Energy Transition Insight & Analytics Report 2021, by Reuters Events
The coronavirus pandemic has helped raise awareness of society’s fragile relationship with the environment, and mobility restrictions have briefly shown how a less energy-intensive way of living can give nature an opportunity to flourish. At the same time, fatal heatwaves have afflicted large areas of the globe, pushing awareness of climate change to the top of the political agenda. As policymakers seek to invest coronavirus recovery funds, the energy transition has emerged as a key priority.
Another reason why the time is right for a change in energy system is that there are now viable alternatives to fossil fuels. Solar, wind, and energy storage are bankable and mature asset classes. Low-carbon hydrogen, meanwhile, is rapidly emerging as the molecule of choice to supersede fossil fuels in hard-to-abate sectors. Governments and the private sector are preparing to mobilise significant investments to scale up the technology.
These shifts are encouraging but it remains to be seen whether they will take a hold in time. Changing energy system to avoid a global climate cataclysm is arguably the most significant challenge of our times and will require a massive, collaborative effort from all sectors of society. It will also call for careful regulation and governance.
Why collaboration is key
The challenge of achieving net zero emissions is so great that no single entity or stakeholder can tackle it alone. This means governments, corporations, and the public will all have to embark on actions and switch to new business models. Claudio Descalzi, CEO of the Italian oil and gas giant Eni, said his company started transitioning to low-carbon business models in 2014 but "it is clear the pandemic increased the sense of urgency."
For some, the changes involved in the energy transition might be hard to embrace. For example, said RWE CEO Markus Krebber at Global Energy Transition 2021, “We see a lot of resistance in many countries to transmission lines, back-up capacity and renewable energies, especially onshore wind and import infrastructure for green energy products.”
To overcome this, industry needed to “take this discussion together with the politicians to the people,” he said, and get citizens to question what they were prepared to pay for or forego for the sake of a more sustainable planet.
The governance issue
In general, however, governments still need to step up their ambition on climate action, for instance through the implementation of carbon pricing schemes and other incentives for decarbonisation. Even companies such as Baker Hughes, a major technology provider to the oil and gas sector, have called for greater incentives to reduce emissions.
A challenge for many administrations is that most national economies have been built upon, and are sustained by, fossil fuels. For policymakers, this means moves towards achieving Paris Agreement targets on climate change have to be balanced against the need to deliver economic growth, particularly in a post-pandemic environment where global finances have been severely strained.
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Financing the transition
According to Reuters Events 2021 Insight Survey, financing does not appear to be a major concern for companies involved in the energy transition. In fact, "There can be no more compelling investment case than the one that presents itself as energy transition,” said Robin Watson, CEO at Wood, a global leader in consulting and engineering across energy and the built environment.
“There's no mistaking the growing need to address the way we all live and work and the impact we have on our planet," he said.
Even oil and gas companies now recognise that the energy transition can provide sustainable revenues. “Our message is higher returns, lower carbon,” said Pierre Breber, vice president and chief financial officer at Chevron. “It’s our goal to win back investors.”
Electrification and technology
Cost reductions have now put wind and solar on track to overtake gas in terms of capacity additions by 2023, and coal by 2024, said Stanley Porter, global leader for power, utilities and renewables at Deloitte, citing figures from the International Energy Agency. However, the Energy Transition Insight survey revealed a wide range of technologies could be needed to reach net zero, including not only wind and solar but also emerging concepts such as clean hydrogen and carbon capture, utilisation and storage.
Increasingly, said Pedro Pizarro, president and CEO of Edison International, grids are “transitioning [from] a system that relied on bulk power resources to a system that’s going to have millions of nodes with resources to allow more dispersed generation.”
Conclusions
After years of slow progress towards climate goals, the coronavirus pandemic seems to have galvanised society into action on decarbonisation. It still remains to be seen if society can achieve the goals of the Paris Agreement, and what the continued role of hydrocarbons within our energy mix with have on both public and private sector net zero targets.
However, there is a growing sense that there is both a moral imperative and a major economic opportunity to pursue rapid decarbonisation—and that is motivating leaders worldwide to act. The energy transition "can be done, and by doing it we'll also increase the economic activity and wellbeing of our population," said Francesco Starace, CEO and general manager at Enel.
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3 年Very interesting read! It’s encouraging to see that “society is being galvanised into action on decarbonisation”, and that we’ve come this far! Yet also daunting to see how much still needs to be done in terms of planning, decision making, and action (to achieve, or come near, the Paris Agreement goals). As concluded, in this let’s trust that the governments of the world (and business leaders) have the interests and wellbeing of the people at heart.???