TINOS, Greece, Oct 28 (Reuters Breakingviews) – The task of decarbonising the global economy can be split into three parts: electrify as many activities as possible; use low-carbon processes when that’s not possible; and make electricity in ways that do not spew out greenhouse gases.
The good news is that this is happening. The bad news is that it is not happening nearly fast enough to stop global warming. Recent reports from the International Energy Agency, and from Goldman Sachs,make clear the scale of the shortfall.
While solar power and supplies of batteries have grown massively, the same cannot be said for expanding electricity grids, or developing long-duration storage, green hydrogen, and carbon removal technologies. As a result, the demand for oil, gas and coal has not yet peaked. The impact on the temperature of the planet – and the cost of adapting to floods, storms, heatwaves and desertification – will be huge.
The IEA’s central scenario, based on governments’ stated policies, sees demand for all three major fossil fuels reaching its peak by 2030. Goldman’s main scenario, which it considers ambitious, foresees oil consumption growing into the 2030s while consumers keep burning more gas until the 2040s.
The problem is not just that the hump for fossil fuel demand risks being delayed, says Peter Hill, who ran the United Nations’ climate conference in Glasgow in 2021. The outlook is now a leisurely decline rather than a rapid fall.
Usage of coal will remain stronger for longer, partly because China and India are burning more of the most polluting fossil fuel after the Ukraine war pushed up the cost of gas. Goldman’s central scenario three years ago was that coal would account for 23% of electricity production by 2030. Now it expects 28% to come from the black rock.
Political developments, notably the upcoming U.S. presidential elections, will affect the speed of the transition to a low-carbon economy. But even if determined politicians can win elections, they will struggle to shift industrial trends quickly. Global temperatures will rise 3.1 degrees Celsius above pre-industrial levels if governments do not take greater action, according to a United Nations report last week. That’s well above the goal of limiting global warming to 2 degrees – and aiming for 1.5 degrees – set by the 2015 Paris Agreement.
GRIDLOCK
There are bright spots. Manufacturing capacity of solar cells has grown six-fold in the past five years and will increase by a further third by 2030, according to the IEA. There is a similar story with lithium-ion batteries, where global production capacity will more than double by the end of the decade. In both cases, China dominates supply.
If all this solar and battery capacity is deployed, clean power and electric vehicles will help drive rapid decarbonisation. But the IEA reckons battery factories will run at just over 60% their capacity while the solar facilities won’t manage even half their potential output.
Muted demand for electric vehicle sales outside China will stop battery production reaching its maximum. One reason is the slow rollout of reliable charging systems, says Goldman’s Michele Della Vigna.
With solar power, a major roadblock is that countries are not upgrading power grids nearly fast enough. Utilities face planning delays and, in some cases, weak finances, according to a report, last month by the Energy Transitions Commission. There’s a particular backlog of renewable power projects waiting for connections in the United States. To provide enough connections and capacity, investment in transmission and distribution worldwide needs to rise to $800 billion a year, two and a half times the current level.
Another problem is that higher global interest rates have pushed up the cost of capital. That disadvantages renewable energy, which involves large upfront costs and distant revenue. This is a particular headache for developing countries that struggle to find investment.
Meanwhile, new uses are boosting electricity demand, much of which is being met by fossil fuels. The growth in data centres and demand for artificial intelligence is part of the story. Even more important is the increased use of air conditioning, itself partly the result of people cooling themselves in a heating world.
SLOW HYDROGEN
The sun does not always shine, and the wind does not always blow. A big problem is how to store renewable electricity until it is needed. Utility-scale batteries can do the trick for a day or two. But other solutions are needed to store power for several months.
Climate change experts had high hopes for green hydrogen, which is made by using renewable energy to split water into hydrogen and oxygen. When power is needed, the hydrogen is burned, releasing energy that can be converted into electricity.
Green hydrogen could also be used for heavy transport, for some industrial processes that are hard to electrify, and to make fertiliser. But it is currently much more expensive to produce than “grey” hydrogen, which is made out of gas.
Although governments have plans to subsidise green hydrogen, some such as the United States have been slow to get their act together. Three years ago Goldman envisaged hydrogen doing 20% of the job of decarbonising the world economy. Now it thinks the gas will only account for 12%.
Another big disappointment has been the slow development of carbon capture, utilisation and storage (CCUS), a technology that stops carbon dioxide escaping into the atmosphere. When renewable energy falls short, fossil fuel power plants fitted with CCUS could provide low-carbon electricity. CCUS could also grab the carbon dioxide which is a by-product of the chemical reaction that creates clinker, a key component of cement production.
Three years ago, Goldman had envisaged CCUS would capture 140 million tonnes of carbon dioxide in 2023. In reality, it sequestered barely a tenth of that. Governments have not been consistent in supporting the embryonic technology while companies have not been willing to make the necessary investments, says Hill.
These multiple roadblocks are going to cost the world dearly. The global economy will be between 7% and 10% smaller by the middle of the century than it would be if the Paris Agreement targets were hit, Swiss Re has estimated,
It would be rational to spend the much smaller sums that are needed now to fast-track low-carbon technologies. The longer the delay, the harder this becomes.
We give you energy news and help invest in energy projects too, click here to learn more
Be the first to comment