We are about to have the CoP28 event in the UAE from 30 November 2023 to 12 December 2023, which is crucial for the energy transition. I feel this is an actual watershed event. Those representatives attending must push for substantial agreements on what needs to be done to reduce carbonization and other polluting gases, seek ways to provide clean air and a more equitable share and conserve resources, or we will forever say goodbye to achieving anything like the 1.5 C degree.

Many experts predict that our planet is presently heading for warming to 3C. If we continue this trajectory, we will enter many unknowns in how the planet reacts and responds. If we have climate extremes, the cost of human life, upheaval and damage will continue to confront us.

This is why I think the energy transition is one of the most essential areas of necessary focus, as it is one of the most complex changes from fossil-burning fuels to clean renewables powered by solar, wind and hydro.

Here, I want to provide a view summarising the Energy Ecosystem, offering some strategic steps of underlying approaches to change and where I attempt to fit into contributions supporting solutions.

Changing the Energy Ecosystem:

Changing the energy ecosystem refers to a comprehensive and strategic effort to fundamentally transform how energy is generated, distributed, utilized, and managed within a region or globally. This transformation involves a departure from traditional, often fossil-fuel-based energy systems towards more sustainable, efficient, and environmentally responsible alternatives. It encompasses various facets of the energy sector, including:

1. Energy Sources: Shifting from carbon-intensive energy sources (such as coal and oil) to cleaner and renewable sources (such as solar, wind, hydro, and geothermal).
2. Energy Efficiency: Enhancing the efficiency of energy production, transmission, and consumption to reduce waste and minimize environmental impact.
3. Infrastructure: Upgrading and modernizing energy infrastructure to accommodate new technologies, grid enhancements, and decentralized energy generation.
4. Policy and Regulation: Implementing supportive policies, regulations, and incentives to encourage sustainable energy practices and discourage harmful ones.
5. Innovation: Embracing innovation and technological advancements to create more sustainable, cost-effective, and reliable energy solutions.

Why Changing the Energy Ecosystem Is Important:

1. Environmental Sustainability: The current energy ecosystem heavily relies on fossil fuels, contributing to greenhouse gas emissions and climate change. Changing the ecosystem is vital to mitigate environmental damage, reduce pollution, and limit global warming.
2. Resource Conservation: Transitioning to renewable energy sources helps conserve finite fossil fuel resources and reduce dependence on geopolitically unstable regions for energy supplies.
3. Energy Security: A diversified and decentralized energy ecosystem enhances energy security, reducing vulnerability to supply disruptions and geopolitical tensions.
4. Economic Opportunities: The energy transition offers substantial economic opportunities, from the growth of clean energy industries to job creation in renewable energy and technology sectors.
5. Health Benefits: Cleaner energy sources improve air quality and reduce pollution-related health issues, benefiting public health.
6. Technological Advancements: Innovation in energy technologies can lead to breakthroughs with broader applications, driving progress in various sectors of the economy.
7. Global Responsibility: As a global issue, addressing the energy ecosystem is a matter of international responsibility. It involves nations cooperating to combat climate change and reduce their carbon footprints.

Changing the Energy Ecosystem by building an approach to change that builds innovation and ingenuity through experimentation and pilots, looking for leapfrog opportunities through rapid learning and knowledge sharing.

A strategic approach to transforming the energy ecosystem. Let’s break this down by focal points, step by step:

1. Changing the Energy Ecosystem: This signifies the overarching goal of making significant and positive changes to how energy is produced, distributed, and consumed. It often implies a shift towards cleaner, more sustainable, and more efficient energy sources and practices.
2. Building Out an Approach: This suggests developing a structured and systematic plan or strategy to transform the energy ecosystem. This approach should be well-thought-out and comprehensive and provide clear roadmaps for the essential broad inclusion solutions required.
3. Change Through Innovation and Ingenuity: To bring about meaningful change, the approach emphasizes the importance of creativity, originality, and novel solutions. This implies that following established practices may not be sufficient, and new ideas and inventions are necessary.
4. Experimentation and Pilots: This highlights the need to try out new technologies, processes, or concepts on a smaller scale before implementing them on a larger, more significant scale. Pilots and experiments allow for learning from mistakes and refining strategies.
5. Leapfrog Opportunities: This indicates the desire to skip over intermediate stages of development and adopt more advanced, efficient, or sustainable technologies or practices. Leapfrogging often involves embracing cutting-edge solutions instead of gradually evolving existing systems.
6. Rapid Learning: In this context, rapid learning means quickly acquiring knowledge and insights from experimentation and experiences. It’s about being agile and adaptable in response to new information and challenges.
7. Knowledge Sharing: To accelerate progress, the approach involves sharing the knowledge and insights gained with relevant stakeholders, such as organizations, governments, and the public. This helps spread best practices and avoid duplicative efforts.

To achieve a sustainable energy transition, there must be consistency in advocating for a systematic, innovative, and flexible approach to transforming the energy ecosystem. Its central emphasis is the importance of learning from experimentation, seeking advanced solutions, and sharing knowledge to make rapid progress towards a more sustainable and efficient energy future in highly collaborative and open ways.

In summary, we must recognize that changing the energy ecosystem is essential to address pressing environmental, economic, and societal challenges. It is not merely about upgrading energy infrastructure but fundamentally shifting our approach to renewables in energy production and consumption to create a more sustainable and resilient future for all. This understanding underscores the endeavour’s importance in the broader context of sustainability and global well-being, enabling the planet to stabilize and slowly recover.

Building out our Value Proposition:

“To focus and support wherever we can, the revolutionizing of the energy landscape, through supporting concept knowledge, insights and ideas to inform and support, to deliver cutting-edge innovation and unwavering ingenuity- both are needed in abundance. The work undertaken needs to build and deliver sustainable, efficient, and forward-thinking solutions that empower individuals, organizations, and communities to thrive in a cleaner, smarter energy future”.

Key Pillars of the Value Proposition:

1. Innovative Solutions: We search and encourage pioneering groundbreaking technologies, strategies, and practices that redefine the energy sector to trigger new thinking or build out existing understanding, hopefully in new, novel ways. Our focal point is the pursuit of innovation that pushes creation and discovery to create solutions that transcend existing boundaries or limits. We look to support those wishing to operate at the forefront of change and push the known edges.
2. Ingenuity in Action: We look towards challenges and view obstacles as opportunities. The search for understanding combines creativity, expertise, and a passion for problem-solving to craft unique and effective knowledge solutions tailored to the evolving needs of the energy ecosystem that trigger and support the advancement of others, better equipped to find breakthroughs in their business.
3. Sustainability at the Core: Critically, the work undertaken must support sustainable energy practices that reduce environmental impact, promote responsible resource management, and protect the planet for future generations.
4. Customized Approaches: We understand that every energy challenge is unique in context and content. Our approach needs to be highly adaptable and customizable, allowing us to address our partners’ and clients’ specific needs and goals, whether they are businesses, governments, or communities. The narrative and how it is built are vitally important to each piece of work.
5. Continuous Learning: We believe that innovation thrives on knowledge. We foster a culture of constant learning, regularly integrating new insights and technologies into our insights, knowledge and solution work to ensure that our clients benefit from the latest advancements. Learning is highly reciprocal and scalable; it is all about liberating creative energy and achieving higher engagement.
6. Collaboration: We know that transformation requires a united effort. We actively collaborate with searching for the latest insights and knowledge, connecting with industry leaders, research institutions, and local communities to co-create solutions that deliver sustainable impact.
7. Judgement-based results: Innovation collaboration can be judged based on its contribution, impact, scalability, sustainability, growth potential and the creation of mutual benefit and value for all parties involved.

Our positioning is anchored in the belief that together, we can create a future where energy transformation is necessary and offers us all a remarkable opportunity for a more sustaining future.

By focusing on innovation, collaboration, and seeking clear resolutions, we pave the way for a sustainable and prosperous energy ecosystem that benefits you. We are your partners in progress to achieve your vision and market fit for contributing to a cleaner, more efficient, and sustainable energy future based on renewables by taking our “Innovating Pillars” approach and working through the “Impact Steps“.

We adopt a “Research and Deploy” approach, providing a structured framework for acquiring knowledge, generating insights, and deploying innovations effectively in your energy transition strategy. We believe the outside view or opinion is essential when embarking on a “Reforming and Disruption” within the changes undertaken within the Energy System.

We advocate for a systematic, innovative, and flexible approach to transforming the energy ecosystem.

The post Why I think the energy transition as one of the most important areas of necessary focus first appeared on Innovating the Energy Transition.

As all the delegates of CoP28 pack their things and head off to Dubai, will there be any real, lasting consensus on how we can manage our world where achieving rapid decarbonization is the priority?

There are so many conflicting opinions, vested interests and “evidence” but can CoP28 achieve that with the right partnerships and immediate political, corporate, and financial action, we can live in a world beyond coal, oil, and gas — one that is safer, cleaner, healthier, and more affordable for all and forge a roadmap to get there that enables all to recognize their part.

COP 28 will take place from 30 November until 12 December 2023. Pre-sessionals will take place from 24 to 29 November. There have been countless meetings leading up to the period (Pre-CoP sessions) trying to forge consensus and make clear progress on many areas of essential importance.

These CoP meetings are so often widely misunderstood, and chaotic to many present, and to the rest of the world looking in, trying to understand the process, the compromises and results that result in some of the most intense days of negotiations determining all our futures.

Let me draw from a few pointers made on the CoP process and what is needed

More than 70,000 delegates are expected to attend COP28, including the member states (or Parties) of the UN Framework Convention on Climate Change (UNFCCC). Business leaders, young people, climate scientists, Indigenous Peoples, journalists, and various other experts and stakeholders are also among the participants.

At its heart, the COP is a political process where critical decisions are made about our Global shared future. A series of “building blocks” are agreed on topics to gather the meeting around to change our present habits and mindsets:

The WWF expects the following essentials outcomes required from COP28:

• A successful Global Stocktake which paves the way for stronger NDCs to correct course to 1.5C.
• A decision to phase out fossil fuels no later than 2050.
• Full operationalization of the Loss and Damage Fund, with pledged funds.
• A decision on a comprehensive framework for the Global Goal on Adaptation.
• Scaling up finance by developed countries to beyond $100 billion per annum.
• Alignment of all private and public financial flows with climate objectives. 

The WWF regards that COP28 must be the moment where the world rallies to meet the climate challenge and delivers for people and nature. These are essential to achieve, can they?

The Building up to the CoP28 is a prelude to the hard work to come

Already there has been many pre-meetings. One critical one was a recent Pre-CoP meeting where delegates from more than 80 countries, including more than 60 ministers, participated over two days in some frank and lively exchanges on many of the issues needing consensus and deepening discussions on issues that will be key for the success of COP28.

Also present were the essential observers who continue to represent the often quiet or less able voices to be represented at these critical events that build commitment and momentum to any CoP meeting.

With such complexity in opinions, in positions that struggle to find consensus at any meeting. there is this critical need is somehow to enable a transparent, open and inclusive process always, so as negotiated positions. These positions are hard-fought, but as they are so intense, respect to foster a level of trust and progressive consensus-building on all positions seems, often stressful, exhausting work; adapting, accepting and recognizing compromise needs to be always needed.

As so often recognized, time will be the most valuable commodity at the actual COP28.

Organizing, forging connections from day one and recognising levels of flexibility across all the periods is determined by the work put into the first week. These the intense negotiations that need time, space so the more pressing matters have “bubbled” up to the surface for the all important political resolutions as the focus of week two.

The effectiveness of this first week is really determined by the abilities and capabilities of the Heads of Delegations to streamline and facilitate so a more effective decision-making period comes from the second week. Within this first week, the Global Stocktake needs to take center stage.

At this CoP28 the Global Stocktake (GST) is central

The Global Stocktake gives the reporting block to synthesize the key pillars of the Paris
Agreement. It has as its aims to connect mitigation, adaptation and means of implementation holistically and, like the Paris Agreement, strives to set the highest bar for ambition, recognises the different starting points of every party and finds the means, desires and ambitions to ensure equity for all.

In short, implementation of the Paris Agreement is lacking across all areas and not where it should be.

The Paris Agreement is praised for inspiring near-universal climate action and playing a central role in catalyzing cooperative action so the world can address the climate crisis.

But there is a well-known big mitigation gap, with the current trajectory of global emissions not being consistent with limiting the global temperature rise to 1.5°C, while adaptation to climate change is not at the levels needed.

The stocktake calls for a systems transformation, which follows a whole-society and whole-economy approach that mainstreams climate resilience and development aligned with low greenhouse gas emissions. Such efforts must be maintained over decades, supporting sustainable development and the eradication of poverty.

The stocktake also points to a growing gap between developing countries’ needs and the support they provided and mobilized for them. It calls for the unlocking and redeployment of trillions of dollars towards climate action and climate-resilient development.

The Global Stocktake resets the ambitions if accepted

The global stocktake is a critical turning point when it comes to efforts to address climate change

The first-ever global stocktake is set to conclude at the UN Climate Change Conference (COP28) at the end of this year. The global stocktake is a process for countries and stakeholders to see where they’re collectively making progress towards meeting the goals of the Paris Climate Change Agreement – and where they’re not.

We know we are not on track to limit global warming to 1.5 degrees Celsius.

The window for meaningful change is closing, and the time to act is now. Governments will take a decision on the global stocktake at COP28, which can be leveraged to accelerate ambition in their next round of climate action plans due in 2025.

To understand the success of the CoP28 lies around this recognition of the Global Stocktake so as to forge a better, more cohesive and collaborative path forward.

This frame offers the essential moment to take a long, hard look at the state of our planet and chart a better course for the future. It enables countries and other stakeholders to see where they’re collectively making progress toward meeting the goals of the Paris Agreement – and where they’re not.

It’s like taking inventory. It means looking at everything related to where the world stands on climate action and support, identifying the gaps, and working together to agree on solutions pathways (to 2030 and beyond).

It is the Global Stocktake and how this is recognized as the present global position will pre-determine all that takes place within this CoP28 and how, if we can, move forward- stumbling or striding towards.

It’s not the stocktake itself that is the game-changer – it’s the global response, the response by countries as Parties to the Paris Agreement, that will make the difference in the form of higher ambition and accelerated action.

To achieve a united response and clarity of essential actions and urgency will be a real achievement of CoP28

* Main source of reference for this post

https://unfccc.int/cop28

The post Please Reenergize, Revitalize, Reconnect and Reimagine at CoP28. first appeared on Innovating the Energy Transition.

How do you reassure those worried that significant changes to their energy system will lead to the inevitable disruption and dislocation none of us like? How can you deal with this to elevate some of those worries? How can we manage so much change occurring to give some level of stability and continuity?

Addressing concerns and reassuring individuals or organizations worried about potential disruption and dislocation resulting from significant changes to their energy systems requires a thoughtful and empathetic approach.

Putting together some areas that are avenues to explore to reduce the concerns, build support, engagement and contingencies are suggested here.

Here are some strategies to help elevate these worries:

1. Communication and Transparency:
   • Provide Clear Information: Offer clear, concise, and accurate information about the proposed changes, including their purpose, expected outcomes, and potential impacts. Transparency can help demystify the process and reduce uncertainty.
   • Engage in Open Dialogue: Create opportunities for stakeholders to ask questions, express concerns, and voice their opinions. Engaging in open dialogue fosters trust and allows you to address specific worries directly.
2. Gradual Transition:
   • Phased Approach: Implement changes gradually, in phases, allowing stakeholders time to adapt. This minimizes abrupt disruptions and provides a smoother transition period.
   • Support and Assistance: Offer support and assistance during the transition. This can include training programs, financial incentives, or technical guidance to help stakeholders adjust to new energy systems.
3. Risk Mitigation:
   • Risk Assessment: Conduct a thorough risk assessment to identify potential disruptions and dislocations. Develop mitigation plans to address these risks proactively.
   • Contingency Planning: Establish contingency plans to manage unforeseen challenges. Demonstrating preparedness can alleviate worries about unexpected disruptions.
4. Economic and Social Considerations:
   • Economic Opportunities: Highlight the economic opportunities associated with energy system changes, such as job creation in emerging industries and potential cost savings over the long term.
   • Community Benefits: Emphasize how the changes can benefit local communities, such as improved air quality, reduced health risks, and enhanced quality of life.
5. Flexibility and Adaptability:
   • Flexibility in Solutions: Show a commitment to flexible solutions that can accommodate different needs and circumstances. Tailoring solutions to specific situations can alleviate worries about one-size-fits-all approaches.
   • Adaptive Management: Communicate that the energy system changes will be subject to adaptive management, meaning adjustments can be made based on real-world feedback and evolving circumstances.
6. Stakeholder Engagement:
   • Inclusion: Involve stakeholders in decision-making processes and seek their input on key aspects of the changes. This fosters a sense of ownership and control.
   • Partnerships: Form partnerships with organizations, communities, and industry players to share resources, knowledge, and expertise. Collaborative efforts can mitigate disruptions and accelerate solutions.
7. Education and Awareness:
   • Public Education: Invest in public education campaigns to raise awareness about the benefits of the energy system changes. Well-informed stakeholders are more likely to support and accept the changes.
   • Training and Skill Development: Offer training programs to ensure that individuals and organizations have the skills and knowledge needed to thrive in the evolving energy landscape.
8. Track Record and Success Stories:
   • Showcase Success: Highlight examples of successful energy transitions in other regions or industries. Real-world success stories can instil confidence and reduce worries.

Remember that addressing worries about disruption and dislocation is an ongoing process. Continuously engage with stakeholders, adapt your strategies as needed, and be responsive to concerns as they arise. Taking a proactive and inclusive approach can help ease worries and build support for the necessary changes to the energy system.

Seeking stability is becoming more of a dream and not a reality in our changing world, so developing a dialoguing process to handle disruption and dislocation makes real sense.

The post Elevate those worries of disruption and dislocation in the Energy Transition. first appeared on Innovating the Energy Transition.

Any search for advantage or validation of making a change must consider the art of leapfrogging, especially in the Energy Transition we are all undergoing.

Leapfrogging can accelerate the rapid and transformative progress toward a more sustainable and efficient energy ecosystem that provides advantage and customer identification.

Leapfrogging done correctly offers the benefits of evaluating existing solution options, considering the added value of environmental considerations and enhancing access and resilience in a rapidly changing world needing faster adoption of cleaner energy solutions to accelerate your solutions.

Where leapfrogging really ‘scores’ is offering the ability of a developing or less developed country to essentially “skip” less efficient and higher carbon-intensive technologies during their energy development.

Leapfrogging provides a significant opportunity to develop and cut carbon emissions simultaneously, it is vastly underrated and considered. We love reinventing the wheel when there is often no need.

Leapfrogging is when developing countries industrialize with renewable energy instead of non-renewables.

Equally, companies can learn and adopt from others to reduce their own research and development costs and long lead times, across a wide range of technical improvements in renewable and storage technologies, grid balancing, use of software management, saving running costs by searching for leading or emerging best practices.

Also it can be by taking certain component parts of a solution you can accelerate and adapt to upgrade parts or finding blending solutions that fit your circumstances.

The search for leapfrogging opportunities becomes essential in the context of energy transformation for several reasons. It can provide:

1. Accelerated Progress: Leapfrogging allows for rapid progress by skipping over outdated or less efficient technologies and practices. It enables you within your part of the energy sector to catch up or surpass competitors, providing advantages in leading with sustainability and greater efficiency.
2. Environmental Benefits: Leapfrogging often involves adopting cleaner and more sustainable technologies, reducing your current energy ecosystem’s carbon footprint and environmental impact, enabling you to promote this and gain potentially greater customer acceptance and adoption.
3. Economic Advantages: By embracing innovative and advanced technologies, your organization can position itself as a leader in the sectors you compete in, search for broader global energy market reach, and build upon the growth and competitiveness aspects these innovative solutions can offer.
4. Energy Access: Leapfrogging can bring energy opportunities by scale and price attraction to explore further access into underserved or remote areas by considering more novel, flexible and adaptable solutions that potentially offer advantages over traditional energy infrastructure developments available.

To enable leapfrogging to be a significant part of the proposed energy change, you need to evaluate different ways leapfrogging can be found.

Several ways and structures can be applied as viable leapfrogging potential. Here are a few to consider to build out a systematic “leapfrogging” capability and capacity evaluation:

1. Technology Transfer: Facilitate the transfer of advanced and proven technologies from developed regions to those undergoing transformation. This can be achieved through partnerships, international collaboration, and technology-sharing agreements.
2. Policy Incentives: Governments can create policy frameworks that incentivize adopting leapfrog technologies. This might include tax breaks, subsidies, or regulatory support for innovative energy solutions.
3. Research and Development (R&D) Investments: Allocate resources to research and development efforts focused on leapfrog technologies in the energy sector. Encourage public and private sector partnerships to drive innovation.
4. Public-Private Partnerships: To fund and implement leapfrogging projects and foster collaborations between governments, private companies, and non-governmental organizations. These partnerships can help bridge the funding and expertise gaps.
5. Capacity Building: Invest in training and education programs to develop a skilled workforce capable of operating and maintaining leapfrog technologies. This ensures that the workforce is prepared to harness the full potential of innovative solutions.
6. Regulatory Adaptability: Create regulatory frameworks that are adaptable and responsive to emerging technologies. Avoid rigid regulations that might hinder the deployment of new and unconventional energy solutions.
7. Knowledge Sharing: Establish platforms for exchanging knowledge and best practices in leapfrogging. Encourage collaboration and information sharing among stakeholders to accelerate adoption.
8. Market Development: Support the development of markets for leapfrog technologies by connecting suppliers with potential customers, promoting awareness, and ensuring accessibility.
9. Financial Mechanisms: Develop financial mechanisms such as green bonds, venture capital, and impact investing to attract investment in leapfrogging projects and startups.
10. Pilot Programs: Implement pilot projects to demonstrate the feasibility and benefits of leapfrog technologies in real-world settings. Successful pilots can pave the way for larger-scale adoption.
11. International Cooperation: Encourage international cooperation and knowledge exchange to learn from successful leapfrogging experiences in other regions.

The energy change proposal can actively seek and leverage leapfrogging opportunities by implementing these strategies and structures, driving rapid and transformative progress toward a more sustainable and efficient energy ecosystem.

Leapfrogging can have the benefits for finding proven solutions to help the environment and saving additional investments, helping channel funds into other parts of the energy transition and economy and the potential for enhancing energy access and resilience in a rapidly changing world from the solutions applied.

The post The Art of Leapfrogging across the Energy Transition. first appeared on Innovating the Energy Transition.

The Energy Transition is probably the most challenging undertaking we need to take in a short time frame of thirty years. to give our planet the chance to regain balance for us to live in and protect what we have.

To get there, we will need to chase a crazy pursuit of existing, competing businesses, all vested in how we do things, to gain their attention and convince them of a sense of urgency and need for a rapid change from the existing to a preferred, based more on renewables, as our principle source of energy.

Equally, I need to undertake a more focused approach. I have recently revamped my thinking towards the Energy Transition. Click on the tabs within this posting and website to understand the changes that need to be undertaken centred on innovation as central to this.

Different companies have different understandings of the changing energy ecosystem; some are narrow in their views and very focused on their business, others seek to break out and become more recognized, while others still want to be seen as leading. What and how do you pitch to each?

To effectively pitch the concept of the changing energy ecosystem to different types of companies with varying perspectives and motivations, it’s essential to tailor your message to their specific needs and objectives. Here’s a breakdown of how we might go about it with a different approach for each type of company or stage they are in:

1. Companies Focused on Their Business (Narrow View):
   • Pitch: Highlight the immediate benefits and relevance of the changing energy ecosystem to their core business operations. Emphasize how embracing sustainable and efficient energy practices can lead to cost savings, increased operational resilience, and enhanced reputation among environmentally conscious consumers.
   • Messaging: “Discover how optimizing your energy practices can directly impact your bottom line. We can help you identify energy efficiency opportunities that align with your current business strategies, ensuring you stay competitive in a rapidly evolving market but recognize and undertake necessary changes within the Energy Transition.”
2. Companies Seeking Recognition and Visibility:
   • Pitch: Appeal to their desire for greater visibility and reputation as industry leaders. Emphasize how being at the forefront of energy transformation can enhance their brand, attract positive media attention, and attract environmentally conscious customers and investors.
   • Messaging: “Elevate your brand to new heights by championing sustainability and innovation in the energy sector. Investing in pioneering cutting-edge energy solutions that make a positive impact and position that is recognized that your company is a recognized leader in the field.”
3. Companies Aiming to Be Seen as Leading:
   • Pitch: Acknowledge their ambition to be recognized as leaders and influencers. Showcase how actively shaping the energy ecosystem can result in industry thought leadership, strategic partnerships, and a voice in policy shaping.
   • Messaging: “Being in a select group of trailblazers shaping the future of energy offers a pioneering status and the real chance of shaping future thinking and practices. By actively engaging in transformative initiatives and thought leadership, you can influence industry standards, seek active collaborations with others driving change, and solidify your position as a leading force in energy innovation.”

In each case, it’s crucial to convey the broader societal and environmental benefits of participating in the changing energy ecosystem, such as reducing carbon emissions, combating climate change, and contributing to a more sustainable future. Additionally, you gain attention and recognition as a listening and orientated partner by tailoring your messaging to align with each company’s specific industry, size, and culture.

We each have different positions in delivering change in this Energy Transition, contributing in the evolving energy landscape. By understanding and adapting to so many unique motivations and objectives, you can effectively bridge conversations, relate and provide help across a diverse range of companies in the journey towards a transformed energy ecosystem, irrespective of your size and theirs.

The post The Energy Transition is a crazy pitching evolving business need. first appeared on Innovating the Energy Transition.

Recently released is the First Global Stocktake for the forthcoming CoP28

This summary of the progress made from the CoP23 Paris Agreement is the first official global stock take undertaken, known as the

Technical dialogue of the first global stocktake

The report will be a central debating feature of the CoP28 meeting, to be held between November 30^th to December 12^th, 2023, in Dubai, the UAE. This report aims to inform and gain consensus on how to move forward.

Over 70,000 attendees are expected to gather and discuss various issues relating to our climate and formulate a fresh impetus for the path forward.

So, in Summary, this global stock take undertaken had these conclusions

Context

1. Since its adoption, the Paris Agreement has driven near-universal climate action by setting goals and sending signals to the world regarding the urgency of responding to the climate crisis. While action is proceeding, much more is needed now on all fronts.
2. To strengthen the global response to the threat of climate change in the context of sustainable development and efforts to eradicate poverty, governments need to support systems transformations that mainstream climate resilience and low GHG emissions development. Credible, accountable and transparent actions by non-party stakeholders are needed to strengthen efforts for systems transformations.
3. Systems transformations open up many opportunities, but rapid change can be disruptive. Focusing on inclusion and equity can increase ambition in climate action and support.

Mitigation, including response measures

1. Global emissions are not in line with modelled global mitigation pathways consistent with the temperature goal of the Paris Agreement, and there is a rapidly narrowing window to raise ambition and implement existing commitments in order tolimit warming to 1.5 °C above pre-industrial levels.
2. Much more ambition in action and support is needed in implementing domestic mitigation measures and setting more ambitious targets in NDCs to realize existing and emerging opportunities across contexts, in order toreduce global GHG emissions by 43 per cent by 2030 and further by 60 per cent by 2035 compared with 2019 levels and reach net zero CO2 emissions by 2050 globally.
3. Achieving net zero CO2 and GHG emissions requires systems transformations across all sectors and contexts, including scaling up renewable energy while phasing out all unabated fossil fuels, ending deforestation, reducing non-CO2 emissions, and implementing supply-and demand-side measures.
4. Just transitions can support more robust and equitable mitigation outcomes with tailored approaches addressing different contexts.
5. Economic diversification is a key strategy to address the impacts of response measures, with various options that can be applied in different contexts.

Adaptation, including loss and damage

1. As climate change threatens all countries, communities and people around the world, increased adaptation action as well as enhanced efforts to avert, minimize and address loss and damage are urgently needed to reduce and respond to increasing impacts, particularly for those who are least prepared for change and least able to recover from disasters.
2. Collectively, there is increasing ambition in plans and commitments for adaptation action and support, but most observed adaptation efforts are fragmented, incremental, sector-specific and unequally distributed across regions.
3. When adaptation is informed and driven by local contexts, populations and priorities, both the adequacy and the effectiveness of adaptation action and support are enhanced, and this can also promote transformational adaptation.
4. Averting, minimizing and addressing loss and damage requires urgent action across climate and development policies to manage risks comprehensively and provide support to impacted communities.
5. Support for adaptation and funding arrangements for averting, minimizing and addressing loss and damage need to be rapidly scaled up from expanded and innovative sources, and financial flows need to be made consistent with climate-resilient development to meet urgent and increasing needs.

Means of implementation and support and finance flows

1. Scaled-up mobilization of support for climate action in developing countries entails strategically deploying international public finance, which remains a prime enabler for action, and continuing to enhance effectiveness, including access, ownership and impacts.
2. Making financial flows -international and domestic, public and private-consistent with a pathway toward low greenhouse gas emissions and climate-resilient development entails creating opportunities to unlock trillions of dollars and shift investments to climate action across scales.
3. Existing cleaner technologies need to be rapidly deployed, together with accelerated innovation, development and transfer of new technologies, to support the needs of developing countries.
4. Capacity-building is foundational to achieving broad-ranging and sustained climate action and requires effective country-led and needs-based cooperation to ensure capacities are enhanced and retained over time at all levels.

The Thematics over the two weeks of CoP 28 are shown below.

Conclusion (no rocket science here)

Now is the time to rapidly accelerate action and support to make progress in this critical decade.

The post First Global Stocktake for the forthcoming CoP28 first appeared on Innovating the Energy Transition.

The post We are falling badly behind on our invention in technology for the Energy Transition first appeared on Innovating the Energy Transition.

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.

The post A reply to McKinsey and its Net-zero transition report by the MD of One Earth first appeared on Innovating the Energy Transition.

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.