The energy industry is a vital pillar of the global economy, powering homes, businesses, and industries worldwide. Energy consumption is projected to grow only by 14% despite the rapid growth of global economy and population. However, the industry faces significant challenges with the increasing demand associated with the urgent need to reduce greenhouse gas (GHG) emissions. The role of electricity in the energy mix will grow from 20% today to 40% by 2050. The corresponding doubling of electricity consumption combined with the uptake of hydrogen will offset fossil-fuels consumption. This article explores some of 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 transition became critical with the pressing need to address climate change issue 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 to ensure a smooth transition while maintaining the security and affordability of their energy supply.
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 requires significant investment in renewables infrastructure, 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, which trap the sun’s heat leading 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) is the process of capturing Carbon Dioxide emissions followed by 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. However, CCUS technology may allow the safe use of fossil fuels in industry and power generation until another clean energy source is available on a larger scale.
Limited Access
The UN’s sustainable development goals (SDGs) recognize the importance of the natural environment to all humans well-being. 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. First, ensure universal access to affordable, reliable and modern energy services. Second, increase substantially the share of renewables in the global energy mix. Third, double the global rate of improvement in energy efficiency. Fourth, enhance international cooperation to facilitate access to clean energy technology. Lastly, promote investments in appropriate infrastructure to supply modern and sustainable energy services for all.
Energy Security
As per IEA definition, energy security is the uninterrupted availability of energy sources at an affordable price. Energy security is a big challenge facing many developing countries as they rely heavily on fossil fuels. Fossil fuels can be subject to price volatility and supply disruptions and its production and consumption can have significant environmental impacts. Examples of energy security may include increasing the production of clean renewable fuels, promoting research on and deploying GHG capture and storage technologies, improving vehicle fuel economy, and improving the energy performance of Governments. Energy security is an essential aspect to drive economic growth, social stability and support industrial activities. Subsequently, energy security risks include high fuel prices, fuel shortages, equipment failures, impact of climate change and net-zero transition risks, such as a lack of investment or system operability challenges.
Electricity Demand
Electricity demand, or Peak demand, on an electrical grid is simply the highest electrical power demand that has occurred over a specified time 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, increase electricity demand, which needs a reliable and sustainable power supply to match.
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 both the physical infrastructure (power plants and transmission lines) as well as the digital infrastructure (smart grids, metering and advanced software). New 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 the global investments in the next 15 years, excluding transmission and distribution reinforcements. This is twice as high as projected investments in conventional power generation, and almost on par with oil and gas investments.
Renewable Energy
Grid integration of renewable energy means reimagining operation and planning for a reliable, cost-effective, and efficient electricity system with cleaner new energy generators. 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 such as land use persist. Thermal generation will play an important role as a flexibility provider, with gas providing substantial shares of base-load generation up to 2040. Nuclear generation is still to require economic support from policies, which is not yet present in many regions as 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. Its uses include balancing the changing load impacts of renewable energy, offering frequency and voltage stability, and maintaining a stable energy supply. New storage technologies can save a lot of money for power grids as they allows them to operate more efficiently, with lower pricing, lower emissions, and more quality power. Recently, battery energy storage systems (BESS) has experienced a rapid decline in cost, mirroring 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 across an electrochemical cell similar to that of a battery to produce electricity, water, and small amounts of heat. Currently, hydrogen is most commonly 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 projected to shift from nearly 100% grey hydrogen to 60% clean production by 2035, as costs decline and policy makers support hydrogen technology adoption. Three fundamental enablers may be needed to support the development of the hydrogen economy: infrastructure and supply chains, technology advancement and manufacturing scale-up, and government support.
Cybersecurity
Cybersecurity refers to the protection of the networks, hardware, and software from attacks, damage, or unauthorized access and rejection of services. The increasing reliance on digital technologies in monitoring and controlling the interconnected power systems requires the implementation of robust cybersecurity measures. These measures will ensure an adequate level of cybersecurity to protect these power systems. Electronic devices in smart meters and protection relays are vulnerable to invasive and non-invasive attacks. These devices are in the physical proximity that can be used as the point of attack to bring the grid down. Security mechanisms can include authentication, authorization, data encryption, and others. Grid security infrastructure (GSI) is an important ingredient which outlines specifications that establish secret and tamper-proof communication between software entities operating in a power grid system.
