The energy transition encompasses all kinds of change. The type of change grabbing the most media attention is focused around forced, rapid, or unexpected change. This type of change captures the more chaotic nature of change, one in which organizations are compelled to react to external events or forces outside their intentions and strategies.
Natural, evolutionary, and adaptive change is also applicable to the energy transition. This category recognizes that organizations change simply because they exist, that they move through a generally understood lifecycle, and that they evolve by doing – by their interactions in the market, with clients, with technology, with competitors, and with governments (David Ruhlen, 2020).
My colleague, David Ruhlen, authored a compelling article titled “Change is Inevitable”, about some key elements of industry change and transformation that can apply here.
In addition to keeping up with the information, many people have observed how complicated it can be to have conversations regarding energy through social media platforms.
For a variety of viewpoints on the topic of energy transition, consider these titles:
- Etam, Terry. The End of Fossil Fuel Insanity: Clearing the Air Before Cleaning the Air. FriesenPress, 2019.
- Smil, Vaclav. Energy Transitions: Global and National Perspectives. Praeger, 2017.
- Yergin, Daniel. The Quest: Energy, Security, and the Remaking of the Modern World (Penguin, 2011)
"Net zero" refers to achieving an overall balance between emissions produced and emissions taken out of the atmosphere. The amount of CO2 we emit must be matched by the amount that we remove from the atmosphere.
The target year of 2050 is a negotiation between the necessary and the possible. The Intergovernmental Panel on Climate Change (IPCC) says if we cut global emissions to net-zero, we can keep warming below 1.5⁰C (Russell, 2019).
As average temperatures rise, spikes and heatwaves could climb much higher than just 1.5⁰C. The (over) simplified version is that the more heat added to the Earth’s climate system, the more imbalanced natural systems become, leading to many potentially destructive events.
Where can I go for energy outlook and transition forecasts?
Energy transition outlook reports can provide a high level of understanding and context around how specific topics or technologies influence the “big picture”.
Each report explains assumptions made in their models and data used (or not used). Representing complex data in a linear or exponential projection over a long period of time does not do the complexities of the data involved justice. For the purposes of these reports, the trends need to be illustrated this way but if you do not understand the data involved, oversimplification of projections can be misleading.
“Peak final-energy demand will occur at different times in the various world regions; indeed, for the regions with lowest GDP per capita, demand will not peak during our forecast period. Furthermore, demand will not peak uniformly across the various demand sectors.” (DVN GL Energy Transition Outlook, 2020, p. 19)
The article Peak Oil Is Suddenly Upon Us (bloomberg.com) focuses on oil demand and includes forecasts from a number of different sources. The authors of this article do a good job at pointing out that these are just forecasts and what happens next depends on the actions people take.
Here are a few of the energy outlook forecasts reviewed.
The IEA was created in 1974 to help co-ordinate a collective response to major disruptions in the supply of oil. While oil security remains a key aspect of their work, the IEA has expanded significantly since its foundation. Taking an all-fuels, all-technology approach, the IEA recommends policies that enhance the reliability, affordability, and sustainability of energy. It examines the full spectrum issues including renewables, oil, gas and coal supply and demand, energy efficiency, clean energy technologies, electricity systems and markets, access to energy, demand-side management, and more.
Explore Canadian energy data, statistics and information, get market updates and view provincial and territorial energy profiles.
DVN GL is the world’s leading classification society and a recognized advisor for the maritime industry, the technical advisor to the oil and gas industry, and delivers world-renowned testing, certification and advisory services to the energy value chain including renewables and energy management. They are one of the world’s leading certification bodies, helping businesses assure the performance of their organizations, products, people, facilities and supply chains. They are also a world-leading provider of digital solutions for managing risk and improving safety and asset performance for ships, pipelines, processing plants, offshore structures, electric grids, smart cities and more.
Much of the analysis in the Outlook is focused around three scenarios: Rapid, Net Zero, and Business-as-usual. The multitude of uncertainties means that the probability of any one of these scenarios materializing exactly as described is negligible. Moreover, the three scenarios do not provide a comprehensive description of all possible outcomes. However, the scenarios span a wide range of possible outcomes and so might help to inform a judgement about the uncertainty surrounding energy markets out to 2050.
Potential Reality 1: Transition will be a measured, gradual process driven primarily by market forces but supported by policy that does not impose excessive costs on people and business.
Potential Reality 2: Transition is an urgent process because the world is facing a climate crisis. Transition will be driven primarily by strong, rapid policy interventions.
Approximately 81% of the world’s energy comes from fossil fuels (DVN GL Energy Transition Outlook, 2020, p. 66). Today’s energy supply is complex and if we want to change the energy supply there are complex lines to follow. Existing energy supply chains cannot easily be replaced, and renewable energy plays a relatively small share of the world’s current energy needs. In 2018, 26% of electricity was supplied from renewable sources, with two thirds generated from hydropower (DVN GL Energy Transition Outlook, 2020, p. 85).
Net Zero 2050 does not mean that hydrocarbons will be removed from the energy mix entirely but what would that look like in terms of the required growth in renewable resources? Mike Simmons, Halliburton UK, created context around how difficult it would be to remove hydrocarbons from the energy mix by 2050. He highlighted that the world uses 11,685 Million tons of oil equivalent (Mtoe) of fossil fuels per year and there are 10,700 days until 2050. We would need to replace 1 Mtoe every day from now until 2050. 1 Mtoe = 1 nuclear power plant or 1,500 wind turbines.
(Simmons, M., (Producer), 2020, Hydrocarbons, Geoscience, and Energy Transition, [webinar])
Energy demand will fall 8% in 2020 due to the pandemic. The world will need to achieve the same percentage of emissions reduction seen in 2020 every year through 2050 to succeed in reaching the ambitions of the Paris Agreement and be on track to 1.5⁰C. DVN-GL forecasts have global energy demand fluctuating 6-8% lower than pre-pandemic forecasts. They are assuming that factors such as the demand for aviation, remote working and reduced commuting will have lasting affect lower energy use. The demand for steel and construction materials for office buildings will also be significantly reduced. Energy efficiency improvements will require significant policy to push to scale to meet 2050 Goals.
The DVG GL 2020 Energy Transition report acknowledges that the drivers and barriers to energy transition are often beyond the control of any single organization or government. Some choices facing policymakers may be clear-cut, but others involve highly complex trade-offs and require comprehensive planning and pro-active policy strategies.
How can you align people and industries when highly complex trade-offs are involved? Is the impact on the environment due to the extraction of raw materials required for rapid electrification one of these trade-offs?
Lithium batteries are required to store all this energy. This article mentions that lithium extraction would need to increase 2700%. Lithium requires 500,000 gallons of water to produce a single ton. With the world's largest reserves of the valuable metal, Chile has been called "the Saudi Arabia of lithium." Over the last 20 years, 40% of the global lithium supply has come from Chile. And global demand is expected to triple within the next six years (Boddenberg and Mortensen, 2020).
Vaclav Smil, a Czech-Canadian scientist, and policy analyst, has the point of view that based on history, a large-scale transition in energy sources will be gradual.
“History shows that neither the dominant sources of primary energy, nor the common energy converters can be displaced rapidly and completely in a short period of time”
“The unfolding energy transition towards decarbonization will inevitably follow the progress of all previous large-scale primary energy shifts – it will be a gradual, prolonged affair.” (Policy Brief, Smil, 2020, p. 2)
The bottom line is that a modeled gradual energy transition may not come close to the goal of keeping the average global temperature below 1.5⁰C.
Many 1.5°C and 2°C scenarios ’achieve’ their GHG-reduction target by pushing mitigation commitments into the future. Placing faith in breakthrough solutions that do not exist now, to solve the problem in the future can carry unacceptable risks (DVN GL Energy Transition Outlook, 2020, p. 254)
Companies are already shifting goals and setting net zero targets:
Are “business as usual” projections already too conservative? A lot of companies have established Net Zero 2050 targets and policies with global implementation. Market analysts believe that linear growth trends are likely too conservative for the changes that are already happening with respect to renewables and energy related technologies. Top oil and gas producing companies are preparing to transition to become "energy" companies and have written down some oil and gas assets and accepted they won't ever produce them.
A push for new technologies will be impactful to forecasts that do not include them:
DVG GL’s 2020 2020 Energy Transition Outlook shows geothermal energy makes up 1% of the energy supply in 2018 and forecasts it to make up 1% of the energy supply in 2050. Their forecast does not include disruptive entrants into electricity production. However, only recently have governments in Alberta and Saskatchewan revamped regulations for drilling and for power generation to stimulate geothermal power in these provinces.
Deep Earth Energy Production Corp. drilled a “gusher” well in Saskatchewan. This single horizontal geothermal well can produce 3 megawatts of renewable, reliable electricity, enough to power 3,000 homes. No company in Canada has produced electricity from geothermal heat, but Deep Earth’s chief executive officer Kirsten Marcia told the Financial Post that there is a “big, big future for geothermal power in Western Canada,” as demonstrated by the results of the first ever horizontal geothermal well, which is also the deepest horizontal well ever drilled in Saskatchewan.
Energy growth in developing nations:
Climate change is at the top of many Canadians’ minds but almost half of the world's population does not have access to reliable electricity services. Developing nations are concerned with education, healthcare, job opportunities, responsible governments, access to nutritional food, protection against crime and violence, clean water, and sanitization, etc. These are things that many Canadians may take for granted. Developing nations will be key drivers of energy growth demand in the future. People living in developed countries are not voluntarily reducing energy consumption. A huge variable in the future energy demand forecasts is how citizens in developed countries can be persuaded to change their energy consumption (Simmons, M., (Producer), 2020, Hydrocarbons, Geoscience, and Energy Transition, [webinar]).
Significant changes in policy are required:
According to the DVN GL Report, EU’s net-zero target appears to be ambitious, and is unlikely to be met owing to cost, the political difficulty of implementing a high carbon price and supply chains (aviation, maritime) beyond the EU’s control. Yet, there is an unprecedented roadmap for coordinated regional climate action and the deal will require many new policies and technical details to be drafted. It brands the new Commission with a clear green profile. To turn plans into action requires approval and support from all member states and Parliament.
Considerable technological developments are still necessary:
Regarding technological advances, the IEA recently reported that uneven progress on clean energy technologies faces further pressure from the Covid-19 crisis. In 2019, only 6 out of 46 technologies and sectors were “on track” with the IEA’s Sustainable Development Scenario. Another 24 technologies showed some progress while 16 technologies were “off track.”
An IEA report on Tracking Clean Energy Innovation stated that most energy technologies are not on track to provide the clean energy transitions targeted by governments. Many technologies required to lower emissions to “net-zero” levels either do not exist or are not ready for markets, notably in sectors such as heavy industry and long-distance transportation, for which large-scale low-carbon solutions are not widely available (IEA, Tracking Clean Energy Innovation, p.7).
Solutions fall within three main categories of emissions reduction, all of which must be addressed in any emissions-reduction plan. To achieve our climate goals, we require solutions that:
- Reduce energy use by improving energy efficiency.
- Increase the share of non-fossil energy supply.
- Capture and store carbon.
To ensure the necessary reductions are achieved, various policy actions are also needed within each of the sectors. This aspect is critical, and without enabling governmental policies and regulatory measures at international, national, and subnational levels, the solutions and technologies are unlikely to scale, and the technologies will not deliver on their promised potential. Furthermore, the contributions and shifts in investments, from both the financial sector and the private sector in general, will be instrumental in accomplishing implementation of the various solutions.
Within the long list of potential technical solutions, it is relevant to question whether we need them all, or which solutions should be selected for prioritization. Clearly, some of the solutions are also partly overlapping, and there is no single way to close the gap. In choosing the optimal approach, cost-efficiency considerations are important and ease of implementation, in terms of political feasibility and public acceptability.
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