We are presently seeing the vulnerability of the European markets to supply dependence and especially risks of reliance upon Gas from Russia. So how much is Europe dependent on Russian gas?
The EU is so dependent on it, and because it has committed to limiting its greenhouse gas emissions. The EU imported 155 billion cubic meters of natural gas from Russia in 2021, almost half (45%) of its gas imports and nearly 40% of the total amount used, according to the IEA.

There is currently a real scramble to change the dependencies due to the Russian invasion of Ukraine and the implications to Europe, and this growing recognition that Europe is faced with a real energy crisis for the next decade.

The current “talking up” of replacing oil, coal and gas with renewables of wind, solar, green hydrogen solutions (PEM Electrolyzers), new grid infrastructure and battery storage means potentially some very volatile and disruptive energy management problems in the short to medium term.

Over now for the next 10 years replacing existing energy generating solutions, dependent on oil, coal and gas with ones based on renewable solutions needs to be even more central to energy management.

But we also need to be recognizing the next crisis following this present one, that is rapidly coming towards us is the dependences on essential minerals and who controls these and that is China.

As the EU attempts to solve this Energy Crisis it is moving into the next one that is possibly worse.

Yet once this crisis gets resolved and that will require a very intense energy transition over the next three to five years with all the social, political and infrastructure issues to manage in radical ways we will enter the next energy crisis: the reality of securing the essential minerals needed for the solutions offered today for the clean energy transition.

In reality, we are moving from one current dependence on oil and gas into another dependence trap of obtaining the present essential minerals needed for batteries within electric cars or to support renewable storage, green hydrogen solutions, solar and wind.

Moving from today’s crisis of dependence on Russian Gas in Europe we will go through volatility and instability of energy for years to come

Today’s crisis in Europe: dependence on Russia for Gas

A short summary, specifically on Germany’s energy shocking dilemma and its dependence on Russsian Gas- that should have NEVER HAPPENED.

Just read this 2014 article “Energy Dependence Dooms EU to Instability“to not understand what was coming towards us, we kicked the energy dependence can (barrel) down the road. Well, it’s well and truly back!

Europe can’t manage the energy transition in progressive ways, it needs to be aggressively managed

In a recent Q&A: How could Germany and the EU weather a fossil fuel embargo on Russia? by Clean Energy Wire (CLEW) the following fallout issues have been highlighted that the German government fears from cutting Russian energy ties?

Without doubt the EU is in a real energy dependence crisis that constricts how they can react to the Russian invasion of Ukraine.

The next crisis is possibly worse, supply of Essential Minerals for Renewable Solutions

Lithium, graphite, cobalt and nickel and other essential minerals are all presently required for the renewable solutions we require to replace fossil fuels and for that, we rely specifically on China, Chile, the Democratic Republic of Congo, Indonesia and Australia.

An essential report to be read was published by the IEA in May 2021, “The role of critical minerals in clean energy transitions. highlights our need for these essential minerals and while we are facing a growing energy crisis in the world our rush to reduce dependence on oil, gas and coal will take us into another very different energy crisis in the possibly the next 5 years to come.

This offers an extensive review of this topic of critical minerals needed in the Energy Transition and anyone interested, concerned or wishing to understand issues that are critical to a successful energy transition should find time to read this report.

The mineral intensity for renewable solutions will become the critical focus point as we attempt to scale up any energy transition

The mineral intensity for our renewable solutions within the energy transition will have an increasing focus on Rare earth elements, and Manganese, Nickel, Chromium, Silicon, Zinc, Copper for our new power generation capacity

Mineral security will become a new variable in the energy transition, that is for sure. Briefly taking some points from this report.

Will the supplies be resilient and secure?

The reality is today that many of the energy transition minerals are more concentrated on a few countries than oil or natural gas supplies—that indicated real risks.

For lithium, cobalt, and rare earth elements, the world’s top three producing nations control well over three-quarters of global output. In some cases, this is one single country. The Democratic Republic of the Congo (DRC) and the People’s Republic of China (China) are responsible for 70% and 60% of global production of cobalt and rare earth elements, respectively, in 2019.

China has a very high concentration for processing operations and has global refining shares of 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements.

The Chinese companies have been making substantial investments in overseas assets in Australia, Chile, the DRC and Indonesia to make for even more critical mineral control.

The decline in resource quality is becoming a growing concern as well.

One example mentioned in the IEA report was Chile, where the average copper ore grade has declined by 30% over the past 15 years. This extracting the metal content of lower-grade ores requires more energy, exerting upward pressure on production costs, greenhouse gas emissions and waste volumes.

This impact from poorer quality will add growing scrutiny on environmental and social performance. Consumers and investors are continuing to source the minerals in sustainable and responsible produced ways. Will they?

Increased mining in already highly stressed parts of the world of climate issues will add to higher water stress levels. Some areas or regions in Australia, China and Africa have extreme heat, and flooding gives greater challenges in ensuring reliable and sustainable supplies.

Reliability, affordability and sustainability for minerals will become critically important to manage.

The IEA regards the risks to the reliability, affordability and sustainability of mineral supplies are manageable, but I openly would question that in this changing world of global conflicts and politics.

This supply management will require a greater focus on these critical minerals, collaborations and policy co-ordinations in a rapidly polarizing world of global politics

The suggestion of recognizing mineral security in similar ways to how the world monitors and manages oil or gas security as this critical mineral threat can have far-reaching consequences throughout the energy system if not globally managed and recognized for the risks it will present.

Recognizing energy dependencies in the public domain.

Mineral supplies will not be seen as quickly as “spikes in pump prices” but in how minerals as essential components for infrastructure and our energy transition will make it more expensive and delay the pathway to net-zero even more than we see today.

Pump prices get immediate public attention, less so for essential infrastructure or energy transition delays although this will change, as more dependence on energy resilience comes into play, as we when ourselves off fossil fuels onto renewable clean energy.

A critical overview of the dependencies and crisis potentially coming for securing essential materials can be seen below.

Let’s take the time to evaluate the following slides from the IEA in support of their May 2021 report, “The role of critical minerals in clean energy transitions.

Energy instability will dominate much in the next ten years, in conclusion:

Mineral security and intensity of use will become the energy risk we will all be facing in ever-increasing growing realities, once the transition from fossil fuel dependence is fully on its way to being replaced by renewables, that is for sure.

The EU in particular has to find a way out of its current fossil fuel dependence, especially reliant on Russian gas supplies.

In the next big crisis, both the EU and increasingly the USA has to face up to its even more dependence on China’s dominating role in essential mineral supply and processing both inside China but in all its investments made in Africa, Asia and Latin America to gain world dominance in these.

Energy management at the global, regional, country and local levels is going to be dominating in the years to come.

*This summary has been drawn from the report from the IEA as per the links shown.

The report by the IEA in May 2021, “The role of critical minerals in clean energy transitions“, offers an extensive review of this topic and anyone interested, concerned or wish to understand issues that are critical to a successful energy transition should find time to read this report.
All rights reserved by IEA. The report reflects the views of the IEA Secretariat.

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I have been providing extracts from the recent McKinsey report in two posts recently,

My first post was  explaining their scenario limitations with the message “we hope that this scenario-based analysis will help decision-makers refine their understanding of the nature and the magnitude of the changes the net-zero transition would entail and the scale of response needed to manage it.”

Then the second post was to re-produce and show their summary of costs and outcomes.

I did not make any personal comments in these two posts, I found the report difficult to comprehend and have been hoping someone far more qualified could provide a view to add or to challenge this report view

I personally found the costs absolutely staggering. I find the disruption frightening. So, we face significant electricity price increases and uncertainties of continuity of supply, very limited job gains over job destructions, whole industries and supply chains wiped out, steel and cement price increases of 30 to 45%, investment inequality even more.

The way McKinsey has phrased this does need deeper clarity. The point is they highlight the effect of the additional $3.5 trillion, their view of the additional amounts we need to spend on achieving Net-zero, not the predicted total spend of $9.2 trillion needed each year. To put this increase in comparative terms, the $3.5 trillion is approximately equivalent, in 2020, to half of global corporate profits, one-quarter of total tax revenue, and 7 per cent of household spending. YIKES! That is of a magnitude that is way beyond me to comprehend. For Real?

Seriously, do any of the energy experts here in Energy Central contributors recognize this as the future conversation in the boardrooms or public institutions? Now if we have a disorderly transition it gets worse.

Today I was reading a reply to this McKinsey report by Karl Burkart, Managing Director One Earth, formerly DiCaprio Foundation Dir. Science & Technology.

I reproduce this here as it challenges the work of McKinsey significantly and gives me a better framing of my concerns and shock.

No McKinsey, it will not cost $9 trillion per year to solve climate change.

1. The real cost of the energy transition is lost in the headline.
Top line, the report puts the total cost of a net zero aligned global energy transition at $275 trillion over 30 years, $3.5T more per year than we spend today. But deeper inside the report, we find that this is a misrepresentation. Business as Usual (BAU) would cost $250 trillion. So based on McKinsey’s own analysis, the real incremental cost is less than $1T per year in additional investments. And to be clear, this is before counting the rapidly rising costs of climate-related disasters (floods, fire, famine) and deaths.

2. The model does not account for rapidly accelerating innovation in clean energy.
The McKinsey analysis uses a model by Network for Greening the Financial System (NGFS), and like most Integrated Assessment Models, it assumes the continuity of our current fossil-fuel dependent energy system, despite a “cambrian explosion” of innovation in the clean energy sector. In reality, rapidly falling costs of clean technologies combined with the existential threat of the climate crisis will drive further innovation and economies of scale. A recent model published by Oxford’s Institute of New Economic Thinking (INET) offers a more realistic approach to modeling anticipated disruptions in the energy system, finding savings from the clean energy transition in the range of $14–26 trillion (PDF).

3. Like other conventional models, this one vastly underestimates the growth of solar and wind deployment.
Like a lot of mainstream energy modeling, this one is almost comical in its estimations of the pace of renewable energy adoption. For example, NGFS assumes 20 PWh of solar in 2050. This is half the level that the leading (and quite conservative) energy research firm Rystad forecasts. According to NGFS, the growth rate of solar would have to slow down from today’s level — from about 25% annual growth today to around 10% in annual growth. This one modeling decision makes a huge difference. Low growth in solar means you would need more carbon capture and storage (CCS) to remove fossil fuel emissions, and this significantly raises the total transition price tag.

4. Like other conventional models, this one vastly overestimates the costs of solar and wind deployment.
Despite the continued drop in renewable energy costs, McKinsey still seems to think that delivered electricity costs from renewables in 2050 will be 25% higher than they are today! Their justification for adding a huge premium on solar and wind is to account for higher grid integration costs, based on the assumption that there will be no innovation in the transmission or storage of intermittent renewables. This argument is old and has been largely debunked. For example, it was recently determined that the U.S. electricity grid can handle as much as 80% renewables with almost no enhancements. Getting to 100% will require additional upgrades but these are already underway — high voltage lines, smart grid technologies, sophisticated utility storage systems, computer-optimized load balancing, wind and solar shedding, distributed urban solar arrays, and many other strategies make getting to 100% renewable power entirely feasible.

5. The report fails to disclose pricing models for key renewable technologies.
Given that renewable energy deployment of solar, wind, geothermal, and green hydrogen is the world’s primary instrument of change in the transition to net zero emissions by mid-century, it certainly would be helpful if McKinsey disclosed how they have chosen to model the cost of deployment over time in their analysis. It’s likely they are not incorporating any benefits of scale or policy incentives that will reduce future deployment costs, even though all evidence points to declining, not increasing, costs. Oxford’s INET paper projects a continuation in the trend of declining costs, as do other models: IRENA, BloombergNEF, ETC, APCAG.

Even the IEA, which has historically been extremely conservative about the role of renewable energy, is now jumping on the bandwagon in their new Net Zero by 2050 roadmap. When the Paris Agreement was signed in 2015, the IEA thought the cost of solar electricity in 2040 would still be higher than that of electricity from fossil fuels, and expected deployment of only a cumulative 360 GW of solar by 2020. Just five years later, BloombergNEF finds that 90% of new electricity generation from renewables was cheaper than from fossil fuels, and 710 GW of solar was deployed. Battery prices have fallen even faster, halving from 2015–2020 and sparking a four-fold increase in deployment. McKinsey should be transparent about how and why they are modeling renewable costs in light of these developments.

6. McKinsey seems to have forgotten about fossil fuel rents.
This is surprising given McKinsey’s expansive knowledge about extractive industries and expertise from decades advising the fossil fuel industry. Our current fossil fuel system involves paying rent to fossil fuel producers beyond operating expenses and capital expenditures (CAPEX). Today, these rents amount to about $2T per year. These costs are not captured if you only model CAPEX. Adding rental costs, even with the McKinsey model, you would basically spend $1T on clean energy to save $2T on fossil fuel rents. And it’s likely rents will go up, increasing net savings from a renewable energy transition. For example, in the U.S. there is now a big push to eliminate the huge discounts on rents currently provided (they’re still at 1980s levels), thereby increasing the cost of fossil fuel extraction and the ROI for renewable energy investments.

7. The report is pessimistic in nature, highlighting the downside of the transition away from fossil fuels.
The McKinsey report seem overly focused on the loss of revenues for countries that are heavily reliant upon the fossil fuel industry for their GDP. It’s true that a lot of governments (and investors) highly exposed to the fossil fuel industry will be big losers over the coming years. But they have a choice. Transitioning to renewables will provide a huge economic advantage to the countries that move the quickest. These will come in the form of a large net increase in long-term jobs, far less volatility in energy markets, fast and cheap energy access for rural areas that currently lack grid connectivity, less oil spills and contaminated water from fracking operations, less deaths from poor air quality, a safer and healthier climate with less risk of environmental disasters, and on and on. All thing considered, countries have a lot more to gain than to lose, and many are now waking up to the large net benefits a renewable energy transition will deliver.

Kingsmill Bond, now at Rocky Mountain Institute, says it well: “There is now a new logic to the energy transition — the pursuit of gain. The shift of energy from scarce to abundant; from concentrated to distributed; from decreasing to increasing returns; from extraction by the lucky to manufacturing by the diligent; and from generating rents for a few to bringing prosperity for the many”.

8. The NGFS model used by McKinsey is not actually net zero by 2050.
A final point to make is that the model used as the basis for the McKinsey report does not actually deliver net zero by 2050:

It shows an 82% drop in actual CO2 emissions to roughly 7 GtCO2 per year in 2050 with 5 GtCO2 in carbon dioxide removal. In Glasgow, the Science Based Targets Initiative (SBTi) released a long-awaited standard for net zero emissions on the heels of the IPCC’s Sixth Assessment Report, calling for a 90–95% reduction in actual CO2 emissions by 2050, with the balance of emissions “neutralized” through carbon dioxide removal. The above NGFS model is +2 GtCO2 in 2050. It sounds like a small amount, but if we are to have at least a 50% chance of limiting global temperature rise to 1.5°C, there is almost no leeway room. The other issue is how those negative emissions are achieved. The NGFS model achieves its carbon removal using the controversial technology called Bioenergy with Carbon Capture and Storage (BECCS). A lot has been published on the limits of this technology to scale. At best, BECCS delivers carbon neutral energy, not carbon-negative energy. It would also require a huge amount of logging to reach anything like 5 GtCO2 per year. And those trees are needed for other services like timber and pulp, not to mention their role in global carbon sequestration.

As it turns out, shifting more quickly to 100% renewable energy will be a cheaper and more efficient way to get to actual net zero emissions by 2050, accompanied by carbon removal from reforestation and ecosystem restoration. One Earth has supported the work of a team of engineers and scientists who have estimated that a rapid, optimized energy transition will cost in the ballpark of about $1.5T per year. Why don’t we all start focusing on transition models that honestly seek to solve the problem of the climate crisis, rather than the problem of preserving profits for fossil fuel companies in a world that no longer wants the products they have on offer?

Written by Karl Burkart, Managing Director One Earth, formerly DiCaprio Foundation Dir. Science & Technology.

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January 2022 Copyright c McKinsey & Company

The second part of my summary or part-reproduction of the McKinsey report “The Net-zero transition: what it will cost, what it can bring”

In a very extensive report, “the Net-zero transition in what it will cost and what it can bring” running to 224 pages, is produced by McKinsey Global Institute in collaboration with McKinsey Sustainability and McKinsey’s Global Energy & Materials and Advanced Industries Practices and published in January 2022.

Within this report, McKinsey outlines the Net-zero transition in one scenario-based analysis, that provides sobering but terrific value to thinking through all that is required in the net-zero transition being attempted.

I have taken here, in this second post, significant parts of their summary, their “in brief,” to amplify this work and show their summary of costs and outcomes. The first post is here. On both, I have not added any views, thoughts or comments. The only change I made was replacing “we” when referring to themselves in this report with McKinsey.

McKinsey, by producing this report, nonetheless hope that our scenario-based analysis will help decision-makers refine their understanding of the nature and the magnitude of the changes the net-zero transition would entail and the scale of response needed to manage it. We also hope that our attempts to describe as accurately as we can the challenges that lie ahead are seen as what they are: a call for more thoughtful and more decisive action, urgency, and resolve.

The net-zero transition: What it would cost, what it could bring.

This research aims to highlight the nature and magnitude of the economic transformation that a net-zero transition would require.

McKinsey finds that the transition would be universal, significant, and front-loaded, with uneven effects on sectors, geographies, and communities, even as it creates growth opportunities:

Capital spending on physical assets for energy and land-use systems in the net-zero transition between 2021 and 2050 would amount to about $275 trillion, or $9.2 trillion per year on average, an annual increase of as much as $3.5 trillion from today. To put this increase in comparative terms, the $3.5 trillion is approximately equivalent, in 2020, to half of global corporate profits, one-quarter of total tax revenue, and 7 per cent of household spending. An additional $1 trillion of today’s annual spending would, moreover, need to be reallocated from high-emissions to low-emissions assets. Accounting for expected increases in spending, as incomes and populations grow, as well as for currently legislated transition policies, the required increase in spending would be lower, but still about $1 trillion. The spending would be front-loaded, rising from 6.8 per cent of GDP today to as much as 8.8 per cent of GDP between 2026 and 2030 before falling. While these spending requirements are large and financing has yet to be established, many investments have positive return profiles (even independent of their role in avoiding rising physical risks) and should not be seen as merely costs. Technological innovation could reduce capital costs for net-zero technologies faster than expected.

In this scenario, the global average delivered cost of electricity would increase in the near term but then fall back from that peak, although this would vary across regions. As the power sector builds renewables and transmission and distribution capacity, the fully loaded unit cost of electricity production, accounting for operating costs, capital costs, and depreciation of new and existing assets, in this scenario could rise about 25 per cent from 2020 until 2040 and still be about 20 per cent higher in 2050 on average globally. Cost increases in the near term could be significantly higher than those estimated here, for example, if grid intermittency issues are not well managed. The delivered cost could also fall below 2020 levels over time because of the lower operating cost of renewables—provided that power producers build flexible, reliable, and low-cost grids.

The transition could result in a gain of about 200 million and a loss of about 185 million direct and indirect jobs globally by 2050. This includes demand for jobs in operations and in the construction of physical assets. Demand for jobs in the fossil fuel extraction and production and fossil-based power sectors could be reduced by about nine million and four million direct jobs, respectively, as a result of the transition, while demand for about eight million direct jobs would be created in renewable power, hydrogen, and biofuels by 2050. While important, the scale of workforce reallocation may be smaller than that from other trends including automation. Displaced workers will nonetheless need support, training, and reskilling through the transition.

While the transition would create opportunities, sectors with high-emissions products or operations—which generate about 20 per cent of global GDP—would face substantial effects on demand, production costs, and employment. In the NGFS Net Zero 2050 scenario, coal production for energy use would nearly end by 2050, and oil and gas production volumes would be about 55 per cent and 70 per cent lower, respectively, than today. Process changes would increase production costs in other sectors, with steel and cement facing increases by 2050 of about 30 and 45 per cent, respectively, in the scenario modelled here. Conversely, some markets for low-carbon products and support services would expand. For example, demand for electricity in 2050 could more than double from today.

Poorer countries and those reliant on fossil fuels are most exposed to the shifts in a net-zero transition, although they have growth prospects as well. These countries are more susceptible to changes in output, capital stock, and employment because exposed sectors make up relatively large parts of their economies. Exposed geographies including sub-Saharan Africa and India would need to invest 1.5 times or more than advanced economies as a share of GDP today to support economic development and build low-carbon infrastructure. The effects within developed economies could be uneven, too; for instance, more than 10 per cent of jobs in 44 US counties are in fossil fuel extraction and refining, fossil fuel-based power, and automotive manufacturing. At the same time, all countries will have growth prospects, from endowments of natural capital such as sunshine and forests, and through their technological and human resources.

Consumers may face additional up-front capital costs and have to spend more in the near term on electricity if cost increases are passed through, and lower-income households everywhere are naturally more at risk. Consumer spending habits may also be affected by decarbonization efforts, including the need to replace goods that burn fossil fuel, like transportation vehicles and home heating systems, and potentially modify diets to reduce high-emissions products like beef and lamb. The up-front capital spending for the net-zero transition could yield lower operating costs over time for consumers. For example, the total cost of ownership for EVs is expected to be lower than ICE cars in most regions by 2025.

Economic shifts could be substantially higher under a disorderly transition, in particular, because of higher-order effects not considered here. The economic and social costs of a delayed or abrupt transition would raise the risk of asset stranding, worker dislocations, and a backlash that delays the transition. Even under a relatively gradual transition, if the ramp down of high-emissions activities is not carefully managed in parallel with the ramp-up of low-emissions ones, supply may not be able to scale up sufficiently, making shortages and price increases or volatility a feature. Much, therefore, depends on how the transition is managed.

For all the accompanying costs and risks, the economic adjustments needed to reach net-zero would come with opportunities and prevent further build-up of physical risks. Incremental capital spending on physical assets creates growth opportunities, in connection with new low-emissions products, support services, and their supply chains. Most importantly, reaching net-zero emissions and limiting warming to 1.5°C would reduce the odds of initiating the most catastrophic impacts of climate change, including limiting the risk of biotic feedback loops and preserving our ability to halt additional warming.

Government and business would need to act together with singular unity, resolve, and ingenuity, and extend their planning and investment horizons even as they take immediate actions to manage risks and capture opportunities. Businesses would need to define, execute, and evolve decarbonization and offsetting plans for scope 1 and 2 emissions and potentially expand those plans to include scope 3 emissions, depending on the nature of their operations, and the materiality, feasibility, and need of doing so. Over time, they would need to adjust their business models as conditions change and opportunities arise; integrate climate-related factors into decision-making processes for strategy, finance, and capital planning, among others; and consider leading action with others in their industry or ecosystem of investors, supply chains, customers, and regulators.

Financial institutions in particular have a pivotal role to play in supporting large-scale capital reallocation, even as they manage their own risks and opportunities. Governments and multilateral institutions could use existing and new policy, regulatory, and fiscal tools to establish incentives, support vulnerable stakeholders, and foster collective action.

The pace and scale of the transition mean that many of today’s institutions would need to be revamped and new ones created to disseminate best practices, establish standards and tracking mechanisms, drive capital deployment at scale, manage uneven impacts, and support further coordination of efforts.

To summarize

The goal of their research is to provide stakeholders with an in-depth understanding of the nature and magnitude of the economic and societal adjustments a net-zero transition would entail. Our hope is that this analysis provides leaders with the tools to collectively secure a more orderly transition to net-zero by 2050. The findings serve as a clear call for more thoughtful and decisive action, taken with the utmost urgency.

The key issue is whether the world can muster the requisite boldness and resolve to broaden its response during the upcoming decade that will in all likelihood decide the nature of the transition.

The first post here provides the scenario taken and its limitations to get to these results outlined above.

The report “The net-zero transition: what it would cost, what it could bring” is joint research by McKinsey Sustainability, McKinsey’s Global Energy and Materials Practice, McKinsey’s Advanced Industries Practice, and the McKinsey Global Institute.

The net-zero transition: What it would cost, what it could bring by McKinsey

January 2022 Copyright c McKinsey & Company www.mckinsey.com

The post At present the net-zero equation remains unsolved- part two outcomes and costs first appeared on Innovating the Energy Transition.

January 2022 Copyright c McKinsey & Company

In a very extensive report, “the Net-zero transition in what it will cost and what it can bring,” running to 224 pages.

This report is produced by McKinsey Global Institute in collaboration with McKinsey Sustainability and McKinsey’s Global Energy & Materials and Advanced Industries Practices and published in January 2022.

McKinsey outlines the Net-zero transition in one scenario-based analysis that provides sobering but terrific value to thinking through all that is required in the net-zero transition being attempted.

I have taken here in this post parts of their preface, executive summary and in a second post their “in brief” to amplify this work and provide the outcomes. I have not added any views, thoughts, or comments. The only change I made was replacing “we” when referring to themselves in this report with “McKinsey”.McKinsey, by producing this report, nonetheless hope that this scenario-based analysis will help decision-makers refine their understanding of the nature and the magnitude of the changes the net-zero transition would entail and the scale of response needed to manage it. They also hope that their attempts to describe as accurately as they can the challenges that lie ahead are seen as what they are: a call for more thoughtful and more decisive action, urgency, and resolve.

Their preface to the work

More than 10,000 years of continuous and accelerating progress have brought human civilization to the point of threatening the very condition that made that progress possible: the stability of the earth’s climate. The physical manifestations of a changing climate are increasingly visible across the globe, as are their socioeconomic impacts. Both will continue to grow, most likely in a nonlinear way, until the world transitions to a net-zero economy, and unless it adapts to a changing climate in the meantime. No wonder, then, that an ever-greater number of governments and companies are committing to accelerate climate action.

We are faced with today’s reality of greenhouse gas emissions continuing unabated and are not counterbalanced by removals, nor is the world prepared to complete the net-zero transition. Indeed, even if all net-zero commitments and national climate pledges were fulfilled, research suggests that warming would not be held to 1.5°C above preindustrial levels, increasing the odds of initiating the most catastrophic impacts of climate change, including the risk of biotic feedback loops. Moreover, most of these commitments have yet to be backed by detailed plans or executed. Nor would execution be easy: solving the net-zero equation cannot be divorced from pursuing economic development and inclusive growth.

None of these challenges should come as a surprise.

Achieving net-zero would mean a fundamental transformation of the world economy, as it would require significant changes to the seven energy and land-use systems that produce the world’s emissions: power, industry, mobility, buildings, agriculture, forestry and other land use, and waste.

This means addressing dozens of complex questions, including what is the appropriate mix of technologies that need to be deployed to achieve emissions reductions while staying within a carbon budget, limiting costs, and delivering required standards of performance?

What levels of spending on physical assets would the transition require? Who would pay for the transition? How would the transition affect companies’ markets and operations? What would it spell for workers and consumers? What opportunities and risks would it create for companies and countries? And how could consumers be encouraged to make changes to consumption and spending habits that will be necessary to ensure the transition?

In this report, McKinsey attempt to answer some of these questions, namely, those pertaining to the economic and societal adjustments. McKinsey provides estimates of the economic changes that would take place in a net-zero transition consistent with 1.5°C of warming.

This report is a first-order analysis of a hypothetical 1.5°C scenario. As such, it has several limitations.

First, it is not clear whether a 1.5°C scenario is achievable in the first place, nor what pathway the world would take to achieve it if it were. Indeed, some believe that 1.5°C is already out of reach, given the current trajectory of emissions and their potential to activate climatic feedback loops, as well as prevailing challenges with revamping energy and land-use systems. This research does not take a position on such questions. Instead, it seeks to demonstrate the economic shifts that would need to take place if the goal of 1.5 degrees is to be attained through a relatively orderly transition between now and 2050.

Second, this report is by nature and necessity limited in its scope. In particular, it does not focus on such issues as technology breakthroughs, physical constraints related to scaleup capacity and the availability of natural resources, delayed-transition costs, the role of adaptation, or other imponderables or uncertainties, nor have we yet modelled the full range of economic outcomes likely under a net-zero transition. As a result, it is likely that real outcomes will diverge from these estimates, particularly if the net-zero transition takes a more disorderly path or restricting warming to 1.5°C proves unachievable. Spending requirements could be higher, for example, due to the additional investment needed to maintain flexibility and redundancy in energy systems or heightened physical risks and commensurate adaptation costs.

Third, this report does not explore the critical question of who pays for the transition. What is clear is that the transition will require collective and global action, particularly as the burdens of the transition would not be evenly felt. The prevailing notion of enlightened self-interest alone is unlikely to be sufficient to help achieve net zero, and the transition would challenge traditional orthodoxies and require unity, resolve, and ingenuity from leaders.

McKinsey, by producing this report, nonetheless hope that the scenario-based analysis will help decision-makers refine their understanding of the nature and the magnitude of the changes the net-zero transition would entail and the scale of response needed to manage it. We also hope that McKinsey’s attempts to describe as accurately as they can the challenges that lie ahead are seen as what they are: a call for more thoughtful and more decisive action, urgency, and resolve.

Six characteristics of the net-zero transition emerge from the McKinsey scenario-based research:

First, the transition would be universal. Indeed, net-zero emissions can be achieved if and only if all energy and land-use systems that contribute to emissions are decarbonized, as these contributions are significant in all cases. All economic sectors and all countries would need to participate.

Second, the scale of the required economic transformation would be significant. In particular, we estimate that the cumulative capital spending on physical assets for the net-zero transition between 2021 and 2050 would be about $275 trillion. This means that spending would need to rise from about $5.7 trillion today to an annual average of $9.2 trillion through 2050, an increase of $3.5 trillion.

Third, these effects would be front-loaded: spending would need to rise to almost 9 per cent of GDP between 2026 and 2030 from about 7 per cent today before falling. Likewise, we estimate that the delivered cost of electricity (across generation, transmission, distribution, and storage, including operating costs, capital costs, and depreciation of existing and new assets) would rise by about 25 per cent between 2020 and 2040 in the scenario modelled here, before falling from that peak, although this would vary across regions.

Fourth, the transition would be felt unevenly among sectors, geographies, and communities, resulting in greater challenges for some constituencies than others.

Fifth, the transition is laden with short-term risks, even as the transition will help manage long-term physical risks. If poorly managed, it could increase energy prices, with implications for energy access and affordability, especially for lower-income households and regions. It would also have knock-on effects on the economy more broadly. If not well managed, there is a risk that the transition itself would be derailed.

Sixth is that, despite the challenges with making economic and societal adjustments, the transition would give rise to growth opportunities across sectors and geographies—and, critically, it would help avoid the build-up of physical risks.

In my second post, I summarize the costs and what the net-zero transition will bring, based on their scenario.

The net-zero transition: What it would cost, what it could bring by McKinsey

January 2022 Copyright c McKinsey & Company www.mckinsey.com

The post At present the net-zero equation remains unsolved- part one scenario limitations first appeared on Innovating the Energy Transition.

The Global Energy Innovation System is NOT Thriving

In a very sobering report from Hoyu Chong of Information Technology & Innovation Foundation (ITIF) published on 10th January 2022, it is highlighted how the global energy innovation system is in poor health.

In this report, it is pointed out there are weaknesses across most indicators and the need is to rectify these by most nations.

The key takeaways:

The post The Global Energy Innovation System is NOT Thriving first appeared on Innovating the Energy Transition.

Burning Woods
Alex van der Linde

We have just finished the most critical COP  meeting in Glasgow. It was the eleventh hour. For two weeks, nearly two hundred countries entered into discussions, finally agreeing on the “Glasgow Climate Pact” to keep the 1.5 degrees C target alive and finalize the outstanding elements of the Paris Agreement.

The President of the proceedings, COP26 President Alok Sharma, commented, “its pulse is weak, and it will only survive if we keep our promises and translate commitments into rapid action.”

“Keep 1.5 alive” has been a rallying cry for diplomats and activists alike at the COP26 negotiations. The phrase refers to the goal of limiting the global temperature increase to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above preindustrial levels.

1.5 degrees Celsius is seen as the threshold beyond which the effects of climate change become increasingly dangerous to people and ecosystems. But scientists warn that time is running out for humanity to take the transformative steps to achieve the 1.5 goals. And according to multiple estimates, the deal negotiated in Glasgow does not bend the curve enough to get there.

All countries agreed to revisit and strengthen their current emissions targets to 2030, known as Nationally Determined Contributions (NDCs), in 2022. This will be combined with a yearly political roundtable to consider a global progress report and a Leaders summit in 2023.

Some 151 countries had responded by submitting new or updated “nationally determined contributions” (NDCs) to the U.N. – including China, just days before COP26 started.

While the new pledges had increased ambition – shaving some 0.2C off warming if fully implemented – the UNEP “gap report” just before COP26 had once again exposed the gulf that remains if the world is to stay below 1.5C. (See: Do new climate pledges “keep 1.5C alive”?)

As we were coming into the talks, the UK COP26 presidency had set high expectations, calling for the summit to “keep 1.5C alive“, focusing on action.

Do new climate pledges ‘keep 1.5C alive’?

According to CarbonBrief.Org, COP26 saw a flurry of new assessments on what existing, and newly updated promises mean for limiting global warming to the Paris Agreement’s aspirational goal of 1.5C.

Carbon Brief took a deep dive into the latest numbers, looking at what they refer to, where different groups agree and disagree on likely outcomes and the potential impact of new long-term net-zero promises.

Current policies in place today will lead to the best estimate of around 2.4C to 2.7C warming by 2100 (with an uncertainty range of around 2C-3.6C).  If countries meet both conditional and unconditional nationally determined contributions (NDCs) for the near-term target of 2030, projected warming by 2100 falls to 2.4C (1.8C-3.3C).

So, if countries meet their long-term net-zero promises, global warming would be reduced to around 1.8C (1.4C-2.6C) by 2100. However, temperatures would likely peak around 1.9C in the middle of the century before declining.

One of the key achievements of this summit is speeding up the timeline for climate action. Countries are asked to come back in a year with more ambitious plans for cutting emissions. Under the Paris agreement, countries were generally supposed to submit new or updated plans every five years. Though a flurry of net-zero pledges was announced in the lead-up to COP26, in many of those cases, countries have not planned for significant emissions cuts in the next decade.

The worrying aspect of this COP26 meeting is that each country goes into these negotiations for its own position. It is ‘hoped’ that over the two weeks to form a growing consensus and recognition of positions to then be embodied in the final agreement.

So much time is lost in establishing and explaining conditions. Then the inevitable happens, positions become ‘dug in’ and somehow, somewhere at some time, these delegates lose the “greater plot for their own need to achieve and needs to achieve. Certainly understandable if they are to lose their way of life, even their very island, lost under rising water or forced by a rapidly drying land to migrate because they are incapable of making that basic living.

The issue of Mitigation

“Mitigation” is what countries need to do to reduce climate change, particularly by minimizing greenhouse gas emissions into the atmosphere. Getting countries to curb emissions is a central aim of the United Nations Framework Convention on Climate Change — but even the United Nations acknowledges that current pledges are far too meagre.

The final Glasgow climate pact failed, in my opinion, on 2030

Recognizes that limiting global warming to 1.5°C requires rapid, deep and sustained reductions in global greenhouse gas emissions, including reducing global carbon dioxide emissions by 45 per cent by 2030 relative to the 2010 level and net-zero around mid-century, as well as deep reductions in other greenhouse gases;

Recognizes that the impacts of climate change will be much lower at the temperature increase of 1.5°C compared with 2°C and resolves to pursue efforts to limit the temperature increase to 1.5°C;

The difference between 1.5°C and 2°C may seem small, but they represent vastly different levels of effort for countries seeking to limit their carbon footprints and strikingly divergent outcomes for the planet. This year’s landmark IPCC report concluded that “every additional 0.5°C of global warming causes discernible increases in the intensity and frequency” of heatwaves, heavy rain and droughts.

U.N. climate talks from COP26 are now planning in the rearview; it’s clear that net-zero commitments are rising, but the net-zero equation is not yet solved, and the URGENCY of what we do between now and 2030 is equally not addressed.

COP once again failed to provide vulnerable nations with the money to rebuild and respond to the unavoidable impacts of climate change.

For me, the energy transition continues to unfold, but at a pace that is totally at odds with the crisis we are in.

The CoP 26 in Glasgow might have begun to build the scaffold to support the planet and its need, the problem was and is this crumbling facade.

We have underneath the rapidly deteriorating condition of the ecosystem hidden under this facade; one, our planet needs so much more in the urgency of time, money, support, and collaboration.

Yes, CoP 26 was an evident disappointment for me but let’s take the steps made and turn these into bigger, more urgent ones that bring the world’s nations together in recognizing this really is a climate emergency.

This did not cheer me up at all; I remained gloomy!

In an article by David Roberts in Canary Media, “Don’t buy into the gloomy COP26 rhetoric.”

“What people seem to forget is that the UNFCCChas no real power to enforce anything, and there isn’t the level of unity needed among participating countries to create a binding target with real consequences.

This was the origin of the Paris Agreement: the realization that the best the UNFCCC could do is structure and publicize voluntary national goals and commitments. The idea was to do with transparency and peer pressure what decades of adversarial negotiations couldn’t: steadily increase ambition.

A shorter way of saying this is that a COP agreement can’t make a country do anything.”

The most sobering remark in this article was, “But it is a mistake to invest any particular hopes for change in the UNFCCC process — it can’t really do anything. It can only illuminate what is being done.”

As David remarks, “If every country that has submitted a 2030 carbon target in the Paris process — an NDC, or nationally determined contribution — hits that target, average warming will be 2.4°C.” And these are all voluntary.

Does that cheer me up? Not at all!

The post Not seeing the wood for the burning trees at COP26. first appeared on Innovating the Energy Transition.

I have been reading IEA’s World Energy Outlook 2021 (WEO), issued a month earlier in October, specifically because of the COP26 Climate Change
Conference meeting in Glasgow in a few weeks time.

This is the IEA flagship report, a 380 plus page report has for this year’s edition of the WEO been designed, exceptionally, as a guidebook to COP26.
It spells out clearly what is at stake.

This COP – short for the Conference of the Parties, the main decision-making body of the United Nations Framework Convention on Climate Change – is particularly significant. This COP session is being held between 31st October to 12th November 2021 and perhaps is the most pivotal climate meeting to date. Why?

It is the first test of the readiness of countries to submit new and more ambitious commitments under the 2015 Paris Agreement. It is also an opportunity – as the WEO-2021 states – to provide an “unmistakable signal” that accelerates the transition to clean energy worldwide.

I wanted to “lift out” of the report a few very short but essential messages provided in this report that give the essential snapshot.

Top Line summary

1. In 2020, even while economies bent under the weight of Covid-19 lockdowns, renewable sources of energy such as wind and solar PV continued to grow rapidly, and electric vehicles set new sales records.
2. At the moment, however, every data point showing the speed of change in energy can be countered by another showing the stubbornness of the status quo.
3. Pressures on the energy system are not going to relent in the coming decades. The energy sector is responsible for almost three-quarters of the emissions that have already pushed global average temperatures 1.1 °C higher since the pre-industrial age, with visible impacts on weather and climate extremes.
4. The energy sector has to be at the heart of the solution to climate change. At the same time, modern energy is inseparable from the livelihoods and aspirations of a global population that is set to grow by some 2 billion people to 2050, with rising incomes pushing up demand for energy services
5. Many developing economies navigating what has historically been energy- and emissions-intensive periods of urbanisation and industrialisation (are struggling).

Our present realities

1. Today’s energy system is not capable of meeting these challenges; a low emissions revolution is long overdue.
2. In the run-up to COP26, many countries have put new commitments on the table, detailing their contributions to the global effort to reach climate goals; more than 50 countries, as well as the entire European Union, have pledged to meet net-zero emissions targets.
3. A lot more needs to be done by governments to fully deliver on their announced pledges.
4. Today’s pledges cover less than 20% of the gap in emissions reductions that need to be closed by 2030 to keep a 1.5 °C path within reach

The recommendation from this report is to focus on four focal areas:

Focal Area One: A massive additional push for clean electrification that requires a doubling of solar PV and wind deployment relative to the APS; a major expansion of other low-emissions generation, including the use of nuclear power where acceptable; a huge build-out of electricity infrastructure and all forms of system flexibility, including from hydropower; a rapid phase-out of coal; and a drive to expand electricity use for transport and heating.

*Accelerating the decarbonisation of the electricity mix is the single most important lever available to policymakers

Focal Area Two: A relentless focus on energy efficiency, together with measures to temper energy service demand through materials efficiency and behavioural change.

Focal Area Three: A broad drive to cut methane emissions from fossil fuel operations. Rapid reductions in methane emissions are a key tool to limit near-term global warming, and the most cost-effective abatement opportunities are in the energy sector, particularly in oil and gas operations.

Focal Area Four A big boost to clean energy innovation. This is another crucial gap to be filled in the 2020s, even though most of the impacts on emissions are not felt until later. All the technologies needed to achieve deep emissions cuts to 2030 are available. But almost half of the emissions reductions need to come from technologies that today are at the demonstration or prototype stage, such as for the deployment of hydrogen-based and other low-carbon fuels, as well as carbon capture, utilisation and storage (CCUS).

Finance is the missing link to accelerate clean energy deployment

1. An international catalyst is essential to accelerate flows of capital in support of energy transitions and allow developing economies to chart a new lower emissions path for development.
2. Most transition-related energy investments will need to be carried out by private developers, consumers and financiers responding to market signals and policies set by governments.
3. Alongside the necessary policy and regulatory reforms, public financial institutions – led by international development banks and larger climate finance commitments from advanced economies – play crucial roles to bring forward investment in areas where private players do not yet see the right balance of risk and reward.

The Big Issues that need addressing or recognizing post COP26

*There is a looming risk of more turbulence ahead for energy markets. The world is not investing enough to meet its future energy needs, and uncertainties over policies and demand trajectories create a strong risk of a volatile period ahead for energy markets.

*Transitions can offer some shelter for consumers against oil and gas price shocks Energy transitions can provide a cushion from the shock of commodity price spikes if consumers can get help to manage the upfront costs of change.

*As electricity takes up a progressively larger share of household energy bills, governments have to ensure that electricity markets are resilient by incentivising investments in flexibility, efficiency and demand-side response.

*A new energy system will need to operate very flexibly, enabled by adequate capacity, robust grids, battery storage and dispatchable low emissions sources of electricity (like hydropower, geothermal and bioenergy, as well as hydrogen and ammonia-fired plants, or small modular nuclear reactors).

*This kind of system will also require digital technologies that can support demand-side response and securely manage multi-directional flows of data and energy.

*Trade patterns, producer policies and geopolitical considerations remain critically important for energy security, even as the world shifts to an electrified, renewables-rich energy system. This relates in part to the way that energy transitions affect oil and gas as supplies become more concentrated in a smaller group of resource-rich countries – even as their economies simultaneously come under strain from lower export revenues.

*Higher or more volatile prices for critical minerals such as lithium, cobalt, nickel, copper and rare earth elements could slow global progress towards a clean energy future or make it more costly.

*The costs of inaction on climate are immense, and the energy sector is at risk Extreme weather events over the past year have highlighted the risks of unchecked climate change, and the energy sector will feel the impacts.

*Today, the world’s energy infrastructure is already facing increasing physical risks related to climate change, which emphasizes the urgent need to enhance the resilience of energy systems.

*A failure to accelerate clean energy transitions would continue to leave people exposed to air pollution. Today, 90% of the world’s population breathes polluted air, leading to over 5 million premature deaths a year.

The summary from the report in simple, stark terms

-The potential prize is huge for those who make the leap to the new energy
economy.

-This creates enormous prospects for companies that are well-positioned along with an expanding set of global supply chains.

-Employment in clean energy areas is set to become a very dynamic part of labour markets, with growth more than offsetting a decline in traditional fossil fuel supply sectors.

-Making the 2020s the decade of massive clean energy deployment will
require an unambiguous direction from COP26.

-Governments are in the driving seat: everyone from local communities to companies and investors needs to be on board.

-The way ahead is difficult and narrow, especially if investment continues to fall short of what is required, but the core message from the WEO-2021 is nonetheless a hopeful one.

-A wave of investment in a sustainable future must be driven by an unmistakable signal from Glasgow and the COP 26 meeting

The question is will it be unmistakable for the right reasons as politics are highly volatile at present?

***The report World Energy Outlook 2021 by the International Energy Agency, released in October 2021 can be downloaded here

The post The World Awaits, What is the Energy and Climate Outlook? first appeared on Innovating the Energy Transition.

Image: IRENA

Since I launched this dedicated posting site www.innovating4energy.com, in December 2019, specifically around innovating in energy, I have written 80 plus posts. Each post was undoubtedly a fundamental learning point for me as I attempted to dive deeper into the topic.

Within this, Hydrogen has been one of the main contributors. Including this post, I have written about different aspects of Hydrogen over ten posts, but most were during 2020.

Posts (with links) have covered Hotter Shades of Hydrogen, Tensions and Bottlenecks and Concerns, Show me the Electrolyzer, Hydrogen is the Big Ticket Needing a Landscape View,

Also, Has Hydrogen got the necessary gas, Massive Doses of Hydrogen Reality, Hydrogens Promise, Believing in Hydrogen and how Plug Power is the Apple of Hydrogen?

Then I suddenly “went off the boil” on Hydrogen. I felt a sense of hijack from the Oil & Gas Majors and the Equipment Suppliers, all pushing hard the interim solutions blending different gases for offering blue Hydrogen as the necessary bridge, over the next ten years or so.

I felt a sense of “lock into” as the investment to purchase gas generating assets and infrastructure can run for thirty or more years. That’s not interim or intermediate and is likely to stay blue as CCUS will get added on at the later stage as the logical option to complete a ROI on this “interim” decision

Then we had considerable commitments in project money from Governments, all claiming the chance to be a world leader in Hydrogen and race to Hydrogen dominance. So this race took hold, the equivalent of a gold rush, the hydrogen rush. Vast sums of money suddenly were caught up in multiple startups, experimentations and small pilot-scale projects, all needing building, validation and proving they “might” scale.

Lobbying has accelerated by the Majors and all with a vested interest in holding onto the status quo and pushing the building of interim solutions can provide the transition answers. They are, in my opinion, “wriggling on the stick on where their existing solutions were getting caught up in the wrong side of the energy transition ” Attempting to sell power generation solutions for example that had thirty to forty-year lifecycles is not interim.

These significant sets of activities began to distort well laid out plans for the hydrogen journey. It gave a period of reasonably intensive (seemingly daily) announcements that confused me more than helped. So I thought, let us leave this for a while. It just has to sort itself out, one way or another as it does seem Hydrogen is becoming a “free for all, grab a piece” and not a structure evolving transition that we really need.

So after nearly nine months, I am back, looking to bring my thinking about Hydrogen back on track for the current and future understanding.

Wood MacKenzie kicked started this with Hydrogen production costs: is a tipping point near., indicated that green hydrogen production costs will equal fossil fuel-based H2 by 2040. Nearly twenty years of ramping up Hydrogen to bring into its potential contribution to building a sustainable energy system.

Then IEA has recently provided an excellent update report, “Global Hydrogen Review 2021“, and it brings me back to wanting to re-engage with Hydrogen after this short break.

The top line summary is

• After several false starts, a new beginning around the corner
• Hydrogen suppliers are becoming cleaner……..to slowly
• Expanding the reach of hydrogen use
• Governments need to scale up ambitions and support demand creation
• Low-carbon Hydrogen can become competitive within the next decade
• Meeting climate pledges require faster and more decisive action.
• More vital international co-operation: a key leaver for success.

The IEA policy recommendations for the near term are:

• Develop strategies and roadmaps on the role of Hydrogen in energy systems
• Create incentives for using low-carbon Hydrogen to displace fossil fuels
• Mobilize investment in production, infrastructure and factories
• Provide strong innovation support to ensure critical technologies reach commercialization soon
• Establish appropriate certification, standardization and regulations

A page covers these top-line summaries and policy recommendations that give you the detailed thinking behind these by following this link to the Executive Summary page.

The IEA report provided a fairly comprehensive report on how the Electrolysis deployment is progressing. To quote:

“Water electrolysis is an electrochemical process that uses electricity to split water (H2O) into Hydrogen (H2) and oxygen (O2). In 2020, this process accounted for ~0.03% of hydrogen production for energy and chemical feedstocks.27 Of installed global electrolyzer capacity of 290 MW, more than 40% is based in Europe with the next-largest capacity shares in Canada (9%) and China (8%).

Four leading electrolyzer technologies exist today: Alkaline, proton exchange membrane (PEM); solid oxide electrolysis cells (SOECs); and anion exchange membranes (AEMs) (see Emerging Technologies below for more on SOECs and AEMs). Alkaline electrolyzers dominate with 61% installed capacity in 2020, while PEMs have a 31% share. The remaining capacity is of unspecified electrolyzer technology and SOECs (installed capacity of 0.8 MW).”

The rising concerns of PEM Electrolysers precious metals is a growing worry. Current materials for electrode catalysts (platinum, iridium), bipolar plates (titanium) and membrane materials are expensive, and presently overall costs for PEMs (USD 1 750/kW) are higher than for alkaline electrolyzers (USD 1 000-1 400/kW). Additionally, PEM systems currently have a shorter lifespan.

The technology challenges to bring down costs and resolve technologies that make up the final hydrogen solution are formidable and can have a twenty-year need to be fully resolved.

We do have an inevitable reality in our deployment. It is not going to scale or giving the needed scale!

In the optimistic tone of IEA comparing their Net-zero Emissions Scenario, capacity requirements in 2030 are 850 GW, some nine times the project pipeline when including early development stages. Despite such significant gaps, current efforts are a sound basis for expanding and accelerating deployment, raising ambition as new projects are developed. More countries build Hydrogen into their national strategies.

The point might become one where the alkaline electrolyzers begin to push the PEM electrolyzer out to the competitive race unless the breakthroughs in technology, scale, and costs are not realized, in PLM in the next few years.

China might hold the key.

As the IEA report states, in 2020, costs fell within the range of USD 1 000-1 750/kW (including electric equipment, gas treatment, plant balancing, and engineering, procurement and construction [EPC]). The lower cost is applying to alkaline electrolyzers produced in China, and the upper representing PEM electrolyzers.

The cost of alkaline electrolyzers in China – USD 750-1 300/kW, with some sources reporting as low as USD 500/kW29 – falls well below the average of USD 1 400/kW in the rest of the world.

Concerns over the reliability and durability of Chinese electrolyzers have been raised in the past, and manufacturing is improving quickly. As recently as a few years ago, Chinese manufacturers had to import several components, limiting their ability to reduce costs through industrial clustering and economies of scale. Local component manufacturing is expanding, however, so cost savings should for Chinese electrolyzers be realized soon.

The critical observations from the IEA report are as follows (quoting directly from the report on Hydrogen supplies, deployment and speed.

The cumulative capacity deployment of projects under construction
and planned would reduce capital expenses by almost 60% by 2030.

Shortfalls in electrolysis manufacturing capacity could impede the deployment of all projects currently under development, which could derail long-term government climate ambitions.

Global electrolysis manufacturing capacity was ~3 GW/yr in 2020, with alkaline designs accounting for 85% and PEMs for less than 15%, plus some minimal, artisanal manufacturing of SOECs and AEMs.

The most significant shares of manufacturing capacity are in Europe (60%) and China (35%). Interest in the technology is growing among significant companies such as Thyssenkrupp, Nel Hydrogen, ITM, McPhy, Cummins and John Cockerill, all of which have announced plans to expand their manufacturing capacities. (I thought Siemens was a major player here, surprising not being mentioned).

If all announced expansions are realized, manufacturing capacity could reach ~20 GW/yr, with process automation or improved procurement driving down manufacturing costs.

A dedicated industrialized supply chain and a corresponding industrial supplier landscape will be essential to meet capacity demands to 2030 and beyond. If available soon, this manufacturing capacity could meet the deployment needs of the current pipeline of projects and government pledges (an average of 6-8 GW/y from 2022 to 2030) and approach.

Increased electrolyzer production will affect demand for minerals, particularly nickel and platinum group metals (depending on the technology type). While alkaline electrolysis does not require precious metals, current designs use 800-1 000 t/MW nickel.

Even if alkaline electrolysis dominates the market by 2030, in the Net zero
Emissions Scenario this would entail a nickel demand of 72 Mt (much lower than the amount needed for batteries).

The catalysts in PEM electrolyzers require 300 kg of platinum and 700 kg of iridium per GW. Therefore, if PEMs supplied all electrolyzer production in 2030 in the Net-zero Emissions Scenario, demand for iridium would skyrocket to 63 kt, nine times current global production.

Experts believe that demand for both iridium and platinum can be reduced by a factor of ten in the coming decade. Recycling PEM electrolyzer cells can further reduce primary demand for these metals and be a core element of cell design.

Meanwhile, SOEC production requires nickel (150-200 t/GW), zirconium (40 t/GW), lanthanum (20 t/GW) and yttrium (<5 t/GW). Better design in the next decade is expected to halve each of these quantities, with technical potential to drop nickel content to below 10 t/GW. Due to the higher electrical efficiency of SOECs, these mineral requirements are not directly comparable with alkaline and PEM electrolyzers.

I wrote about “Will critical Mineral Supplies Stop The Energy Transition“, asking will supply be resilient and robust. Securing these critical minerals at economical prices at a time resource quality is becoming a growing concern as well will be making the Energy Transition even trickier to manage.

Hydrogen holds promise, but it is signalling high risk at present

I relate to some of my previous fears, discussed in the articles shown above, with their links.

PEM and Alkaline might be today’s runners for Hydrogen, but the IEA report rightly points out there are other production technologies of the future that hold promise. Let me quote from the report again on the four contenders.

Solid oxide electrolyzer cells (SOECs)

These are still in the demonstration phase for large-scale applications.

SOECs use steam instead of water for hydrogen production, a fundamental departure from alkaline and PEM electrolyzers. Additionally, as they use ceramics as the electrolyte, SOECs have low material costs. While they operate at high temperatures and with high electrical efficiencies of 79-84% (LHV), they require a heat source to produce steam.

Therefore, if SOEC hydrogen were used to produce synthetic hydrocarbons (power-to-liquid [PtL] and power-to-gas [PtG]), it would be possible to recover waste heat from these synthesis processes (e.g. Fischer-Tropsch synthesis, methanation) to produce steam for further SOEC electrolysis. Nuclear power, solar thermal and geothermal heat systems, and industrial waste heat, could also be heat sources for SOECs.

Methane pyrolysis

Methane pyrolysis (also known as methane splitting, cracking or decomposition) converts methane into gaseous Hydrogen and solid carbon (e.g. carbon black, graphite) without creating any direct CO2 emissions. The reaction requires relatively high temperatures (>800°C), which can be achieved through conventional means (e.g. electrical heaters) or using plasma.

Per unit of Hydrogen produced, methane pyrolysis uses three to five times less electricity than electrolysis; however, it requires more natural gas than steam methane reforming.

The overall energy conversion efficiency of methane and electricity
combined into Hydrogen is 40-45%. Notably, the process could create additional revenue streams from selling carbon black for use in rubber, tyres, printers and plastics. However, the market potential is likely limited, with global demand for carbon in 2020 being 16 Mt of carbon black, corresponding to hydrogen production from pyrolysis of 5 Mt H2. Carbon from pyrolysis could be used in other applications such as construction materials or replace coke in steelmaking.

Anion exchange membranes (AEMs)

AEM electrolysis combines some of the benefits of alkaline and PEM electrolysis. Using a transition metal catalyst (CeO2-La2O) does not require platinum (unlike PEM electrolysis). A key advantage is that the anion exchange membrane serves as a solid electrolyte, avoiding the corrosive electrolytes used in AEL. AEM technology is still at an early stage of development (TRL 4-5), but Enapter (Germany) is developing kW-scale AEM electrolyzer systems combined to form MW-scale systems.

Electrified steam methane reforming (ESMR)

SMR is a widely used process to produce Hydrogen from natural gas,
and SMR can be combined with CCUS to reduce CO2 emissions. To
achieve capture rates of 90% or higher, CO2 capture needs to be
applied to two gas streams: the synthesis gas stream after the steam
methane reformer (characterized by relatively high CO2
concentrations) and a more diluted flue gas stream caused by steam
production from natural gas. Because the latter has a lower CO2
concentration, capture requires more energy.

The technology has been demonstrated at only the
laboratory scale (TRL 4) to date, but a pilot plant is under construction
to use biogas as a feedstock in ESMR to produce Hydrogen and
carbon monoxide, which will then be converted into methanol.

Will these emerging technologies accelerate and become real competitors? They all have some technology or value in how they are made up to get to potentially competitive points, providing they can go beyond small scale into demonstrating the ability to be scaled.

The IEA lays out a plea or journey for Hydrogen.

The IEA’s Net-zero by 2050 roadmap (of IEA) shows that achieving net-zero targets will require immediate action to make the 2020s the decade of clean energy expansion through massive deployment of available low-carbon technologies and accelerated innovation of those still under development.

Hydrogen technologies are a crucial example, with a considerably higher pace of progress and deployment required from now until 2030 is needed.

The three overarching goals are to significantly expand hydrogen use while bringing new technologies onto the market; make hydrogen production much cleaner (i.e. shift away from unabated fossil fuel-based routes), and reduce the costs of technologies for hydrogen production and use.

All of these three overarching goals need a more coherent, extensive push, allowing the markets to evolve in the present fashion is not the ideal way to bring clean Hydrogen (green specifically) and cost of those technologies down without a greater concentration of efforts in the R&D labs, by Government targeted support. Collaborative environments to drive towards green hydrogen solutions that can cost-effectively take out fossil fuel alternatives.

If we do not bring all the parts together, then Hydrogen will not play the part within the Energy Transition it is expecting to play.

The post Getting concerned for Hydrogen first appeared on Innovating the Energy Transition.

Clean energy, growing the potential of Electricity – Image rights RethinkX

I have been absorbing a couple of interesting research reports from RethinkX,  an independent think tank that analyzes and forecasts the speed and scale of technology-driven disruption and its implications across society. They produce impartial, data-driven analyses that identify pivotal choices by investors, business, policy and civic leaders to stimulate thinking and promote avenues of disruptive change.

Firstly on Rethinking Climate Change on how Humanity can choose to reduce emissions 90% by 2035 through the disruption of Energy, Transportation, and Food with existing technologies.

Secondly, the Energy Report – Rethinking Energy 2020-2030 100% Solar, Wind, and Batteries is Just the Beginning states we are on the cusp of the fastest, deepest, most profound disruption of the energy sector in over a century. Like most disruptions, this one is being driven by the convergence of several key technologies.

Both of these reports are well worth the time to really read and absorb. This is some “sterling” work by  Tony Seba, James Arbib, Adam Dorr and other members of the RethinkX team.

So where do you “sit” on this report and the acceptance and realities of the proposal in time, consequences and complexity?

They use the Seba Technology Framework shown here

Ownership: Tony Seba and RethinkX

I want to summarize the key points from the “rethinking energy” report

These extracts summarize the value of focusing on a clear set of disruptive technologies that can displace and expand the energy system in a relatively short period as the solutions are proven and now need to be rapidly scaled and deployed.

-Taking the Energy report here focuses on the convergence of three clean energy technologies: solar photovoltaics, onshore wind power and lithium-ion batteries. (SWB). *The report was published in October 2020, and I would argue since the initial research, and today you could add offshore wind, all (longer) storage and batteries. The result would be even more positive and dramatic.

-Their argument is applying this SWB set of solutions. It is both physically possible and economically affordable to meet 100% of electricity demand with the combination of solar, wind and batteries by 2030 across the entire continental United States. Overwhelmingly the majority of other populated regions of the world can also capture the tradeoff relationship between electricity generation and energy storage. (Key Finding point one and two)

-100% SWB will provide the cheapest possible electricity system by 2030, pushing the existing conventional generation power plants operating on coal, gas, or even nuclear power as uneconomical

-SWB can provide a whole new architecture that provides different sets of rules and metrics. This truly disruptive energy system shifts existing thinking of minimizing energy use (on demand) to maximizing as it is not harmful to the environment to utilize electricity generated from sunshine and wind fully. Still, actually, it is harmful to let it go to waste. In maximizing output and utilization, there is no fuel or waste to minimize.

-100% SWB systems eliminate all greenhouse emissions from the existing electrical power sector, taking out and looking to displace fossil fuel in extending electricity into residential, commercial, industrial, transportation and agriculture.

Combining with electric vehicles, a 100% SWB system can eliminate all fossil fuel and greenhouse gas emissions in the electricity sector and road and rail transportation sectors, taking out a huge carbon footprint.

-SWB will not merely replace conventional power generation technologies on a 1 to 1 substitution but can set about to create a much larger electricity system by reducing the marginal cost of energy to near-zero for much of a year.

-Surplus power creates new novel business models, products and services and markets across many industries (hard to abate) with dramatic societal capabilities and delivery considerations of potential new economic prosperity for many regions of the world that are excluded today.

-Applications including the electrification of road transportation, heating, water desalination and treatment, waste processing, recycling, metal smelting and refining, chemical processing, heavy industry and assorted manufacturing due to the prospect of near-zero marginal cost clean energy by electrifying their processes.

-Cryptocurrency mining, cloud computing, and communication also gain and rapidly achieve carbon removal from the use of clean energy generated by the SWB approach.

-Surplus power offers a significant potential for electricity being on demand 24 x 7 all year round with the appropriative considerations to building a distribution grid that is not just adapted but designed specifically for SWB.

-SWB can be autocatalytic by dedicating a growing portion of its surplus to the manufacture and recycling of solar panels, wind turbines, and batteries themselves to reduce the manufacturing “greenhouse” effect of using fossil fuels today in production as well as extracting for reuse of rare material.

Gaining recognition and acceptance of the inevitable, perhaps?

Gaining acceptance, focusing on delivering solutions at speed and scale, recognizing the transformative dynamics of disruption to an energy system that needs to move from the old to a new one, recognizing the cost of write off and stranded assets will be a significant part of the cost of this transition

We need to accept the disruption of the conventional technologies is now inevitable and placing as much of our transforming energies into assets for building this SWB Energy System is rational from this point forward.

We need to speed up the energy transition and completely transform the electric power system in this decade. Solar and wind generating capacity can exceed the total electricity generating capacity installed today.

Renewables at an accelerated pace of replacement are required

The SWB approach is the cheapest available option for power generation on a 2030 timeframe, in many cases, forces existing operations to shut down and be written off and provide a future surplus of energy to stop curtailment (old paradigm) and push out towards extending the electricity market

Operating on the premise of extractive, depletion and polluting needs a radical overhaul. That was past centuries; we need to recognize we must have clean energy that stops greenhouse gases in its tracks.

A new operating model for any energy transition needs to seek to minimize costs, maximize benefits, seek wider engagements and different value creation business models so every level of society and the economy can benefit.

The report raises the challenge, who will embrace and capture the extraordinary social, economic, political and environmental benefits that an SWB system can offer?

The dramatically different architecture, boundaries, regulatory field and capabilities are massive to tackle. Still, as suggested, if a new system is much larger than the old one it replaces, then disruption is inevitable.

Let me begin to wrap up on the disruption effects

Below is a great visualization of the effects of disruption with their casual feedback loops that drive disruption

I quote from the report to wrap up my read

In over a century, we are on the cusp of the fastest, deepest, most profound disruption of the energy sector. Like most disruptions, this one is being driven by the convergence of several key technologies whose costs and capabilities have been improving on consistent and predictable trajectories – namely, solar photovoltaic power, wind power, and lithium-ion battery energy storage.

My opinion of the Energy Report is it is far too optimistic and perhaps simplistic

• I commend it on its singularity of approach, focusing (exclusively) on Solar, Wind and Batteries for a rapid abundance of electricitiy. I wish it was so easy.
• The thrust of the report is focusing on having an abundance of electricity that brings costs of energy down to levels where significant investments and expansion into those harder-to-abate areas has a massive incentive.
• Yet the levels of complexity are going to cause a real drag on the highly ambitious target date of 2030. The investments are not just in new energy sources (solar, wind, etc) but what happens to the significant levels of stranded assets and the cost (to whom).
• The ramping up in solar and wind is massive, thousands of wind installations become hundred of thousands and the raw material availability, the production ramping up, the logistics are formidable.
• Then you have the approval process, from the federal government to local government and local communities and the impositions of studies commissioned by different and opposing groups.
• The sheer amount of new capital and the projected return on investments, when you include stranded assets have real implications on balance sheets, by the investors etc. Compressing time periods raises greater risk.
• To make such a switch over to clean energy is not just its production alone, it is the enormous changes and investments in infrastructure. The transmission and distribution networks and subsequent planning permissions and the building of national-wide grids is daunting to say the least.
• So the level of change within such a short period, the different levels of decision complexity is highly ambitious.
• To decarbonize in each country, to achieve this over the globe has so many political and social implications.
• The likelihood is we will be facing a real crisis, in extreme weather and unhealthy environments to galvanize all aspects of sôciety yet to bring together all the parts of such an energy transition in such a limited time I struggle with.
• The consequences of a slow ramping up in this decade will be potentially disastrous but the political, business and social will are far from being in place.
• There is a gathering of reductionists looking to have a narrow mindset promoting linear progression and not “seeing” the disruptive forces of radical change in the energy transformation; they are holding on far too much to the incumbent system.

I think the report provides a “clean” vision but can this actually happen within such a short time, even if solutions are already available. The level of change needs a much longer time frame.

What is right is the imperative of urgency to simply get on is not wrong, time is rapidly stacking up against us. The idea of focusing and the massive ramping up of clean energy (wind and solar) for electricity as the real top priority to compress energy prices, shifts the economics and over time, the solutions this pricing can bring to accelerate the energy transition.

***Both of these reports are well worth the time to really read and absorb, firstly on Rethinking Climate Change on how Humanity can choose to reduce emissions 90% by 2035 through the disruption of Energy, Transportation, and Food with existing technologies and Secondly the Energy Report outlined and summarized in this post.

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