Part I — The Future of Energy
Lives and livelihoods, economies, and societies depend on accessible, reliable, and affordable energy to grow. Most of the energy we use today comes from hydrocarbons — coal and oil, and increasingly from natural gas. By 2050, the number of people on the planet is forecast to grow from 7.7 billion currently to 9.7 billion, out of which around three-quarters will live in cities, putting more pressure on the food, water, and energy resources essential for our shared well being and prosperity. Experts agree that global energy demand is likely to double by 2050 compared to its year 2000 level. At the same time, tackling climate change caused by carbon dioxide (CO2) emissions has never been more important.
Meeting the challenges of energy security and climate change will require both revamp of the global energy infrastructure and utilization of cleaner forms of energy. The abundance of our planet’s energy resources and exponential growth in our energy consumption, expected to increase by nearly 50 percent between 2020 and 2050, according to the U.S. EIA report guarantees that breaking away from our past energy habits will prove to be humanity’s most daunting engineering challenge thus far. Decarbonizing the economy will entail the transformation of the infrastructure of the highest polluting sectors — electricity generation, transportation, aviation, shipping, buildings, agriculture, cement, and steel, accounting for about 80 percent of the world’s emissions. The innovations — financial and technological, required to reduce the carbon footprint of these industries are ripe for implementation. The objective of this blog, first in a series of three, is to elaborate on decarbonization solutions that are being sought after by everyone from businesses to government to individuals.
1. Renewables transform energy future
Renewable energy costs continue to drop precipitously, making them the first choice for power generation in many geographies such as the U.S., Australia, China, India, Germany, Mexico, and the Middle East. Endowed with generous natural resources, solar and wind have undercut energy costs per kilowatt-hours of their non-renewable counterparts. Secondly, renewable energy systems are safe, modular, and consequently easily scalable. The building of large-scale renewable plants in many parts of the world today is the most efficient way of generating electricity and with several companies working on myriad energy storage technologies — electrochemical (lithium-ion, flow batteries, and other new chemistries), mechanical (compressed air, pumped hydro, gravity-based) and thermal (molten salts), the criticisms about the dispatch-ability and reliability of this electricity are also getting addressed.
Now contrasting energy generation from the renewables to that from hydrocarbons, the global fleet of coal-fired power stations is aged and is approaching the end of their technical operating lives. The power station owners will need to make an investment decision concerning both returns of, and return on capital for any additional capital expenditure investments essential to maintain and possibly extend the life of the plant. As such, the preponderance of these plants is dilapidated, increasingly unreliable, and consequently does not warrant any capital investments for upkeep. The decision to keep these plants running until they are in total disrepair and fully depreciated in financial statements is value dilutive in most cases.
Renewables, plus a combination of new technologies are best-placed to meet and serve the interests of 9.7 billion people in 2050
2. Solar and wind advancements in the last decade have given us most of the tools we need
A decade ago, only 8.6 percent of the world’s electricity came from renewable energy (including hydropower). Circa 2020 the share of renewables in the global energy mix has more than tripled today to 25 percent (IEA Global Energy and CO2 Status report). Grid-scale and distributed storage continue to abet the penetration of solar and wind in the U.S. economy. The demand for clean energy solution is so vigorous that its adoption continues furiously even despite multiple financial crises (European sovereign default, Great Recession), market disruptions (U.S. shale gas boom, China’s global domination of solar manufacturing, failure of the U.S. national carbon policy), political turmoil (U.S. withdrawal from the Paris accords), and acts of nature (Coronavirus pandemic). (Figure 2)
Some macroeconomic trends like the scale economies that China achieved in the manufacture of silicon-based solar photovoltaic (PV) panels turned out to be a blessing rather than a curse. The price of solar energy fell by about two-thirds in five years. Secondly, wind technology, which was already considered to be relatively mature by the early 2010s, continued to beat expectations as blades grew longer, towers grew taller, and control systems became more sophisticated. In the last ten years, the benchmark price for solar has dropped 84 percent, offshore wind by more than half, and onshore wind by 49 percent. (Figure 3) Consider this: In 2010, the first large-scale solar farms in California generated electricity at approximately $150per megawatt-hour. In the last six months, the lowest-cost solar and wind farms running in Australia, China, Chile, and the UAE have hit a levelized cost of electricity (LCOE) of $23–29 per megawatt-hour, low enough to threaten thermal power fleets in the world coal capital of China and fossil fuel facilities in the petrostate of the UAE.
The generation costs of renewable energy plants are expected to decline further, according to BloombergNEF, to less than $20 per megawatt-hour by 2030. These downward trending cost curve trajectories will not merely be observed stateside but worldwide including in Europe, Australia, Chile, and the UAE.
China deserves special attention. The country is now a world leader in renewable energy, both in terms of producing and consuming solar and wind power. Five of the ten largest wind turbine manufacturers and nine of the world’s top ten solar panel manufacturers are Chinese-owned or -operated. Furthermore, China has maintained a strong track record of renewable energy deployment targets. For instance, the country surpassed its 2020 solar PV target of 105 gigawatts three years ahead of schedule, bringing its total installed capacity to over 130 gigawatts in 2017. The “middle kingdom” is the leading investor in renewable energy worldwide and has widened its lead over the U.S. every year since 2009. It invested $126 billion in 2018; three times that of the U.S. It plans to invest another $360 billion by 2020, and an estimated $6 trillion by 2030.
Incidentally, India, home to 1.35 billion people, a vast economy, and a huge military has set itself a target of 175 gigawatts renewable energy capacity by 2022 including 100 gigawatts of solar and 60 gigawatts of wind. India’s achievements in the last decade in accelerating renewable capacity addition have been remarkable (starting with less than 1 gigawatt in 2010, it now has around 37.6 gigawatts of solar power, recording a 200x growth), but the country has lost momentum over the last 18 months due to state-center conflicts and policy contradictions. Nevertheless, India’s Ministry of New and Renewable Energy is trying to turn over a new leaf and execute an ambitious globally interconnected power grid plan called ‘one sun, one world, one grid’, through which, the country will build a global ecosystem of interconnected renewable energy resources that are seamlessly shared for mutual benefits and global sustainability. By 2030, India’s Prime Minister Narendra Modi’s administration aspires to generate 450 gigawatt-hours of renewable power.
I would be amiss not to mention Singapore’s efforts to wean itself off fossil fuels which include large-scale solar energy generation, electrification of the country’s car fleet, urban farming, waste reduction, and efficiency tools to manage energy consumption by its residential and commercial buildings. Singapore’s desire for solar is especially noteworthy, as the nation-state is installing panels on every rooftop, and has sanctioned the Sun Cable project which ambitiously aims to import power from giant solar farms in Australia via a 3,800-kilometer undersea cable. Besides, Steve O’Neil’s leadership at REC Group, an international pioneering solar energy company selling the world’s most powerful solar panels (REC Alpha Series, 72-cell 450W), and Olivia Oo’s passion at Singapore utility SP Group, in setting-up island-wide electric vehicle charging infrastructure asserts citizen’s devotion in country’s rapid New Energy transitions.
Finally, let us make a few observations about the sunburnt country Australia. The country generates 20 percent of its electricity from clean fuels, and at the current rate of solar and wind installations, renewables will supply 50 percent of the power demand by 2025. Australians earnest hope is to completely obviate their use of dirty fuels by mid-century, producing a potentially massive green export energy by then.
Solar and Wind are now the cheapest sources of electricity for at least two-thirds of the world’s population. A decade ago, solar was more than $150 per megawatt-hour and onshore wind exceeded $100 per megawatt-hour. Best-in-class projects would be below $20 per megawatt-hour much before 2030. Along with batteries and nuclear, solar and wind are best-placed to decarbonize the electricity grid, addressing 60 percent of global CO2 emissions.
3. Solar and Wind will not push for deep decarbonization of global energy system
Many proponents of the Paris agreement in their obsession with decarbonizing electric grid forget that electricity generation represents only 25 percent of the world’s greenhouse gas (GHG) emissions. The other GHG sources include (i) industrial activities such as the manufacturing of petrochemicals, cement, and steel (21 percent), (ii) agriculture (24 percent), and (iii) long-distance transportation via trucks, airlines, and ships (transportation contributes 14 percent of GHG emissions). (Figure 4) The demand for these products, goods, and services will continue to burgeon yet we do not devote much attention to their decarbonization, which is imperative to limit the increase in average planetary temperatures to under 2 degrees Celsius. Any effective strategy for transforming transport other than small vehicles and industrial processes will require breakthroughs in research on hydrogen and implementing solutions like clean coal and natural gas.
Hard-to-electrify transport: The cost and performance of Lithium-ion batteries continue to improve and therefore electric vehicles continue to capture growing shares of new sales for passenger vehicles. However, batteries will not be able to replace petroleum-based fuels in all transportation sectors. Petroleum-based fuels have both high volumetric energy density (energy per volume) and high gravimetric energy density (energy per weight), both of which are important for transporting large volumes of goods or numbers of people. The Lithium-ion batteries that enable electrification of light-duty passenger vehicles are several orders of magnitude away from matching the energy density of current liquid fuels and are unlikely to ever meet the performance requirements for aviation, shipping, and long-distance road transport. Instead, air travel, shipping, and long-haul trucking will likely continue to rely on liquid fuels for the foreseeable future. Biofuels (a lower-carbon bridge to a net-zero transportation system), hydrogen (a carbon-neutral fuel), synthetic fuels made from ambient carbon dioxide, and carbon-neutral ammonia are prospective solutions.
Industrial-sector emissions: The industrial sector is especially challenging to decarbonize, due to two sets of emissions sources that are difficult to eliminate using existing technologies. Firstly, the industrial processes for making cement, melting iron ore, and producing plastics require temperatures above 1000 degree Celcius, primarily generated by combusting fossil fuels. The electrification of such high-temperature heat poses significant cost and technical barriers. Secondly, “process” emissions (majorly CO2), which result directly from industrial processes and are independent of the source of energy used to drive the process, cannot be eliminated by switching to low-carbon energy sources. Hydrogen produced from electrolysis of water using zero-carbon electricity could be combusted to generate high-temperature heat. Also, advanced nuclear concepts operating at higher temperatures than the current light-water reactor designs could provide heat for some industrial processes. Lastly, carbon capture, utilization, and storage may be the only option for mitigating process emissions.
Bioenergy, nuclear, hydrogen, and carbon capture will play an integral role in decarbonizing the heavy transport and heavy industry, thereby addressing 30 percent of total global emissions
4. Around the Baseloads: Geothermal, Biomass, and Hydropower
Currently, we underappreciate how critical baseload renewable energy sources like geothermal, biomass, and hydropower are to reducing GHG emissions to zero. Unlike solar and wind which are plagued with intermittency problems — the sun does not always shine and the wind does not always blow, the baseload sources can generate electricity 24/7. The one exception to this rule is hydropower, which can have its output reduced or increased during seasonal fluctuations in the water supply.
Iceland is a popular example of a nation that has harnessed Earth’s internal energy to heat its buildings and swimming pools. The U.S. leads the world in the amount of geothermal electricity generation (>3.5 gigawatts); California state contributing 71.2 percent of that capacity in 2019. Although accounting for just 0.4 percent of net electricity generation in the U.S., the geothermal energy is more noticeable from the electricity-generation standpoint in the other 25 countries. For instance, Indonesia, which is the second-largest producer has 5 percent of the country’s total electricity generation derived from underground reservoirs of steam and hot water. Kenya is the ninth-largest geothermal electricity producer, but it had the largest share of its total electricity generation from geothermal energy at about 47 percent. As a source of renewable energy for both power and heating, geothermal will continue to progress, nevertheless, the overall percentage in the energy mix is expected to remain at 2 percent by 2050.
When the biomass, the organic material of animal and vegetable origins consisting of energy harnessed from the sun is burned, the chemical energy is released in the form of heat — the reason why biomass can be burned or converted to biogas or biofuels. In 2017, biomass fuels made up around 5 percent of the U.S. total primary energy use. In the future, biomass as a percentage of U.S. energy sources will increase materially. According to the IEA, bioenergy will remain the largest source of renewable energy over the next five years due to its widespread use in heat and transportation — sectors in which other renewables currently play a much smaller role. Bioenergy power capacity is expected to increase by 37 gigawatts over the next five years, reaching 158 gigawatts in 2023. By 2023, biofuels are expected to account for nearly 90 percent of total renewables in the transportation sector. The bottom line is that the modern bioenergy is instrumental to any decarbonization efforts focused on aviation, shipping, and long-haul road transport.
Last but not least is good old hydropower which remains the largest renewable electricity technology by capacity and generation. In the U.S., hydroelectricity is one of the largest sources of clean energy. Because hydropower provides 7 percent of the electricity in the nation and represents a staggering 97 percent of the country’s energy storage via pumped-storage hydropower, such a method of energy generation offers flexibility and reliability to the clean-energy industry. Although growth prospects for new hydropower capacity in the next 5 years remain strong (121 gigawatts by 2025), a downward trend is expected due to less large-project development in China and Brazil, where concerns over social and environmental impacts have restricted projects. However, deployment in India, Africa, and Southeast Asia is accelerating as hydropower seems the most viable energy solution to fulfill part of the total demand from an upwardly mobile population.
No country will ever get to 100 percent renewable energy without using geothermal, biomass, hydropower, or a combination of the three.
5. Nuclear Energy: A silver bullet for clean energy
Nuclear energy has a PR problem. Most layperson exclusively links it with disasters like Three Mile Island, Chernobyl, and Fukushima. The last of those incidents especially turned the tide of public opinion against nuclear power with Japan and Germany abandoning the development of new plants and fulfilling their growing energy needs in these last few years using fossil fuels instead. In a 2019 report, IEA estimated that to supply a third of the world’s electricity, nuclear energy generation will need to triple. However, due to recent rising antagonism towards fission based power, it is only expected to double. We cannot achieve a zero-carbon future without nuclear power. Popular misconceptions about nuclear must be mitigated. According to Markandya & Wilson (2007) and Hannah Ritchie (2020) reports, death rates from nuclear plants are a minuscule fraction of the death toll from less maligned fuels like biogas. (Figure 5) Yes, the figures do not factor in the death toll from Fukushima but note that the official death toll was 573 people, out of which the majority of deaths were attributed to premature evacuation and displacement of populations in the surrounding area, and will not discernibly impact the bar chart or the conclusions they point towards.
Chernobyl is on everyone’s mind due to the recent HBO series that portrayed the mismanagement of the Soviet Union’s response to the nuclear accident, only stoking fears about nuclear energy. When comparing the impacts of the climate change-amplified Australian bushfires and Japanese typhoon Hagibis with the Fukushima nuclear meltdown caused by an earthquake that is estimated to occur only once every 500 years, the decision to denuclearise becomes irrational as the aforementioned incidents caused more harm. Nuclear energy remains the safest method of power generation, and as such we must address the publics’ ignorance about its safety and affordability.
In general, there are three alternative pathways nuclear energy can evolve into alternative design, size, or process. Alternative design refers to newer generations of generators, which are already available commercially and boast better safety, efficiency, and costs savings than its predecessors. Importantly, the nuclear waste generated by the plant can be reprocessed and reused as fuel, significantly reducing the total amount of waste generated. Alternative sizes link to physical size and the amount of energy generated. The Small and Medium Reactors, due to their size, offer more flexibility in their placements and can be mass-produced, making them cheaper by lowering initial investment costs. Alternative processes consider other ways that nuclear energy can be generated. To date, all nuclear-related discussions have been about nuclear fission, where a large atom splits into smaller ones, releasing energy in the process.
Leaving moonshots for last groups of physicists, bureaucrats and entrepreneurs are also looking at ways to generate energy using nuclear fusion, where two small atoms fuse to produce a larger atom which also releases energy. Companies leveraging proprietary science and engineering to produce commercial fusion energy include Tokamak Energy, AGNI Energy, General Fusion, Commonwealth Fusion Systems, and Tri Alpha Energy. Fusion is more efficient and safe than fission and could singlehandedly power our planet if the seemingly intractable technical problems find solutions. Nuclear fusion is energy’s holy grail but many people are disillusioned with its promises made repeatedly over the last 50 years.
There needs to be a substantially expanded role for nuclear energy, a clean and reliable source that is delivered 24/7 if the world is to meet both the demands for energy and reducing greenhouse gases.
6. The Hydrogen economy
Speaking of holy grails, while not placed on the same pedestal as nuclear fusion, hydrogen can provide solutions for hard to decarbonize sectors. It will become a significant part of the global energy landscape after 2040, competing with both natural gas and storage batteries. Besides making long-distance transport and heavy sectors greener, hydrogen will also play an important role in energy storage, which will be increasingly necessary both in remote operations such as mine sites and as part of the electricity grid to help smooth out the contribution of renewables such as wind and solar. This could work by using the excess renewable energy (when generation is high and/or demand is low) to drive hydrogen production via electrolysis of water. The hydrogen can then be stored as compressed gas and put into a fuel cell to generate electricity when needed. (By the way, electrolysis is an extremely inefficient energy process.) Furthermore, hydrogen can also be used to produce industrial chemicals such as ammonia and methanol and is an important ingredient in petroleum refining.
China, Japan, and South Korea have set ambitious targets to put millions of hydrogen-powered vehicles on their roads by the end of the next decade at a cost of billions of dollars. Germany has just announced the National Hydrogen Strategy to spend €9 billion ($10.15 billion) on hydrogen as part of an economic stimulus package.
I will cover the topic in detail in the coming months, but it is important to note that the majority of hydrogen produced would not be converted back to electricity. The majority would be consumed directly as a fuel for heating, or as a feedstock for primary materials manufacturing. Hence, our focus for the majority of hydrogen R&D efforts ought to be the technology and infrastructure that we will need to produce hydrogen, store it, and transport it — rather than the fuel cell technology that converts hydrogen back into electrical energy. Consequently, hydrogen will be mostly employed as a delivery medium (“molecules”) for the most difficult to electrify end uses. For other end uses, electricity (“electrons”) is now looking like the probable winner.
Achieving the hydrogen vision would create significant benefits for the energy system, the environment, and businesses around the world
Final Thoughts
By 2050, electricity will account for more than 25 percent of all energy demand, compared with 18 percent now. The solar and wind will grow four to five times faster than every other source of energy, and along with other renewables, nuclear, batteries, and digitization best-placed to achieve a 100 percent renewable electric grid. (Figure 6) The global demand for coal will likely peak around 2025, and the growth in the use of oil, which is predominantly used for transport, will slow down as vehicles get more efficient and more electric.
The hard-to-abate sectors are islands of enduring fossil fuel demand, but no impediment to a transition. Due to increasing demands from heavy industry and heavy transportation, hydrocarbons will dominate energy use through 2050. As renewable energy sources become increasingly prevalent, so each of the islands will be overwhelmed by the rising renewable tide. Meanwhile, financial markets react during the peaking phase of the energy transition, long before the last sources of fossil fuel demand need to be replaced. The existing technologies — biofuels, carbon capture, use, and storage (CCUS), and power to gas to power (P2G2P) along with the development of new technologies such as fusion and hydrogen will help markets close the gap and build a decarbonized energy system.
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Coming up next is Part II — Storage: The missing link
Disclaimer: I wrote this article myself, and it expresses my own opinions. The assessment of energy trends is based on the latest available data and announcements by governments and companies, as of June 10, 2020, tracking progress with individual projects, interviews with leading industry figures, and incorporates also the latest insights and analysis from across IEA, U.S. EIA, IRENA, and BloombergNEF work.
