The global energy transition is unstoppable
The current continuous geopolitical conflicts have led to a sharp rebound in global fossil energy demand and high prices. However, in the long run, the evolution of carbon tax and the decline in the cost of renewable energy production and storage will offset the influence of fossil energy. The general trend of energy transformation Still the same. The disruption of global supply chains caused by the epidemic may also hinder the energy transition in the short term, but at the same time, the countermeasures adopted by some industries in response to the epidemic also mean that the demand for certain types of energy, especially fossil energy demand, may never be able to meet the demand. Restored to its former glory.
Det Norske Veritas (DNV GL), an independent energy consulting and certification organization, recently released the “Energy Transition Outlook 2022” report, predicting that by 2050, electricity will account for 83% of the global energy structure, and fossil energy will account for 83%. Under the squeeze of renewable energy, it is less than 50%; although the short-term production cost of renewable energy is relatively high, the production capacity growth of solar energy and wind energy is unstoppable, with an increase of 20 times and 10 times respectively; the proportion of hydrogen energy will reach 5%, pure hydrogen The scale of application in the manufacturing industry will expand in the early 2030s, and the use of ammonia in the form of heavy-duty transportation will develop on a large scale in the late 2030s. The proportion of green hydrogen will increase steadily over time, and the proportion of blue hydrogen and blue ammonia will increase. It will still account for a large proportion in the long run; to achieve the goal of net zero emissions in 2050 needs to be based on the current policy, and controlling carbon emissions as soon as possible is very critical, and the window period left for human beings is very short.
Det Norske Veritas also predicts that after 2024, oil and gas demand in high-income countries will stop increasing, and after 2028, oil and gas demand in low- and middle-income countries will also stop growing; OECD countries must achieve net Zero emissions, after which negative emissions should start; China should reduce carbon emissions to zero by 2050; renewable energy is still not enough, 1/4 of carbon removal depends on carbon capture and combined with land use change methods, such as reducing deforestation.
According to the existing data and forecasts of Det Norske Veritas, global coal demand will peak in 2014, heating energy demand will peak in 2018, oil demand will peak in 2025, transportation energy demand will peak in 2030, and sales of passenger cars will peak in 2033 Half of them will be driven by electricity, wind power will surpass hydropower in 2033, maritime shipping energy demand will peak in 2034, natural gas demand will peak in 2036, nuclear energy demand will peak in 2038, manufacturing energy demand will peak in 2041, and more than half of the global energy demand will peak in 2043. Vehicles are driven by electricity, solar power will account for 35% in 2045, and carbon capture and storage (CCS) technology will be used to capture 5% of energy emissions in 2047.
Det Norske Veritas divided the world into ten major regions (including Greater China, but not listed), sorted out its energy transition policies from the perspectives of energy use, emissions, and net-zero path selection, and demonstrated the importance of global energy transition. overwhelming.
Europe
(includes the Baltic States, excluding Russia, Turkey and other Soviet republics)
The question for Europe is how to stay united under the current situation and deal with the shortage of energy supply and high prices caused by geopolitical conflicts. In addition to overreliance on Russian oil and gas, other commodities needed for Europe’s energy transition, such as metals and rare earth metals, also rely on international supply chains.
The European Commission has recently proposed a series of measures aimed at ending Russia’s dependence on fossil fuels by 2027, and has set higher renewable energy and energy efficiency targets. Achieving these targets will cost hundreds of billions of euros between now and 2027 input.
According to the EU’s emergency natural gas rationing plan, the member states agreed to do their best to reduce natural gas demand by 15% on the basis of the average consumption in the previous five years by the end of March 2023.
Recent energy security issues have forced decision makers in some European countries to re-examine their energy policies to eliminate nuclear power and coal-fired power generation. Nuclear power plants are expected to extend their service life to cope with energy shortages, and the possibility of new coal-fired power generation to ensure winter lighting is also increasing.
To address raw material supply issues, the EU is establishing new oil and gas and base/precious metals alliances with suppliers in the US, Middle East, Africa and South America. The EU will also make up for the absence of Russian natural gas with diversified imports of pipeline gas and liquefied natural gas (LNG). According to the plan, by 2030, the EU will import an additional 50 billion cubic meters of LNG from the United States.
According to the “2030 EU Renewable Energy Law”, the overall target of the EU’s renewable energy share will increase from the previous 40% to 45%. To speed up deployment, the EU will create dedicated renewable energy zones in areas with low environmental and social risks, while shortening and simplifying approval procedures.
The European Union’s solar target is to have more than 320 GW of installed solar capacity by 2025 and close to 600 GW by 2030. The EU’s wind energy goal is to have 50% of the electricity generated by wind power by 2050, of which the installed capacity of onshore wind power will expand from the current 173 GW to 1,000 GW, and the installed capacity of offshore wind power will reach 60 GW by 2030. to 300 GW.
North America (Canada and United States)
Both North American countries are rich in natural resources, so the energy transition inevitably lacks motivation. The energy structure of these two countries is dominated by fossil fuels, but the government has set a goal of net zero greenhouse gas emissions in 2050, and the medium-term goal is to reduce carbon emissions to 50%~52% of 2005 levels by 2030 (United States) and 40%~45% (Canada).
Canada’s 2030 carbon reduction plan, the Canada Clean Air and Strong Economy Plan, and the United States’ Reducing Inflation Act can support the energy transition. The governments of the two countries have also cooperated through the “Mission Innovation”, “Net Zero Forum”, “Global Methane Pledge” and the G7 Climate Conference.
With high gasoline prices, the United States and Canada are focusing more on electric vehicles, but energy shortages in Europe have boosted oil and gas production, which will stall the pace of decarbonization in the United States and Canada in the short term.
The United States mostly reduces carbon emissions through incentives and increased spending on clean energy, which may not be as effective as carbon taxes. North America’s manufacturing policy will promote renewable energy production and employment. According to the executive order issued by the president and the “Infrastructure Investment and Employment Act”, the US Department of Energy will provide $8 billion for the construction of regional hydrogen hubs.
Canada’s “Clean Fuel Regulations” has provisions to encourage the production of low-carbon fuels by the oil and gas industry, which is a major greenhouse gas emitter, to help it increase its competitiveness in the global clean fuel market. In order to increase the penetration rate of electric vehicles, Canada has implemented a series of policies in the field of transportation, including 900 million Canadian dollars (about 4.785 billion yuan) invested in related infrastructure and 1.5 billion Canadian dollars in purchase incentives. Canada also plans to invest 2.6 billion Canadian dollars in CCS projects in the next five years, and invest 1.5 billion Canadian dollars per year before 2030 to encourage carbon capture, utilization and storage (CCUS) projects, and achieve the goal of reducing greenhouse gas emissions by 15 million tons per year.
In addition to the government, more and more companies in North America have also made commitments to net zero emissions, making up for the lack of relevant government policies to a certain extent. Funds focused on sustainable development and green energy are currently oversubscribed in North America and represent the aspirations of the energy transition in North America.
Latin America (extends from Mexico to the southernmost tip of South America, including the Caribbean islands)
Latin America is extremely rich in mineral resources, low-carbon fuels, and renewable electricity, and is unique in terms of energy transition. For example, northern Chile has the world’s largest copper and lithium reserves, Brazil has huge hydropower and biofuel production capacity, and wind power and photovoltaic development. Wait quickly. The substantial growth of renewable energy generation in the region has been mainly driven by government tenders and competitive tenders, while the low price of renewable energy has also facilitated the transition from fossil fuel to renewable energy generation. Nonetheless, investing in renewable energy in Latin America still needs to be aware of regulatory risks.
Many Latin American countries intend to become hydrogen export centers. Chile released the “National Green Hydrogen Strategy” in 2020, and Colombia also drew a “Hydrogen Roadmap” in 2021, demonstrating its determination to enter the hydrogen field.
Brazil, Mexico, and Venezuela are still countries with oil and gas resources. Venezuela, Ecuador, Mexico, and Colombia mainly produce heavy crude oil with high sulfur content. The task of reducing carbon emissions is not easy. Fortunately, the effects of some carbon reduction measures are gradually showing.
The six largest economies in Latin America, namely Argentina, Brazil, Colombia, Chile, Mexico and Peru, account for about 85% of the region’s total greenhouse gas emissions, and Mexico ranks No. 1 in the list of global greenhouse gas emitters. 11, Brazil 16th.
For Latin American countries, reducing the use of fossil fuels in industrial production processes, increasing the use of green fuels in road transport and improving energy efficiency are the keys to the transition.
Uruguay plans to achieve carbon neutrality as early as 2030, while Argentina, Chile, Colombia, Costa Rica, and Panama aim to achieve carbon neutrality by 2050, and Brazil by 2060.
Chile plans in its “Climate Change Framework Law” that by 2025, the proportion of non-hydro renewable energy power generation will reach 20% (9% in 2020) and 35% by 2030, and onshore wind energy will be among them. At the same time, reduce natural gas imports, increase the development of shale oil and gas resources and increase investment in related infrastructure.
Brazil focuses on maintaining the scale of hydropower and increasing solar and wind power generation, but plans to double oil and natural gas production by 2030, and also has plans for hydrogen energy and offshore wind power.
Chile’s goal is to generate 70% of the electricity mix from renewable sources by 2030. Colombia will be committed to blue hydrogen development with the goal of reaching 1-3 GW of electrolysis capacity by 2030. The development of renewable energy in Mexico is not going well. The government focuses on increasing oil and gas production, refining capacity and fuel production, which runs counter to the general trend of global energy transformation.
West Asia and North Africa (from Morocco to Iran, including Turkey and the Arabian Peninsula)
The economies and politics of West Asia and North Africa are very diversified and rich in oil resources. It is the world’s largest oil-producing region and the ballast of global oil and gas trade. In addition, the region is also extremely rich in renewable energy, with abundant sunshine throughout the year, desert wind and vast space are all indispensable elements for renewable energy projects.
Affected by the energy transition, the income of oil and gas resource countries in West Asia and North Africa is under pressure, but the recent energy shortage has eased this pressure. In order to make up for the energy supply gap in Europe, many oil and gas investment projects have been approved, which is not conducive to the development of the region in the short term. energy transition.
Countries in West Asia and North Africa also attach great importance to the potential of renewable energy and regard diversification of energy sources as an economic growth strategy. Egypt, Saudi Arabia, Morocco and the United Arab Emirates are undertaking some large-scale renewable energy projects, and Turkey has also scaled up renewable energy projects to ensure supply.
Many countries and national oil companies in West Asia and North Africa have participated in hydrogen projects, and Saudi Arabia and the United Arab Emirates are carrying out nuclear power hydrogen production projects. Morocco, Oman and the United Arab Emirates have successively announced hydrogen strategies, and Algeria, Egypt, Saudi Arabia and Turkey are also formulating hydrogen strategies. But the deployment of electric vehicles in the UAE and Saudi Arabia is still in its infancy.
Growth in renewable energy generation in West Asia and North Africa will accelerate. Saudi Arabia and the United Arab Emirates plan that by 2030, the proportion of renewable energy power generation will reach 40% to 50%. Morocco plans to use renewable energy to account for 52% of electricity generation by 2030. Egypt plans to use renewable energy to account for 42% of electricity generation by 2035. Turkey plans to use renewable energy to reach 50% of its power generation by 2023, but it has achieved 66% in 2020. The region mostly adopts public tenders or auctions to promote the development of renewable energy.
Recently, rising electricity prices have made countries in West Asia and North Africa pay more attention to medium-term energy efficiency improvement and demand-side management, and the possibility of regional power trade and public storage of batteries has greatly increased. At the same time, continuous investment in oil and gas production is expected to minimize the cost of oil and gas extraction in the region, and maintaining the proportion of oil supply in the international market is conducive to maximizing government revenue.
Hydrogen development in West Asia and North Africa will benefit from the region’s renewable electricity and cost advantages of CCUS. The UAE and Saudi governments are jointly funding hydrogen projects. Morocco plans to invest a total of US$8 billion in hydrogen energy by 2030 and US$75 billion by 2050. Oman plans to invest $34 billion in green hydrogen by 2040. Egypt is increasingly becoming an export hub for LNG, electricity and green ammonia. The UAE and Saudi Arabia are also interested in the use of hydrogen in industry and road transport.
sub-saharan africa
(All African countries except Morocco, Algeria, Tunisia, Libya and Egypt)
South Africa is the largest coal producer in the region. Nigeria and Angola rank among the world’s top 20 oil-producing countries, and Nigeria’s LNG export volume also ranks among the world’s top ten. Tanzania and Mozambique in East Africa are rich in natural gas reserves and are intensively developing LNG projects. Mauritania and Senegal in West Africa, Angola and Namibia in the southwest have also recently discovered a large amount of offshore natural gas.
Ghana, Kenya and Rwanda are on track to achieve full electricity access by 2030, but lack of energy infrastructure remains a major socioeconomic constraint.
Inflation, high food security and commodity prices, as well as the impact of climate change, are big challenges that the region is about to face. Affected by the epidemic, foreign funds invested in the region’s renewable energy sector have been greatly reduced, which is not conducive to its future energy transformation.
Sub-Saharan Africa has huge wind, hydro, geothermal and solar resources that are still under development. However, from 2000 to 2020, renewable energy investment in this region accounted for less than 2% of the world. To achieve the energy transition, investment in renewable energy in the region needs to increase from the current US$5 billion to US$70 billion.
As the infrastructure gap in sub-Saharan Africa widens, government debts increase, and the efficiency of state-owned power companies deteriorates, the role of new energy companies is becoming more and more important. Investment from China accounts for 60% of local hydropower project investment.
Resource holders in sub-Saharan Africa remain committed to gas production, but more official aid money and funding from financial institutions is likely to go to clean energy and energy efficiency projects.
Mauritania will focus on green hydrogen production and export, Angola will use hydropower to produce ammonia, and South Africa plans to have 15 GW of electrolysis capacity by 2050. Renewable energy in the region will be developed with funding from international partners and offtake agreements.
Northeast Eurasia
(Russia, Mongolia, North Korea, etc.)
The region is highly dependent on oil and gas revenues. In 2021, natural gas production in the region will account for 23% of global natural gas production, and crude oil production will account for 15% of global crude oil production. Coal resources are also abundant. Russia dominates in size, population, and economic output. The European Union and East Asia are the main markets for oil and gas resources in the region, but the current situation has made the relationship in the region very delicate. European countries plan to gradually stop importing energy from Russia, and Japan has also promised to reduce its dependence on Russian energy.
The region is relatively backward in carbon reduction technologies, and its reliance on fossil fuels is both a major cause and a consequence of its ineffective energy transition.
Many countries in the region have taken actions in renewable energy. Azerbaijan and Abu Dhabi reached a cooperation agreement on offshore wind energy and green hydrogen; Uzbekistan joined the “Methane Pledge” and planned to add 30 GW of low-carbon power generation capacity by 2030; Kazakhstan approved the green taxonomy, etc.
Kazakhstan has pledged to become carbon neutral by 2060, but abundant coal reserves could mean the country’s electricity generation will remain dominated by coal until 2040. At present, the average price of carbon emission trading in Kazakhstan is US$1/ton, which is not enough to promote decarbonization. However, there is a recent draft government decree, which proposes to increase the carbon tax to US$50.8/ton of carbon dioxide equivalent by 2030.
High energy prices will benefit Russia in the short term, but geopolitical conflicts will affect its trade, reducing foreign direct investment and hindering technology flows. Russia is more focused on hydropower, nuclear energy and land use, but its 2060 net-zero emission target will not be further specified.
Indian subcontinent
(India, Pakistan, Bangladesh, etc.)
Economic and population growth in the Indian subcontinent has driven up energy demand, and the energy transition is driven primarily by energy security, lower renewable energy prices and the need to tackle air pollution. Pakistan, Bangladesh, and India are the countries with the worst air pollution in the world, especially India, where more than 75% of its electricity comes from fossil fuels. Therefore, the country’s energy choices will largely determine the speed of energy transition in the region. Over the past five years, India has added more renewable capacity than coal power. In 2021, India’s installed solar power capacity will exceed 10 GW, ranking fifth in the world, and its photovoltaic electricity price is also the cheapest in the world.
The energy mixes of Bangladesh, Pakistan and Sri Lanka are also dominated by fossil fuels, with hydropower only supplementing thermal power and often affected by climate change. Nepal and Bhutan are rich in hydropower but depend on imported fossil fuels for other energy needs. Less than half of Afghanistan’s population has access to electricity, mainly hydropower and imported electricity. The Maldives relies heavily on imported fossil fuels, about half of which are used to generate electricity.
In 2022, India will add 15 GW of non-hydropower renewable energy power generation installed capacity, and the non-hydropower renewable energy power generation installed capacity will reach 111 GW, which is lower than its target of 175 GW. According to the plan, by 2030, the installed capacity of non-fossil energy in India should reach 500 GW, of which the installed capacity of wind and solar power will exceed 400 GW. India’s 2070 net-zero emissions target has added increased energy efficiency, a focus on offshore wind and green hydrogen. India will no longer encourage new coal-fired power plants, and other related measures and reform plans will also benefit the energy transition.
Bangladesh plans to achieve a goal of 40% of renewable energy generation by 2041. Pakistan will shift from coal-fired power generation to renewable energy and hydropower, and achieve a goal of 30% of renewable energy generation by 2030. Sri Lanka, which has encountered a financial crisis, is currently also emphasizing energy transformation. The goal is to increase the proportion of renewable energy power generation from the current 20% to 70% by 2030.
Southeast Asia
Indonesia, the Philippines and Thailand are the largest economies in the region, but Singapore has the highest GDP per capita. Oil and natural gas dominate the region’s primary energy mix, with oil used for transportation and coal and natural gas used for power generation. At the 26th United Nations Climate Change Conference (COP26), Indonesia, the Philippines and Vietnam signed an agreement committing to stop using coal by the 2040s.
In the past two years, renewable energy power generation has played a significant role in Southeast Asia, and the proportion of new capacity in 2020 will reach 82%. Vietnam has the largest investment in renewable energy and the fastest growth in wind and solar power generation. Laos, Malaysia, Vietnam, Indonesia, and Thailand have set net-zero emission targets in the region.
The lack of carbon tax in Southeast Asia may hinder the development of CCS and low-carbon hydrogen. Indonesia has formulated a plan for simultaneous development of CCS/CCUS and gas fields. The Asian Development Bank has selected Indonesia, the Philippines and Vietnam as pilot countries for its energy transition mechanism, which aims to establish a fund to buy coal-fired power plants and accelerate the decommissioning of coal-fired power plants. The goals of ASEAN member states in 2025 include: renewable energy accounts for 23% of primary energy supply, energy intensity is reduced by 30% compared with 2005, renewable energy accounts for 35% of installed power generation capacity; hydropower, solar energy and Wind power generation will grow substantially. Singapore plans to import low-carbon electricity that accounts for 30% of its total electricity supply by 2035, and will also take the lead in importing hydrogen from Australia, Chile and New Zealand.
OECD Pacific
(Australia, New Zealand, Japan and Korea)
The region has relatively mature economies with diversified energy use. Australia is a net energy exporter, with the government committing in late 2021 to a technology-driven net-zero emissions target by 2050. New Zealand, Japan and South Korea rely on energy imports but have all committed to net-zero emissions by 2050.
Australia has abundant coal and natural gas resources, and its carbon emissions have been slowly declining. With the rapid growth of wind and solar power generation, the country has achieved the 2020 renewable energy development target, and the proportion of renewable energy power generation has reached more than 30%. After a long period of uncertain energy policy, the Australian government has developed an ambitious energy transition plan, including grid development, electric vehicle promotion and investment in green metals. As the world’s largest LNG exporter, Australia is exploring the possibility of hydrogen energy development.
New Zealand relies heavily on renewable energy generation, particularly hydroelectric and geothermal, and to some extent wind and solar. Fossil fuels still dominate the energy supply, but hydrogen is increasingly a new point of interest for the country. New Zealand plans to achieve net zero non-agricultural emissions by 2050.
Japan’s geothermal and hydropower potential is well developed, but geography limits solar, onshore wind and grid connection. The development of nuclear energy is still controversial, and the power shortage caused by the reduction of nuclear power has been balanced by imported fossil fuels and more coal-fired generation. Japan plans to step up efforts to develop offshore wind power and innovate in decarbonization technologies. Japan has also enshrined carbon neutrality into law and emphasized the importance of innovation.
South Korea is dominated by fossil fuels (80%), and coal, oil and LNG are also dependent on imports. The country’s energy transition is driven by reductions in air pollution, carbon emissions and energy independence, with new President Yoon Hee-yeol promising to overhaul plans to phase out nuclear power. Wind and solar power generate about 4 percent of South Korea’s electricity supply, but its export-oriented manufacturing base is carbon-intensive. Since 2017, South Korea has been committed to the development of hydrogen energy and has made continuous efforts to become a global hydrogen energy power. South Korea’s 2050 carbon neutral strategy includes comprehensive energy decarbonization, the development of LNG, renewable energy and the electrification of transportation. By 2034, renewable energy will account for more than 40% of electricity generation, of which offshore wind will dominate and nuclear energy will account for 10%.
