Energy transition won’t happen overnight: Daniel Yergin
IHS Markit Vice Chairman Daniel Yergin cautioned that the transition to a net-zero economy will take time, and not happen overnight, but power company executives said they are ready to embrace the challenge.
It took five decades for wind and solar to clamber out of a niche existence and for costs to come down, and it took at least a century for electric vehicles to gain ground after Thomas Edison first introduced them, Yergin said 14 April at the Edison Electric Institute (EEI) Global Electrification Forum, where the theme "Destination 2050" -- as in net-zero emissions by 2050 -- dominated the talks.
The forum, which runs through April 23, has brought together leaders of global as well as US power companies in the runup to the Leaders' Climate Summit on April 22-23. At this summit, US President Joe Biden is expected to ask leaders of the 40 invited nations to develop a new ambitious target that improves on the carbon emissions reductions they or their predecessors agreed to make as part of the 2015 Paris climate treaty.
The Paris treaty called on countries to curtail GHG-intensive activities to limit global warming to 1.5 degrees Celsius, a goal that the UN Secretary General Antonio Guterres in February said the signatories would not meet with their currently announced GHG reduction targets.
"The world remains way off target in staying within the 1.5-degree limit of the Paris Agreement," Guterres said. "This is why we need more ambition, more ambition on mitigation, ambition on adaptation, and ambition on finance."
How do we get there?
Yergin said the Paris treaty has been responsible for putting climate in the forefront and for driving the pace of energy transition.
"We know 'what' we need to do to get to 2050," Yergin said, "but 'how' we get there is unclear."
At the same forum, but in a separate discussion, Lawrence Jones, EEI vice president for international programs, joined the CEOs of AES, Enel Group, Iberdrola, and Ørsted in discussing how the power sector reaches a net-zero carbon future.
When Jones, the panel's moderator, asked whether the world is on an irreversible path to a clean energy future by 2050, they all agreed.
Although "some politicians have come out against climate change, the weight of the evidence is strong," said Andres Gluski, CEO of US-based AES, adding: "I don't think it is a fad, this is a reality."
Gluski and Mads Nipper, CEO of Danish renewables firm Ørsted, said time is of the essence.
Nipper said he is concerned that the power sector is not moving fast enough, while Gluski said "we have to run" to decarbonize the sector with renewables as it is cheaper and cost-effective.
"We have an obligation to accelerate our investments, and politicians have an obligation to help us with what is difficult," Nipper added.
Iberdrola CEO Ignacio Galán added it is a "moral obligation" not just for the power sector, but for the world's leaders to leave a cleaner energy future for the coming generations.
That point was underscored by Francesco Starace, CEO of Enel Group, which is planning to spend nearly €190 billion ($239.64 billion) through 2030 on decarbonization, electrification, and digitization, three trends he said will allow the power sector and, indeed, the global economy to decarbonize.
Roughly half of that amount will go toward generation and about the same toward building a resilient electricity grid and related network that can connect energy flows from remote locations with relative ease.
Starace said the problem doesn't lie with providing power generation through renewables. Rather, the issue is "how do we make them available them to society," he said.
Galán said building an infrastructure than can handle renewables is key to decarbonization. The renewables sector is ripe for growth, but that is only possible if there's a way to get that energy to where it is needed, he added.
An IHS Markit white paper released in March said annual installations of renewable power generation globally will accelerate from about 200 GW in 2020 to about 300 GW in 2024. The same paper attributed the growth to falling costs for solar photovoltaic (PV) and wind power, combined with companies and countries making net-zero commitments.
Investors ready and waiting
Institutional investors, such as mutual funds, are ready to invest in infrastructure and renewables, noted Nipper.
JP Morgan announced 15 April its plans to raise $2.5 trillion over the next decade to help companies transition to a net-zero economy that will include $1 trillion for "green" initiatives that support the accelerated deployment of clean energy solutions, such as renewables. JPMorgan's announcement follows similar pledges by other major US financial institutions, including Bank of America and Morgan Stanley.
A week earlier, Bank of America said it will mobilize $1 trillion by 2030 to accelerate the transition to a low-carbon economy. And earlier this week, Morgan Stanley pledged to raise $750 billion by 2030 for sustainable development. That is a three-fold increase from an initial commitment of $250 billion announced in 2018.
AES' Gluski said permitting remains the largest bottleneck to any newbuild, whether it be renewables or energy storage or transmission.
"The biggest bottleneck is not money, it's not even technology, it's quite frankly the permitting and acceptance," Gluski said, agreeing with Nipper that it's not the lack of capital, or technological knowhow that is preventing these projects from ever materializing.
A WindEurope report published 13 April said the greatest obstacle to the EU's goal of reducing its GHG emissions by 55% is permitting for onshore wind projects, despite a record €42.8 billion being invested in 2020 in new onshore and offshore wind projects across the continent.
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