Courtesy of CB Insights

I have been working through the latest IEA report “Direct Air Capture: a key technology for net-zero”

I have to be utterly honest here, I really struggle with the viability (as it stands) for Direct Air Capture (DAC) to be a significant contributor to achieving net-zero by 2050.

If we cannot soon demonstrate AT SCALE the viability I think this pursuit of capturing CO2 directly from the air is a distraction, huge experimentation that deflects us and much needed financial and human capital away from more proven (at scale) technologies or solutions.

I want to be wrong in my current disbelief but I am simply not optimistic

In this recent IEA report the DAC their scenario states a capture of more than 85 Mt of CO2 in 2030 and around 980 MtCO2 in 2050. They put it mildly this is requiring a large and accelerated scale-up from almost 0.01 MtCo2 today. No need to check the figures suggested and where we are, it strikes me as something we want but seems to not be able to achieve in technology.

IEA claim DAC is a key part of the carbon removal portfolio but it only operates at a (very) small scale with 18 DAC facilities operating experimental plants in Canada, Europe and the United States. The first large-scale DAC plant of up to 1 MtCO2/ year is in advanced development to come on stream (possibly) by mid-2020.

Current realities are in plain sight

In the executive summary of the report, it states “Capturing CO2 from the air is the most expensive application of carbon capture. DAC cost estimates (to quote) are wide-ranging and uncertain”

My interest to keep some hope alive is through Innovation, to get DAC technologies to reduce dramatically their needs for significant amounts of energy. DAC still needed to be demonstrated in different conditions, that is extremely dry or humid conditions, or even dealing with polluted air.

The push is to dangle the capture to offer synthetic fuels but their current cost can be (or is) five times conventional fossil-based options- Really!

The hope within this report comes from the Six priorities for direct air capture deployment

To reproduce these six priorities I have taken them, as outlined in the Executive Summary of the IEA report.

DAC deployment must be accelerated for net-zero. The Net Zero Scenario requires the immediate and accelerated scale-up of DAC, calling for an average of 32 large-scale plants (1 MtCO2/year each) to be built each year between now and 2050. This will require increased public and private support to reduce costs, improve technologies and build the market for DAC technologies, aligned with net-zero goals:

1. Demonstrate DAC at scale as a priority. Targeted policies and programmes are needed for near-term demonstration and deployment. Governments should ensure that planned projects are able to progress to operation and provide essential learnings for DAC technologies and supply chains.

2. Foster innovation across the DAC value chain. Innovation will be critical to reducing manufacturing and operational costs, as well as the energy needs for DAC plants; supporting the availability of low-emission energy sources for high-temperature heat; and developing and reducing the cost of CO2 use applications including synthetic aviation fuels.

3. Identify and develop CO2 storage. The potential for DAC to remove CO2
from the atmosphere in large quantities rests on the development of suitable geological CO2 storage. Although the storage potential is vast, the time to develop these resources can be as long as ten years and could act as a brake on the scale-up of DAC in some regions.

4. Develop internationally-agreed approaches to DAC certification and
accounting. Robust, transparent and standardised international certification and accounting methodologies for DAC are needed to facilitate its recognition in carbon markets and IPCC greenhouse gas inventory reporting.

5. Assess the role of DAC and other CDR approaches in net-zero strategies.
Improved understanding and communication of the anticipated role of DAC
and other CDR approach in net-zero strategies will help identify the
technology, policy and market needs within countries and regions. For
example, the United Kingdom’s Net Zero Strategy identifies a need for around 80 MtCO2 of technology-based carbon removals by 2050.

6. Build international cooperation for accelerated deployment.
Collaboration through international organisations and initiatives such as the IEA, Clean Energy Ministerial, Mission Innovation, and Technology
Collaboration Programme on Greenhouse Gas R&D (GHG TCP/IEAGHG) can
play an important role in promoting knowledge sharing, reducing duplication in research efforts, and harmonising approaches to LCA and accounting methodologies for DAC technologies.

In summary

I just find this extremely hard to believe in, as it stands in technology solutions. We are not beyond a pilot, experimental stage and this pursuit to find workable solutions that can scale has been with us for a number of years.

As I said earlier I hope I am wrong and we see some very promising, robust and scalable solutions within the next two to three years, otherwise, it needs to be taken off the solution radar and realisable alternatives, that are proven, need to move this development money into realistic carbon reduction return projects.

The post Direct Air Capture- a viable dream or impossible first appeared on Innovating the Energy Transition.

I need to remind myself that my objective is to focus on different aspects of innovation needs within the energy transition. It should be simple for me, but it certainly is not!

The sheer scope of the energy transition often pulls me away in so many different directions from my innovation focal point. Equally, it can force me as a necessity to understand a significant amount of advice, detail and opinion, so I can far more appreciate where innovation has an even more significant potential to contribute.

I keep constantly investing my time in growing my further understanding, expertise, and thinking of energy transition ‘cross-over points’ where we move away from the old energy systems into the new ones.

This knowledge understanding provides some distinctive and inter-related “core” topics, which are admittedly time-consuming but essential based on the in-depth research undertaken.

What I look for is where innovation has a more catalytic effect as these might become ‘flash points’ of future challenges that need a new level of creative or innovative thinking.

The whole Energy Transition has been a growing platform to apply my innovation learning and ecosystem thinking. There are so many inter-related topics, and you have to make choices?

I have decided to narrow these inter-related topics to focus on critical areas that impact any successful energy transition.

The topics I will focus on are shown below. I have also provided links to some of my previous thoughts or views to build out these focal topics.

The critical focal points I have chosen to concentrate upon.

-Firstly on rare minerals and the impact the extraction and use these have within any future solutions requires a radically different approach to the extraction, use, disposal and will have so many fluctuating issues in the years to come,

-Secondly, the growing importance of the (smart) edge for a greater distributed energy architecture.

-Thirdly, the hydrogen story is taking off. Electrolyzers are a place for invention, research, and increased development are coming together for solutions that have more significant scaling potential and innovation.

-You have the whole topic of power generation. The shifts, structures and positioning are ripe for innovating at individual levels to resolve legacy and location and energy sources, and the solution “fits”—Nuclear, wind, solar and hydropower.

– The recognition and investment need for wholesale change in Grids and the growing value of microgrids where the adaptability and flexibility and the emphasis on robustness and resilience grow in importance.

-Storage and batteries have such an important role to play in any new energy system design. They deliver the “response” rate and much of the stabilities we require in any newly designed system.

-No one can avoid decarbonization as a topic to understand and see the need for greater carbon capture and natural solutions. My post “Themes for decarbonizing, my agenda setting post“ offers my thoughts here.

-Lastly, within this current focus area, it is necessary to keep relating to all the complexities of the climate crisis. These ongoing crises will accelerate and progressively alter so much of the energy transition, the timing of investment, and increasing understanding of impact and risk assessments.

Hard choices for all involved.

Choices are needed everywhere in the difficulties of what to invest in and when. These include facing up to the decisions required regarding when to dispose of assets and how to treat these within the P&L, especially in the growing area of stranded assets—recognizing the necessary shifts in structures and the challenges within current business models.

Also, understanding the why with the ‘evolving state and risk’ of the options needed and what options are available to deploy within this deteriorating environment is fraught with issues and business impact.

We are faced with increasing volatile times over the coming decades before any reliable stability returns. The growing recognition and urgency need multiple ‘voices’ and contributions to help those in decision-making roles to gain more significant insights and awareness of the implications.

Implications need to have a more informed, independent understanding. Then, decision-makers can execute their decisions with growing knowledge, in more effective and efficient ways.

Often, it is not recognized that innovation, in the age of disruption and radical change, equips the organization and person far better than often realized.

Each of these focus areas above is massive in its own right.

Simply each of these topic areas has the absolute need for innovation. My other focus area of ecosystem design is to create value, deliver impact and find improved ways to collaborate and learn and gain from increasing collaborations, knowledge and application.

It is finding impactful ways, as they all become interconnected for any business to advance on their journey of understanding delivering sustainable growth and new business potential.

Risk and opportunity are the two sides of the innovation coin.

My focus due to the innovation aspect naturally falls far more at the Front End Of the Energy Transition, at the discovery,  development and validation stages, as this is where innovation emerges.

Today, I see and believe that there is a real gap in many organizations by not having the robust innovation capability, capacity, and competency needed, recognized, well-established and firmly in place.

The magnitude of change required means greater reliance on researchers, scientists, and engineers and their need to ramp up to a whole new performance level. The attention to innovation throughout all of our organizations needs to become a shared sense of purpose, involvement and commitment to contribute.

I have worked in innovation advisory work for over twenty years, advising and transforming the activities and awareness, to help fill those poor understanding gaps of lacking comprehensive approaches to capabilities, capacities and competencies in innovation and the tools to drive change throughout organizations. Innovation is rarely treated as core, and it should be as change emerges from the dynamic environment that promotes innovation.

A critical decision time for Energy requires a different and radical mind shift.

We are presently at a critical decision time; the level of investment needed to achieve this energy transition is massive. The current estimate to create a safe climate system is the need to invest USD 140 trillion of new investments in the energy sector by 2050.

Much of the investments need to be directed away from fossil fuels (the primary carbon emitters) into clean technologies. It is renewables, including most power generation and end-use applications, that need to invest primarily through new generation sources of wind, solar, hydrogen, and biofuels.

This level of investment commitment will radically alter the energy landscape, where Energy is generated, by what means, and how it will be distributed, stored and consumed by us all. I am working on energy fitness landscapes as a way to plot and execute around.

Presently we are not making the essential investments we need to make.

We are all becoming painfully aware that the period until 2030 is absolutely critical for investments not just to be pledged but effectively deployed on the ground in the physical solutions and effective operation needed to make this energy transition required on track to reach the climate goals.

Innovation is critical in this energy transition. I have a clear role to play.

We need to move from research and development through engineering validation into pilot and scaling solutions, at speed, requiring a different innovation approach from discovery to execution.

What is recognized increasingly is that we do not have the luxury of evaluating radical change over standard lifetime returns or observing others over the years, we need to be highly proactive in innovation from discovery to final execution at scale. There is the need to raise validation and take higher risks than in more stable times.

We need to be more pioneering. Without a coordinated and leadership direction, the efforts and the risk will always remain cautious without guarantee or point of crisis. Scientists, engineers and researchers are, by nature, often conservative. There is a need for leadership to instil the imperative to reevaluate risk, seek out opportunities at high speed, and push for discovery and experiment constantly.

We also need to encourage this different mind shift of acceptable risk. Having an innovation mindset helps.

So for me, the energy transition is at the forefront of “cutting edge” innovation to deliver; this is why I have been increasing my attention to understanding, investigation, research, and become more immersed in the changes and challenges, issues, and barriers.

I need to emphasize my positioning and what I offer in innovation system design and building knowledge and expertise. To support and help deliver innovative solutions, I suggest my multipliers for innovation at the front end of the energy transition.

The ability to help discover, see and effectively manage the change in solutions and recognize and build out the business case for building a more robust and sustaining innovation system is critical for the future energy transitions we need to find and then put into place.

As I said in the opening to this post: I need to remind myself that my (sole) objective is to exclusively focus on different aspects of innovation” to help in this energy transition.

I need you as the vehicle and mechanism to deliver! I deliver innovation understanding and capability as the business promise return.

The post Understanding the innovation needs of the energy transition first appeared on Innovating the Energy Transition.

I have been building out the value of having a Fitness Landscape framework within the Energy Transition and why it makes sense.

I am looking at the Energy Transition from an evolving technology innovation perspective. In other words, what “forces” can be identified or promoted that can transform the existing energy system through the pursuit of the new invention, innovation, or technological advancement.

Specifically, ones that will be needed over such an extended time and complexity of change that this Energy Transition will take, upwards of twenty to thirty years to give it an unstoppable momentum.

When you look through the lens of innovating at the Energy Transition, you are often questioning the fitness, or the reality to achieve something. We need to recognize that the energy world is “stacked” with Scientists, Engineers, and Researchers that have a real depth of expertise but so often can be lacking the required “T” shape skills that can actually be restrictive to making change.

It is thinkers, designers, innovators, inventors that need to bring balance into Energy transitions work to give it a rapid push or advancement, well as much as the scientist with his potential breakthrough. They go hand in hand.

There is a greater need for skills that can anchor a solution, advocate the reason for the change, and then provide the broader resolve and purpose to ensure the delivery of the change.

The value of fitness landscapes needs to be part of any Energy Transition awareness as it can make sense,  to bring greater identity and structure.

Taking Hydrogen as my point of reference, to understand the context, complexities, and creative tension.

Firstly, mapping out the hydrogen terrain to the task at hand enables us to understand and relate to what is needed – I call that the context for change. I have been investigating Hydrogen as a promising energy carrier to understand the barriers and obstacles to the energy transition we need to undertake.

There are so many underlying “tensions” in this change from established fuels, infrastructure, and product delivery that Hydrogen needs to overcome.

Taking this fitness landscape thinking and applying it.

Any Energy Transition Fitness Landscapes identifies the opportunity spaces on where you need to focus your efforts- the appropriate resources to navigate the terrain. The higher the ‘fitness’ transforms your landscape potential into accelerating opportunities into final tangible outcomes.Fitness Landscapes helps in this task by identifying the opportunity spaces on where you need to focus your efforts‐ and applying the appropriate resources to navigate the terrain. A greater understanding of the ‘fitness points needed’ can transform your hydrogen landscape potential, or in business parlance, achieve your goal.

Mapping out your capabilities, competencies, and capacities to the task at hand enables you to understand and relate to what is needed. You begin to get fit for the journey ahead.

I took what I call a “Fitness Landscape Result Expectancy” approach.

Fitness Landscape Result Expectancy

My approach here is a work-in-progress; it will evolve and adapt.

The expected results or points of investigation sought, by identifying the critical aspects of capability identification for the Hydrogen (or any energy transformation journey), can make a significant contributor to the Future Energy Mix.

For example:

• A greater understanding of the obstacles and barriers to Hydrogen, becoming a significant energy carrier in the future energy mix is critical to understand. It “conveys” the fitness landscape journey.
• The understanding of what needs to be changed moves Hydrogen towards an energy transition that is sustainable and evolutionary built on technology investigation, validation, and ability to scale. Solutions gain worldwide recognition and adoption as the resulting outcomes and processes from discovery to realization. Greater adoption and scaling-up potential
• The journey generates a learning process for the identification of real and ‘false’ dynamic capabilities. Dynamic capabilities bring about change in the environment. As we frame, we can identify differences separating the more static ones that often just need reinforcement or retirement as not of lasting value.
• Pursuing limited or ‘selective’ development allows for restrictive exchanges within a network of specialization. These will not have the desired effect to accelerate solutions that can replace the existing ones unless the broader network effects are not accounted for.
• Any fitness landscape journey, where change is a significant level of requirement, requires a holistic view of the existing issues and the intent and goal of the journey by framing a clear strategic plan to mobilize the necessary forces.
• The solutions suggested will draw out internal discussions, growing recognition, and the reality of the present and future needs in this area of resource allocation and capital allocation.
• Importance of linking capability across different activities or technology applications to become increasingly ‘dynamic’ for a more sustainable future.
• The ability to build out a clear capability portfolio knowing where resource needs to be applied and their likely timeframe from concept to fruition. These evaluations will also help identify synergies to bring new value and future impact options.
• We need to challenge long, well-established routines and processes to see how we can extend technology options. To discover and continue the existing can be valuable to place additional resources behind.
• Having clarity in the fitness landscape allows for regularly taking additional “adaptive walks” to learn and adjust current thinking and question alternatives more openly.
• Knowing your capabilities, competencies, and capabilities intensifies and solidifies the studies, investigation, and importance of innovation through greater engagement and a growing understanding. You have greater confidence in where to invest new capital and resources.
• Outcomes from these expected results raise dynamic capability and the importance of dynamism for more flexibility and fitness discovery. By identifying higher points of value, you accelerate the change process and plot different projects and their impact.
• You give momentum and connected identity and purpose

The energy complexities do need understanding, explaining, and mapping. The knowledge of how the traversing will be undertaken to get to the end goal of a clean energy system as soon as we can, needs often different articulation? Fitness landscapes help make the journey a lot easier to determine what is needed to be undertaken and how to systematically go about it.

The post Exploring Energy Fitness Landscapes 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.

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.