also, increasingly, in electric vehicles.
Green hydrogen will cover most of what solar, wind and batteries can’t reach. The gas can be used for industrial processes, heating, long-term energy storage and heavy transportation, all areas that are hard to decarbonise by other means.
The great news about two of these three roadmap ingredients is that they are already being deployed at scale. Wind and solar are already beating traditional energy sources on price in many parts of the world, and their costs are expected to drop further.
Batteries, meanwhile, are besting gas plants and delivering impeccable grid services at low cost, without even having had to benefit from government subsidies.
And battery technology’s ride down the cost curve has only just begun—lithium-ion could drop much, much further in price as manufacturing ramps up globally to handle the electrification of the automotive industry.
That only leads green hydrogen as a nascent asset class, but there is no reason to suspect it cannot scale to the extent we need it to. While the gas is tricky to handle, it has also been used at industrial scale for decades.
And, true, producing hydrogen via electrolysis is expensive, but those costs could drop sharply with growing investment in electrolyser capacity. Perhaps the most encouraging part of the hydrogen story is the extent to which it is being embraced by the oil and gas industry.
If any sector has the financial might and business imperative to make low-carbon hydrogen a reality, then it’s oil and gas. The only other ingredient that is missing from the net-zero puzzle is investment, and here again things are finally starting to look up.
Before the COVID-19 pandemic, investors had record amounts of capital to hand out. The last year and a half has not changed that picture much except that now governments are keen to spend, too, in order to kick-start national and regional economies in the wake of coronavirus.
Furthermore, investor sentiment is now decidedly anti-carbon, while renewables have been shown to offer good returns in times of crisis. There’s no doubt that reaching net zero will require vast sums of money, but there is little evidence that investors and governments will see the need to hold back.
As for us at Pacific Green, we’re ready to do our bit to help cut emissions.
We have built the partnerships needed to scale globally at speed and we are backing opportunities across all of the key pillars needed to enable the energy transition, from intermittent renewables through storage to green hydrogen.
In the UK alone, we are already working on the development of 1.1 GW of battery storage that will help the grid operate in a more flexible way.
Each project like this brings us one step to close to fulfilling the goals that Wood Mackenzie, the IEA and others say are necessary to keep our planet safe. And we’re looking for partners in this journey. If you are interested, then get in touch now for more information.