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.
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.”
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.