Renewables, green hydrogen and carbon capture utilisation and storage (CCUS) will be key to ‘Herculean’ task of keeping global warming within 2-degrees.
This was central to Wood Mackenzie’s annual Energy Transition Outlook report, which argued the world must combine coronavirus recovery efforts with massive investment in renewable energy and clean infrastructure if it hopes to hit the target set as part of the Paris Climate Agreement.
Prakash Sharma, Wood Mackenzie head of Markets and Transitions for Asia Pacific, warned that the coronavirus pandemic has slowed climate change mitigation efforts in 2020.
“As the world begins to reconstruct its economy, all energy and natural resources sectors will face a survival of the fittest. We call it the ‘Darwinian Challenge’ because society and investors must evolve and adapt to the changes needed to overcome the twin crises and prepare for the future.”
There is nearly US$20 trillion, or 25% of global GDP, currently earmarked for tackling COVID-19 and rebuilding in its wake, but only a tiny proportion of this is allocated to hitting the Paris Agreement targets as part of the recovery.
In the UK, there have been consistent calls for the COVID-19 recovery to be a green recovery, placing the nation's net zero by 2050 goal centrally in all plans.
Wood Mackenzie warns that currently the world is on a 2.8C-3C pathway – not 2C or lower – warming trajectory. Peak energy emissions are set to peak at 36.3 billion tonnes in 2030 before falling 4% by 2040. However, this means they will remain 2.6% higher than 2019 levels.
The report suggest that Western Europe – including the UK – and the US can reach net zero by 2050 however, but it will take emerging markets China and India longer. This week China announced that it would aim to be carbon neutral by 2060, a pledge welcomed around the world as a significant step in fighting climate change.
In the UK, the energy system is well on its way to decarbonising, with renewable playing an increasingly large role in the mix. According to the Department for Business, Energy and Industrial Strategy, renewables provided a record 46% of Britain’s energy mix in the first half of 2020 for example.
Wood Mackenzie's 2-degree scenario shows the world needs much more efficient, substantially more electrified and a circular economy. Within this, peak energy will be hit by 2023, and the total energy use in 2040 would be down by approximately 25% from the base case, with electricity consumption up 14%.
In this scenario wind and solar should account for 30% of 2040’s power generation in the base case.
Both green hydrogen and CCUS will need to be successfully deployed at a commercial stage to reach the Paris Climate Agreement according to Wood Mackenzie, playing a ‘vital’ role in decarbonisation.
“The versatility of green hydrogen is remarkable, with three times the energy content compared to fossil fuels,” said Sharma. “The declining costs of solar and wind power make green hydrogen an attractive proposition. In some nations, green hydrogen production costs will become competitive with fossil fuel-based hydrogen by 2030.
“Most energy Majors and miners have started to ramp up diversification efforts. Internal carbon price assumptions have increased up to US$70/t or higher for new project FIDs. Capital has followed: not just to renewables, but green hydrogen, fuel cells and CCS/CCUS projects, energy storage and end-user consumer management.”
In the UK, trade association RenewableUK called on the government to launch a green hydrogen strategy this week, arguing it could play a key role in the UK's energy sector as a cheap and clean power source.
Earlier this month, Scottish Power announced that it was set to use solar energy together with wind to power a new 10MW electrolyser outside of Glasgow, helping to generate green hydrogen in one of the first large scale projects in the country.