The authors of the “Transition Outlook 2019” study (on the implementation of the global energy transition by 2040), the representatives of one of the leading international consulting companies Wood Mackenzie (Edinburgh, the UK) believe that there is a high probability of failure to meet the goals set by the Paris Climate Agreement.
At present, the document is the most negative prognosis for the success of the global energy transition amid rapid climate change. According to Wood Mackenzie experts, it is based on an objective assessment of available investments and willingness to invest in green industries against the background of persistent inertia to changing many industries (metallurgical, transport), the actual low level of implementation of climate commitments at the state level and deployment of a number of global economic and political conflicts, especially the so-called “trade wars” between the US and China.
Wood Mackenzie experts believe that the current energy transition is too slow and could lead to a global temperature rise of about 3 °C by 2040. This takes into account the effects of further political support for sustainable development in certain states and technological progress, based on inertia of business and consumers regarding changes in behavior with energy sources. This scenario predicts a further increase in carbon emissions in the next decade, with a slowdown only in 2030s.
A possible alternative scenario is the intensification of global efforts to introduce stricter carbon emissions policies, state and financial support of decarbonization, the spread of electrification, support of energy efficiency and green technologies. According to international experts, this will require the mutual efforts of the world leading countries and increase of CO2 emissions tax rates in most countries in the near future.
Wood Mackenzie estimates that, as of now, decarbonization policy has certain results only in the energy sector. At the same time, heavy industry, machinery, housing, aviation, maritime and road transport, agriculture and heat supply companies require the introduction of new technologies, energy modernization and reforms to reduce energy consumption and transit to alternative low carbon fuels. Hydrogen and derivative synthetic fuels occupy a small share of the market, while carbon capture and storage technology remain expensive and technologically sophisticated. The situation is aggravated in sectors characterized by stiff competition at the global level, in particular, representatives of the metallurgical industry (powerful corporations from China, South Korea and Japan) may resist the introduction of expensive low carbon products due to the threat of losing their markets.
The report explains that for the planet to follow the “two degrees Celsius” scenario, as envisaged by the Paris Climate Agreement, “urgent political and regulatory initiatives are needed in both OECD member states and OECD non-member states.” They should include tax policies and subsidies that encourage research and capital investment in zero carbon technologies. Long-term programs are needed to stimulate the development and deployment of RES, as well as other technologies such as carbon capture and storage (CCS), batteries and long-term energy storage systems, hydrogen and other alternative technologies, with their further introduction at industrial and commercially viable level.
The abandonment of targeted government subsidies is slowing the growth of RES in many countries already at the moment, even if technology costs continue to decline, although it is expected that in most regions of the world solar generation will be cheaper than conventional energy sources by 2023. Wood Mackenzie also predicts that around 600 GWt of energy storage devices will be installed in the world by 2040.
BloombergNEF, for its part, is making much more optimistic predictions about storage systems, emphasizing their decisive role for further successful global decarbonization. In the study “Energy Storage Outlook 2019” analysts are predicting a rapid growth in the global storage capacity market by 2040 due to cheaper technologies and the expansion of combined systems with RES.
According to the study, 1095 GWt / 2850 GWt of capacity per year with a total investment value of about USD 662 billion is expected to be commissioned. In this case BloombergNEF only takes into account the dynamics of the growth of lithium-ion batteries and the reduction in their cost by another 50% as compared to 2018 in the period until 2030. In conjunction with the needs of the electromobile industry, the total expected storage capacity by 2040 can be 4548 GWt per year.
The key markets for this growth are industrial fixed storage systems and electric vehicles, and the growth drivers are large volumes of new generation by wind and solar power plants with low electricity prices, which will increase the profitability of combining them to ensure stable operation and balancing according to the needs of the energy system.
Small accumulation systems installed for the needs of private households and industrial sites will remain a niche product without significantly affecting the operation of the energy system. Instead, they will be one of the main tools for reducing consumer electricity costs, which will be used by the so-called behind-the-meter algorithm.
BloombergNEF predicts an increase in the role of storage systems in such market segments as the shift of peak electricity production by solar power plants during peak consumption periods, the coverage of peak loads on the power system in response to unexpected demand growth, the management of electricity supply of consumers due to the accumulation of cheaper electricity and consumption in autonomous mode during peak hours.
Wood Mackenzie, an international consulting firm, gives a fairly conservative assessment of the global energy sector’s ability to carry out a low-carbon transformation by 2040 and emphasizes the emergence of new challenges – political tensions, trade wars, protectionism, inertia to changes in business and society, with the consistent willingness to invest in high-profit hydrogen use or production projects. The study can help to shape more balanced approaches to energy transformation and accelerate the introduction of new legislation, especially in the EU, which seeks to remain the planet’s “green” leader.
According to international experts, this narrative testifies to the limited global investment in energy transformation and the need to generate significant incentives while renouncing excessive government support and funding. Green auctioning may not be a sufficient incentive for new RES investments and will need to be supplemented, for example, by temporary tax deductions for developers.
The global market of lithium-ion battery power systems has significant potential for further rapid growth due to the steady demand in the industrial plants segment and the development of electric transport. Possible new technological solutions can only accelerate respective capacity building, which quickly gain competitive advantages over traditional energy system balancing sources, and in combination with RES it can gain advantage over basic and alternating generation.