The energy industry is a critical pillar of the global economy, powering homes, businesses, and industries worldwide. Despite the rapid growth of the global economy and population, energy consumption will grow by only 14%. However, the industry faces significant challenges due to increasing demand and the urgent need to reduce greenhouse gas (GHG) emissions. The role of electricity in the energy mix is expected to grow from 20% today to 40% by 2050. This shift, along with the adoption of hydrogen, will help offset fossil fuel consumption. This article explores the challenges facing the energy industry and possible steps to address them.
Clean Energy Transition
Clean energy transition refers to the global shift in energy sector from fossil-fuels to renewables. Such a transition became critical with the pressing need to tackle climate change issues and rising demand for electricity. In the short-term, the transition is bumping against energy security requirements of many countries. Basically, in the long-term, the transition continues to accelerate but still not sufficient to match the Paris Agreement climate goals. Above all, many countries are struggling. They are trying to ensure a smooth transition while maintaining the security of their energy supply. Affordability remains a significant challenge.
According to IEA, renewable energy will account for 95% of global net increase in power capacity by 2025. Its cost has continued to decline where solar and wind power are becoming increasingly competitive with fossil fuels. Certainly, these trends indicate a promising future for renewable sources but with many challenges still to overcome. Energy security, macroeconomic impacts, the North-South divide, and minerals will each have significant impact on how the transition unfolds. None are easy to deal with and they will interact with each other, which will compound their impacts. The transition in the energy industry requires significant investment in renewable infrastructure. It also requires the development of energy storage solutions and more flexible power grids.
Decarbonization
Decarbonization of the energy sector means reducing its carbon dioxide emissions per unit of electricity generated (grams CO2/Kwh). It requires a fundamental transformation in how the societies provide transport and consume energy. The large-scale expansion of low-carbon electricity, phase-out of unabated fossil fuels, and widespread direct electrification are uncontroversial.
The 2015 Paris Agreement set an ambition task to limit global warming to below 2°C above pre-industrial levels. Also, it emphasize more efforts to limit the global warming rise to 1.5°C by pursuing zero carbon by 2050. Decarbonization has become a global imperative for governments and businesses as it plays an important role in limiting global warming. Many companies across all industries have publicly declared their intention to become carbon neutral by 2050.
The harder-to-abate sectors, like shipping, road freight, and aviation need more efforts to realize the ambition of Paris Agreement. Undeniably, these sectors share common characteristics, such as long asset lifespans, high energy dependency, and complexity of electrification. Together they account for around 32% of global CO2 emissions.
According to IEA, the energy industry is responsible for about 75% of global GHG emissions. Mature economies need to accelerate the reduction of their annual gas emissions by nearly nine times to meet 1.5°C requirement. Many countries are pursuing a range of strategies for decarbonization. This include investing in renewables, increasing energy efficiency, and transitioning to low-carbon fuels. However, despite these efforts, global carbon emissions continue to rise, emphasizing the need for urgent and comprehensive action.
Greenhouse Gas (GHG) Emissions
Greenhouse gas (GHG) include a majority of Carbon Dioxide (CO2) and smaller amounts of Methane (CH4) and Nitrous Oxide (N2O). The combustion of fossil fuels to produce electricity releases GHG. These gases trap the sun’s heat. This process leads to global warming and climate change. Between 1990 and 2021, the warming effect from GHG emissions rose by nearly 50%.
Carbon Dioxide was responsible for about 80% of this increase. China, the United States, and India are leading the twenty countries responsible for 75% of the world’s GHG emissions. The reduction of GHG emissions requires the adoption of clean energy and the implementation of policies favoring low-carbon energy sources. The technologies to reduce GHG emissions currently exist. They include swapping fossil fuels for renewables, boosting energy efficiency, and applying taxes on carbon emissions.
Carbon Capture, Utilization and Storage (CCUS)
Carbon capture, utilization, and storage (CCUS) involves capturing Carbon Dioxide emissions. The next step is using them or permanently storing them below the ground surface. CCUS has environmental, economical and social benefits, which can be a key factor in tackling climate change issues. Typically, Carbon Dioxide is captured from a steel or cement factory, power plant or natural gas processing facility. Conversely, as the capture process is over, carbon sequestration process secures Carbon Dioxide from entering the Earth’s atmosphere.
This can be biological or geological. Biological sequestration is the storage of Carbon Dioxide in vegetation (grasslands, forests), in soils and oceans. Geological sequestration is the process of storing/injecting Carbon Dioxide in underground geological formations or porous rocks for long-term storage. CCUS technology might enable the safe use of fossil fuels in industry. It could also allow safe use in power generation. This is possible until another clean energy source is available on a larger scale.
Limited Access to Energy
SDG–7 is to “ensure access to affordable, reliable, sustainable and modern energy for all”. It is considered as a major challenge confronting every country. According to IEA, nearly 759 million people living in sub-Saharan Africa and South Asia lacked access to electricity in 2019. Limited energy access can hinder economic development and educational opportunities, and impact health and safety. SDG-7 defined five targets to ensure universal access to sustainable energy by 2030.
Energy Security
As per IEA definition, energy security is the uninterrupted availability of energy sources at an affordable price. Maintaining energy security is a big challenge for the energy industry in many developing countries. These countries rely heavily on fossil fuels. Fossil fuels can be subject to price volatility. They may experience supply disruptions. Its production and consumption can have significant environmental impacts. Examples of energy security may include increasing the production of clean renewable fuels. It can also involve promoting research on and deploying GHG capture and storage technologies. Additionally, improving vehicle fuel economy and enhancing the energy performance of Governments are crucial.
Energy security is an essential aspect to drive economic growth, social stability and support industrial activities. Energy security risks include high fuel prices. They also encompass fuel shortages and equipment failures. Additionally, there is the impact of climate change and net-zero transition risks. These could be a lack of investment or system operability challenges.
Electricity Demand
Electricity demand, or Peak demand, refers to the highest electrical power demand on an electrical grid. This occurs over a specified period. Globally, electricity demand rises by 1.8% per year, growing to almost 57% by 2050, as traditional biomass, coal and oil demand decline. Population growth, urbanization, and economic and technological developments lead to increased electricity demand. A reliable and sustainable energy industry is needed to meet this demand.
Energy Efficiency
Energy efficiency is the use of less energy to perform the same task or produce the same result. Energy-efficient homes and buildings use less energy to heat, cool, and run appliances and electronics. Energy-efficient manufacturing facilities use less energy to produce goods. It can help to address climate change, reduce costs, and enhance energy security.
This requires the development of new technologies and the implementation of encouraging policies and regulations. Energy efficiency has many environmental and economic benefits. Environmental benefit means that increased efficiency can lower GHG emissions and decrease water use. Economic benefit means that improving energy efficiency can lower individual utility bills and help stabilize electricity prices.
Aging Infrastructure
Aging infrastructure requires significant investment to modernize the physical infrastructure. This includes power plants and transmission lines. It also requires investment to modernize the digital infrastructure, like smart grids, metering, and advanced software. Modern technologies, capturing more than 65% of the investments up to 2035, are required to support the energy transition.
Renewable sources will account for more than 30% of global investments in the next 15 years. This excludes transmission and distribution reinforcements. This is twice as high as projected investments in conventional power generation. It is also almost on par with oil and gas investments.
Integration of Renewable Energy
Grid integration of renewable energy involves reimagining operation. It also means planning for a dependable, cost-effective, and efficient electricity system. Cleaner new energy generators are necessary for this transformation. Renewables will lead the power generation mix, reaching 80-90% in 2050. Solar and onshore wind will contribute much to the global generation growth due to their declining costs. Both are projected to make up 43% and 26% of generation respectively in 2050. Offshore wind is projected to remain less than 7% of global generation due to permitting constraints and policy hurdles.
It has potential to grow further if constraints on onshore wind like land use persist. Thermal generation will be crucial as a flexibility provider. Gas will provide significant shares of base-load generation up to 2040. Nuclear generation still needs economic support from policies. These policies are not yet present in many regions. Public acceptance continues to be challenging.
Energy Storage
Energy storage can give system operators a flexible and fast response resource to effectively manage variability in generation and load. New storage technologies are critical components of contemporary electrical power networks. It is used to balance the changing load impacts of renewable energy. It also offers frequency and voltage stability. Additionally, it maintains a stable energy supply.
New storage technologies can save a significant amount of money for power grids. They allow these grids to operate more efficiently. This results in lower pricing, reduced emissions, and higher quality power. Recently, battery energy storage systems (BESS) have experienced a rapid decline in cost. This decline mirrors the learning curves seen from wind and solar generation over the past decade. BESS can help to address the intermittent nature of renewable energy sources and enhance power grid flexibility.
Hydrogen
Hydrogen fuel cells produce electricity by combining hydrogen and oxygen atoms. The hydrogen reacts with oxygen in an electro-chemical cell. This process is like that of a battery. It produces electricity, water, and insignificant amounts of heat. At present, hydrogen is most used in petroleum refining and fertilizer production, while transportation and utilities are emerging markets. Hydrogen is projected to grow five times by 2050, driven primarily by road transport, maritime, and aviation.
Hydrogen supply is expected to change significantly. It will shift from 100% grey hydrogen to 60% clean production by 2035. This transition is driven by declining costs and policy makers who support hydrogen technology adoption. Three fundamental enablers may be needed to support the hydrogen economy’s development. These are infrastructure and supply chains, technology advancement with manufacturing scale-up, and government support.
Cybersecurity
Cyber-security involves protecting networks, hardware, and software from attacks. It also involves safeguarding against damage, unauthorized access, and service rejection. Digital technologies are increasingly relied upon in monitoring and controlling interconnected power systems. This change necessitates the implementation of robust cyber-security measures. These measures will ensure an adequate level of cyber-security to protect these power systems.
Electronic devices in smart meters and protection relays are vulnerable to invasive and non-invasive attacks. These devices are close enough to serve as an attack point. They can be used to bring the grid down. Security mechanisms can include authentication, authorization, data encryption, and others. Grid security infrastructure (GSI) plays a critical role. It outlines specifications to establish secret communication between software entities in a power grid. This communication is tamper-proof.
External Links
Decarbonization of Energy
How to Decarbonize Global Power Systems
Carbon Sequestration
Alternative Fuels
Understanding the Demand Rate
Energy Efficiency
Energy Storage Technologies
Cybersecurity in Power System
Zero-Energy Buildings and its Role in Mitigating Climate Change Impacts
A Roadmap to a Climate-friendly Energy Transition for Asia and the Pacific
Off-grid Solar Systems: A Key Solution for Climate Adaptation and Resilience
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