Net-zero puzzle needs multiple pieces in place: Tripling renewables and slashing oil & gas emissions

As scorching heatwaves engulf the globe, climate change concerns gain prominence, urging the world to make good on its low-carbon and green energy aspirations by accelerating the buildout of a sustainable energy mix. Multiple sources of supply vie for attention in the journey to net-zero, with renewables being crown jewels while boosting energy efficiency, nuclear, and hydrogen, along with ways to cut emissions from oil and gas remain fateful sidekicks of this energy transition quest.

It is no secret that the world is currently experiencing one of its warmest summers ever, as scientists claim that the first two weeks of July were the Earth’s hottest on human record. These unprecedented temperatures have not let up so far, which raises climate change concerns to a whole new level while heatwaves endanger millions of lives and push electricity grids to their limits due to air conditioners getting cranked up.

Aside from the consequences associated with agriculture and human lives, extreme heat also has a major impact on global energy systems due to the surges in demand for electricity, which could result in a vicious cycle of increased greenhouse gas emissions that in turn make the world even hotter. Bearing this in mind, policymakers are engaging in a race to make global energy systems more sustainable, however, more investment in energy efficiency is also crucial at this time. This was also discussed at the fourth and last Energy Transitions Working Group Meeting, held under India’s G20 presidency and concluded in Goa last week.

The two-day meeting saw engagement from over 115 delegates representing G20 member countries and nine invitee countries on discussions centered around critical challenges related to climate change, sustainability, energy security, equitable energy access, and financing, in the context of global energy transitions. The G20 meeting also underscored the urgency for “feasible, collaborative, and accountable policy actions to accelerate global energy transitions while ensuring universal energy access and just, affordable, and inclusive energy transitions in line with achieving sustainable development goals (SDGs).”

While taking note of the significant convergence on hydrogen-related issues including Green Hydrogen Innovation Centre proposed by India and the Global Biofuel Alliance, Shri Pankaj Agarwal, the Union Power Secretary, commented: “Our decision and collaborative endeavours at this juncture will drive the energy panorama for future times. There has been a substantive meeting of minds on low-cost financing for energy transition. The working group has taken note of the voluntary action plan proposed by India for doubling of pace of energy efficiency by the year 2030.”

According to Agarwal, affordable access to power and clean energy solutions was identified as a growing necessity, along with safeguarding the supply chains of critical materials to foster a more sustainable clean energy transition.

Shri Ajay Tewari, Additional Secretary, Ministry of Power, Government of India, underlined: “The importance of developing and widely adopting both existing and emerging clean technologies was underscored, including carbon capture utilisation and storage (CCUS), green and low-carbon hydrogen and its derivatives, biofuels, small and modular reactors (SMRs), among others. Participants recognised that technology cooperation and collaborative investment are vital to advance these initiatives successfully.”

The International Energy Agency’s Executive Director, Dr Fatih Birol, and other IEA leaders were among those who participated in a series of international ministerial forums on energy and climate issues in Goa, India, late last week, culminating in the G20 Energy Ministers Meeting. Birol highlighted the urgency of accelerating clean energy transitions worldwide in order to advance sustainable development, reach climate goals, enhance energy security, and take advantage of the new global energy economy that is emerging.

In line with this, Birol underscored the need for countries to commit to doubling global progress on energy efficiency and tripling global renewable power capacity by 2030 to keep the target of limiting global warming to 1.5 °C within reach. Meeting this target calls for strong action in the energy sector to drive a major reduction in the world’s greenhouse gas emissions by 2030. Renewables such as solar and wind are expected to play a critical role in this endeavour.

While an update is waiting in the wings ahead of the COP28 Climate Change Conference, the IEA’s global Roadmap to Net Zero by 2050, which was first published in May 2021, sets out an energy sector pathway that would limit global warming to 1.5°C, which outlines that doubling down on progress in energy efficiency goes hand in hand with massively ramping up a wide range of clean energy technologies this decade to curtail the demand for fossil fuels and reach net-zero goals in a timely manner.

Based on the IEA’s research, the most important lever to bring about the reduction in carbon dioxide (CO₂) emissions needed by 2030 is to triple the global installed capacity of renewable power by the end of the current decade. If this is achieved, it would avoid about 7 billion tonnes of CO₂ emissions between 2023 and 2030, which is equivalent to eliminating all the current CO₂ emissions from China’s power sector. The IEA is urging governments worldwide to commit to tripling renewable capacity by 2030 ahead of COP28.

Huge strides have been made in expanding renewable energy capacity in recent years, especially in the wake of the Ukraine crisis, which set the global energy crisis in motion, providing fresh impetus by underscoring the energy security benefits of renewables in addition to their climate credentials. As a result, the amount of renewable power capacity added worldwide rose by almost 13 per cent in 2022 and is expected to jump by a third in 2023 as growing policy momentum, elevated fossil fuel prices, and ongoing energy security concerns drive strong deployment of solar PV and wind power, according to the IEA’s Renewable Energy Market Update published last month.

As impressive as this progress seems, the IEA is adamant that more is needed to reach net-zero emissions from the energy sector by 2050. While annual capacity additions have more than doubled from 2015 to 2022, rising by about 11 per cent per year on average, a slightly higher annual growth rate would put renewables on track to meet the 2030 capacity target. This will require stronger government policy actions to ensure resilient technology supply chains, secure and cost-effective system integration of solar PV and wind, and renewables deployment in many more emerging and developing economies.

For the IEA, solar PV is providing grounds for optimism on the pace of renewable expansion, as it is on course to account for two-thirds of this year’s increase in global renewable power capacity with further strong growth expected in 2024. While wind power is set for a strong year in 2023, further growth next year will depend on whether governments can provide greater policy support to address permitting and auction design challenges. The Internal Energy Agency underscores that wind turbine supply chains are not growing fast enough to match accelerating demand over the medium term, mainly due to rising commodity prices and supply chain challenges, which are reducing the profitability of manufacturers.

Even though the acceleration of renewable energy capacity has a critical role in the net-zero journey, the IEA elaborates that a significant acceleration in energy efficiency improvement progress globally is the other key pillar of emissions reductions between now and 2030. In addition, nuclear power will need to expand further, while the availability and use of low-emissions hydrogen and ammonia in power generation would help reduce emissions from coal- and gas-fired power plants.

Laying out the groundwork to usher in a sustainable energy future also requires the oil and gas industry to show its commitment to tackling climate change by delivering a major reduction in greenhouse gas emissions from its operations by 2030. Currently, the industry accounts for around 15 per cent of total energy-related emissions globally.

“Yet progress on efficiency, nuclear power, hydrogen, oil and gas emissions and all the other areas will be insufficient if the world does not triple renewable capacity by 2030. This target is both vital and possible – and governments need to commit to it going into COP28 to keep alive the goal of limiting global warming to 1.5°C,” outlined the IEA.

The IEA’s first annual Critical Minerals Market Review points out that the market for minerals that help power electric vehicles, wind turbines, solar panels, and other technologies key to the clean energy transition has doubled in size to $320 billion over the past five years. This shows that record deployment of clean energy technologies is propelling huge demand for lithium, cobalt, nickel, and copper, among other minerals. Therefore, overall demand for lithium tripled from 2017 to 2022 while cobalt saw a 70  per cent jump in demand and nickel logged a 40 per cent rise.

Many believe 2023 is a pivotal year for countries to increase both ambition and action on the clean energy transition front, thus, the upcoming COP28 climate summit in Dubai is seen as a crucial moment to agree on concrete steps to keep the goal of limiting global warming to 1.5 °C within reach.

While renewables are portrayed as the future, many agree that oil and gas, especially LNG, will be required for decades to come to fuel this transition process and met the world’s energy demands. In the aftermath of the Ukraine crisis, tensions swept over gas markets, however, this has eased significantly since the start of the year. Despite this, the IEA is of the opinion that there is little room for complacency, as deeper coordination among market participants is essential given momentous shifts in how gas markets function.

The IEA’s latest report on the global gas market found high inventory levels at storage sites in key Asian and European markets, providing grounds for cautious optimism ahead of the 2023-24 winter heating season in the Northern Hemisphere. However, a full stop of Russian piped gas to Europe and colder-than-expected temperatures could still unleash fresh volatility.

In line with this, the world’s demand for oil is coming under pressure from the challenging global economic environment, not least because of the dramatic tightening of monetary policy in many countries over the past year. This resulted in lower expectations for global oil demand growth in 2023, which signifies a reduction of 220,000 barrels per day to 2.2 million barrels per day.

Even though Chinese demand growth is continuing to lean towards the upside, the demand in advanced economies, such as Europe, is languishing amid a grinding slowdown in industrial activity. The IEA emphasises that global oil supply could tumble by more than 1 million barrels per day this month as Saudi Arabia implements steeper production cuts.

The IEA’s report warns that the drop in supply, as well as recent declines in the amount of oil being transported or stored at sea, suggest the oil market may soon see renewed volatility.