A global perspective on the energy transition: looking back, looking ahead

CEC CSIRO, renewables clean energy council, CEC

A GHD Future Energy expert calls ‘Year One’ on the energy transition.

Across arguably every key measure, 2020 marked a critical turning point. Nowhere was this fundamental shift more pronounced than global energy systems and economies, as oil prices plummeted, companies set bold net zero targets and governments hastily unveiled energy investment roadmaps to drive economic recoveries. 

Greenhouse gas emissions dipped dramatically as our usual carbon-intensive routines–most notably, traffic movements and air travel–ground to a halt, putting our carbon footprint firmly front-of-mind and spurring a deeper collective consciousness of our environmental impact. 

As we head into 2021, what can we expect from the international energy transformation? Can we maintain the momentum born out of one of the most tumultuous periods on record, parlaying those gains into a new era of clean energy? What will our shared quest for decarbonisation look like as we enter a post-pandemic world? 

Here, GHD’s global Future Energy expert, Tej Gidda, provides his perspectives on the year that was, and predictions for the year ahead. 

What were the major energy shifts in 2020 – globally and across key markets? 

While many of us will look back on 2020 as the year of COVID and a challenging one at that, I think history will ultimately mark this period as a positive and very significant moment in time for the energy transition. Transformation has been happening for years, but 2020 marked a true step change. I think of it as Year One. 

Energy demand around the world decreased as we stopped flying, driving, and as industry ramped down. This changed how we consumed energy and thus how energy was evaluated. The price of oil plummeted, in some cases below zero dollars per barrel. This created a shock to the energy supply system, especially in the oil and gas industry. This in turn forced many companies to rethink their transition planning horizons, as they tried to foresee how they would evolve over time and maintain the viability of their business. 

At the same time, electrical systems changed. In Europe, for example, renewables contributed to almost half of all electricity generated – a major milestone that was achieved much earlier than previously expected. All this pressure on energy systems provided additional onus for energy transition, especially as governments considered how they would spend stimulus on green energy infrastructure to help the economy recover. 

On top of all that, many individual companies further committed to net zero carbon targets, including many oil majors and by the end of 2020, whole countries (notably the UK). And finally, the US election has shifted the outlook for Future Energy in the United States, as the new administration comes in with ambitious goals for decarbonisation. 

What new solutions or innovations gained traction in 2020? 

The hydrogen economy is coming – that is probably the most significant shift we have seen. We have witnessed this as at the corporate level, with large firms such as Shell and BP including hydrogen as a key pillar in their transition strategies when announcing net-zero carbon goals for 2050. Likewise, we are also seeing hydrogen come to the fore at the national level. The UK’s recent 10-point plan towards net-zero carbon by 2050 includes 5GW of low-carbon hydrogen by 2030, a highly ambitious goal. Various countries are also seeking to become importers of hydrogen to meet their own goals – Japan, Korea and Germany being some key examples. 

At the same time, we see continued transition of electrical grids, in particular with the retirement of coal assets. The replacement of traditional fossil fuel assets by renewables requires ongoing attention to energy systems integration, to balance and store energy with appropriate respect for existing grid infrastructure. In North America, renewable natural gas is coming online as a transitional fuel, using biogas sources to generate a renewable product that can be transported via existing natural gas transmission and distribution infrastructure. Energy from waste continues to gain prominence, as a means of both mitigating environmental concerns with waste and to fuel renewable energy – especially from food wastes, a consideration that is now gaining traction in Australia, is very mature in Europe, and that is on the upswing in North America. 

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One of the other areas that is gaining traction is carbon capture, utilisation and storage. CCUS is vitally important for larger oil and gas companies to transition their existing infrastructure and we are seeing much more activity in this area, especially as it relates to blue hydrogen production. 

What are going to be the gamechangers for in 2021 and beyond? 

For 2021 and beyond, expect rapidly decreasing cost curves for renewables such as hydrogen, balancing and normalising against conventional energy production. Market conditions will encourage more start-ups to develop new technologies given the scale of the energy transition required – perhaps also supported by a greater focus on research and development. The new administration in the US and recent UK Government announcements will also set a bullish tone globally and set an example for other countries.

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I would expect the export/import of green energy to become vitally important from 2021 forward. Previously, the use of renewables has been largely restricted to near their point of origin, but vectors such as hydrogen and ammonia create exciting potential export opportunities for green energy. This will require new, specialised infrastructure at key ports. We will also see game-changing approaches to utilising existing in-the-ground infrastructure to move green energy – such as oil and gas pipelines that can be repurposed over time. The same goes for refineries, which have significant asset bases from which to develop green future fuels infrastructure. 

At the same time existing assets are repurposed, new infrastructure will be constructed to match the energy transition framework, sponsored in great part by the equity markets, which are increasingly viewing and supporting investment opportunities through an Environmental Social Governance lens.