The energy transition to a carbon-free future may be one of the biggest challenges, changes and opportunities we must deal with.
While we may argue that ‘big oil’ rules the world, even big oil is eyeing the future with heavyweight investment in renewable sources of energy, and the hi-tech involved in harnessing it.
Oil and gas are finite. To maintain our current (and growing) energy needs, we need to encompass all available alternative energy sources – and perhaps work on as yet unproven sources, too.
As the search for a viable, sustainable energy mix continues, there are many new trends emerging.
Analyst house Deloitte predicts some game-changing events on the horizon. It sees an increase in renewable energy deals, as governments join forces with companies and utility providers prepare to meet ambitious climate targets.
And as decarbonisation efforts redouble, Deloitte suggests there will be a move towards hydrogen production and storage projects – on top of wind and solar – as an additional pathway to carbon emission reduction.
Energy storage is also considered key in the new energy economy, so expect to see new battery business models emerging at both utility and residential scale. Cost reduction and maturing technology are seeing energy storage projects becoming more economical.
Despite this backdrop of game-changing innovation, ideas and changing needs, global government pledges fall well short of what is required to bring global energy-related carbon dioxide emissions to net zero by 2050 – and provide an even chance of limiting the global temperature rise to 1.5 °C.
How electricity is now produced, used, stored and traded is changing, transforming every element of the energy system, and shifting the global equilibrium of power.
The maturing of renewable energy technologies, the proliferation of distributed energy resources, the falling cost of battery storage and changing, and more empowered, savvy consumer behaviour are affecting how we produce, use, value and trade electricity.
This power shift needs to be examined, predicted and managed.
Analyst EY suggests the transition to a carbon neutral world is being driven by three factors: digitisation, decarbonisation and decentralisation.
Digitisation – innovation is delivering new ways to deploy renewable energy sources. The confluence of smart energy networks and digital solutions better allow for controlling energy demand and trade.
Decarbonisation – Renewables are now considered to be the fastest growing global energy source. They are now competitive in terms of cost with fossil fuel sourced power in most markets.
Decentralisation – We’re seeing a move towards off-grid resource production, such as rooftop solar, electric vehicles and battery storage, which will lead us towards a far more decentralised energy future. EY predicts this trend could come to fruition by 2050.
Director-General of the International Renewable Energy Agency, Adnan Z. Amin, explained to think tank Chatham House that the last big energy transition – to fossil-fuels – created an energy system based on geographically concentrated resources. “This allowed the exercise of geopolitical power around the distribution of those resources which, in turn, had economic advantages for those countries that extracted those resources,” he said.
But the rise of renewables – and a shift from scarcity to abundance (solar, wind, waterpower) means soon every nation will potentially enjoy a degree of unforeseen energy independence.
Amin sees this as a striking, fundamental change with deep running impact on the global economy. He goes as far as to say the current energy transition is going to be as consequential, if not more, as the global shift to fossil fuel reliance some 200 years ago.
The UAE, of course, is blazing a trail in pivoting from heavy reliance on fossil fuels – not only as a supply of power but also as a major source of national income – to the adoption of a new, diversified, economic model.
The UAE’s latest energy strategy calls for 70 per cent decarbonization and 44 per cent clean energy power generation by 2050. This economic diversification strategy is necessary, crucial and will help ensure the country stays competitive in the new energy era.
The change is unarguably coming, the question we must ask ourselves as citizens, as business owners and as energy consumers, is how ready are we to embrace the change? Such dramatic change needs to be steered by strong strategy, leadership and vision. Without these in place, whole nations look set to lose out in the shifting dynamics of the new energy paradigm.