Energy transition in a low carbon world: How easy it is?

ENERGEN EXCLUSIVE đź’ˇ


This year many records related to energy consumption have been broken. Global oil demand will be in the region of about 6-9 million barrels per day year on year and gas demand is also expected to drop by around 150 billion cubic meters year on year; both being the largest year on year demand shrinkages in history.

On the positive side, it is estimated that 2020 will also face a decrease in CO2 emissions - the largest since World War II. With aviation and road transport severely constrained, it is easy to understand the drivers behind this trend. Slowdown in industrial activity is also a big contributor to emissions reduction but that sector has opened up more with regards to the first two.

Excited by the positive news of emissions reductions, the energy community is tending towards the belief that this year will prove to be an accelerator for the decarbonization of the energy sector driven largely by lesser consumption of fossil fuels.

But how possible is an accelerated energy transition? In this article we highlight the key questions still unanswered around energy transition, and also touch upon some key actions that need to be taken to enable it.

Let’s dig in

Starting with the fundamentals of energy transition people need to be aware that energy transitions take time. The last energy transition from biomass to fossil fuels took approximately 200 years with gradual intrusion of oil and coal into the energy mix, and gas came later. So realistically, fossil fuels are likely to still be a big part of the energy mix for the next 50, even 100 years!

Secondly, there are areas in the energy mix which cannot be replaced by renewables. Aviation, petrochemical production, shipping and heavy-duty vehicles constitute a big part of the oil & gas consumption but there does not seem to be a greener alternative yet.

Thirdly, not every nation can afford renewable power generation. Germany is a great example of rapid renewables deployment driven by a series of government policies and incentives. But Germany is one of the world's strongest economies, and electricity prices there are by far the most expensive in Europe and one of the most expensive globally. How can emerging economies afford expensive energy when they currently lack energy access to begin with?

And finally, there hasn’t been a single study to calculate full life emissions of renewable energy production. A solar panel itself or a wind turbine do not produce any CO2 emissions. However, the copper and steel required to build those come from highly emitting industries. Extraction itself is a heavy emitting process, while smelting that usually occurs in coal-fired plants is also a highly intensive process. Similarly batteries to build electric vehicles too have an emissions intensive value chain.

Developments in technology have brought solar power costs at par with coal and gas fired plants in some regions but face the limitation of energy storage. Batteries show great promise for utility scale energy storage but the costs associated with it are still much higher than fossil fuel generation. However, as with every technology, the more it advances the more efficient it becomes.

While the above points might be worrisome, they do not undo the fact that the energy transition must happen. It is imperative for the future well-being and sustainable growth of the world.

Conclusion

  • The energy transition won’t happen overnight. We still have to answer fundamental questions around it. Doubtless, this transition needs to happen if the world keeps growing at this pace

  • What the world needs is a coordinated effort from governments, energy companies, technology companies and most importantly people to successfully transition to a greener future

  • Governments need to set the right policies, energy companies need to develop the right models, and technology companies need to be the enabler for the two.

  • People need to face a paradigm shift around energy consumption. Energy transition needs to be driven by a radical change in the culture of energy consumption and energy inefficiencies of the past

Only when these stakeholders combine their efforts, will the energy transition be successful, sustainable, and not undermine the weaker economies’ growth.


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