Energy Transitions & Decarbonization e-dialogues- Full Summary
End of January we kicked off the dialogues for the year at Energy Dialogues LLC with an extremely relevant discussion on energy transition scenarios. With a reinvigorated international push towards collaboration on climate action and net zero goals, the panel focused on decarbonization initiatives globally, infrastructure needs, energy poverty and the role of natural gas and innovation.
A broad range of perspectives, as well as convergence in opinions was represented on the panel, including Brian Lloyd with Sempra LNG, Chris Goncalves with BRG Energy & Climate, Bobby Quintos with Delta Offshore Energy and Lee Beck with CATF. Below are some highlights and takeaways –
From Resource Scarcity To Energy Abundance – Fossil fuels are the foundation of modern society and have enabled tremendous economic growth, with global consumption growing since the 1800s along with global anthropogenic CO2 emissions. What is striking is how far we have come, but how big regional differences are; in North America we have experienced a massive shift from coal to gas, similar to Europe, but Asia has an enormous base of installed coal capacity relative to gas, with average installed units at about 11 years young whereas a lot of the European and North American facilities are many decades old; this is relevant because it’s easier to phase out an old asset than a fairly new one.
Renewable Energy & Energy Transition – The economic foundations for the energy transition are well-established, taking hold and driving the wagon of energy transition on their own, even before we implement substantial new climate forward policies; the question about future policies concern the speed of change, not the direction of change. Chris Goncalves with BRG Energy & Climate refers to the accelerating transition as a snowball and circular virtuous cycle where the investor preference is driving down the cost, is then improving the economics, is then again driving the investor preference. We should look out for more of these self-propelling virtuous cycles in the future.
Looking globally, Europe and North America are in decline when it comes to gas and other fossil fuel demand, but there is big growth in gas demand in emerging Asia, Africa and other emerging economies.
Infrastructure Needs – Brian Lloyd with Sempra, focused on infrastructure and moving abundant lower-cost energy into areas where demand growth and consumers are. The US, over the last 20 years, has reduced greenhouse gas emissions more than any other country. Access to customers, coupled with transmission and distribution infrastructure and policies are and will be fundamental in providing lower carbon energy. Texas went from 40% coal 15 years ago, to 17% last year and projections by the grid operator suggest that by 2035 it will be an almost coal-free power grid, to a big extent because of the ability to move the resource from where it is produced to the markets. LNG can do the same thing globally, take lower carbon natural gas from the US, where demand will likely be flat over the next decades, to other parts of the world, that are largely relying on coal today. Absent the global LNG trade it is difficult to see how these countries can accelerate their decarbonization while at the same time grow their economies. 90% of the growth in electricity demand over the next 20 years is going to occur in these markets. In light of COVID19, where we saw a negative trend for the first time in 25 years of pulling people out of extreme poverty, it will be even more critical to make economies more resilient, more wealthy and with better access to energy, to be able to withstand pandemic shocks, climate shocks or other.
Energy Poverty – Bobby Quintos with Delta Offshore Energy, a project in Vietnam’s Mekong Delta proposing to bring US natural gas to the region, brought up energy poverty as an important part of the equation. Southeast Asian nations are more keen to move away from coal as fast as possible, but for Vietnam and many countries in the region, affordable, reliable and available energy access take priority. Net zero policies are ultimately first world policies; policies that can be applied to countries with strong economies, wealth and infrastructure in place. India, China, Africa, and South America want to keep their economies growing and pull their citizens’ out of poverty. As countries get wealthier, they can focus on climate, but there is a tipping point required to get to that point, where clean air can compete with basic access to energy.
Climate justice will be a topic that needs to be focused on, making sure climate policies are fair toward underprivileged communities and countries.
ESG, #NetZero Goals and Next Generation Climate Policies – We seem to be at a point where a sense of urgency around climate goals is becoming louder. Despite the polemics and polarization, there is a lot of consensus of Americans on their support for clean energy policies, pragmatic, but progressive policy. Politicians and governments will accelerate the speed of change when it comes to carbon tax and border adjustments. It will also likely raise the cost of energy, unless it’s somehow refunded to society. Net zero power in the EU and North America really means no natural gas for power without CCUS. Will it mean no natural gas for power generation at all? Cost economics, availability of storage, sourcing of minerals and resources needed to produce batteries will all be factors upon which the success of net zero goals will depend.
Innovation and Collaboration – Advanced economies in Europe and North America will likely take the lead and invest in low carbon energy technologies. They will also need to make them available globally, so emerging markets can tap into the lower cost of commercialized technologies. A concentrated national and international effort of investing in R&D to develop new, and bring down the cost of existing technologies will provide long-term benefits. Fatih Birol recently stated that 75% of future emissions reduction hinges on technologies that do not yet exist or haven’t reached commercial maturity, which means there is huge potential for advancement.
All The Rainbow Colors of Hydrogen – All recent energy dialogues have ended on hydrogen, so it seems fitting to close on this topic: Hydrogen will likely evolve as the power grid did. For a hydrogen economy to take off, a lot of cheap hydrogen is required, so that people are incentivized to move in that direction while the industry continues to explore how to blend increasing amounts of hydrogen into the natural gas distribution system, and innovate on CCUS from hydrogen produced from natural gas. Production of green hydrogen (from green electricity) through electrolysis, taking the fossil fuel cost out of the generation, making it cheaper and greener, sounds great, but likely cost will go up before it goes down, with truly competitive economics at least a decade away or more.
Hydrogen remains a volatile and challenging fuel to work with, embrittlement of pipelines can cause issues and a lot of additional investment is required in advancing electrolysis, pipeline safety, blending, storage in underground salt caverns and more.
Our mission at Energy Dialogues is always to encourage and facilitate fact-based conversation to solve the world’s most pressing energy challenges locally and globally. In the spirit of the dialogue, below are some questions and thoughts to continue the conversation, please #JoinTheDialogue:
- What will next steps look like to commercializing hydrogen?
- What level of innovations needs to occur for hard-to-abate sectors, including cement, steel, plastics, aviation, medicine and other materials, shipping and how do these sectors fit into net-zero goals?
- What role do you think the natural gas infrastructure will play in a transition to cleaner energy solutions?
- How are energy transition realities differing in the context of economic development, energy poverty and access to reliable, affordable and available energy?
- Lee Beck, Senior Fellow, Atlantic Council, CCUS Policy Innovation Director, Clean Air Task Force
- Brian Lloyd, RVP of External Affairs, Sempra LNG
- Christopher Goncalves, Managing Director, BRG Energy & Climate
- Bobby Quintos, Managing Director, Delta Offshore Energy