Leading the Way for Clean Energy
by Silke Fett, Kathrin Preu, Leandra Rhoese & Grace Galdos Arenas
Few would argue with the fact that we are in the midst of a global energy crisis. In our frantic efforts to fix the situation short-term, we can’t lose track of long-term sustainable development goals. While buying up fossil fuels to get us through the cold season might be unavoidable in the short run, we need a full energy transition in line with UN SDG 7 “Affordable and Clean Energy” to resolve the underlying issue in the long term. And in fact, the current energy crisis might help to accelerate an all-encompassing transition towards clean energy and following through with sometimes drastic and inconvenient changes. Let’s unpack this and take a look at which policy measures are necessary, which pathways to 100% renewable energy systems are available, what a possible roadmap to net zero could look like, and how much progress we have made so far as a global community.
The International Energy Agency (IEA) concludes in its World Energy Outlook 2022 that “faster clean energy transitions would have helped to moderate the impact of the crisis, and they represent the best way out of it (p.3)”.
This is an important take-away that needs to frame any discussion around potential economic barriers to wide-scale implementation of renewable energies.
The IEA report underscores that the current energy crisis promises to be a turning point for the energy transition, based on stated policies and increased investment plans by governments worldwide into clean energy. Apart from the clear environmental advantages and energy security aspects, the economic case for the energy transition is getting stronger. According to the IEA, there is evidence that higher shares of renewable energy correlate with lower energy electricity prices.
The IEA Stated Policies Scenario (STEPS) assumes a rise in government investments into renewables to more than USD 2 trillion by 2030, which is approximately 50% higher than today. This scenario foresees a peak or plateau for global fossil fuel demand within the next few years, which would be an unprecedented turning point.
Many researchers agree that solar energy and wind power as well as energy efficiency measures can function as the primary drivers for the energy transition, with limited support by nuclear energy.
Solar and wind energy are fluctuating and not universally available, so there is a need for energy storage technologies. Power-to-X (PtX)[1] technology is a central component of fully renewable energy systems. This technology enables the production of various fuels, e. g. green hydrogen, so that these can be transported and made accessible where renewable energy sources themselves aren’t readily available. With this option for long-term storage and flexibility, it’s possible to strengthen the networking of electricity, heat and mobility sectors.
An analysis by McKinsey and the Hydrogen Council concludes that the race for green hydrogen has begun, even though production still needs to scale up and supply chains have yet to be established. The Hydrogen Insights 2022 report counts 680 large-scale project proposals worth USD 240 billion combined, while a final investment decision has been made for 10% of these.
There is still a long way to go to reach our net-zero ambitions, as a closer look at the Electricity Maps app reveals. All the more refreshing and inspiring, then, to read a recent study from about 20 researchers and scientists around the world who developed a possible roadmap to net zero emissions by 2050.
The route they outline goes far beyond the existing energy scenarios of the Intergovernmental Panel on Climate Change (IPCC)’s reports. The interdisciplinary research team takes into consideration opportunities and challenges connected to grid congestion, energy storage, sector coupling, electrification of transport and industry by using PtX, and approaches to remove carbon dioxide from the atmosphere (Negative Emissions Technologies, NET). Their conclusion is that a global 100% renewable energy system by 2050 is technically feasible and economically possible.
How far have we come on this journey up to now?
The Energy Progress Report 2022 on SDG 7 states that renewable energies accounted for more than 80% of all new electricity capacity added in 2020. IEA and IRENA (International Renewable Energy Agency) scenarios show that solar photovoltaic (PV) and wind will contribute the most growth in electricity production by 2030 under stated policies.
To show the opportunities of the transition pathway for renewables, let’s focus on the European energy market as an example. According to a status quo report of energy think tanks E3G and Ember, wind and solar power accounted for 24% of the European Union’s energy mix in the period from March until September 2022. Their contribution to the overall mix was able to mitigate impacts on the energy supply caused by unavailability of nuclear capacity and reduction in hydroelectricity generation as a consequence of drought. The year-on-year increase of 39 TWh or 13% comes at a time when the EU is stepping up its measures to implement the RePowerEU proposal to reduce its dependency on Russian gas.
Professor Aled Jones of Anglia Ruskin University confirms that the tipping point for the shift to solar and wind as dominant technologies has already been reached in Europe. He states that while the energy transition will cause job losses for roughly 3 million people, more than 12 million new jobs will be created as a result of this change by 2030 (WEF, 2022). This is an immense opportunity.
So how do we leverage these opportunities? More than anything else, it will require business leaders to pursue innovative solutions. Exemplary for many, here are three innovation areas that will be significant drivers to accelerate the energy transition.
1. Business networks
The Intelligent Enterprise Institute recognizes the power of business networks and how they can help organizations accelerate their energy transition efforts. By leveraging business networks, key players and organizations can make full use of the pre-existing infrastructure as well as the latest innovations.
Use Case: CEO Alliance
Green hydrogen can play a substantial role in paving the way towards a carbon-neutral future for energy-intensive industries such as building materials, chemicals, glass, non-ferrous metals, paper and steel. A prerequisite is to establish an industrial-scale green hydrogen value chain by leveraging business networks and organizations. One example for cross-industry collaboration in this matter is the CEO Alliance, an action tank of 14 leading European companies. This industry business network aims to build up renewable energy production in Southern Europe to supply green hydrogen and ammonia to industrial hubs in Central and Northern Europe.
2. Decentralized energy systems
Future energy systems will be increasingly decentralized. Today’s consumers are future producers, so-called prosumers, who own rooftop solar panels, battery storage and electric vehicle chargers. The goal is to make the interaction between energy supplier, grid and prosumer seamless.
Use Case: Integrating prosumers into the grid
Solar energy is an essential pillar for the energy transition. Integrating prosumers into the grid will make it possible to sell surplus solar energy to any local consumer. This can help to decrease regional dependence on imported energy carriers. To do so, all stakeholders require digital systems and technologies that help collect data from sensors, analyze consumption profiles, predict, simulate and balance energy grids. Utility providers profit by integrating prosumers into the grid, as they can offer their smart metering hardware to new customers. An example for a community-centric software approach is Exnaton’s EnergyCommunity solution that enables utility companies to track all relevant energy data and easily bill these energy exchanges.
3. Digitalization
Digitalization is a central component to establish future intelligent and resilient energy systems. The energy transition will go hand in hand with digital transformation. In the future, energy service providers (ESPs) as well as information and communications technology (ICT) companies will offer a wide range of services beyond generating, transmitting and distributing energy. New business models will evolve, e. g. Energy-as-a-Service (EaaS). The IRENA identifies these additional services offerings in their innovation landscape brief (2020) as “energy advice, energy assets and energy management”.
Use Cases: Large real estate and infrastructure owners
Energy management affects not only utility providers, but also large real estate and infrastructure owners, e. g. hotels, retail stores and warehouses, airports and train stations. Digitalization can help those stakeholders to address their challenges in terms of energy efficiency and financial resilience. To better assess financial risks in real-time, real estate and infrastructure owners have to be able to forecast energy demand and simulate impacts from fluctuating energy prices. In the future, digital solutions will support these stakeholders to reach their net-zero goals by tracking energy assets as well as the overall energy mix. In addition, they can manage their green purchase agreements and calculate greenhouse gas emissions.
From the tenant point of view, automated billing based on real consumption can provide an incentive to reduce energy use.
These are just some relevant aspects for leading the way to clean energy. We are fully aware that there are many more routes to net zero. We require political interventions by international organizations, but also technological innovation, regional initiatives, action from public and private companies and full commitment from each and every one of us.
Regardless of which routes we might take forward, it will only be a viable path if we pursue it together — and if we act on it now. Especially in a time of energy crisis like we’re experiencing it now, there is no time to waste to drastically intensify our collective efforts to speed up the transition towards renewable energy systems.
*PtX principle: power (P) based on renewable energy is converted (t) into another (X) energy carrier for long-term storage, e. g. Power-to-Gas (PtG).
The Intelligent Enterprise Institute helps business leaders understand the transformative potential of different forms of intelligence and use it for their organizations and life. It provides a platform to inspire and accelerate change, supported in market trends and SAP’s vision to help the world run better and improve people’s lives. By generating new insights and bringing together unheard voices and unique perspectives from leading thinkers and doers of the world, the Intelligent Enterprise Institute aims to foster different qualities in enterprises and their stakeholders alike taking it into action for desirable outcomes.
