The Energy Transition is a journey where we’ve walked and now, we must run

We are still a long way from meeting the 1.5°C Paris Agreement goal, which itself is arguably at the lower end of the scale of what we should be trying to achieve to mitigate climate change. This was the stark reminder from IRENA’s World Energy Transitions Outlook 2021.

One fact is clear; we need to do more. Countries need to enact better policies and regulations to encourage green investments; corporations need to set more stringent targets and adapt operations to substantially reduce environmental impact, and we as individuals must adjust our lifestyles and vote with our wallets, to drive the change we need. We don’t have much time in which to act. Last week, I put out a poll on social media seeking to gauge people’s responsiveness to climate change. The results were overwhelmingly positive. Of the 384 votes, 51% said they would make some changes to their lifestyles to combat climate change, and 42% are willing to reassess their lifestyles completely. This is exactly the kind of bottom-up action that we need, which will drive change throughout the system.

From the top-down, we are also seeing positive action. The Middle East is making particularly good progress in accelerating the transition to renewables and is forecast to be the fastest growing renewables market in 2021 to 2022, according to IEA ‘Renewables 2020’ report. Around 5.6 GW of renewable energy is expected to be added across the region in 2022, or 36.6% growth. It’s starting from a relatively low base, but the commitment is there, the investment is there, and the pricing is right.

Based on the current national commitments and project plans, the Middle East is on track to save the equivalent of 354 million barrels of oil through the deployment of renewables, according to IRENA. That represents a 23% reduction in oil consumption that would come with it the creation of more than 220,000 jobs. It would also reduce the power sector’s carbon dioxide emissions by 22% while cutting water withdrawal in the power sector by 17%. But more still needs to be done.

“The coming nine years will clarify whether we can achieve the speed and scale of deployment necessary for a 45% emission reduction. The highest levels of ambition and effort are required to change course,” Francesco La Camera, Director-General or IRENA, presciently said.

The good news is that this is achievable. We can leverage the technologies currently available to us to make a significant impact, and the socio-political and macro-economic conditions are favorable to enable this transition and advance the development of new technologies. As well as making environmental sense, a rapid switch to more sustainable energy sources has the potential to make economic sense.

We are at a moment in time, where in the wake of the Covid-19 pandemic, we can capitalize on the momentum of investment and spending to align stimulus packages and recovery measures that will secure the future of our environment.  The EU has set up a 750 billion euros recovery fund with 37% earmarked for climate-related activities. The U.S. is setting up a package of $1.9 trillion and if it moves forward, it will address all sectors – roads, bridges, airports, broadband, etc. - not just energy.

In October last year, we held our very first energy conference MEA Energy Week, for the Middle East and Africa region. The event drew more than 2,500 participants from NGOs, governments, finance, and from the energy sector. The results of the fruitful conversations over this three-day event were distilled into 10 priorities which we believe are essential to a successful energy transition.

I was privileged that my comments were used to support the 10th point, that we must act now. What I said then, still rings true now. We have a unique opportunity to fast track the energy transition. Covid-19 has dramatically impacted economies around the world. Effort and capital are being directed towards a fast recovery. Uniting, and focusing our efforts, will enable developing and developed countries alike to advance to a prosperous and zero carbon future extremely quickly.  

But this investment needs to be directed in the right areas, in the right ways, whilst bearing in mind that demand for energy will grow rapidly. Globally, electricity generation is expected to grow three-fold from 26,380 terawatt hours (TWh) in 2018 to close to 78,700 TWh in 2050.

According to IRENA, to achieve the 1.5°C scenario, renewable energy will obviously play a key role, accounting for over 90% of energy through direct supply, electrification, energy efficiency, green hydrogen and Bioenergy with carbon capture and storage (BECCS). Natural gas will continue to have a small role in the energy mix.

We believe that natural gas will play an important role in enabling the energy transition. Gas turbines can be a sustainable investment, running with natural gas now and potentially with carbon-neutral, clean hydrogen in the future. Siemens Energy industrial gas turbines can already today co-fire up to 60 per cent of Green Hydrogen with modern dry low emission combustion systems, and by 2030 we hope to make this 100 per cent. Natural gas fired power plants, with their large rotating mass, also provide stability for electricity grids as well as a role in managing demand fluctuations and providing operational reserves.

As renewable energy grows to form the backbone of the electricity in grids, stability of grids will be important to manage. IRENA estimates this will require significant investments in power grids and flexibility measures, including storage, in the order of $730 billion per year over the period to 2050, nearly tripling from $275 billion in 2019.

The costs may seem eye watering, but the economic advantages are immense. IRENA estimates that investing in energy transition technologies creates up to three times more jobs than do fossil fuels, for each million dollars of spending.

Ultimately, the benefits of energy transition outweigh the costs and significantly outweigh the risks. We need to accelerate this change, now.