The Fu­ture of En­ergy

One of the key find­ings from DNV GL’s 2019 En­ergy Tran­si­tion Out­look was that gas and vari­able re­new­ables will be the only en­ergy sources for which de­mand is higher in 2050 than to­day.

Norway-Asia Business Review - - F OREWORD - CHEYENNE HOLLIS

But this won’t be enough for cli­mate goals to be reached by 2050. In or­der for that to hap­pen, work to de­car­bonise the en­ergy mix, along with a greater up­take of car­bon cap­ture and stor­age (CCS) in par­tic­u­lar, must be im­ple­mented faster than cur­rently ex­pected.

Ac­cord­ing to re­search from DNV GL’s ETO, a re­port that pro­vides an in­de­pen­dent forecast of de­vel­op­ments in the world en­ergy mix to 2050, de­mand for oil will peak in 2022 while gas is ex­pected to over­take oil and be­come the world’s largest en­ergy source by 2026.

The re­port also notes global en­ergy use will peak by 2030 due to im­proved en­ergy ef­fi­ciency along with elec­tri­fi­ca­tion pow­ered by re­new­able sources. It can be tempt­ing to think the use of fos­sil fu­els will be a bar­rier to a rapid en­ergy tran­si­tion. How­ever, gas will

be a key en­abler for the world’s shift to a lower car­bon en­ergy mix in the com­ing decades.

Yet this alone won’t be nearly enough to reach in­ter­na­tional and na­tional emis­sions tar­gets. The 2019 ETO found that emis­sions will not fall suf­fi­ciently by 2050 to bring global warm­ing to well be­low 2° Cel­sius. The tran­si­tion from oil to gas does pro­vide a net pos­i­tive, but it is not the an­swer in and of it­self.

“For gas to re­alise its true po­ten­tial help­ing reach in­ter­na­tional and in na­tional emis­sions tar­gets, its pro­duc­tion and con­sump­tion must be de­car­bonised,” Ms Liv A. Hovem, CEO, DNV GL – Oil & Gas, states. “We have to act faster to shape the clean en­ergy sys­tem mov­ing for­ward. This re­quires more sup­port from all stake­hold­ers, more in­vest­ment into de­car­bon­i­sa­tion, more re­new­ables and greater en­ergy ef­fi­ciency.”

Ms Hovem adds that the tech­nol­ogy to im­prove the world’s en­ergy sys­tem is read­ily avail­able for the most part mean­ing de­car­bon­i­sa­tion ef­forts will come down to de­vel­op­ment and pol­icy.

“In the long run, the cost of the en­ergy source tends to wins. If en­ergy sources are cost com­pet­i­tive, they will out com­pete oth­ers on the mar­ket,” Ms Hovem says. “De­car­bonised gas holds huge po­ten­tial to be­come an abun­dant source of clean en­ergy. The chal­lenge is that all ma­jor routes to re­mov­ing car­bon from oil and gas use rely on the large-scale up­take of car­bon cap­ture and stor­age (CCS).”

Speed­ing up CCS

CCS can pre­vent up to 90 per­cent

of the car­bon diox­ide emis­sions pro­duced by elec­tric­ity gen­er­ated via oil and gas from en­ter­ing the at­mos­phere. De­spite the en­vi­ron­men­tal ben­e­fits, wide­spread us­age of CCS is still decades away.

Ac­cord­ing to the ETO, CCS will not be im­ple­mented at scale un­til at least the 2040s un­less gov­ern­ments change pol­icy and set a higher car­bon price than the cost of the tech­nol­ogy. In­dus­try must also play a role in stim­u­lat­ing quicker adop­tion of the tech­nol­ogy by find­ing ways to re­duce the cost of im­ple­ment­ing it.

“The tech­nol­ogy for CCS is al­ready here, but it isn’t cost ef­fi­cient. Un­til the cost of im­ple­ment­ing CCS goes down or the cost to emit car­bon rises, it won’t be a real choice,” Ms Hovem ex­plains. “If CCS is ap­plied more fre­quently, we can ac­cel­er­ate the en­tire im­ple­men­ta­tion process. In or­der for that to hap­pen, sup­port to push these technologi­es is re­quired.”

It was noted that DNV GL ex­pects CCS to en­ter cost learn­ing curves sim­i­lar to the so­lar and wind in­dus­tries. For CCS, this would see costs re­duc­ing by 1315 per­cent per dou­bling of ca­pac­ity.

“So, how do we get go­ing? Well, it’s a bit of a chicken-and-egg sit­u­a­tion. We won’t move down the cost learn­ing curve, un­less we start rolling out the tech­nol­ogy. And we don’t fore­see a roll­out of tech­nol­ogy, be­fore the costs have come down,” Ms Hovem says.

Per­haps the eas­i­est way to get the process mov­ing is for gov­ern­ments to place taxes on car­bon emis­sions. Ms Hovem points out that up­take in CCS won’t be­gin in earnest un­til busi­nesses need to utilise it or face pay­ing taxes for not do­ing so.

“At the mo­ment, 85 per­cent of global emis­sions are cur­rently un­taxed. The re­main­ing 15 per­cent of emis­sions costs less than USD 10 per tonne of CO2 to emit, ac­cord­ing to last year’s World Bank’s State of Trends of Car­bon Pric­ing. If the cost of emit­ting car­bon into the at­mos­phere in­creases, the speed at which in­dus­try will de­ploy CCS tech­nol­ogy will also in­crease,” Ms Hovem states.

She con­tin­ues, “If there was to be an in­crease of the car­bon price by 30 per­cent, you would likely see the util­i­sa­tion of CCS in­crease sev­en­fold. Of course, ques­tions about this per­sist, namely the fea­si­bil­ity of achiev­ing a global car­bon price. The Euro­pean Union man­aged to do some­thing in this re­gard through its EU Emis­sions Trad­ing Scheme and is be­gin­ning to see re­sults.”

Once the util­i­sa­tion of CCS be­gins, an­other wave of ben­e­fits will be un­locked. Ms Hovem cites syn­er­gies be­tween hydrocarbo­n and re­new­able en­ergy technologi­es that could work to­gether to de­car­bonise the en­ergy mix as one po­ten­tial op­por­tu­nity.

“There are op­por­tu­ni­ties, such as power-to-gas, where ex­ist­ing gas pipe­lines could be used to trans­port hy­dro­gen pro­duced from elec­trol­y­sis of sea­wa­ter, or offshore-based meth­ane re­form­ers. This can be used to heat homes and busi­nesses with car­bon-free forms of gas through ex­ist­ing gas net­works,” Ms Hovem says.

How­ever, some re­gions may be bet­ter equipped to tap into these ben­e­fits in the short term.

“The United King­dom and the Nether­lands have po­ten­tial to re­alise the ben­e­fits of power-to-gas ar­range­ments since they al­ready have most in­fra­struc­ture in place. As we look for the po­ten­tial in de­car­bon­is­ing, we must also cre­ate more value for busi­ness,“Ms Hovem notes.

DNV GL has a unique role in all of this as it looks to pro­vide much-needed knowl­edge re­gard­ing new po­ten­tial value points as well as study­ing and test­ing de­car­bon­i­sa­tion op­por­tu­ni­ties, such as hy­dro­gen.

“Now DNV GL is work­ing with our customers as they look to de­car­bon­i­sa­tion their as­sets by con­duct­ing analysis and lab­o­ra­tory tests on hy­dro­gen and other new gas blends to en­sure their sta­bil­ity and safety. We want to en­sure every­thing is as safe and en­vi­ron­men­tally friendly as pos­si­ble,” Ms Hovem de­tails. “The en­ergy tran­si­tion can ex­em­plify our role as we can help put every­thing to­gether. We can add per­spec­tive, see the im­pact and un­der­stand what is re­quired mov­ing for­ward. Our goal is to put facts into the de­bate and sup­port our customers and the in­dus­try with tech­nol­ogy and ex­per­tise.”

Asia’s en­ergy tran­si­tion

When it comes to the en­ergy tran­si­tion, Asia finds it­self in a state of flux as dif­fer­ent coun­tries chart dif­fer­ent cour­ses. Un­like other re­gions, South­east Asia will not see a sig­nif­i­cant re­duc­tion in the use of oil and coal un­til closer to 2040 de­spite the mas­sive po­ten­tial of re­new­ables.

Ac­cord­ing to DNV GL’s ETO, this is be­cause en­ergy de­mand in South­east Asia will keep grow­ing un­til 2050 due to pop­u­la­tion growth and an in­crease in in­come per capita. How­ever, a lack of en­ergy in­fra­struc­ture will see some ar­eas jump im­me­di­ately to newer, more ef­fi­cient technologi­es.

“Where you come from can help de­ter­mine your route. If you are a coun­try that has an es­tab­lished en­ergy in­fra­struc­ture, you are go­ing to need to move away or build upon the old tech­nol­ogy and find a path for­ward,” Ms Hovem notes. “If you’re a coun­try that doesn’t have that in­fra­struc­ture, you aren’t be­holden to what came be­fore you.”

In China, the Blue Sky Pol­icy is an ex­am­ple of how the govern­ment has acted quickly to im­ple­ment reg­u­la­tions. The coun­try is also one of the big­gest in­vestors in re­new­able en­ergy while hy­dro­gen is also on the agenda for trans­porta­tion.

And while DNV GL’s ETO high­lighted the fact the coun­try is tar­get­ing at least 35 per­cent of power con­sump­tion to come from re­new­ables by 2030, other is­sues may now stand in the way of the coun­try’s clean en­ergy goals.

“China will need to im­port a lot of gas to reach its clean en­ergy goals. The on-go­ing trade war with the US and other geopo­lit­i­cal fac­tors can com­pli­cate these ef­forts,” Ms Hovem states. “The en­ergy sys­tem is com­plex and mat­ters not di­rectly re­lated the sys­tem can have a neg­a­tive im­pact on it.”

PHOTO: DNV GL

DNV GL

Above left: DNV GL pro­vides car­bonPHOTO: cap­ture, util­i­sa­tion and stor­age (CCUS) ex­per­tise for tech­ni­cal as­sur­ance, test­ing, ad­vi­sory and risk man­age­ment. Above: Ms Liv A. Hovem, CEO, DNV GL – Oil & Gas, be­lieves more busi­nesses will utilise CCS if they face pay­ing taxes for re­leas­ing car­bon emis­sion.

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