Reliance on weather-dependent energy sources such as wind and solar pose challenges for the pursuit of California’s net-zero emissions targets, particularly for the electrification of transport and heating. While battery storage can help balance the grid, current technology cannot cost-effectively store enough energy for the winter months. Despite being more expensive than wind or solar power, geothermal and nuclear, or even carbon capture and storage for gas-fired plants, could provide critical reliability to help the Golden State avoid blackouts. Expanding the capacity of these so-called “clean firm power” sources to the same level as California’s existing natural gas fleet could help decarbonisation efforts without raising consumer costs.

Fugitive emissions from coal- and gas-based hydrogen production with the deployment of carbon capture and storage (CCS) could jeopardise decarbonisation goals. Carbon prices of $22-46/tCO2e would be required to make hydrogen from fossil fuels with CCS competitive with hydrogen produced from fossil fuels without CCS, while the cost of producing zero-carbon hydrogen from electrolysis could fall in the foreseeable future and be cost-competitive with fossil fuel options. This increases the risk of stranded assets if governments pursue a fossil-based hydrogen supply chain.

Global coal demand will increase in 2021 after a decline in 2020 because of the covid-19 pandemic. By 2025, global demand will flatten out at around 7.4 billion tonnes. Trends
are expected to vary by region by 2025. In Europe and North America, coal demand will continue contracting after a projected temporary uptick in 2021. In China, the world’s
largest consumer, demand will flatten over the next five years. And in India and some other countries in South and Southeast Asia, use is expected to increase through 2025.