Europe braces itself for a battery arms race

Extreme weather records: why we need a strategy to adapt our buildings

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Increasing global temperatures are leaving Europe’s buildings, and their occupants, exposed

What we all felt last year is now scientifically documented: 2022 was another year of weather extremes which brought us the hottest summer on record for Europe. The scorching heatwave put a strain on millions of Europeans; and floods and wildfires brought devastation in many regions across Europe.

According to the World Health Organisation, at least 15,000 Europeans died from heat stress in 2022. And this is a conservative estimate. Temperature extremes also have a longer-term lethal effect, as they exacerbate chronic health conditions such as cardiovascular and respiratory diseases.

Europe is warming faster than the global average and faster than any other continent during the past decade, the World Meteorological Organisation has confirmed.

The normal reaction of people exposed to extreme weather conditions is to retreat to their homes. But this past summer, many Europeans realised that their buildings are ill-equipped to protect them from high temperatures.

While temperatures were rising outside, buildings were also heating up, providing little relief for occupants. The development of urban heat islands, capturing the heat stored in concrete and bricks, prevented cooling down at night.

Public buildings such as schools closed and hospital appointments were cancelled as the system could not cope with the heat impacts. In the UK, media reported that sales of portable air-conditioning units rose by 2420% in a week. And data centres used by Google and Oracle had to be shut down as cooling equipment failed, leaving their customers with unreachable cloud services.

It is an uncomfortable truth: our buildings are ill-equipped to cope with extreme weather events. We need to adapt our buildings to this new reality.

LACK OF ATTENTION

However, while climate adaptation in buildings is imperative, it does not get enough attention. Not in policy design nor in academia, where the research is insufficient, and much attention is still given to mitigation.

Adaptation and mitigation are not mutually exclusive: the focus on mitigating the impacts of the construction, renovation and use of our buildings on climate change is fully justified. The sector is not decarbonising at the speed necessary, but that does not mean we should not start adapting our buildings to the impacts of climate change.

Preparing for crisis is the only response. Ensuring that our homes can provide adequate shelter in extreme weather events, which will happen more and more frequently in the near future, should start now.

This requires structural changes in terms of how we (re-)design urban spaces, how we renovate our buildings to increase their resilience and how we improve their capacity to provide healthy and safe places for occupants.

Adaptation must not be confused with buying more air conditioning units and fans. This would only increase cooling needs and thus, put a bigger strain on our pressing demands for energy.

PEOPLE FOCUSED

The structural adaptation of buildings to better withstand the physical impacts of extreme weather events needs to be coupled with a people-centric approach. Thermal comfort, healthy indoor air quality, a generous supply of daylight: all need to be at the centre of technical and design measures for adaptation.

While European lawmakers are in the final stages of updating legislation to decrease the climate impact of buildings, adaptation measures should be integrated into future renovation strategies, policies and standards.

As renovation cycles often span decades, renovation measures or any structural changes to buildings should not only save energy but should also ensure that the building is providing comfort and shelter in extreme weather conditions.

In fact, smart adaptation measures will help save energy, as cooling loads in buildings will go down. Such measures include improved passive shading, natural cooling and ventilation, and green facades and roofs to support the absorption of extreme rain.

Focusing on adaptation measures in the built environment will not divert attention from mitigation efforts. Rather, adaptation and mitigation should be seen as mutually reinforcing. Stronger action to reduce our emissions now means that we will need to do less adaptation in the future.

NO TIME TO LOSE

Deeply renovating our buildings is urgent. It is urgent to reduce carbon emissions, to increase our buildings’ resilience against climate change impacts and to ensure our buildings satisfy the needs of occupants.

Beyond the individual building, it is essential that urban design increases focus on resilience. Urban resilience will have to be much more in focus in the years ahead.

As the EU Commission is finalising a technical guidance document on how to adapt buildings to climate change, policymakers finalising the Energy performance of buildings directive should require governments to turn adaptation into law to protect European citizens from the growing impacts of climate change.

It is time to face reality and accelerate our climate actions on all fronts. The time for adaptation is now. •

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

The lure of powering Europe from the Sahara Desert endures

Major electricity waste and loss could jeopardise net zero targets

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

The rise of distributed power generation could cause gridlock on grids without further upgrades

The global energy transition is driving a massive increase in renewable energy capacity delivered at unprecedented speed, yet the effort will be wasted without an equally dramatic increase in electricity capacity.

Net zero will require power grids to form the backbone of the future energy system and supply half of all energy consumption by 2050 through the electrification of sectors from transport to industrial manufacturing.

Yet, few realise that existing networks are already leaking massive amounts of power and running significantly below capacity, imposing needless constraints on renewable generation and impeding the energy transition.

ACCURATE DATA

The power sector is yet to match the digital transformation of other industries which would enable it to harness smart data from its networks to boost grid capacity and reduce waste, unlocking more renewable energy resources without excessive build-outs.

Accurate data on everything from power line temperatures to wind conditions could hold the key to safely increasing capacity, sharing loads between lines or preventing power loss.

With enormous renewable energy capacity already being curtailed, caught in congestion or facing lengthy interconnection queues, the electricity grid is rapidly becoming the real bottleneck in the race to net zero.

Even worse, attempts to alleviate the capacity crunch and avoid the risk of gridlock through build-outs of new networks could run into planning restrictions or land-use conflicts with communities and cost upwards of $14 trillion globally.

With power grid expansion running behind net zero targets, we need a dramatic shift in network efficiency to help operators meet their targets for grid decarbonisation and capacity expansion without unsustainable costs.

LOOMING GRIDLOCK

There is a imminent risk of gridlock, power outages or major curtailments of renewable energy generation due to the growing squeeze on network capacity. Significant amounts of renewable energy is caught in interconnection queues and even more renewable supply is being curtailed because of capacity constraints.

Combined with the current lack of utility-scale storage solutions, this creates a growing risk that the grid will lack the flexibility to support sudden surges in demand from millions of electric cars and heating systems.

And global grid expansion is falling far behind target due to soaring supply chain costs, bureaucratic permitting processes and land-use conflicts with local communities over the potential impact on everything from flora and fauna to water pollution.

BLIND SPOTS

The wasteful, inefficient use of existing networks is one of the key roadblocks to increased incorporation of renewable energy and a major driver behind the demand for new infrastructure.

The problem is that the growing decentralisation of power grids and diversification of power sources has left network operators with limited visibility over their networks.

Many utilities have very limited oversight of primary circuits using basic Supervisory Control and Data Acquisition (SCADA) systems, and little to no visibility of the secondary circuits where renewable power sources are widespread.

Many operators currently rely on rough estimates of network conditions or capacity from a few basic parameters such as temperature or weather forecasts, leaving major data blind spots across their networks.

This denies them the opportunity to help reduce power loss by finding the site and source of electricity losses or seeing where they could share loads between lines. Crucially, limited data prevents them taking advantage of cooler weather to increase power flows while staying within safe conductor temperatures.

OVERLY CAUTIOUS

For instance, grid operators currently estimate the ampacity or maximum current that overhead power lines can carry without overheating by using crude calculations based on limited parameters.

This means they set excessively cautious capacity limits that fail to take account of the much greater thermal capacity of overhead lines during cooler conditions. As a result, many power grids run 20% below their true capacity.

Under-estimating ampacity means renewable generators are being needlessly replaced with dirty power sources such as gas-fired peaker plants because operators mistakenly believe their long-distance transmission lines are overloaded.

Accurately calculating ampacity would therefore help operators achieve their net-zero targets by reducing reliance on backup power from fossil fuel plants or diesel-powered generators.

The lack of network visibility also means utilities are missing other opportunities to maximise efficiency and output without new infrastructure. For example, the lack of current, comprehensive data on loads across feeder lines is hampering operators from balancing loads between parallel lines to enhance grid reliability and flexibility.

Outdated grid monitoring systems relying on limited, late information from call centres or technicians mean that power loss and theft are going undetected across many networks.

A NEW APPROACH

Utilities in the Middle East are harnessing “multi-sensing” technologies that accurately analyse myriad parameters across networks in real-time to minimise power losses, optimise usage and maximise grid capacity. This could help operators enhance grid performance while deferring or reducing capital investment in new infrastructure.

A recent pilot in the Middle East saw the world’s first deployment of multi-sensing systems on transmission lines to enable Dynamic Line Rating, which safely increases power flows without exceeding safe temperature limits during cooler weather conditions.

The system’s sensors analysed data from over 60 parameters, helping to predict the maximum current that overhead lines could carry several days ahead. This is helping operators harness favourable weather conditions to safely increase capacity, relieve congestion and integrate more renewable power into networks without unnecessary extra infrastructure.

Unlocking spare capacity on long-distance high-voltage transmission lines, could also remove the need to curtail distant renewable energy generators and turn on fossil-fuelled ‘peaker plants’ during peak periods.

SMART GRIDS

The same technology can also use feeder sensors to identify unusually low power levels or leaking grid components and even find common causes of power loss across multiple sites, helping networks conserve power.

This could ultimately be combined with machine learning systems to create smart “self-healing grids” that can anticipate and avert power loss or other faults before they occur.

Cumulatively, a more digitally-drive approach to grid operation could enhance network capacity, flexibility and reliability by giving grid operators a 24-hour, full-spectrum window to dynamically improve network performance.

This could create smart, self-improving grids that continuously increase flexibility and capacity, helping integrate more renewable energy without excessive new infrastructure. A transformation in network efficiency must take place in parallel with new infrastructure development to help achieve the energy transition without unsustainable costs. •

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

Europe’s sleeping giant is waking up

Invest in buildings and not more stranded fossil-fuel assets

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Revision of EU directive could provide much-needed momentum to buildings renovation

Ventures into renewable energy and improving energy efficiency standards are not to blame for Europe’s forest fires during the record-breaking scorching summer of 2022 or for the skyrocketing energy bills coming through the letterboxes of homes which families cannot afford to heat.

The EU’s inefficient building stock is responsible for 40% of our energy consumption and 36% of greenhouse gas emissions, which begs the question: why are we choosing to spend money on what will be eventual stranded fossil fuel assets, such as ‘Dash for Gas’ in Africa, when we should be investing in assets that we live, work and study in every day?

Buildings need to be seen as a core element of our energy system. Like solar panels and electric cars, our buildings play an integral role in our energy transition away from fossil fuels.

Yet, the ever-increasing fossil fuel subsidies are locking homes into using fossil-fuel-based heating installations or inefficient hydrogen boilers. This ultimately fails to address the fossil fuel crisis as it undermines our energy security, making people dependent on expensive and dangerous energy sources, and our commitment to our emission reduction goals in the 2015 Paris Agreement.

DEEP RENOVATION

Instead, more support is needed for the deep renovation of our buildings combined with the installation of renewable heating and cooling technologies, replacing fossil-fuel-based heating installations. In particular, this support needs to target low-income households and the most vulnerable people first as they are feeling the brunt of this crisis.

The Energy Performance of Buildings Directive (EPBD) is currently being revised and discussed by EU and national policymakers. This piece of legislation will have a vital role in decarbonising the EU’s building stock and help lift millions of families out of energy poverty.

It should set ambitious minimum energy performance standards that support higher renovation rates and establish a comprehensive range of incentives for the rollout of renewable heating solutions including heat pumps powered by renewable electricity and solar thermal.

Outreach and advisory support measures and schemes, such as one-stop shops, are needed to support and guide renovation efforts at the local level. In addition, targeted funding is needed to subsidise renovations, especially for low-income and vulnerable households living in the worst-performing buildings.

SOCIAL VALUE

It is often undervalued what the benefits are that building renovations and heating decarbonisation can bring to families across the EU. It is estimated around 18,000 jobs would be created per €1 billion invested in energy efficiency.

With strong social protection measures, fair working conditions, adequate wages and resources to undertake reskilling and upskilling programs to improve accessibility, these could be local, decent, long-term jobs stimulating economic activity across the EU.

On top of this, we can also lower households’ energy costs while having an overall positive impact on the EU’s socioeconomic development, reducing greenhouse gas emissions, improving air quality and enhancing indoor living conditions.

STRANDED ASSETS

The alternative, scary and unstrategic scenario is billions being spent on fossil fuel infrastructure that will become stranded assets only to make EU homes and buildings dependent on them for their energy needs.

The examples of the Nord Stream 1 and 2 fossil gas pipelines in the Baltic sea sadly demonstrate how they have now become part of Europe’s most expensive stranded assets on which millions of Europeans were dependent for their energy needs.

Renovating our buildings and fulfilling our heating needs with renewables solutions, does not provide political leverage to undemocratic governments, finance wars, leak methane into the atmosphere and waste precious funding on projects that in the long run provide no real benefit to people, the environment, or the economy.

JUST TRANSITION

In the short run, support is needed for vulnerable households to help them pay their energy bills and heat their homes sufficiently this winter.

But they also need to be embedded in a longer-term approach that will allow us to power and heat our homes and buildings in an efficient, sustainable and renewable manner by the end of the decade and put us on a path to completely phase out fossil fuels in buildings by 2035 at the very latest.

Some EU member states are already working on fossil fuel phase-out policies through the introduction of fossil fuel heating restrictions in Austria, Belgium, Denmark, France, Germany and the Netherlands.

A recent study highlighted the different ingredients needed for a successful fossil-fuel phase-out including subsidies to cover upfront costs for the replacement of fossil-fuel-based boilers, reducing the need for heating in homes through improving energy-saving standards and making electricity more affordable.

SMART MONEY

Most important of all, we need to prioritise low-income households who are living in the worst-performing buildings and may already be experiencing energy poverty.

With the prospect of austerity measures banging at our doors, we can no longer afford to put our money in the deep pockets of the fossil fuel industry.

A more ambitious recast of the EPBD provides an opportunity for EU policies to be felt in people’s homes through the provision of adequate financing and technical support for deep renovation projects in combination with the installation of sustainable renewable heating technologies, making our homes more energy efficient.

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

Shocks that people can see and feel are the most powerful drivers of change

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

The energy crisis has made the transition tangible for end-users

From the recent Covid-19 pandemic to the 9/11 terror attacks, history is peppered with key moments in time where the gravity of the situation shakes the foundations of society and causes a fundamental shift, transforming deeply embedded architectures of democracy, sovereignty and security.

Whether the current energy crisis will go down as an equivalent, historic event that catalyses accelerated action remains unclear. But Putin’s invasion of Ukraine has handed us the greatest crisis our modern energy system has ever seen—so it should stand to reason that we are in a unique position to acknowledge the limitations of our reliance on fossil fuels, drive towards a future powered by renewables and unlock the opportunities it affords. Every unit of gas we burn benefits Putin’s regime; yet nobody can weaponise access to the sun or wind.

A definitive transformation remains to be seen, but there are important glimmers of hope that change is happening. Energy has suddenly become front and centre of everyday discourse; consumers are seeking out ways to reduce their bills and use energy in a more intelligent way.

FLEXIBLE DEMAND

Faced with immense supply-side challenges, focus has shifted to the demand side.

While European countries were quick to roll out public information campaigns encouraging a reduction in energy consumption, the UK made significant progress in domestic flexibility—whereby households shift or reduce their energy demand at specific times to support the grid.

At the start of 2022, the concept was completely novel. Fast-forward 12 months: we have gone from the first large-scale domestic flexibility trial involving 100,000 customers that proved the ability of consumers to respond to grid signals and reduce demand to a fully-fledged “Demand Flexibility Service” involving more than four times as many customers.

Households in the UK are being offered discounts on their electricity bills if they cut energy use at peak times over the winter, as part of National Grid ESO’s efforts to avoid blackouts.

CONSUMER ROLE

The remarkable speed and scale of this progress are what we need to meet our net zero targets. Consumers will be at the heart of a green, decentralised system and will need to play an active role in supporting the grid. This requirement will not be borne out of geopolitical circumstances but will result from a system powered by variable renewable energy.

The combination of variability and greater electrification, fuelled by the roll-out of low carbon technologies (LCTs) in the home such as electric vehicles, heat pumps and home batteries, means that intelligently shifting demand around in households will be a central part of the future energy system.

Whilst LCTs have the potential to increase system peaks—the times at which lots of people are using energy—they also offer a controllable resource. This means users can still adopt these technologies without putting the grid under strain by using energy at different times.

PLAY A PART

Whether a household owns low-carbon technology or not, everyone can play a part in domestic flexibility and reap the rewards. We know that the benefits that a fully flexible energy system offers are significant, with the potential to deliver material net savings of up to £16.7 billion a year in 2050.

This cost would otherwise be passed on to households through their bills. At present, the costs of balancing supply and demand are at an all-time high, primarily as a result of high gas prices.

Consumers have responded positively to domestic flexibility initiatives, but there are lots of questions to answer to refine the consumer experience, in order to deliver maximum benefit and value back to the people who will drive this transition.

Areas of research include what level of automation is required to unlock seamless domestic flexibility at scale; how we can leverage behavioural insights to design schemes that incentivise more people to participate; and how we can improve accuracy and engender trust in the system.

FAIR PAYMENT

Ensuring that consumers are fairly rewarded for providing flexibility services is paramount.

To do this, more accurate forecasting models that predict a household’s normal electricity consumption in the absence of external signals, known as a “baseline”, are necessary.

If a baseline overestimates a household’s consumption, then consumers would be given higher energy reduction targets that are harder to achieve, potentially impacting opt-in rates. An underestimated baseline would mean a consumer would not be appropriately rewarded for the flexibility they provided.

Whilst the system-wide shock that we might have hoped for is yet to materialise, the current crisis has shrunk the psychological distance we place between ourselves and our polluting energy system, bringing it to the doors of millions of homes.

Now is the time to capitalise on recent evidence of our willingness to adapt, change our behaviours and actively shape a greener energy system, with people at its heart.

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

Lessons grid operators could learn from Africa

A civil nuclear industry will raise standards across entire engineering supply chain

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Lessons from supporting a growing nuclear sector help to streamline manufacturing processes in a safe way

The UK Government plans to build up to eight new nuclear reactors to improve the country’s energy independence and reduce its greenhouse gas emissions, as well as create thousands of new jobs.

At present, the only stations planned or under construction in the UK are EDF’s European Pressurised Water Reactors (EPR) at Hinkley and potentially Sizewell, with two reactors at each site.

If realised, the nuclear buildout programme will not only deliver the generating capacity required (if all the goals in the government’s strategy are met, nuclear could provide 20-25% of electricity needs by 2050) but bring significant economic benefits to the UK, including to the nuclear supply chain.

Successful delivery will strengthen the global perception of the UK’s nuclear sector, which will be important given that foreign competition is already strong and British firms will face a significant challenge from overseas companies vying for the same work.

An expanded and more capable supply chain should be well-positioned to access new domestic and export markets. Implicit in this is a focus on enhanced quality.

SAFETY PRIORITISED

But the benefits of this buildout will be felt much more widely than just the nuclear sector. The transfer of knowledge and enhanced processes the supply chain will gain directly from the experience of working in this ultra-safety-regulated and highly rigorous sector will undoubtedly impact the quality of delivery in other market sector applications, particularly across the nuclear sector’s Tier 2 and Tier 3 supply chain.

For obvious reasons, material sourcing and provenance are vital in the manufacture of all systems, but for the nuclear industry especially, its importance in the manufacture of components is on a completely different scale. Materials cleanliness and, for instance, welding perfection, are prerequisites, but by far the most important factor demanded by principals and Tier 1 contractors in nuclear is safety—for workers and of course end-users.

A culture of absolute perfection pervades the entire manufacturing process because, bluntly, the scale of potential harm due to error is incalculable. Everything, therefore, aligns with the regulatory expectations placed on the UK Nuclear Licensees and is shared throughout the nuclear supply chain to support quality improvements.

At a practical level, it means the intensity and precision of the documentation are much greater than in other sectors; but this in no way underestimates the quality systems in, say, the oil and gas sector which has its own inherent risks to manage. Nonetheless, the level of scrutiny is also a lot higher for those working in the nuclear sector. All of this, of course, impacts time and cost. But it also means work undertaken in other sectors is greatly improved.

LESSONS LEARNED

Taking experience from working on nuclear sites to future projects, nuclear or otherwise, means the time taken for the initial designs, development and procedural documentation can safely be cut back dramatically. In fact, the whole production cycle should be reduced by up to two-thirds of the original cycle, allowing the procedures to be performed in a more time-efficient manner—saving money at the same time.

All these are learnings which can feed back into the nuclear sector for other manufacturers facing similar challenges. Importantly, however, this experience can also add value to other market applications.

Interestingly, one of the downsides of the nuclear sector’s rigour is the pace and resistance to incorporate potential learnings from other industries. For example, certain welding techniques suited for delivering neat fabrication quickly are not yet approved for use in civil nuclear. In due course, the right applications may come but in the meantime, there is good reason why most of the traffic of learning is one-way.

Understanding how to prepare for inspection and test plans and incorporating these well in advance in the organisation of workflow, provisioning for the right procedures for each application and building up a library of procedures and techniques for future use, all feed into best practices aimed at reducing time and improving quality.

Documented learning in this way eventually reduces the process from 40 days down to 15 whilst improving the quality, and above all the safety, of the end product. •

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

More sustainable batteries will power the Race to Net Zero

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Supply chain concerns are driving research in cobalt-free batteries

Global demand for batteries has exploded over the past decade. The installed output of lithium-ion batteries alone has gone from 0.5 gigawatt-hours in 2010 to around 525 gigawatt-hours ten years later and this is just the beginning.

For the most common type of battery in use today, Bloomberg is projecting global demand to expand to over 9300 gigawatt-hours in the next decade—a startling 17-fold increase.

As the world progressively swaps from fossil fuel-based power to emissions-free electrification, batteries are becoming a vital storage tool to facilitate the energy transition.

Where countries build out renewable energy sources, batteries can help stabilise the grid. They can also help decarbonise road travel or power homes, but supplying the necessary raw materials is becoming a growing concern.

EYE OF THE STORM

Production of batteries requires a variety of metals including lithium, nickel, manganese and cobalt, among others. Procuring these can be expensive, consequently limiting the pace of electrification.

At the same time, the extraction of these raw materials also brings about a set of complex supply chain challenges.

A number of these metals are considered critical minerals and are essential for a wide range of clean technologies that are expected to significantly increase in demand, as countries and companies commit to ambitious net-zero targets.

These two factors of price and demand are the prerequisites for a perfect storm—especially as production and processing operations of lithium-ion batteries are currently concentrated in a small number of countries. The resulting supply chain vulnerability poses a serious threat to electrification.

BRIGHTER SKIES

A solution needs to be reached to scale up processes and speed up the development of producing batteries that use less critical minerals.
Similarly, the development of rechargeable batteries, which are both cost-effective and utilise resources more efficiently, is a necessary step for increased electrification.

Effectively, we need batteries with lithium-nickel-manganese oxide (LNMO) battery cells or similar features that present the above characteristics.

The absence of cobalt and the relatively low nickel content make LNMO battery cells a more sustainable and cost-effective alternative to today’s mainstream high-nickel lithium-ion battery materials.

There is a dire need for deploying cheaper, safer and more sustainable battery materials and this is a step in the right direction for a brighter future.

WHERE WE NEED TO BE

Fortunately, there is a growing consciousness among industry, investment communities and political bodies that availability, diversification, circularity and de-risking of supply sources are key to unlocking the full potential of batteries in the energy transition.

We see more battery projects being matured in Europe, but until we have established more sources of refined raw materials than from the few regions we see today, we are not anywhere close to material independence.

We still need greater collaboration to support sustainable electrification trends and expand battery applications. Not only will this improve material efficiency, but it will also reduce energy dependence.

And ultimately, what really drives progress is demonstrating how sustainable batteries benefit the everyday life of society when brought to use, for instance, in trains, e-ferries and micro-transport, and any opportunity to display this will be a great catalyst for change.

Supportive government legislation is the plug, and private investment is the charge—to keep the race to net zero alive. It is absolutely vital that these two components are accelerated hand-in-hand.•

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com

Embrace the potential of hydrogen for heating buildings

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Hydrogen should be welcomed as a solution to heating our buildings

It might sound like a bold statement but embracing the potential of hydrogen for heating buildings is essential from both an ecological and an economic point of view.

Hydrogen has served successfully as an energy carrier in municipal gas grids for decades. “Green” hydrogen, produced by renewables in a climate-neutral way, can replace natural gas, therefore contributing fundamentally to the energy transition and the decarbonised energy landscape of the future.

It can be beneficial not just to industrial and non-residential environments, but to every household that has relied on gas as an energy carrier up to now.

GAS MIXTURE

What is particularly interesting for building operators is that hydrogen can be used as a mixture with natural gas in the existing gas grid, using existing heating technology.

While heat pumps are becoming one of the most popular heating technologies for new construction, the potential of hydrogen in renovating and refurbishing the heating systems in existing buildings needs to be emphasised.

The transition from using natural gas in a building’s heating system to hydrogen can be smooth. Technically, mixing natural gas with hydrogen does not pose any major issues.

Heating systems with gas boilers, for instance, can cope with an admixture of 10% hydrogen without any problems. Even an admixture of up to 20% hydrogen to natural gas seems feasible in most cases. A steady increase in the proportion of hydrogen to natural gas could begin immediately.

HYBRID SYSTEM

The ideal setup for such a building heating network seems to be a hybrid system.

Basically, this involves the use of two different energy sources. The combination of a hydrogen boiler with an electric heat pump is a good choice. The heat pump does its work whenever that makes sense, such as when the outside temperatures are within a “normal” range.

Whenever it gets too cold outside, higher water temperatures are needed in the building, which in turn could make the heat pump’s work less efficient. Under these circumstances, the hydrogen boiler can take over in order to heat the building.

Depending on the design of the respective heating capacity of the appliances, this results in a utilisation of the heat pump of 70-90% and an almost completely regenerative heating model, of course depending on the green share in electricity and gas production.

Similarly, it might make sense to combine a hydrogen boiler with a solar thermal system. Often, investments have already been made in the infrastructure, which can be further utilised by combining it with hydrogen.

STORING SURPLUS

In Europe today, it is assumed that boilers will have to be able to use a mixture of natural gas and 20% hydrogen within the next five years. From 2029, it should be possible to convert gas appliances to 100% hydrogen by means of conversion kits (“H2-ready”).

Using hydrogen and other green gases across Europe would save €130 billion a year in 2050, according to experts from the industry alliance Ready4H2.

The existing natural gas infrastructure, which can be used immediately for injecting hydrogen, and the ease of storage and transportation, make hydrogen indispensable.

SECURE FUTURE

Green hydrogen is a key lever for a climate-neutral, sustainable, and secure future. As we all know, the challenge of green electricity harvested from renewable energy sources is dependent on the real-time availability of wind and solar radiation, as well as on geological, timely or seasonal aspects in general.

If you want to switch to 100% green electricity, you have to provide production capacity that exceeds the maximum demand. With the help of electrolysis plants, surplus electricity can be stored in the form of hydrogen. This ideal symbiosis will guarantee a secure and continuous energy supply.

Successfully tackling the energy transition will not be possible without sector coupling, which brings electricity, heating, and e-mobility together. As a result, it will be possible to make use of electricity peaks. Here, balancing via hydrogen, which can also be used to heat buildings, will be the ideal solution.

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com

Will the UK’s permitting reforms speed up offshore wind deployment?

The role of storage in a renewable electricity grid

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Developing long-duration storage technologies is essential for a fully decarbonised system

Europe is on the path towards a fully renewable electricity system. This has generated much discussion around the need to add more storage to the grid and find long-duration electricity storage (LDES) solutions.

But instead of rushing to solve the anticipated storage needs, we need to use all the tools and technologies available to successfully achieve a 100% renewable energy system. Before looking at what kind of long-term storage is required, we must understand all the ways we can reduce storage requirements in the first place.

Adding a counter-cyclic renewable energy source to wind or solar generation projects—such as wave or tidal power—to the system will even out the inherent variability since the supplementary technology generates energy out of sync with solar and wind, cutting a big need for storage. This is the first piece of good news.

The second is that it is likely that we simply do not require as much long-duration storage as has been feared. Recently published simulations of European electricity demand by Norway’s Rystad Energy used data over the last five years to show that an increase in the installed capacity of wind and solar to a level where it covers the peak demand leaves us with surprisingly short deficits.

We can address these deficits with technologies already on the market today and by overbuilding the system.

However, as electricity demand is expected to double until 2040, this will not be enough.

DEMAND RESPONSE

One highly effective way to limit the need for storage is through demand response at scale. Accessing the flexibility from new loads in the system such as EVs or heat pumps has become very easy and can be triggered and optimised through existing price signals on the market.

Energy-intensive industries need to operate in a more flexible way—such as how they operate some electrolysers, where hydrogen is produced and stored during times of abundance of electricity and then used in during deficits. After exploiting all these measures, the need for storage capacity is smaller but still remains.

Thanks to the automotive industry we know how to manufacture batteries at scale to handle short-term storage, but what type of long-duration storage technologies will be key?

STORAGE TECHNOLOGY MIX

With approximately 50% of all global energy used for heating, solar heating systems are an effective long-duration storage solution to decarbonise district heating, add renewables capacity and remove fossil-fired plants.

Well-established technologies use a method of pushing hot water down into the bedrock, heating the rock and bringing the hot water back up in the wintertime when it is needed.

Meanwhile, hydrogen, another promising solution for long-term storage, can be used directly to support the existing gas system or as an electro-fuel. It can also be used as a flexible resource in hard-to-abate industries such as steel, cement, fertiliser or chemical production. Hydrogen plays an integral part in the energy islands concept proposed by transmission system operator Energinet for the North and Baltic Seas in Denmark.

Most of today’s existing long-term storage is based on pumped hydro. This proven concept uses low-cost excessive electricity to pump water up a reservoir and when there is a high demand or low access to renewables in the system, the water runs back down through turbines generating electricity.

Using abandoned mines, as is being pursued by newcomers like Mine Storage, avoids the large environmental impact of having to build new sites, a win-win solution.

BATTERIES BOOST

Novel battery technologies will also have a role and redox flow batteries are on the cusp of being commercially ready. Instead of using a single battery cell where electrolyte mixes with conductors, redox flow batteries store the active material in exterior tanks.

The larger the tanks are, the more electricity can be stored and generated. With a surplus of tanks becoming available with the move away from oil-based fuels, there is an excellent opportunity to recycle these as electrolyte tanks—companies such as Vopak are already looking into this.

Finally, there are also chemistries for ordinary batteries that avoid materials such as lithium and nickel that are strained in the value chain and in cases such as cobalt, controversial for social acceptance. Sodium is a good alternative with some players, such as Sweden’s Altris, already offering this on the market.

BARRIERS ON THE ROAD

Storage technologies have developed tremendously over the past five years and they will be an integral component of the future European grid.

To a large extent, the technology is already available. But even though there are several markets where batteries do fit today and provide commercial grid services, there are still issues that should be addressed immediately: double taxation and double grid fees for storage operators in certain markets or a better adoption of long-term capacity payments for energy storage, for instance.

The current review of the existing market design is an excellent opportunity to remove these barriers.

It is a challenge to achieve 100% RES but it is completely feasible. Easing the need for long-term storage and combining new technologies while leveraging Europe’s large synchronous system that gives us the ability to share resources between the different markets will get us there.

This is the final article in a series of three articles in which Johan Söderbom examines what next-generation technology means for the energy transition and the opportunities that lie within. Click here to read the first and second articles. •

This is the third article in Johan Söderbom’s series examining what next-generation technology means for the energy transition and the opportunities that lie within. Click here to read the first and second articles.

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

Consumers’ role in flexibility is built on trust

The new business models making solar affordable for all

Can European stalwarts survive the growing threat of Chinese OEMs?

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

An influx of Chinese equipment into the European market may offer brief respite for western OEMs

Although now a mature industry that has benefitted from invaluable pioneering experience, the European offshore wind sector is at a turning point. A perfect storm of high commodity prices, supply chain shortages and a large backlog of inflexible procurement agreements have resulted in all major European turbine original equipment manufacturers (OEMs) operating at a loss.

Contrast this with the fortunes of the major Chinese turbine OEMs, who, following a year of record installations, are currently able to offer competitive warranty offerings and lower production costs than their European counterparts.

While this turn of events has prompted some commentators to question whether European offshore wind manufacturers will lose their leading position in European markets—in a manner akin to their peers in the solar industry in the 2000s—perhaps we can learn from those lessons and ensure that we manage this competition in order to drive the market to better performance and longer-term stability.

Indeed, many project developers in Europe and Asia will inevitably welcome an increase in Chinese bidding owing to political net-zero aims and a lack of production capacity from the likes of Vestas and Siemens Gamesa.

And a chance to work through order backlogs and reassess supply commitments at uneconomic prices may also offer beleaguered European OEMs an opportunity to consolidate and restructure where necessary, pausing the inexorable drive to ever larger turbines and prototypical equipment at a time of record low auction prices and volatility in the commodities markets. Indeed, a period of restructuring may offer European OEMs the opportunity to return as more competitive entities.

Lastly, in the face of significant rises in European power prices following the invasion of Ukraine, European citizens are becoming increasingly vocal as to the need for secure, and clean, sources of domestic power. Yet, these same citizens understandably do not want to commit to signing up for expensive offshore wind build-out programmes that overcompensate supply chain failures. We must, therefore, balance future job creation with recognising the cost pressures placed on consumers that ultimately pay for project development.

AN UNPREDICTABLE MARKET

While the long-term fundamentals are stronger than ever for European turbine OEMs, they are facing challenges in the near term through the likes of rocketing steel prices and supply chain uncertainty. While global offshore wind growth continues and is largely driven by Asian markets, the International Energy Agency (IEA) recently warned that renewable power growth is set to slow down for the first time in a decade.

And, with European supply chains notably more exposed to international gas prices than their Asian counterparts, this ongoing instability is making it increasingly difficult for European OEMs to accurately price products for new orders during tender processes, with resulting knock-on effects for the likes of marine suppliers and other stakeholders.

Similarly, the risk of maintaining fixed labour contracts in the current market means that European OEMs cannot accommodate price fluctuations as easily as Chinese OEMs who are less burdened by such issues owing to government initiatives to secure favourable prices for raw materials—particularly steel—and a lower cost of labour than western markets.

SOLUTIONS EXIST

While developers in the European markets will likely encourage the opportunity for lower prices in turbine supply, the question remains as to the extent that it is right to welcome OEMs from China to make up for the shortfall in offshore wind.

Such has been the focus on the use of domestic supply chains, and the development of European offshore wind as an engine for economic growth, that removing a large part of manufacturing and componentry from European markets, for European projects, could become politically untenable.

Therefore, while Chinese OEMs are in a better place than ever to begin displacing European OEMs in their native markets, a considered response might be the implementation of prudent light-touch political and regulatory solutions, in certain development criteria, across Europe to ensure long-term success and healthy competition.

LIGHTER TOUCH

Far from seeking to entirely cut out Chinese OEMs, sensible lighter touch regulation could look at the total penetration of European OEMs in each native market, set a percentage benchmark for content, and, once this was secured, leave developers with the choices in procuring turbines for future or remaining auctions or tenders.

In reality, the world is not that simple and there would have to be further considerations in the detail, but some form of incremental light protection is perhaps the only way that, in the short term at least, European OEMs will retain market share.

Operating in this way or similar, policymakers should be acting to ensure fair competition, either by keeping rules at a minimal level, or incrementally adjusting regulation to prevent the dominance of one or two manufacturers able to enjoy an unfair advantage.

Policy failure ultimately sees a global dominance by a monopoly or an oligopoly of manufacturers and results in trade wars and tariffs—none of which help with maintaining a levelised cost of energy that is affordable for consumers and fair for manufacturers.

LONG-TERM VIEW

But alongside regulations that seek to apply checks and balances, there should also exist those that open doors to stable long-term industry development.

We know historically that this has been an area that policymakers have struggled with most, but by taking measures such as smoothing the permitting process for offshore wind development, policymakers indirectly provide significant support for beleaguered turbine OEMs.

The REPowerEU Action Plan may afford such opportunities in the coming months. However, permitting reform alone will not guarantee the future survival of European OEMs. In the short term, these manufacturers will need to steer away from a constant push for larger machines and focus on building efficiency in manufacturing processes.

The focus for European OEMs should also shift from competing with Chinese manufacturers to focussing on a set catalogue ensuring a reliable supply of equipment to projects with shifting timelines.

This focus on consistent products could prove beneficial in the short- to medium-term, allowing European OEMs to hone their offerings, automate their factories and reduce immediate costs linked to volatile market conditions.

COORDINATED RESPONSE

The uncomfortable truth is that certainly in the short term, the travails of European turbine OEMs are likely to continue. And, commensurately, Chinese offshore turbines will consistently look more attractive.

But to avoid a point of no return for European manufacturers and ultimately trade wars and tariffs, there will have to be some coordinated responses across industry and policymakers.

The former can support suppliers by reducing the pressure for newer, ever-larger turbines. The latter could examine light touch regulation to offer some protection to its longest-served industry pioneers, shoring up opportunities for future stability and growth, but not at the expense of providing future opportunities for more globally diverse product offerings.

The answers are not simple, but as we witness more challenges and complexity in the energy markets than perhaps ever before, it is clear that to protect European jobs and investment policymakers will need to make a choice sooner rather than later. •

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com

Technology and incentives: How to reduce heavy-truck emissions quickly

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

A cohesive industry and regulatory effort is needed to accelerate zero-emission vehicle uptake

Heavy-duty vehicles (HDVs) haul goods and foodstuffs across the continent, playing a vital role in keeping supply chains running. However, when we think of truck traffic, we also think of endless convoys of carbon-polluting trucks on our highways.

Indeed, in the EU, HDVs are responsible for almost a third of CO2 emissions from road transport. At the same time—contrary to what highway service stations and laybys forever clogged by parking HDVs suggest—they only make up 2% of all vehicles on Europe’s roads.

If we are to reduce the EU’s greenhouse gas emissions by at least 55% by 2030 and reach climate neutrality by 2050, the decarbonisation of heavy-duty truck traffic is crucial.

And this vision could (and should) become a reality in the very near future. Zero-emission (ZE) vehicles include battery electric and hydrogen fuel cell trucks and emit exactly what their name suggests: nothing. No particulate matter, no nitrogen oxide, no carbon dioxide.

European truck manufacturers have targeted the mass market roll-out of long-haul ZE trucks for 2024. Daimler, MAN, Scania, and Volvo have all announced models that are able to cover a 500-kilometre range or run for 4.5 hours between charging breaks.

As a result, the requirements for charging infrastructure OEMs are clear: In 2024, we need to roll out a network of high-power chargers to provide charging capacities for these battery electric trucks on the go. The development of a new megawatt-charging system to cover these charging needs is in full swing.

THE CHALLENGES

Currently, there are three main challenges to overcome in the quick and widespread installation of megawatt-charging points.

Firstly, there is a lack of sufficient grid connection on-site. Multi-megawatt charging stations will create a significant electricity demand in rural areas with limited grid connections. The establishment of new grid connections is hampered by lengthy approval procedures and long lead times for equipment (especially transformers).

Furthermore, grid expansion activities must be coordinated and pooled per site between car and truck charging infrastructure providers.

Secondly, there needs to be a guarantee of high availability. Facilities for truck parking are very limited. At peak times, demand for parking facilities at highway service stations far exceeds capacities, hence the real risk that diesel trucks will block designated truck charging stations.

Unavailable, incompatible, or out-of-service charging stations result in spiralling opportunity costs for the freight industry. With time pressure engrained into their business, logistic companies urgently require planning security in the form of new parking spots designated exclusively for charging, smart reservation systems and real-time occupancy detection systems.

In the future, truck telematic systems and logistics dispatch systems could be directly connected to charging stations for flexible route planning and reservation management.

Finally, downward charging technology compatibility is essential. The currently installed Combined Charging System (CCS) fast-charging plug standard can only transmit a maximum power of 500 kilowatts, which results in long charging times for electric trucks—which is feasible for overnight depot charging, but not for on-the-go charging.

Accordingly, the new Megawatt Charging Standard (MCS) is being implemented to provide the necessary charging power. However, it is not downward compatible, which means long-haul electric trucks will require both CCS as well as MCS inlets in order to charge with MCS along the route and use CCS for overnight charging.

Also, highway and en-route charging infrastructure needs to feature both CCS and MCS connectors to allow delivery of electric trucks that have only CCS inlets to charge as well.

REGULATORY AMBITION

Awareness of these challenges is helpful in devising strategies to overcome them—and can pave the way for the rapid decarbonisation of the road freight sector. With manufacturers of ZE trucks as well as charging infrastructure providers at the ready, regulatory bodies must now define more ambitious emissions goals to set the pace.

The ramp-up needs to happen in unison for a viable business case to develop: Any scenario where ZE trucks are on the road that cannot charge in the required time and location, or where high-power charging points sit idle, will seriously limit the decarbonisation drive we need in this decade.

Shortening the approval procedures for grid connections is urgently necessary to provide the required infrastructure for MCS charging points. The EU’s Alternative Fuels Infrastructure Regulation (AFIR) proposes mandatory targets for a high-power charging station network across Europe until 2025.

However, these are only minimum targets, given that truck manufacturers forecast a sale share of up to 10% for ZE trucks. Although the current 2025 emission targets for heavy-duty trucks could be met with a mere 5% of ZE vehicles, there is a clear need for doing more. In order to transform this interest into action, however, there needs to be the right purchase incentives and financing instruments for SME road freight companies that make up a large share of the market.

Currently, EU emissions reductions lag behind what market-ready technology could achieve. All eyes are now on a review of EU emissions standards for heavy-duty vehicles in the final quarter of 2022.

The campaign group Transport & Environment rightly argues in favour of a 100% emissions reduction target for 2035—which is more than feasible from a technological point of view and much-needed if we want to stand a chance of honouring the Paris Agreement’s 2050 goal. •

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

Shipping on a voyage to low-carbon fuel options

Today’s approach to energy is unsustainable

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Industrial energy efficiency measures are growing in popularity

Today, energy efficiency is at the forefront of the global discussion. The ongoing war in Ukraine, the disruption caused by the Covid-19 pandemic and the global climate crisis have all compelled us to reconsider our relationship with energy. In short, the way we consume energy today is simply not sustainable if the global energy sector is to achieve the ambition of net-zero emissions by 2050.

However, it is not all gloom and doom. At least one multinational investment management company regards the current crisis as an opportunity to accelerate progressive change. While conceding that capital may initially flow to the oil and gas sectors, soaring energy costs could hasten the transition to a low-carbon economy.

In addition to using clean energy, our entire society, from homes and businesses to industry, must commit to using power more efficiently if we are to reach net-zero emissions.

I am not alone in this belief. At a recent global conference on energy efficiency, ministers and other senior representatives from 24 countries—including France, Germany, Indonesia, Japan, Mexico, Senegal and the United States and the African and European Unions—issued a joint statement stressing the importance of energy efficiency for addressing many of today’s critical challenges, including the energy crisis, inflationary pressures and rising greenhouse gas emissions.

The International Energy Agency estimates that embracing energy-efficient technology will support global economic growth of 40% by 2030 while cutting energy use by 7% compared to today’s numbers.

MOTOR EFFICIENCY

A critical step to achieving this and making better use of energy resources is to improve the efficiency of electric motors. The reason is that today, industrial electric motors consume more than 45% of the world’s total electricity, and by 2040, their number is expected to double.

Even marginal improvements in efficiency can reduce energy use by a significant amount in absolute terms, with an additional benefit of saving cost and CO2 emissions. Independent research reveals that replacing the world’s 300 million-plus industrial electric motor-drive systems with optimised, high-efficiency equipment could reduce global electricity consumption by 10%—roughly 90% of the entire EU’s annual consumption.

High-efficiency electric motors controlled by variable speed drives can significantly contribute to the success of modern industry’s net-zero journey. Experts estimate that around half of all industrial motors could be paired with a drive for greater efficiency, but the current rate of adoption is just 23%. Too many of the world’s electric motor-driven systems still use outdated and inefficient technology and waste energy.

INDUSTRY RESPONSE

In a recent survey we conducted with industrial companies on energy efficiency, nearly 90% of the respondents indicate that they will increase energy efficiency spending over the next five years. Reassuringly, more than half (52%) intend to achieve net-zero emissions over the same period. Meanwhile, the vast majority (97%) are already investing or planning to invest in energy efficiency technologies.

We also found that 40% of the companies surveyed plan to make energy improvements already in 2022. Almost two-thirds of the survey respondents are upgrading their equipment to best-in-class efficiency ratings, such as high-efficiency electric motors controlled by variable speed drives (VSDs).

INVESTMENT BARRIERS

While the survey findings were largely positive, there were also areas of concern. Half of the respondents listed cost as the most significant barrier to improving energy efficiency, especially those who are not planning to do so in future. Still, despite cost being a barrier to energy efficiency investment, 59% of the respondents listed cost savings as the most important reason for investing.

For the global industry to make significant gains, it is vital to help stakeholders understand that transitioning to net-zero emissions need not mean a net cost. Both suppliers and governments need to advocate the message that the adoption of energy efficiency technology offers a fast return on investment while cutting CO2 emissions.

While our survey was conducted shortly before the war in Ukraine, with its consequent impact on energy supplies, the message has not changed. Indeed, it has become even stronger. In recent months, Microsoft, DHL and Alfa Laval are among the industry-leading companies that have joined forces under our Energy Efficiency Movement.

We formed this initiative to highlight that saving energy has long-term benefits for the planet. And the time to act is now. •

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

Inertia’s new frontier

High energy prices and momentum to transition demand new grid capacity and fast

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Increasing electricity demand for a decarbonised economy provides opportunities for new ways of thinking

Europe’s energy landscape is facing a watershed moment. A convergence of factors is urgently pushing decarbonisation of both energy systems and big industrial processes like steel, fertiliser production or heavy mobility.

To meet European energy and climate ambitions, including those newly set out in the REPowerEU Plan, current fossil fuel generation capacity needs to be replaced with renewables—a big challenge in itself.

At the same time, electricity demand is increasing dramatically which also poses the challenge of massively adding new renewables capacity in the long run. But with a coordinated approach to implement new made-in-Europe technologies that are becoming available, it is possible.

ADD CAPACITY QUICKLY

Existing renewable energy sources, specifically wind and solar power, will need to be capitalised on in order to add new capacity to the system in a reasonable timescale. In the Nordics there is a fair amount of unused land and establishing wind farms is less complicated from a permitting viewpoint. But the picture looks very different across the rest of Europe where conflicts between local interests and power needs exist.

The scale of new electricity supply that is anticipated based on commitments made in various European plans and ambitions is massive. This is evident in the recent Esjberg Declaration by the governments of Belgium, Denmark, Germany and the Netherlands which will see 150 gigawatts (GW) of offshore wind capacity deployed in the North Sea by 2050.

To deliver on that goal, newer offshore wind technologies will deliver the biggest impact. As it is relatively cost-effective with a fast speed of deployment, it is completely foreseeable that there will be a massive instalment of floating offshore wind in the North Sea this decade.

In fact, in order to build out enough capacity to fulfil targets set in the “Fit for 55” package, additional multi-GW offshore wind projects would need to be commissioned as early as 2030.

Generating electricity offshore solves many issues but raises new ones. How do we best bring this power on-land, distribute to consumers and ensure grid stability?

OFFSHORE GRID

Today, offshore wind farms use individual point-to-point connections in order to collect the electricity, but from a long-term perspective, and at scale, it will be more cost-effective to build high-voltage direct current (HVDC) grids in the sea instead.

In order to construct such grids, HVDC breaker systems will also be needed. This technology is currently being developed and has been verified in a European-funded project. Some interesting new technologies are emerging in this area, such as SCiBreak.

COMPLIMENTARY TECHNOLOGIES

If we are successful in massively scaling renewables, the issue causing fluctuating prices still remains. For both wind and solar, we are dependent on weather for generation. One way to balance this is to use a renewable energy source that is out of phase with both solar and wind: wave power.

Taking advantage of this technology, generation from an offshore power system could be made more consistent through wave power generation, even during low wind periods. Additionally, this could decrease the eventual need for storage capacity on land.

Consistent generation Wave power’s production profile complements wind and solar generation cycles (source: CorPower)

TRANSMISSION AND DISTRIBUTION

Transmission and distribution are the next pieces of the puzzle, as the existing grid has its constraints. It is generally more difficult to get permission for, and to build, new transmission and distribution infrastructure than it is to take care of existing grids, hence it is very important to focus on maintenance and optimised operations.

New technologies are emerging on the market that open opportunities: satellite imaging for maintenance planning, drone inspections of powerlines and equipment, digital twin software to optimise operations, and dynamic line rating to extend the usage envelope.

These technologies are enabled by a combination of advances in monitoring hardware, communication technology and increased calculation capacity. Examples of new actors in this segment include Hepta Airborne and Enline which both contribute with novel approaches to their area.  

CROSS-BORDER COORDINATION

To truly accelerate adding production capacity and optimising the grid for this, coordination between Member States is crucial. The implementation of these projects requires very intensive investments and collaboration.

The Transmission System Operators (TSOs), industry and governments need to join forces in order to look at cost-effective grid installations. An excellent example of this could be seen recently at WindEurope where several member states, TSOs, industry and NGOs released a joint declaration in support of the expansion of offshore wind in Europe.

However, it is not yet entirely clear how such projects will be best implemented. One option could be through Important Projects of Common European Interest (IPCEIs) from the European Commission. Given the urgency, more straightforward procurement procedures would also increase the speed of implementation as well as expedited permitting.•

This is the second in a series of three articles in which Johan Söderbom examines what next-generation technology means for the energy transition and the opportunities that lie within. Click here to read the first article.

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

Chemicals’ complex route to green

The cleantech funding conundrum

Water efficiency could help Europe drive decarbonisation and boost industrial competitiveness

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

The climate urgency requires swift action at global, regional and local levels

While the risks of a climate crisis loom ever-nearer, global leaders gathered a few weeks ago for the World Economic Forum in Davos, Switzerland, to argue once again for the need for swift climate action.

Even before this, in January 2021, the new German Chancellor Olaf Scholz called for a determined approach, saying: “We will no longer wait for the slowest and least ambitious. We’ll turn climate from a cost factor to competitive advantage”. It is encouraging to see leaders finally rising to the climate challenge.

The message is clear: We need more than ever to move faster and act collectively to address the climate emergency. To accelerate decarbonisation in industry and successfully achieve the goals set under the 2015 Paris Climate Agreement, we will have to work together. Governments, businesses, investors and civil society will need to partner to turn this commitment into concrete actions.

Water efficiency is part of the solution to decarbonisation.

CRITICAL ELEMENT

Being a fundamental resource for nearly every step of manufacturing and production processes, water is a critical element of the solution. Water and energy are closely intertwined as water is the primary energy transfer medium for many industries–using water for pumping, heating, cooling and cleaning requires energy.

This water-energy nexus is ubiquitous in our modern industrial society and their relationship in terms of energy efficiency can be represented quite simply: saving water means saving energy, which leads to greenhouse gas emission reduction while reducing costs for industry. In other words, water efficiency can help mitigate climate change while boosting industrial competitiveness.

In Europe, industry represents nearly 50% of total water use. Optimising industrial water use will not only decarbonise the economy in a cost-effective manner, but it will also help reduce pressure on water resources and exposure to risks of shortages.

According to the World Resources Institute, there will be a global deficit of 56% between water supply and demand by 2030. In addition, the International Energy Agency forecasts a 35% increase in world energy demand by 2035 which corresponds to a growth of 85% in water demand.

Exacerbated by climate change and energy demand, water stress has become a serious business issue and generates competition between various economic sectors.

POLICY INCENTIVES

A strong policy framework is needed to incentivise water efficiency. Circular water management can help alleviate this problem through water efficiency and water reuse techniques. Unfortunately, only 2.4% of Europe’s treated urban wastewater effluents are being reused.

For this reason, water reuse in industrial processes should be strongly incentivised whenever appropriate to minimise water abstraction and wastewater discharge. This would bring environmental benefits and have a positive climate impact.

The water-energy nexus should be better reflected in legislation, and lawmakers should fully consider the benefits stemming from water efficiency as a key driver to delivering energy savings. For instance, the industry should be encouraged to assess water efficiency opportunities as part of their energy audits as it would incentivise measures towards water optimisation and energy savings.

EU lawmakers should seize the Green Deal policy package as an opportunity to exploit the benefits from the water-energy nexus in order to contribute to the climate neutrality objective while addressing water preservation and reinforcing industrial competitiveness. Technological solutions already exist, but they need regulatory incentives to be deployed at a large scale and to make long-lasting impacts.

PERFORMANCE INDICATORS

Becoming greener also means being more competitive. Large industrial companies are increasingly realising that improved water cycle performance can drive both cost efficiencies and corporate sustainability commitments.

Driving continuous improvement on water and energy-mass balance has become a critical performance indicator for industry as global competition increases pressures on productivity and costs while at the same time industry is called to support increasingly ambitious environmental regulation.

As an example, Arcelor Mittal, the world’s largest steel mill company partnered with Ecolab to save 8.3 billion litres of water, reduce its energy use by 6.2 million kWh and avoid 1,226 metric tonnes of CO2 equivalent, while saving €1.2 million and creating a more sustainable operation in just over one year through more efficient water usage at a manufacturing site in Romania.

Water efficiency is a direct and cost-effective strategy that enables decarbonisation and supports industrial competitiveness. It is now time for lawmakers and industry leaders to speed up their actions and seize these existing opportunities. •

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

The water-energy nexus: an untapped resource for major energy savings

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

We must move to an energy-neutral wastewater sector to achieve climate neutrality in Europe

The water-energy nexus refers to the link between energy use in water management and water use in energy production. Water and wastewater infrastructure account for 3.7% of the global electricity consumption. The good news is that any efficiency gains in one benefits the other.

And by using high-efficiency technologies, we can cut half of that energy consumption at zero or negative cost. This would be equivalent to removing 9.2 million fossil-fuelled cars per year and it would free up $40 billion to invest in other types of water infrastructure.

The nexus also holds the potential to generate large-scale energy and water savings across sectors and drastically reduce greenhouse gas (GHG) emissions—an important element to address the impending climate change crisis.

SET TARGETS

The European Commission is revising the EU Urban Wastewater Directive which has been in place since 1991. This presents a major opportunity for lawmakers to update legislation with the latest trends in the wastewater sector and reduce the energy used to treat water.

Wastewater utilities are at the centre of this important work with many already adopting energy-saving measures.

A good way forward is to introduce energy efficiency targets for wastewater treatment plants of a certain size—for instance, of over 10,000 population equivalent (pe)—and consider mandatory energy audits that include measuring water efficiency.

Establishing GHG emission reduction targets for wastewater utilities is also key to addressing the energy-climate challenge. GHG emission targets for larger treatment plants of over 100,000 pe should be in place by 2035 and for the wider sector by 2040.

AVOID LEAKAGE

Lastly, addressing the issue of water leakages is critical to conserving energy. Due to water leakages, more than 20% of clean drinking water is lost in distribution networks of about half of the EU Member States—in some countries this percentage is as high as 60%. This means we use energy to clean and move this water but then is lost as it leaks through an old pipe or busted water main.

When this happens, we lose twice—the water itself and the energy required to treat, pump and deliver it. The city of Brussels, Belgium, experiences 23% of water losses – wasting 1.77 gigawatts, or 634.4 metric tons of CO2-equivalent, per year. This is equivalent to 138 cars running non-stop on natural gas for a whole year that can easily be solved through existing solutions.

ADOPT DIGITAL

Digital solutions can achieve significant energy savings within a short period of time with limited investment needs. Utilities across the globe are proof positive that these solutions work.

A wastewater treatment plant with 400,000 residents in Cuxhaven, Germany, achieved a 26% reduction in aeration energy usage. This corresponds to 1.1 million kilowatt-hours annually, or 485 metric tons of CO2-equivalent, in savings, by simply using digital solutions.

Across Europe, the implementation of similar real-time support solutions to wastewater treatment can further reduce energy use and GHG emissions by 0.3 million metric tons of CO2-equivalent. This, in combination with intelligent pumps for wastewater management, can bring huge energy savings thus considerably lowering costs for utilities.

Water technologies for energy savings and promoting green energy production are tried, tested and readily available. We can make a profound difference by coming together with wastewater utilities to seize this moment to promote the dialogue around water and bring impactful policy approaches and technologies to solve water and energy challenges. •

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

A new way to count greenhouse gas emissions

Technology can empower consumers at a time of high energy prices

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Greater penetration of internet-connected devices and appliances will help manage bills

Since October 2021, European households have been hit with high, fluctuating energy prices. And the future seems bleak: high prices are here to stay. But there is a silver lining. While the current energy situation is dire, it also brings a great opportunity to accelerate the energy transition.

And we do not have to look as deep into new technologies as one may think. Capitalising on a number of already available solutions, end customers can make a significant impact in decarbonising the EU’s energy sector while also cutting their energy bills.

These existing technologies address the immediate need to offer more control over individual electricity consumption and bills, while also making strides in electrification and driving the clean energy transition.

CUSTOMERS TAKE CONTROL

The European Commission’s ongoing harmonisation of the EU energy market has fostered a much-needed transparent pricing scheme. This has paved the way for new business models and suppliers to serve hourly-based retail electricity services.

Since fluctuating prices create an incentive for flexibility, these app-based energy management solutions like Tibber and Greenely have become profitable for residential consumers in recent months.

In addition to savings, these apps also adapt consumption patterns to the availability of renewable generation thus allowing for a low CO₂ system. And as energy prices will not stop fluctuating, the business models taking advantage of this will prevail.

END-USER ENERGY MANAGEMENT

These pricing models are however only useful when consumers can be flexible with their electricity use as well. Luckily, today, more and more average consumer devices or household appliances are connected to the internet. What, just a few years ago, was quite complex and highly proprietary, is now mainstream, leading to increased penetration of connectivity in household devices.

This opens for more control, adaptation to price variations and lower bills for household energy consumption. Household appliances can be set on schedules via energy management platforms to run when energy prices are lower and customers can make use of these to better control electricity consumption in general.

As increased connectivity is no longer expensive or complicated to integrate, this will be expanded to even more household uses including larger devices such as hot water heating in washing machines and dishwashers.

CONTROLLABLE LOADS

Additionally, in many parts of Europe new types of electrical loads are being added to the system. The ongoing penetration of heat pumps throughout Europe, and especially in the Nordics where they are commonplace in residential buildings, provides a large, controllable, often wifi-enabled load making it suitable to integrate into energy management platforms.

Similarly, we also see a quick and increasing uptake of electric vehicles (EVs). Their charging systems are extremely well-suited for controlling and shifting to low-cost charging times.

Behind the metre, there is an increasing number of photovoltaic (PV) installations which form part of the local generation system. Through this, production and consumption can be optimised to try to avoid fluctuating prices.

MONEY WELL SPENT

But heat pumps, EVs and solar PV sound like technologies that exclude those hardest hit by the current energy prices: low-income households. This makes it all the more important to support lower-income households with access.

One thing is certain, Governments will spend money to help alleviate the stress of high prices. Funds could be best used to introduce these technologies via support schemes rather than subsidising electricity bills or capping prices.

Residential subsidy schemes to install EV charging stations or to switch from gas to heat pumps already exist throughout Europe. Tweaking such programmes to make receiving support dependent upon the devices being connected will put direct control in the consumers’ hands at no major additional cost. Allocating support in this way additionally opens up for innovations and start-ups that create new jobs.

We should not underestimate the power of the individual customer to take advantage of existing technologies that can save them money. Given Europe’s pressing need to transition to clean energy, strategies that enable both consumer savings and make steps towards a low carbon system should be favoured for adoption. •

This is the first in a series of three articles in which Johan Söderbom examines what next-generation technology means for the energy transition and the opportunities that lie within.

If you have a thoughtful response to the opinions expressed here or if you have an idea for a thought leadership article regarding an aspect of the global energy transition, please send a short pitch of 200 words outlining your thoughts and credentials to: opinion@foresightdk.com.

Sovereign wealth funds wade into the energy transition

From laggard to leader: How Poland became Europe’s fastest-growing heat pump market

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Poland’s long-term strategies are a blueprint for heat pump rollout

With the war in Ukraine compelling everyone to rethink their energy strategies and focus on getting rid of Russian fossil fuel imports, while maintaining what is left from the affordability of energy supply, the go-to tactics are achieving several energy policy goals at the same time. The Polish heat pump sector seems to be doing just that.

It is showing the fastest growth rate for heat pumps in Europe in 2021 with an expansion of the market by 66% overall—more than 90,000 units installed reaching a total of more than 330,000 units. Per capita, more heat pumps were installed last year than in other key emerging heat pump markets, such as Germany and the United Kingdom.

But this has not always been the case. For years Poland prided itself on being one of the most energy independent countries in Europe. Its coal mining sector and coal-fueled power plants provided carbon-intensive, but domestic, energy—both for heating and electricity.

COAL DEPENDENT

Even now, with the recent growth of renewables making quite a dent in Polish coal reliance, the share of coal in electricity production and district heating is around 70%. In individual home heating, it is around 48%. Poles consume as much as 87% of the coal burned by all EU households in their homes for heating. The heating sector is responsible for nearly a quarter of CO2 emissions in Poland.

This reliance, however, has been proving less and less sustainable for a number of reasons — especially in the individual heating sector. First of all, the energy independence narrative no longer holds. Polish coal mines are notoriously labour-inefficient, but a bigger problem is that they become less and less economical to run for sheer geological reasons. The average depth of extraction is now close to 800 metres below ground, which brings immense cost—both economical and human. 

Time has seen a steady decline in coal mining output, especially for the coal sorts used by individual boilers are in shorter supply. This has been replaced by imported coal mainly from Russia. Poland is currently buying €0.5-1 billion worth of Russian coal each year to heat its houses. 

Even if we put aside the acute air quality problems that burning coal in old individual coal furnaces brings—which we should not as the list of 20 most polluted cities in Europe constantly features at least 10 Polish cities—this should be enough in the current circumstances to warrant a huge public policy shift directed at eliminating coal from individual heating altogether.

The preferable way of doing so would be a massive deployment of heat pumps and energy efficiency programmes whilst continuing to utilise more renewables for electricity generation at the same time. This would check the boxes for so many policy objectives, including increasing energy security, reducing carbon emissions and lowering long-term heating costs.

LONG-TERM PLANNING

Given Poland’s reliance on coal for heating, how did the Polish heat pump market achieve such remarkable growth? All signs point towards government policy. Through the ten-year Clean Air Programme that started in 2018, Poland will provide close to €25 billion for replacing old coal heating systems with cleaner alternatives and improve energy efficiency.

In addition to providing subsidies, many regions in Poland have begun to phase out the coal heating systems through regulation. Prior to those bans, heat pump installations rates were modest with limited growth over the years. This shows that policy can make a big difference in steering the market towards clean heating away from polluting fossil fuel heating systems. 

TRUST BUILDING

The recent success is also a showcase of efficient market development by the heat pump industry association, PORT PC. Building customer and installer trust by developing and introducing industry guidelines, quality standards and certification, as well as conducting extensive training programmes, is now bearing fruit.

Further growth in the heat pump sector in Poland is expected and will need to take place in order to further replace coal heating. This can be achieved by implementing changes to the Clean Air Programme and other similar programmes designed to improve the efficiency of homes and heating systems, like the current tax breaks for investment in buildings insulation as well as the STOP SMOG programme designed to help local governments give targeted support to the poorest households. 

Also, the recently announced new programme “My Heat” financed from the sale of EU ETS allowances through the Modernisation Fund and fully directed towards heat pumps, will provide additional sources of funding and hopefully build even more awareness among consumers.

Whilst the Clean Air Programme has so far promoted mostly gas boilers (over 40% of the total), the war in Ukraine has shown that natural gas will be a scarce and costly resource and should be used wisely. Heat electrification, rather than gasification, is surely the way to go.

CHALLENGES REMAIN

Three challenges remain to be tackled for continued success. Firstly, for heat pumps to be most beneficial in terms of climate protection, electricity generation should continue on the pathway towards (quicker) decarbonisation. 

Secondly, heat pumps should be an element of system flexibility, rather than a strain on the peak demand. For this, dynamic tariffs and smart solutions are fairly easy fixes but require regulatory intervention as well as consumer awareness and industry willingness to go the extra mile. 

Thirdly, proactive measures should be taken to avoid potential supply chain disruptions and to secure enough of a skilled workforce. Poland is very well positioned in both areas, now being a highly industrialised country with excellent technical education.

Poland’s energy transition is picking up speed, and the growing heat pump market is a prime example of a policy push working with supply pull to deliver excellent results. The prospects are encouraging and there have never been more incentives to continue on this pathway. •

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Clarity is the key to confidence in voluntary carbon markets

In from the cold

Listen and subscribe to Watt Matters wherever you get podcasts. Follow us on Twitter at @WattMattersPod or email us at show@wattmatterspodcast.com. You can also find FORESIGHT Climate & Energy on LinkedIn.

Illustration: Masha Krasnova-Shabaeva. Art director: Trine Natskår.

The questions facing low-carbon heating

Listen and subscribe to Watt Matters wherever you get podcasts. Follow us on Twitter at @WattMattersPod or email us at show@wattmatterspodcast.com. You can also find FORESIGHT Climate & Energy on LinkedIn.

Illustration: Masha Krasnova-Shabaeva. Art director: Trine Natskår.

A secure Europe

The fallout from Russia’s unprovoked and unjustified invasion of Ukraine will be felt for many years to come across all areas of society.

While the questions over Europe’s dependency on Russian oil and gas—and whether it has been a millstone around the neck of the energy transition—have been around for many years, there is now new political momentum to shut off the supply and end this dependency.

Can Europe go it alone and what does it mean for the shift to a decarbonised economy – and the economy in general?

A market fit-for-purpose

In today’s episode, we are looking into electricity market design. A vital part of the energy transition, market design can make or break a country’s decarbonisation efforts.

You can have all the renewable energy you need, but without an effective market in which to sell the power, this time, effort and investment would be wasted leaving the energy transition to grind to a halt.

Meanwhile, the last few months have seen huge increases in power prices across Europe. Is this the sign of a broken market or a symptom of something much bigger? Paired with more distributed energy resources, the rise of the prosumer and digitalisation, the electricity market is having to adapt rapidly.

Fiscal reform may make or break EU green hearts

Energy transition faces a shortage of key workers

Our top ten from 2021

The energy transition entered the digital age in 2021. Our most-read articles of the past 12 months show an appetite for data, artificial intelligence and effective accounting. Hydrogen, of course, also makes an appearance

With the global economy still reeling from the Covid-19 pandemic, 2021 was a year of adjustment to a new normal for many. These new processes are increasingly digital-based solutions, which was reflected in our most-read articles for the year.

We also present our top five opinion pieces for 2021. These pieces are written by high-level actors from across the energy spectrum and we would like to invite anyone that has an interesting view on the energy transition to pen such a piece. These articles are not promotional but are a chance to demonstrate your thought leadership on the barriers to a decarbonised economy and to create a discussion over potential solutions.

If you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers send a short pitch of 200 words explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Most read articles of 2021

The grid in search of a brain

Around 50% of the shift from fossil fuels to renewable forms of energy has been a digitised transition to 2020, says Energinet, Denmark’s power system operator. As the world digitises further, the already vast volumes of data will only increase in mass. Advances in Artificial Intelligence technology and machine learning tools provide ways of processing this tsunami of data into a new world order. Read here

Traditional rules do not apply in this experiment

Five years ago, technologists excitedly started suggesting how to use blockchain for energy applications and a raft of start-ups followed, sporting distributed ledgers for the power sector. Today, the word “blockchain” is seldom heard in energy circles. While the hype may have been overblown, work continues instead on a quieter revolution to the one that was promised. Read here

Metrics that inflate the cost of the energy transition are under attack

Put garbage into an economic model and garbage comes out. By using a discount rate that inflates the cost of the energy transition, the EU’s executive body is undermining the bloc’s new and more ambitious carbon reduction goal. Behind the scenes, however, method may lie in the madness. Officials working on legislative updates are suspected of holding a negotiating trump card up their sleeves. Read here

Use the correct data in the right way

Data is having a major impact on our world. In energy, an influx of data is changing the roles of each player across the value chain but it needs to be gathered and processed in a suitable way to have the greatest influence. Ensuring the data is right to begin with is essential to the success of the energy transition. Read here

Why hydrogen trains are tracking hot

Hydrogen suffers from an abundance of hype, particularly about what it can be used for in the energy transition. Wild claims for the application of hydrogen, with little basis in current science and commercial reality, have worked to obscure the realistic opportunities for putting truly clean hydrogen to work here and now. Read here

Most read opinions of 2021

Governments can stimulate green growth in emerging technologies

Emission-free energy alternatives to fossil fuels are emerging that could drive the world’s shift to a net-zero future. But there must be sufficient stimulus from governments to limit the technical, commercial and financial risks of these new technologies for investors, says Arnaud de Giovanni, global renewables leader at EY. Read here

The green comeback of public transport

The public transport sector has been hit hard by the covid-19 crisis. Since climate change is not taking a break, electrification must be at the centre of a green recovery. Smart depots will play a crucial role in transforming the face of urban transport, says Monique Mertins at Siemens Smart Infrastructure. Read here

Surpassing $100 billion in climate finance requires stronger whole-of-government diplomacy

Developing a climate finance plan of requisite scale depends on better joined-up diplomacy by developed countries who must heed the warnings of high jeopardy, says Iskander Erzini Vernoit from think tank E3G. Read here

Clay cement can cut up to 3% of global CO2 emissions

Replacing limestone with clay in cement production can cut global CO2 emissions by up to 3%. But there is significant investment tied up in the “old” ways of doing things, and it will be necessary to use a range of incentives—as well as technological advancements—to change the status quo, writes Fleming Voetmann, vice president at FLSmidth. Read here

A small molecule with big potential

Green hydrogen is expected to become a commercially viable energy carrier soon. The coming decade could see it become a vital part of the energy transition, says Frank Wouters from the MENA Hydrogen Alliance. Read here

Keep up-to-date with FORESIGHT Climate & Energy in 2022 by subscribing here. You can get your first 30 days for just €29.

Green hydrogen hurdles complicate Southeast Asia’s net-zero goals

Cross-border cables hold a crucial role in the energy transition

Second part of Fit-for-55 is an opportunity to deliver a fair and ambitious green deal

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

With some member states pushing back on the first package of proposals, the imminent second set of policies can solidify progress on Europe’s climate agenda

Compared to July 2021, the political context has changed. International and domestic developments are adding to the pressure to deliver socially fair and climate ambitious proposals. COP26 in November offered a political lifeline for accelerating action to keep temperature rise below 1.5C.

Now our attention turns to 2022, which will be about acceleration and delivery; all EU proposals will be assessed in light of the contribution they will be making ahead of COP27. The energy price crisis also casts a sharper light on the risks that come with a continued reliance on fossil fuels and underlines the need to accelerate the green and fair transition. A lot is riding politically on the upcoming package.

The European Commission is expected to release the second part of the “Fit for 55% Package” on December 14th (even though a delay is rumoured). This will be the first opportunity for the EU to confirm their seriousness to accelerate the European Green Deal after COP26. Dropping the ball now would dent the credibility of its climate action.

The political momentum around climate action is still considerable. The past 12 months saw the EU pivot from political target setting to actual implementation. With COP27—taking place in Egypt in November 2022—already on everyone’s mind, the EU must now confirm its role as a global front-runner while accelerating the delivery of the European Green Deal.

The July Fit-for-55 package was about meeting expectations on climate efforts. Amid a severe energy price crisis, the December proposals are about demonstrating that the Union can meet citizens’ expectations to accelerate the transition as it decarbonises its economy.

Unfortunately, some Member States are getting cold feet and pushing back against the first round of proposals. It is crucial that the EU secures the viability and acceptability of its climate plans by designing climate policies that also directly benefit EU citizens and consumers.

WHAT TO EXPECT

The December legislative proposals include provisions for a gas package, the European Performance of Buildings Directive (EPBD) and the recommendation on the social dimension of the climate transition. All are an opportunity to deliver a socially fair and climate ambitious European Green Deal.

All can make a progressive offer to citizens. All can set a clear narrative on the need to change consumption patterns and send a clear signal to markets about the necessary transformation. And all can introduce governance improvements—whether it is ensuring citizens’ participation, respect for subsidiarity, or science-based decision making.

How could this be achieved in practice? The gas package can clarify the future role of fossil gas in the energy mix and set a clear pathway to manage the transition away from it. If we are learning anything from the energy price hikes, it is that renewable and energy efficiency solutions are safest for citizens, who gain secure stable and affordable energy.

The EPBD can boost the decarbonisation of our building stock, currently responsible for 40% of today’s EU energy consumption. Renovating homes will make our homes more energy-efficient, reduce energy bills and create new jobs. Finally, policy proposals must take the social dimension seriously. Relying solely on the Social Climate Fund is a high-risk strategy that must come with improving provisions across policy files to strengthen fairness, inclusion and participation.

All EU institutions will be exposed to reputational risks in 2022 as they seek to deliver the European Green Deal as the cornerstone of the EU’s political agenda. The Commission’s credibility will hinge on its ability to shepherd implementation proposals throughout a swift legislative process.

The European Parliament, elected on a green wave only two years ago, is approaching the mid-term; civil society organisations will take stock of its success in delivering the green mandate it received from EU voters. And the Member States will be facing a serious stress test for their commitment to decarbonise their economy while negotiating a “Fit for 55%” package fit for society.

December is an opportunity to deliver a socially fair and climate ambitious European Green Deal – let’s seize it.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

All aboard

There’s more to digitalisation than data

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Digitalisation of wind assets can help increase the transparency between stakeholders

The wind power sector is more complex than ever. The trend towards consolidation means project owners and operators increasingly oversee large, global multi-brand wind, solar and storage portfolios, rendering many operations and maintenance (O&M) strategies obsolete.

This trend is set to gather pace in the coming years, as momentum for the energy transition drives investor interest in green energy. Financiers understand that wind is a good long-term bet but operators will need to justify this trust.

Amid this changing landscape, digitalisation has continued to take hold.

There are three main stumbling blocks for the growing wind sector as it looks to achieve full digital integration: siloed data, complex portfolios and a need for truly holistic digital tools.

SILOED DATA

Digitalisation naturally produces large quantities of data. This can take the form of technical data on asset health or operational data on how teams are functioning. Data is siloed when it is held separately within an organisation and used for different purposes.

A data silo, at best, means missing out on additional profit as key opportunities to improve processes and operations are not uncovered. At worst, it means an inefficient organisation where critical information is not shared with the right people, leading to suboptimal decisions on an operational and strategic level.

The key to a non-siloed approach is considering a wind farm as a single, cohesive power plant, rather than seeking to optimise the output of individual turbines. To enable this, asset management platforms must provide the right analysis to the right user type within an organisation, drawing from multiple data sources.

Ultimately, it means delivering instant access to key information to entire teams, from field services to CEOs, to create clear lines of communication throughout an organisation.

COMPLEX PORTFOLIOS

In 2030, total installed renewables capacity will be 902 gigawatts (GW) of solar capacity, 1114 GW of wind power and 87 GW of storage—up from 339 GW of solar, 449 GW of wind and 5 GW storage in 2020. The new reality faced by the leading owners and operators in the future will be diverse, with assets of different brands and different technologies and different ages.

Tomorrow’s digital tools will need to be very different from today’s. Using single tools to manage one aspect of operation will lead to ineffective decision-making across global portfolios. The next generation of digital platforms must integrate seamlessly with legacy hardware, large personnel counts and existing IT systems.

Crucially, with over 60% of operators set to manage mixed portfolios of wind and solar assets by 2025, software platforms will need to accommodate hybrid portfolios and hybrid assets, without compromising on asset-specific functionality. This means deep sector knowledge for each asset type, building in engineering and operational expertise.

HOLISTIC DIGITAL TOOLS

Many wind markets, including the UK, have thrived without significant government support for years. As key markets such as China look to follow the shift to a merchant environment, more projects will be exposed directly to pricing mechanisms.

The operators who succeed will be those who remain responsive to energy price changes and prioritise profitability over maximising energy production. Flexibility is key. Turbines can be uprated or derated as necessary to boost the value of the energy sold, measuring success by different metrics that reflect revenue per unit of spend.

At present, digital tools tend to have a granular focus, tracking operational data without linking to profit-driving key performance indicators. In contrast, the software platforms needed to drive wind’s growth in the future will support asset managers and field teams to make decisions based on portfolio-wide profitability, using data on asset performance, sales and pricing.

Digitalisation is one of the most powerful trends shaping the wind sector. If it is approached smartly, it could change the way owners and operators view and manage their assets. Approached without a strategic vision, it will mean a proliferation of increasingly obsolete “magic bullet” solutions that fail to connect the dots and keep pace with a complex and changing wind sector.

Businesses need to change their mentality when it comes to digitalisation, driving change from within organisations by creating internal champions, capable of connecting available technologies to the commercial benefits with a strategic vision.

The advanced, integrated digital platforms that the industry needs to scale efficiently and minimise growing pains will be created.•

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Decarbonising heat at city scale

So you have committed to net zero… now what?

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

All parts of the energy value chain will need to be flexible to reach net-zero

There has been a lot of talk about net zero and carbon neutrality lately, especially around the COP26 climate negotiations in Glasgow. Many countries, cities and companies have made substantial public commitments, which are admirable. I call this the “what”. More importantly though, now the question is “how” will they achieve these ambitions?

The answer to this is far more complex and requires great minds with holistic views including an understanding of the role of industry and infrastructure. Our political leaders can drive the changes by setting goals and visions and even providing funding and favourable public policy settings. But then you need people with the right skills to make it happen. The task at hand is an engineering and technology feat the likes of which we have never seen before.

The good news is that I believe we can solve these challenges, especially through technology and innovation accelerated through collaborative partnerships and the right policy settings.

CONVERGENCE

The future of energy is closely connected to several other global trends: Industry 4.0 and the transition to integrated intelligent infrastructure. Electrification of everything, digitalisation and the Internet of Things (IoT) are driving and enabling this convergence. It is similar to the convergence that took place over the last 30 years in telecommunications; voice, data and video have all converged and we now take this for granted. Energy, infrastructure, and industry are all converging.

This means more opportunities but also a need to approach things differently. Take for example Industry 4.0—a term coined by the Germans to prospectively explain the fourth industrial revolution taking place. To prepare for this the Germans are focusing on getting the standards right, developing appropriate legal frameworks, allowing for new business models and developing the skills and education system to produce people needed in this environment.

The energy transition needs to be viewed in a similar holistic way but also interconnected to Industry 4.0. The same goes with our view of the world moving towards a much more intelligent infrastructure. One thing impacts the other.

CONSUMPTION

About 40% of the world’s energy is consumed by buildings. Industry including manufacturing consumes about 20% of the world’s energy. Through technology upgrades we can halve consumption in both sectors through existing technologies. Australia’s iconic sports stadium, the Melbourne Cricket Ground, has a smart building management system connected to its events booking system so that heating ventilation and cooling only runs when and where it is needed.

The Melbourne Museum smart infrastructure upgrades show an annual 42% reduction in energy consumption. There are many similar examples with existing technology upgrades. It is important to note though that many of the technologies that will be employed post-2030 have not even been invented yet so I’m hopeful of even greater outcomes and importance in the energy transition. The greatest gains we can make of course come from the energy we do not use.

Along with other energy experts, I am convinced that flexibility is the key to our future electricity system. That is flexibility in conventional generation, flexibility in renewable generation, flexibility in networks and flexibility in demand. The way we generate, consume, store and share energy is being transformed—and is all made possible by digitalisation. In this context, the Grid Edge plays an important role in net zero because this is the place where the consumer, prosumer and the intelligent grid interact, and where we need to balance the fluctuating energy supplies and demands.

On a technical level, some fundamental things we take for granted as part of Industry 4.0 equally apply to the energy transition. The digital twin, which is already widely in use in the industry sector allows you to analyse and plan complex electrical power systems, making them ready for changing requirements. Data analytics, Industrial IoT and artificial intelligence allow you to plan and adjust energy needs in real-time based on real demand data.

HYDROGEN

Effective storage has been said to be the holy grail of a renewable energy future because you can address the reliability issue that comes with intermittent forms of energy such as wind and solar. Not everyone in the Asia-Pacific region has the abundant renewable potential that Australia has and so green hydrogen is a legitimate alternative to fossil fuels if it is scaled up quickly and costs go down.

It also supports decarbonisation of the gas network as we are already seeing with the Australia Gas Infrastructure Group using excess rooftop solar in Adelaide through a Siemens electrolyser to split H2O and create green hydrogen which is reticulated into the local gas grid. As the Asia-Pacific region looks to decarbonise, Australia’s green hydrogen should be a great support in that energy transition.

Moving from the “what” to the “how” is complex but very possible. Energy grids, buildings and industry need to merge into one optimized system. Flexibility is key for energy networks and digitalisation plays an integral role in achieving this and in optimising the energy value chain and lifecycle of our energy systems.
All of this can only be achieved through close interaction of society, academia, and industry to really master the energy transformation. •

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Cities battle to beat the heat

Trusted messengers

The neighbourhood approach to decarbonisation

Source new information from old data

Greater and smarter electrification is key to combatting climate change

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Businesses and governments can work together to utilise the latest smart technologies in our cities and factories

Global warming is real. Rising greenhouse gas emissions threaten to make coastal regions and river deltas uninhabitable for billions of people. To soften the impact of climate change, we must ramp up electrification using green power. The question is: how can governments and businesses offer support?

Humankind needs to take its medicine—decarbonisation through electrification. About 80% of global, annual energy consumption—roughly 14,400 million tons of oil equivalent—comes from fossil fuels. Every ton of oil, or coal, or gas releases damaging carbon dioxide into the atmosphere.

Meanwhile, energy demand is rising. Six hundred new coal plants are planned worldwide to meet this demand. According to the International Energy Agency (IEA), global electricity demand is rising faster than the output from solar and wind, with renewables expected to meet only about half of the projected rise in demand.

To stop pumping carbon into the atmosphere we must increase renewable energy to substitute power from fossil fuels; increase energy efficiency to limit the impact of growing demand; and substitute fossil fuel consumption with electrified applications. This will test the stability of existing grids as the output from renewables results in variable—and at times volatile—energy supply and power flows.

The answer lies in technology—in smart grids balanced by artificial intelligence, in e-mobility and smart buildings. Business and government both have a role to play. Politics must lead by coordinating global policy and setting the regulatory framework. Over 130 countries seek to reduce their carbon emissions to net-zero by, or before, 2050.

ACCELERATE THE TRANSITION

Governments can help accelerate this transition in several ways including carbon pricing and incentives for renewables investment. They can also legislate for any new buildings to use smart infrastructure and encourage existing buildings to improve energy efficiency. Thirdly, electrification of transport will need to be further incentivised including charging infrastructure.

Next, governments can provide funding for research into carbon capture and storage technologies. Finally, additional support for small-scale and off-grid solutions will increase access to electricity.

More than 10% of the world’s population burns fossil fuels because they lack electricity. Cities and governments should provide funding to bridge the gaps in urban and rural power networks and for standalone, individual solutions – for microgrids and battery storage.

Digitalisation is key to sustainability. Big data, 5G, the internet of things, connected devices, automation, electric vehicles, smart buildings, smart grids and smart cities empower us to save resources and eliminate carbon. Digitalisation gives industry—and society—the tools they need to reach decarbonisation goals by improving existing infrastructure at an affordable cost.

Businesses must take responsibility for more than just electrifying their own operations, however. Companies must also help and encourage their partners and supply chains. The decarbonisation of supply chains is complex and time-consuming.

It means asking tens of thousands of suppliers—themselves supplied by thousands more companies—to disclose energy usage and sources in great detail. It means helping them to implement low-carbon power across all their operations and it means encouraging them to invest in greater energy efficiency.

CITY ACTION

Cities must ensure that business has access to clean power. Unless we act now, we will not reach the Paris climate goals. The time has never been better to care about smart infrastructure with investments to make cities smarter expected to jump from $100 billion today to $250 billion in 2030.

Cities can achieve much on their own, without national governments. Small steps add up—planning denser cities, electrifying public transport, setting tighter building regulations, investing in smart grids. And if everything is powered with renewable energy, the climate crisis will be remembered as a near miss.

Global warming is a psychological challenge as well as a technological and regulatory problem. We need to think differently and prioritise electrification and decarbonisation over economic growth and higher profit.

Everyone deserves a prosperous life. The challenge lies in doing it sustainably. Of course, electricity will not be our only source of power. Hydrogen made with renewables will be crucial to decarbonising sectors like aviation, shipping and trucking and making them sustainable.

This is going to be a long haul. It is complex. Reducing carbon emissions to zero and then removing carbon dioxide from the atmosphere is a huge task. The alternative does not bear thinking about. Without a roadmap, without bold government action and without business playing its part we will not make it.•

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

What net zero looks like around the world

The North Sea region must lead the just transition of the oil and gas industry

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

The three nations have similar climate ambitions but are taking different approaches to phase out oil and gas

The oil and gas industry is the next frontier for closing the gap between climate ambition and policies. The world does not have much time to take action: All countries will need to stop exploring new oil and gas fields this year if the world wants to stay on the narrow pathway to limiting global warming to 1.5°C, the IEA’s Net Zero Roadmap released in May 2021 found.

If there is one part of the world that has the resources and can garner the political will to initiate plans for phasing out oil and gas while minimising the social costs of the transition, it is the North Sea region. It is a matter of credibility and responsibility, particularly for the UK as the host of this year’s UN Climate Change Conference (COP26). However, governments are far off track.

Despite their ambitious climate commitments and greenhouse gas emissions reduction targets, both the UK and Norway, for example, do not have plans to phase out oil and gas production. To be consistent with the Paris Agreement’s ambition to limit global warming to 1.5°C, oil and gas production between 2020 and 2030 would need to fall annually by 4% and 3%, respectively.

Yet current production plans and forecasts predict an average annual increase of 2% over the same period. The UK government is considering approving a new oil and gas field in Scotland. Similarly, producers in Norway have plans to develop new fields and continue production beyond 2050 (even though a new government might change the licensing regime).

Ahead of the COP26 summit, this is the right time for governments in the North Sea region to close the gap between international climate leadership and domestic action by setting phase-out deadlines for oil and gas exploration and extraction as well as putting the right regulations in place for a just transition.

JUST TRANSITION

The region can become a first mover and example for the world in collectively agreeing on a fair and effective sunset for the oil and gas sector. Not to mention that it could pioneer developing the skills, technologies and infrastructure of the green economy—valuable knowledge which the region’s companies can export to other countries.

Denmark’s Energy Islands in the North Sea, for instance, will become the first of its kind in the world, eventually allowing to cover all of the country’s electricity needs through offshore wind while also producing green hydrogen from seawater. Excess electricity will be stored in batteries on the island and could be exported.

The oil and gas economies of Norway, Denmark and the UK are interconnected and their governments share similar climate ambitions. Still, the three countries apply different policies and are all at different stages of the transition. Denmark has already made plans to phase out oil and gas production by 2050 and has recently taken the lead within the Beyond Oil & Gas Alliance.

Norway, with its large sovereign wealth fund, is uniquely positioned to diversify its economy, reskill workers and demonstrate to other countries that it is possible to transform an economy heavily dependent on fossil fuels. Today, the oil and gas phase-out is finally leaving behind its status as a taboo subject. Yet, it is far from becoming a government priority. Recent parliamentary elections, however, may see a new government restrict the exploration of new oil and gas fields.

In the UK, the oil and gas sector is a declining industry. Yet, the COP26 presidency needs to translate its climate ambition into concrete and credible domestic action, building on its positive track record in transitioning towards a net-zero economy. The devolved Scottish government’s Just Transition Commission has set a benchmark to engage different stakeholders in the conversation. Also, an organised coalition of civil society groups is currently advocating to stop new licensing immediately, increasing pressure prior to COP26.

NEXT STEPS

To initiate rapid change, we need credible and evidence-based transition scenarios. They need to consider the interests of all relevant stakeholders, including workers, local communities, small and large companies and investors.

By engaging with a new research initiative—Oil & Gas Transitions—Norway, Denmark and the UK can demonstrate their leadership in participatory policymaking by looking into the need, barriers and opportunities for a just transition of their oil and gas sectors.

Doing so would prove to the world that consensus-building on just oil and gas transitions is possible. The next few years will show which countries—in the North Sea region and globally—will turn into true climate champions.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Surpassing $100 billion in climate finance requires stronger whole-of-government diplomacy

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

To bend the course of emissions and history at COP26, the world needs trust and ambition

Amid the biggest poverty crisis in decades, fulfilling the 2009 Copenhagen pledge of $100 billion in annual climate finance support from 2020—not yet met—is core to rebuilding and maintaining trust. Rather than charity, this pledge is about honouring commitments, ensuring that poorer countries have the means to pursue clean development and to cope with worsening climate impacts.

Trust is also key for ambition to “keep 1.5 alive”. As long as the $100 billion failure remains, countries like China (with half the world’s coal power plants) will find it easier to excuse a failure to reduce their emissions.

It was therefore good news that at the July 2021 ministerial meeting for COP26, Germany and Canada committed to co-lead a process for developed countries to formulate a climate finance plan for delivering on the $100 billion commitment through to 2025. This responded to prior calls urging developed countries to come up with a plan, from the UN Secretary General, the UK’s President-Designate for COP26 and the V20 group of climate-vulnerable countries, among others.

There are four key criteria for assessing the merits of the plan for it to rebuild trust:
1) Timeliness: Can the plan be released sufficiently ahead of the Glasgow summit to have its intended effect?
2) Scope: Can the plan be more than a roadmap and contain measures to reach the $100 billion with immediate effect?
3) Quality: Can the plan reassure vulnerable countries on the composition of finance, with sub-goals for increasing adaptation finance, grant-based finance and other components?
4) Quantity: Can the plan aim for a higher target, such as $150 billion by 2025, to surpass $500 billion over the five years?

The V20 called for a floor of $500 billion of climate finance over a five-year period, implying significantly surpassing the $100 billion in later years. A higher target is needed to average out beyond $100 billion annually and make amends for initial shortfalls. Indeed, Lord Stern from the Centre for Climate Change Economics and Policy at the London School of Economics, has said $150 billion per year would be feasible by 2025.

Although lawyers may argue there is no legal basis for a higher target or $500 billion expectation, this misses the point. The issue is not a legal obligation, but a political necessity of showing good faith. To permit progress on other agendas—including the post-2025 finance goal and obtaining pre-2030 emissions reductions by all major economies to keep 1.5C alive—ambition on scale is crucial.

INTEGRATED POLICY

Various policy efforts must be integrated—requiring enhanced coordination within developed country governments—with the formulation of the climate finance plan in order for it to deliver credible and suitably ambitious scale. These efforts include: country climate finance pledges and fair burden-sharing, recapitalising and replenishing the international finance institutions, managing reallocation and classification of IMF SDRs, and the wider context of ambition on development support, including the G7’s Build Back Better for the World initiative.

Enhanced climate finance pledging by countries is vital—in particular from those lagging in climate finance, like the United States, Italy, and Australia—and must happen ahead of COP26. Key to a credible plan is overcoming a lack of common standards for climate finance and of a framework for dividing responsibility.

The US has a key responsibility—despite being roughly half of developed countries’ combined gross domestic product (GDP) and half their cumulative emissions, it is nowhere near contributing half of the $100 billion. Indeed, it is set to contribute less than Germany, whose GDP is a fraction of the US’s. By combining climate funds replenishment, bilateral finance, imputed Multilateral Development Bank (MDB) climate finance and leveraged private finance, the US can instead aim for a share of $40 billion or higher.

International finance institutions have a pivotal role in providing predictable delivery of climate finance. In 2021, developed country shareholders must commit to a broad agenda of recapitalisation, including climate-specific capitalisation, of MDBs alongside replenishment of international climate funds for the next five years.

This is essential for MDB climate finance to achieve a scale consistent with the global climate action required in the 2020s without coming at the expense of poverty relief and other objectives—and also essential for meeting a $150 billion target by 2025, of which MDBs could mobilise about $90 billion.

Reallocation of IMF-issued special drawing rights (SDRs) could also represent a novel source for potentially closing the gap to $100 billion this year. The G7 alone are expected to receive around $218 billion in SDRs. Various finance ministries have supported creation of an IMF “Resilience and Sustainability Trust (RST)”, to help countries combat climate change and improve healthcare systems.

Depending on accounting, if sufficient contributions to such a new facility are classed as climate finance, this could in theory close the gap to $100 billion on its own in 2021. This would respond to calls from a decade ago, including from civil society, for developed countries to use their SDRs to support climate finance. However, there are important concerns, including from civil society—reallocation of SDRs should not be used by developed countries to meet Official Development Assistance (ODA) targets and any climate financing should be additional money for poverty relief and other objectives.

FINANCE PLAN

Lastly, new ambitions in the wider context of development assistance must be harnessed to raise the ambition of this climate finance plan. The G7 meeting in Cornwall in June 2021 signalled leaders-level intention to “develop a new partnership to build back better for the world, through a step-change in our approach to investment for infrastructure, including through an initiative for clean and green growth”. Labelled a “Green Marshall Plan” for developing countries in the press, this is the level of ambition and enlightened self-interest the world needs.

With the original Marshall Plan, agreed in the wake of World War II, the US spent over 2% of its annual GDP versus spending less than a tenth of that (<0.2%) in international assistance today. Post-G7 high-level deliberations on B3W can raise ambition for larger 2020-2025 targets for climate finance, which must be integrated in formulating the climate finance plan.

Formulating a climate finance plan of requisite scale therefore depends on better joined-up whole-of-government diplomacy—and thus stronger leaders-level diplomacy. Developed country leaders, finance ministers, and foreign and development ministers alike must heed warnings of the high jeopardy and long-term ramifications of failure to deliver on the $100 billon.

Former UK prime minister, Gordon Brown, who helped originate the $100 billion goal, warned that developed countries look “poorly prepared and organised”. Meanwhile, Saleemul Huq, of the International Centre for Climate Change and Development (ICCCAD) in Bangladesh, has said that vulnerable developing countries should be shown the $100 billion before November or should not be expected to travel to Glasgow for COP26.

A credible plan to surpass $500 billion in climate finance over five years is needed—not just for trust between countries, but for action to keep 1.5 degrees alive in this decisive decade for human history.•

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

ESG investing will speed-up the energy transition

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Investors are aware that ESG-based investments can bring speedy returns

At the beginning of 2020, environmental, social and governance (ESG) investing was identified as this decade’s ultimate investment megatrend. We knew it would cut across all sectors and have a disproportionate impact on the energy industry and its ongoing transition, but we could not predict just how much and how quickly it would develop.

When the pandemic hit, the world changed forever, accelerating those global trends with a momentum no one witnessed before—including ESG concerns.

The umbrella term covers three main factors. E is for the environment and includes issues such as climate change policies, carbon footprint and use of renewable energies. S is for social and includes workers’ rights and protections. Finally, G is for governance and includes diversity of the board and corporate transparency.

In June 2020, around 26% of our clients around the world were eyeing exposure, or already had exposure, to ESG investments. This has now increased to 44% over the past 12 months. This trend is set to gain further momentum.

INVESTOR CONFIDENCE

First, governments and regulators are becoming increasingly supportive of ESG criteria which boosts investor confidence. In the United States, the Biden Administration is taking a tougher approach on the use of fossil fuels and is promising swift action to tackle climate change.

Additionally, the new chairman of the Securities and Exchange Commission, the US’s financial regulator, Gary Gensler, is a proponent and is likely to strengthen investment and disclosure rules to help the US catch up with Europe.

Secondly, as millennials (those born between 1981 and 1996) who are more likely to seek responsible investment options, become the major beneficiaries of the largest intergenerational transfer of wealth—an estimated $30 trillion in the next few years—we can expect both retail and institutional investors to continue to pile into ESG.

Finally, the pandemic has focused minds on the fact that the health of our planet directly affects human health which, in turn, affects the way we all live and work. What is perhaps more impressive is that those investments with robust ESG credentials are continuing to outperform the market and experience lower levels of volatility.

This booming ESG trend is going to have a significant accelerating effect on the energy transition because as it becomes ever more mainstream, institutional investors will increasingly pile into renewables.

When they do, they will bring even higher levels of capital and expertise into the energy sector. In turn, this is likely to trigger greater regulatory scrutiny, which will further drive confidence for investors, as well as impact policy agendas for governments and their agencies.

All of this positive movement in the transition can be expected to have the effect of lowering prices which can only speed up mass adoption of green energy.•

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

The political stars have aligned but are not shining

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Renewing confidence in multilateral collaboration will need more than warm words; lack of action on Covid-19 will also undermine the fight against climate change.

This year, 2021, should be the super year for climate. The United States is supposed to be back, with the UK complementing the Biden administration’s domestic programme on building back better. At the same time, the UK and Italy are respectively leading the G7 and G20 whilst jointly chairing the COP26. China is hosting the UN Biodiversity Conference. But Covid-19, and an inadequate international response, is undermining this potential.

The pandemic and its accompanying fallout are unprecedented in modern times and massively disruptive across global economies. Further, it was not anticipated that the crisis was going to come in waves, as shown by new Covid-19 variants driving ongoing uncertainty and renewed border closures. This crisis is certainly unique, but it also hit at a time when the global economic system was ill-prepared after a long period of low global interest rates, with high inequality and weak productivity growth.

The global responses have been reactive, with limited input from recipients of support and framed as a philanthropic endeavour rather than as acts of mutual self-help. This framing explains each response’s limited ambition and short-sighted nature. It does not recognise the nature or severity of the crisis and assumes that the global economy can return to business as usual.

There have been limited positive steps, such as the unprecedented scale of the International Monetary Fund’s Special Drawing Rights (SDR) issuance, the decision to bring forward International Development Association (IDA) replenishment by the World Bank and mutualising some debt in the European Union. While these help, they risk being limited interventions in an economic system that is really struggling.

The action, or lack of it, from leaders of the G7 and G20 is central to this. They have not deployed enough firepower to address the crisis, let alone to begin to address the pre-existing structural challenges faced by the global economy.

Vaccines have not been rolled out fast enough, and there is insufficient money on the table to support developing countries. This is reducing the capacity at national level to contain the health crisis, already causing fragility in large middle-income economies. This threatens to undermine a lasting global recovery.

LIMITED RECOVERY

The scars of the crisis are not confined to economic damage. It has also fundamentally undermined trust in the multilateral system. Cooperation could become merely transactional. This imperils the possibility of building foundations for restoring prosperity in a decade where action on climate urgently needs to take place.

From a developing country perspective, the currency of multilateralism is not rhetoric but financial firepower over the short and medium term. To date, the measures deployed do not add up to sufficient financial firepower to prove convincing.

Limited resources for a global recovery have left climate advocates struggling to avoid a zero-sum equation with other calls on public finance such as vaccination or education. At the same time, the underlying system architecture of the global economy has been shown to be vulnerable and unresponsive.

The G7 and G20 Finance Ministers’ communiqué underlined this: although progress has been made on climate, there is still a disconnect between the scale of action needed and the incremental approach that has been taken to date. This makes it harder to reach the goals of the Paris Agreement and sets the global economy on an unsustainable path.

In sum, the right discussions are not yet taking place; the revival of multilateralism has yet to drive a recognition of the need for mutual self-help. This must change to avoid 2021 proving to be a year of failure.

NEXT STEPS

Although to date outcomes from the G7 and G20 dialogue have been disappointing, there is still time to act. Reshaping the debate to reset the system and deliver a long-lasting recovery would mean moving from a sectoral to a system-wide discussion; from a country-by-country rescue to a global perspective.

A short-term view of the recovery will not address wider issues such as how to deal with uncertainty emerging from the known unknowns of the energy transition and climate crisis.

The G20 Finance Ministers meeting in October is the last chance to reframe the narrative away from limited philanthropic efforts towards mutual self-help, represented by both a significant increase in available resources and recognition of the need for system-wide reform.

As a minimum, this should include meaningful increases in fiscal space for developing countries, including:

– A swift reallocation of SDRs, with the speed and efficiency of the reallocation mechanism prioritised over haggling about precise amounts. This is a one-off exercise—reallocation of SDRs alone will be insufficient in the medium term. The IMF is not the right institution for financing a long-term recovery.

– A major recapitalisation of Multilateral Development Banks (MDBs), as these are the key institutions for bridging from short-term recovery to longer-term rebuilding. Tinkering around the edges by changing capital adequacy rules, however welcome, will be woefully inadequate; it places responsibility on the staff of MDBs, rather than on the shareholders—particularly those from developed countries.

– A reframing of debt sustainability to allow for spending on resilience. The benefits of shifting to a sustainable, green and resilient pathway need to be captured today if private and public sectors are to reap the benefit of the transition.

The COP26 negotiations have been rightly characterised as an event in which the outcome will be defined by the progress each country makes on climate ambition. However, the climate ambition of developing countries will be shaped by their perception of support from, and renewed trust in, the commitment to multilateralism shown by developed economies.

The window to successfully put the world onto a more sustainable, resilient and inclusive pathway is closing. The ingredients for a successful 2021 are still there, but the limited crisis response is likely to make climate action unpalatable to developing economies. •

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Energy efficiency will power industry’s decarbonisation efforts

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Future-proofing equipment improves energy efficiency and bottom lines at a faster rate

In May 2021, the International Energy Agency (IEA) published a landmark report setting out its roadmap for the global energy sector to achieve its net zero ambitions by 2050. The IEA describes the roadmap as one of the most important and challenging undertakings in its history. The message is clear: we are in a crisis. The time to act is now.

However, the roadmap offers some encouraging news. It points out that increased energy efficiency can play a vital role as the first fuel in tackling the scale of this unprecedented challenge. The IEA’s view is that adopting energy efficiency measures will allow the world economy to grow 40% by 2030 while using 7% less energy than today.

There is still one often overlooked energy efficiency technology that is vital on this road to net-zero: high-efficiency electric motors controlled by variable speed drives (VSDs).

Electric motors are an integral part of modern life. They drive the heating, ventilation and air conditioning systems that maintain buildings at a comfortable temperature. Motors power the myriad of pumps essential for the supply of freshwater and are found in a broad range of industries from steel to food and drink. In the EU alone, there are estimated to be around eight billion electric motors in all applications, which account for almost half of the EU’s energy consumption.

TECHNOLOGY UPDATE

The challenge is that too many of the world’s motor-driven systems are based on outdated and inefficient technology that wastes energy unnecessarily. However, legislation is in hand to address this. The EU’s new Ecodesign Regulation (EU) 2019/1781, came into full effect in July 2021 for low-voltage induction motors and VSDs. This requires a wide range of industrial electric motors to meet the IE3 premium efficiency standard.

The implications for energy savings are huge. Mandating the use of higher-efficiency motors, together with VSDs that regulate their speed to meet demand and save even more energy, will enable the EU to save 110 terawatt-hours by 2030. That is the same as the annual electricity consumption of the Netherlands.

These changes are just the first step in a two-year process. In July 2023, the Ecodesign regulation will expand to raise the base level for certain motors to IE4 ultra-premium efficiency.

FUTURE PROOF

However, to achieve the maximum impact on energy efficiency, industry should look beyond what the legislation calls for now. Instead, it could adopt even more advanced technology that is already commercially available. IE5 ultra-premium efficiency motors and drive packages are already easily available on the market. Thinking ahead will surpass the regulatory demands of today and tomorrow, as well as delivering exceptional energy efficiency that feeds right into the bottom line.

Investing in the latest energy-efficient technology can have a major impact. A recent study highlights that if the world’s 300 million industrial motor-driven systems were replaced with optimised, high-efficiency equipment, global electricity consumption could be reduced by up to 10%. That’s roughly equal to more than 90% of the annual consumption of the entire EU.

Practical examples are useful to illustrate the difference that efficient technology can make. Campbells, the American food and beverage manufacturer, wanted to reduce energy consumption and carbon emissions at a plant in Australia. It replaced all the old inefficient motors in compressors and cooling systems with modern IE5 motor and drive packages. By doing this, Campbells reduced the energy consumption of the plant by 14% and the carbon dioxide emissions by 131 tonnes per year. The success has prompted Campbells to start planning the optimisation of other plants worldwide.

At this crucial stage, energy-efficient motor and drive technology promises to be a vital factor to help put the world on the path to net-zero. It also comes with the important upside that saving energy means saving money. Industry can enjoy a fast return on investment that will deliver long-term benefits for the planet.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

The EU Climate Law changes the net-zero equation without changing the ambition

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Establishing accurate carbon budgets will help decide future policy

Just weeks after the EU Climate Law negotiations were finalised, the European Parliament saw an interesting development: the European Green Party voted against the law.

At face value, the European Climate Law offers very little in the colossal challenge to prevent climate breakdown. An automatic five-year ratcheting of ambition, in line with the requirements of the Paris Agreement, had been built into the original proposal by the European Commission but was removed by Member States who felt threatened by what they supposedly agreed to when they signed up to the 2015 climate accord.

Similarly, the requirement to have sectoral targets so that all sectors of the economy are on a steady trajectory to net-zero to ensure that the goal of carbon neutrality in the EU will be met by 2050, was also removed.

However, a small step towards outlining the contribution of carbon removals in the pathway to net-zero is both necessary and timely. The aspirational target that the EU will be “net-negative” after 2050 is a bittersweet development. On the one hand, the EU is acknowledging that it will have to go beyond simply cutting its emissions. On the other hand, the situation is so dire that cutting emissions is no longer enough.

The EU Climate Law is currently the world’s largest instrument translating the Paris Agreement into a legislative framework covering nearly a whole continent. But is it really a law? A crucial provision that would have given the EU Climate Law its legal character—the access to justice, enabling citizens to challenge the national energy and climate plans as well as the long-term strategies in court—was removed in the negotiations.

What is a law when there is no access to justice and it does not have legal consequences?

CARBON REMOVALS

The new EU Climate Law sets up an independent expert body and also effectively separates the accounting of land sink carbon removals from emission reductions, establishing two huge steps towards properly setting the pathway to net-zero. They are important on their own but when combined with additional elements such as the carbon budget approach, they indicate a future step change from a small role of removals up to 2030 to a big role for both accelerated reductions and removals to meet the remaining carbon budget which might suggest the EU needs to get to net-zero before 2050.

Even though the Climate Law expects a limited contribution only from nature-based removals, there is nothing to prevent the future inclusion of engineered removals. In fact, the recitals to the Climate Law mention the need for CCS-enabled methods of carbon removal, particularly in relation to the mitigation of process emissions in heavy industry.

As such, the fact that the contribution of removals to the 2030 target has been explicitly capped is a major step forward in operationalising the logic of net-zero. This tiny agreement to effectively separate carbon removals from emission reductions might have significant implications further down the line.

At the moment, the European Commission is working on how to certify carbon removals; how to know exactly how much carbon is being removed by a particular process. This is partly in response to the growing voluntary market, where polluters are increasingly seeking out opportunities to offset their emissions by purchasing removals.

The Commission’s work has raised questions about whether removals would be introduced into the emissions trading system (ETS), however they have made it clear that there is no intention to do this in the short term.

SEPARATE TARGETS

This burgeoning interest in purchasing carbon removal offsets highlights the need to set separate targets for the reduction of emissions and for the removal of carbon, to ensure both happen simultaneously rather than at the expense of the other. For several years, academics, experts and society have been calling for such a separation—or at a minimum, transparent distinctions between the two.

The Climate Law takes a small yet significant step in this direction, but the integrity of this de facto separation will need to be strengthened in future legislation. The establishment of an expert body which will suggest a carbon budget is another small but effective measure introduced into the law.

The carbon budget approach, while scientifically complex, will simply tally historical emissions to inform legislators about the maximum level of emissions permissible to stay within a manageable level of temperature increase (although recent events show that a warming of up to 1.5C comes with much more uncontrollable weather disasters than initially thought).

This will provide much-needed emphasis on the fact that the path we take to reach net-zero is just as important as the date we meet that target. We need to reduce emissions in the short-term as a priority. In fact, the EU’s large historical emissions and weak 2030 target, combined with the rather ambitious climate neutrality target for 2050 is likely to result in a carbon budget that is largely consumed by the mid-2030s.

The expert body and its carbon budget approach will almost definitely show that the lacklustre emission cuts targeted for this decade will result in the need for much more stringent cuts in the following decade, perhaps even bringing forward the climate neutrality target. So while many provisions with teeth and dreams for big ambitious steps towards 2030 were removed from the EU Climate Law, the seeds planted by it are bound to grow rapidly. •

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

The EU’s new Environmental Action Programme must live up to its name

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

A shift towards a well-being economy is needed for a successful transition

In autumn 2020, when the European Commission presented its proposal for an 8th Environmental Action Programme (EAP)—which sets out the direction for EU environmental and climate policy action until 2030—WWF criticised the lack of ambition and forward-looking actions to achieve the stated long-term aim of “living well within the means of our planet”.

Rather than building on the European Green Deal—the Commission’s flagship project for achieving long-term sustainability—the proposal falls short of effectively tackling the challenges the world faces, instead simply repeating existing commitments without adding substance.

The 8th Environmental Action Programme could trigger a shift towards an EU “wellbeing economy”, allowing Europe to pursue prosperity for all with the possibility of social progress, in a way that is environmentally sustainable and respects planetary boundaries.

What exactly do we mean by a “wellbeing economy”? This concept starts from the idea that public interests should determine economics and not the other way around. A well-being economy monitors and values what truly matters, therefore measuring progress on societal values such as health, nature, education and others, not merely economic growth.

Only when we take all of these indicators together can we truly determine the progress of our society. The EU should adopt this approach and firmly embed it in the 8th EAP as the framework for future European environmental policymaking.

TIME TO RECONSIDER

Right now, there is still room for manoeuvre to improve on the Commission’s proposal on the 8th Environmental Action Programme as it moves through the EU institutions. In March, the Council representing the EU’s member states already adopted its position, which strengthens the Commission’s proposal but fails to make the wellbeing economy a guiding principle, merely making a vague reference to the concept.

Instead, it would have been helpful to include concrete actions, such as a requirement to assess existing frameworks and indicators with the purpose of moving towards a framework using “wellbeing indicators” to measure societal progress.

The European Parliament is currently discussing its position and there is hope that it will be more ambitious. The draft report by MEP Grace O’Sullivan is a good basis and strengthens the Commission’s proposal in several key areas.

Not only does it call for the EU to shift towards a sustainable wellbeing economy within the planet’s boundaries by establishing new indicators of economic performance and social progress beyond Gross Domestic Product (GDP), but more importantly, it makes explicit the enabling conditions that will determine whether the European Green Deal is a success.

Ensuring that the green oath for EU initiatives to do no harm to the environment—a key commitment of the European Green Deal—is firmly integrated into the EU’s way of working, is fundamental in this regard.

INCOHERENT GOALS

Currently, the success of environmental legislation is often undermined by initiatives or laws in other policy areas which are incoherent with the EU’s environmental and climate goals. There are myriad examples of this: from harmful subsidies for unsustainable agriculture or fisheries to rules that govern our energy system.

Take bioenergy, for instance, which is being promoted by the EU Renewable Energy Directive as “renewable”, even if it comes with significant carbon emissions and devastating impacts on forest ecosystems, running contrary to both the EU’s climate and biodiversity goals. Hydropower is similarly problematic, hailed as a green energy source, but ultimately—due to its environmental impact on rivers—incompatible with the EU’s goal of ensuring good status of its freshwater ecosystems.

Another often criticised area of incoherence is the continued and entirely absurd support for fossil fuels through public subsidies to the tune of €50 billion every year, which dramatically undermines the EU’s agreed goal to reach climate neutrality by 2050 at the latest. Fossil fuels have no role to play in a carbon-neutral world, so the EU and all Member States must—as early as possible and by 2025 at the latest—phase out all direct and indirect fossil subsidies.

As they adopt their position on the 8th Environmental Action Programme this week, MEPs in the Parliament’s environment committee should ensure that provisions on these key issues are included and taken forward to the plenary vote in July for the full Parliament to endorse.

Only with such an ambitious Parliament position can we hope that the EU will end up adopting an Environmental Action Programme worthy of its name, with the necessary impetus to ensure that the next decade of EU policy-making is driven by much needed environmental action, in line with the promises and objectives of the European Green Deal and leading the way to a genuine wellbeing economy.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

The time and place for geoengineering projects

Reliability is a challenge but the opportunities are endless

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Improved incentives would encourage discoms to explore the potential possibilities offered by non-wires solutions

Discoms are under increased pressure to begin maintaining an uninterrupted supply of electricity. In her recent annual budget speech, India’s finance minister Nirmala Sitharaman noted that the discoms’ “monopoly behaviour” is a deterrent to the country’s economic growth.

As a means of correcting the problems, Sitharaman announced actions were underway to open the power sector to more competition, thereby providing consumers with choice putting greater pressure on the discoms—who will remain the primary operators of, and investors in, the grid for the foreseeable future—to ensure better reliability and quality of power supply.

These efforts to reform the traditional discom business model are creating fresh opportunities for distributed energy resources (DERs). They should be explored fully for the economic, reliability and environmental benefits they can provide, relative to traditional grid investments.

If, as is likely, clean distributed energy resources are found to be critical elements of a least-cost plan for improving reliability, lowering total costs and cutting emissions, then the regulatory rules should ensure that implementing that plan will be the discoms’ most profitable course of action.

MATURING MARKET?

India’s power sector has matured over the last few decades, especially with the reforms ushered in by the Electricity Act in 2003 and per-capita consumption of electricity has more than doubled since then. Yet, a large number of consumers still depend upon a combination of grid and backup supply solutions including diesel generators, kerosene lanterns, lead-acid batteries, gas water heaters for reliability and quality of power.

These dirty and expensive decentralised systems in use today are not a policy choice, but rather a forced outcome of India’s discoms inability to meet their customers’ needs.

However, the falling costs and wider availability of cleaner technologies have now altered this value proposition. They allow for discoms to shift from wires-only solutions to non-wires alternatives and greater reliance on clean decentralised solutions. While reliability has largely been a private cost, in some cases discoms have implemented pilots to optimise power supply and distribution costs.

In addition, there has been a push from the central government for the development of decentralised solar capacity that can inject power at the sub-distribution level grid to meet local reliability needs while avoiding transmission infrastructure upgrades and network losses.

A Ministry of Power’s scheme aims to set up ten gigawatts (GW) of decentralised solar projects, install 1.75 million stand-alone solar agriculture pumps, and solarise one million grid-connected agriculture pumps. Discoms are the implementing agencies for this scheme and stand to benefit from reductions in power procurement costs and losses due to these installations.

Discoms in some states have been actively pursuing energy efficiency and demand-side management measures, such as time-of-use tariffs with special volumetric rates during off-peak periods, manual and automated demand response pilots for load reductions, appliance replacement schemes, and solar PV microgrids with battery storage, among others.

These measures will further assist the discoms in improving local grid reliability at a low cost. And while they also create value by saving money and improving local reliability, they may also lead to revenue losses for the discoms. This is because prices are volumetric in nature—as they should be for the sake of economic efficiency and fairness.

REVENUE CONCERN

Reductions in sales usually result in lower revenues. However, the structure of prices—and especially their relationship to underlying costs—can either exacerbate or mitigate the revenue impacts from changes in sales on discoms’ bottom lines.

One example of this are the cross-subsidies built into tariffs: commercial and industrial (C&I) consumers pay more than their fair share of the costs of supply so that agricultural and low-use residential consumption can be served at low, non-compensatory prices.

This has been a long-standing feature of electricity pricing in India. But it means that measures to improve efficiency at C&I sites will have a particularly adverse impact on discom net income, whereas end-use efficiency for residential and agricultural users will actually improve the discoms’ financial health.

Furthermore, time-of-use prices—where costs are allocated to hours of use—also determine when it is better, from a discom’s financial perspective, to avoid consumption.

The challenges that arise out of legacy decisions, such as tariff design, inter-class cross-subsidisation and even long-term contracts with thermal power plants, are barriers to solutions that would otherwise benefit the entire system. The trick to overcoming these obstacles is to make sure that the interests of the individual actors—the discoms, the customers, and competitive providers—are best served when their actions best serve the public interest.

For lawmakers, this is about understanding where the incentives lie and correcting them when they work against desired objectives.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Offshore wind’s success is only the beginning

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Global collaboration should place offshore wind at the core of the energy transition

As an island nation, the UK looks to the sea for solutions to the challenges we face. That is why we have built the world’s largest offshore wind deployment in response to the need to decarbonise and drive down the cost of doing so.

Offshore wind is renewable, affordable and large-scale. Off the coast of my constituency in East Yorkshire lies Hornsea Project One, which alone is powering more than one million households.

The Contracts for Difference (CfD) model the UK uses requires wind farms to pay back the state if the wholesale price exceeds the guaranteed price. This, coupled with the largest auction pipeline, has transformed the economics of offshore wind and seen prices drop from £117/MWh in 2015 to £57/MWh in 2017 and £40/MWh in 2019.

Offshore wind is plentiful. There is enough potential worldwide to meet global electricity needs 18 times over, yet current capacity is less than half of 1% of this.

The offshore wind sector in the UK is growing rapidly and there are extensive project construction activities scheduled up to 2030.

The UK has the largest future pipeline of offshore wind projects in Europe and is seeking to develop at least 40 gigawatts (GW) of capacity by 2030 from a current total of around 10 GW. This means some £40 billion of investment in Capex to 2030 and ongoing expenditure in operating and maintaining the assets for 25-35 years.

Significant momentum

It has now been just over 20 years since the UK’s first offshore wind farm was installed. We have the most offshore wind installations in the world, generate more electricity from offshore wind than any other country and export our expertise around the world from America to Asia.

Now the UK is going further. Floating wind farms can be deployed in deeper waters, meaning that countries around the world with naturally limited shallow waters can still access offshore wind power.

The UK is already home to the world’s first two commercial floating offshore wind projects and by 2030 we intend to have scaled up this capacity twelve-fold, creating countless opportunities for businesses in the process.

As well as providing clean energy solutions, offshore wind supports livelihoods and families through the diverse chains of green jobs it creates. From designers and component manufacturers to turbine technicians and deep-sea divers, offshore wind can offer high-quality employment opportunities for everyone from school leavers to experienced hires leaving fossil fuel industries.

Moreover, these largely local roles can boost our coastal communities and help “level up” our country; for example, 97% of the staff at the Siemens Gamesa factory in northeast England live within just 50 kilometres of the facility and an offshore wind industry cluster there has helped the city cut its unemployment in half.

In the last 18 months, UK Export Finance, the government export credit agency, has supported three major offshore wind projects in Taiwan with £500 million in financing. This enables UK firms to win green energy contracts that they otherwise may have missed.

For instance, FoundOcean, a Scottish-based company, has won a contract to provide the foundations for a 100-turbine offshore wind farm in Taiwan. This contract will create 30 new green jobs at the firm and help place Scotland at the vanguard of Taiwan’s offshore wind revolution.

So it is welcome that research by the Offshore Wind Industry Council (OWIC) indicates the private sector is set to invest more than £60 billion in UK offshore wind in the next five years, with the number of direct and indirect jobs in the industry set to rise to almost 70,000 by 2026.

But, in order to achieve the full potential of ocean-based solutions, we need nations all around the world to embrace offshore wind and step up their ambitions in this area. That means understanding their technical resource, engaging in marine spatial planning, developing national visions for offshore wind and setting long-term targets for offshore wind deployment.

Climate talks

Global problems require global solutions and the UK is very much looking forward to hosting the UN Climate Change Conference (COP26) in Glasgow later this year. This is an opportunity to galvanise global action around climate change at a critical moment for our planet and our peoples.

The UK’s presidency will champion international cooperation on an accelerated transition to net-zero and building a resilient global economy.

We must come together as an international community and strain every sinew to build a better, greener and more prosperous future for us all. Tapping into our latent offshore wind potential is a great place to start this World Ocean Day.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Carbon offsets can send emissions reductions efforts off course

On the hunt for low-carbon aluminium

All parties must be on board to decarbonise the retail building sector

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

EU proposals are a good start but tenants and owners also need to align their goals

Even after years of carbon pledges and strengthened policymaking, many developers and owners of large retail parks are still unsure how to prepare for a zero-carbon journey. Planning to achieve anything is impossible without clear specifications of the goal.

Terms such as zero-energy, net-zero, nearly zero, zero-carbon, net-zero carbon and carbon-neutral are already being integrated into public policy and industry practices. But they come with a great deal of uncertainty. Many of these definitions refer to different boundaries: site energy, source energy, cost, or emissions. Moreover, there may be further variations in the requirements of these standards depending on the building type: new or existing, office, retail user or other.

Many owners or developers of retail spaces are still asking fundamental questions: what do all these climate-neutral terms actually mean? What are the climate-neutral boundaries for retail real estate, particularly considering the high number of retail tenants and their unique energy consumption patterns of retail spaces?

A vast number of emerging market tools to track Paris Agreement compliance adds to the noise: carbon accounting protocols, ESG reporting frameworks, carbon risk assessment tools, and green building rating and certification systems. Many of these tools are time-consuming and costly, and developers have to ask themselves if they are worth the investment.

While the lack of certainty around metrics makes it difficult to draw up carbon budgets and identify reliable targets and actions, retail real estate managers and practitioners cannot wait until a consensus is reached among these frameworks. Reputational risk, potential loss of profitability, increased exposure to legal liability for failing to manage or report material financial risks, as well as exposure of retail assets and portfolios to physical damage from climate change are all very real risk threats in the medium term.

Ultimately, the proliferation and diversification of these frameworks and methodologies mean we need better alignment and harmonisation on both national and international levels as well as among the various governmental and industry-led programmes.

FINANCIAL VALUE

The challenge to define and disclose carbon spend is closely linked to the question of data, and how data can help—or hinder—the valuation of an asset. Easy access to transparent, reliable data is essential to help real estate valuers accurately assess the sustainability performance of property holdings, bringing the value of energy efficiency out of the shadows and translating it into actionable and meaningful financial information. To date, this is not the case—energy consumption data is not easily shared; valuation remains a cumbersome exercise based on patchy information at best.

In its Renovation Wave strategy, the European Commission has proposed several items which should incentivise and mainstream the real value of energy-efficient buildings. The proposed introduction of Minimum Energy Performance Standards (MEPS) in the Energy Performance of Buildings Directive (EPBD) is expected to be a strong incentive to retail real estate developers to renovate their portfolios. Properties in prime locations are less likely to be affected negatively in value terms. But all properties of poor specification and energy or carbon performance, which are expensive to upgrade, may reduce in value in case of inaction. This can result in price differentiation and instigate market players to take strong action.

Improving and harmonising Energy Performance Certificates (EPCs), another Renovation Wave action point is another positive step in the right direction. To date, the reliability of EPCs as an indicator of energy or carbon performance varies widely across the individual EU Member States.

While operational energy use is typically measured through utility bills, some EPCs, like in Sweden, are based on real energy consumption taking into account smart meter data. Ongoing research into the development of specific EPC metrics, such as comfort and smartness, shows clear potential to transform EPCs into a market-enhancing tool enabling companies to derive emissions intensity performance thresholds and zero-carbon trajectories.

To achieve this level of value, certification regimes must first be properly implemented and endorsed, supported by well-functioning management, control and monitoring mechanisms. Access to transparent and reliable data is a fundamental prerequisite to making EPCs valuable to market players. The European Commission needs to carefully consider how access to data should be improved in its upcoming EPBD revision and within the broader Fit-or-55 package.

SPLIT INCENTIVES

Even with tools like MEPS and improved EPCs, challenges of definitions, disclosure, or data will remain unsolved without addressing the elephant in the room. Split incentives, or the better known “landlord-tenant dilemma”, is a very real barrier to climate-neutral buildings. Decarbonisation will remain an uphill battle if building owners and tenants are misaligned in their objectives and if tenants do not have the incentive, knowledge and skills to step up their own energy efficiency game.

Ultimately, commercial retail tenants do not have the same level of responsibility or interest in energy efficiency as building owners, yet they represent the most important energy users—and carbon emitters—in shopping centres. While the retail developer builds the core and shell structure of a shopping centre, tenants have a high degree of control over their in-store energy use and usually build out their leased spaces independently. In many jurisdictions, tenants have access to cheap energy contracts, leaving little incentive for change.

This is especially true since the outbreak of the covid-19 pandemic, which hit commercial retail hard. Even if forcing tenants to change their energy strategy was easy, doing it would mean stepping into tenants’ energy supply contracts. Not only does this sound like an administrative nightmare, but it is also often contractually impossible.

Against this backdrop, the revised Fit-for-55 and the EPBD packages offer an important opportunity to assess the broader needs of the building sector to successfully decarbonise and give a clear definition of what a building stock aligned with climate-neutrality by 2050 means. If all actors along the value chain must increase efforts by a factor of five, then all actors must equally prioritise decarbonisation with clarity on who is responsible for doing what.

Retail real estate is an important segment of the building stock where adequate action will lead to a significant reduction of energy consumption and carbon emissions. It also serves as a strong example of the challenges policymakers and industry must address, requiring unprecedented levels of collaboration. Lawmakers must provide clear expectations for all actors who contribute to a building’s energy consumption. These same actors in turn must align their own goals and frameworks to enable decisive strategic action on the ground.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Coal-for-renewables finance model raises doubts

Non-wires alternatives can be a solution to India’s grid reliability challenge

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Consumers and distribution network companies are partners when creating value for the network and themselves

India’s electricity regulators, at the central and state level, are tasked with setting appropriate regulations and standards that govern grid reliability and protect consumer rights. While the incidence of complete blackout is rare, the reliability of distribution networks—better known as discoms in India—is below par, especially in rural areas.

One of the main reasons for inaction by discoms is that they have limited financial resources to invest in network upgrades—a key prerequisite to strengthening the local grid. Discoms struggle to meet their working capital requirements. Raising funds for long-term capital expenditure is therefore an even bigger challenge.

Discoms can now, however, think beyond traditional network upgrades to meet local reliability and power quality requirements in a much cleaner and more efficient way. Technological improvements and maturation have driven cost reductions for several newer modular solutions, such as rooftop PV, energy storage, or microgrids. This holds promise to solve the grid reliability challenges in a more sustainable way. There are some insights to be gained by taking a look at the experience of utilities and regulators elsewhere, in building up the ecosystem for newer solutions to work.

NON-WIRES ALTERNATIVES

Non-wires alternatives (NWAs) refers to technologies and other interventions that can, individually or collectively, present an alternative to traditional wired solutions such as new and upgraded distribution lines, feeders, and substations. Typically, NWAs include a combination of distributed generation, demand response, energy storage, and end-use energy efficiency measures to meet a given set of network requirements.

Motivations for the promotion of NWAs differ from region to region. In some places, they are being promoted with an aim to integrate a larger share of cleaner energy resources; while in other places it is to decrease the variable and fixed costs of distribution utilities. Elsewhere, NWAs are promoted as a means to increase the resiliency and reliability of the local grid.

The Bonneville Power Administration in the northwest of the United States, was an early employer of NWAs. In the 1990s, it cost-effectively deferred expensive network upgrades in the San Juan Islands by investing primarily in broad-based efficiency measures (measures (such as lighting, insulation, heating and cooling, and process equipment) in homes and businesses.

More recent examples include the Brooklyn-Queens Demand Management (BQDM) programme and the Oakland Clean Energy Initiative. The BQDM programme allowed New York’s distribution utility, Consolidated Edison, to achieve 50 megawatt (MW) peak demand reduction with demand-side resources, thereby deferring a $1.2 billion substation upgrade. In the case of Oakland Clean Energy Initiative, the utility was able to retire an uneconomic power plant without a transmission upgrade.

ROLE OF REGULATORS

Typically, regulators play tough when they scrutinise a discom’s capital expenditure plans, a majority of which involves low-voltage distribution network upgrade, partly because the discoms have an inherent financial motivation to spend —at times beyond what is reasonably required—to earn an almost-assured rate of return. It is also partly due to the public pressure put on regulators when they are asked to approve higher costs and, in turn, hikes in retail tariffs.

Regulators should be guided by three core objectives during the process of annual capital expenditure approvals: optimisation of grid investments and performance; integration of cost-effective non-wires alternatives; and increased customer engagement.

A prerequisite for these is an environment that requires discoms to engage stakeholders in a public resource planning and power procurement process. Such engagement builds trust and a shared vision—a distribution system plan that the regulators, discoms, and public can support—and thus a greater likelihood that desired outcomes will be achieved.

It will not be easy, but it is worth the effort. Regulatory commissions will have the challenging task of making sure participants are motivated (mostly financially) to shift to a new approach to grid planning and investment that will encourage and accommodate a variety of solutions. This means that, among other things, access to usage and other relevant data by NWA service providers will be critical. By opening up the network in this way, regulators can encourage innovation in product offerings for enhancing reliability, improving environmental performance, and lowering overall costs.

INTEGRATED PLANNING

Traditionally, high value-usage consumers have invested on their own in resources, especially diesel backup generators, to ensure uninterrupted power supply where the discom network is unreliable. That leads to an increase in the total cost of electricity procurement for these consumers. With an increased role of the regulator and deployment of low-cost, cleaner modular solutions, the total cost of reliability can be reduced for all consumers in the system.

It is essential that discoms open up to the possibility of an integrated approach for planning network upgrades, benefit from new technologies, and the regulator should take the lead in seeing this through. The way to move ahead lies in reimagining the system as one in which end-users are partners with the discoms in creating value for the network and themselves.

Perhaps the place to start on that journey is to create a new approach to infrastructure planning, one that will drive solutions that create greater societal benefits than costs. But this is unlikely to be enough so long as discoms lack the motivation to do so. The societally preferred outcome should also be the preferred course of action for discoms. It is therefore up to regulators and policymakers to create the means for fairly evaluating NWAs and incentivising discoms to create and manage this change for a better societal outcome.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Battle lines drawn over CCS access to European funding

Ambitious targets remain academic if we do not get permitting right

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Europe’s current permitting regulations are not aligned with the bloc’s emissions reduction goals

The European Union is gearing up its climate ambitions. Last year the EU agreed to reduce greenhouse gas emissions by 55% by 2030. To make this possible the European Commission is putting together the so-called “Fit-for-55 package”.

The package will increase Europe’s renewable energy target, reform of the EU Emission Trading System (ETS) and revise other key legislation. All this points to an accelerated uptake of renewable energies. Great times for wind energy, you might think.

Alas, Europe is not building enough new wind farms to deliver the new 55% greenhouse gas (GHG) reduction target. The EU will only build 15 gigawatts (GW) of new wind capacity a year over 2021-2025. But the 55% goal needs us to build 27 GW a year. The problem is not technology, finance or costs. It is permitting. Europe is simply not permitting enough new wind farms to meet its renewable energy targets.

Permitting rules are too complex, procedures too slow and often the permitting authorities are not adequately staffed to process permit applications as fast as they should. This creates additional costs and increases the development risk of wind farms. In many countries, it takes five years or more to permit a wind farm. That deters investors from putting their money into wind.

TROUBLED OUTLOOK

Because of their inefficient approach to permitting, 11 EU countries are already at risk of missing their existing 2030 commitments for the expansion of renewables. Even more countries would fall short of delivering the increased renewables targets that come with the new 55% emissions reduction goal.

The long-term outlook for wind energy looks outstanding on paper. To deliver the Green Deal the EU aims to have 1000 GW of onshore wind and 300 GW of offshore wind by 2050—up from 165 GW onshore and 15 GW offshore today. But even the most ambitious targets for wind energy expansion remain academic if we do not get permitting right.

The EU’s Renewable Energy Directive already imposes a two-year deadline on the Member States for deciding on permit applications and this comes into force in July this year. It requires them to have a one-stop-shop for information on permits. But what is missing is a strong and common understanding across Europe of how to simplify permitting rules and procedures. The Commission should actively disseminate best practices to guide Member States and act as a clearing house, praising and elevating good practice where it exists. Quantitative performance indicators can play a role here too.

POLITICAL BARRIERS

Aside from procedural hurdles some Member States need to radically change their approaches to wind energy. Take Poland, for instance, which wants to reduce its dependence on coal.

Wind energy is perfectly positioned to help Poland deliver its transition to cleaner energy. But in 2016 the country’s government introduced a “10h” distance rule which says new onshore wind turbines can only be built if they are at least ten times the tip height away from any house—in practice two kilometres. This rules out new wind farms on around 99% of Polish territory. Onshore wind is the cheapest form of new power generation capacity in Poland. But the 10h rule makes it close to impossible to get new permits for onshore wind.

Some old projects (with permits awarded before 2016) are still being built but they have to use the technology that was in their original permit application instead of using the most modern turbines. The Polish wind farm developers often struggle to find manufacturers that still produce these older turbines. The 10h rule is crippling onshore wind development in Poland.

It is good that the Polish Government is now looking into revising the excessive rule. They have already held one public consultation on it and now Anna Kornecka, Poland’s deputy minister of development, labour and technology, has given public signals of intent towards a revision of the rule.

The Polish Entrepreneurs Federation are also advocating for more onshore wind as a key factor for the future competitiveness of Poland’s industry, especially the energy-intensive sectors.

PURCHASING POWER

The interest from large corporates to source renewable electricity through corporate Power Purchase Agreements (PPAs) has been on the rise in Europe for the past years already. With nearly 4 GW of capacity contracted through PPAs across 12 countries, 2020 was a record year for new PPAs.

Polish companies now also source their electricity through PPAs. Recently the Polish steel manufacturer Commercial Metal Company Poland (CMC) signed a long-term PPA demonstrating their engagement and support for the energy transition in Poland.

To further facilitate the uptake of PPAs, the Fit-for-55 package should oblige all Member States to issue Guarantees of Origin to renewable electricity producers, irrespective of whether the renewable energy projects receive Government support. Guarantees of Origin make electricity from wind “traceable” and are key to corporate PPAs.

Wind energy will continue to bring economic benefits to communities in Poland and the rest of Europe. The wind industry today generates €2.5 billion of value added to the EU economy for each new gigawatt of onshore wind installed. It pays €5 billion in taxes to the EU economy, including €1 billion in local taxes and other payments benefiting communities.

Onshore wind turbines create lasting jobs in rural areas while offshore wind revives coastal regions. That is why it makes economic sense for the European Union to place wind at the centre of its Fit-for-55 package.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

How to sink the cost of floating offshore wind

The European Climate Law agreement is about more than new targets

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

With the upcoming legislative package, it will be important to keep in mind that talking about climate without talking about governance is a high-risk strategy

Decarbonising the economy will require difficult and timely choices in the coming years. Over the past decade, many governments—in Europe and beyond—have equipped themselves with national climate laws to provide a legal framework capable of addressing future challenges in the most appropriate way. In line with the experiences at a national level, the recent agreement on the European Climate Law provides the Union with a revised framework to achieve its domestic and international climate objectives.

The Union’s commitment to the Green Deal agenda during covid-19 confirms the determination of European institutions on climate action. The EU Green Deal, originally presented as the new growth strategy for the Union, has become a key tool to deliver economic recovery together with the decarbonisation objectives. In this context, the European Climate Law offers an overarching governance framework that provides stability beyond political cycles and clarity on the direction of travel. The deal is made up of two complementary and equally necessary elements: updated climate targets and governance tools.

First, the Climate Law enshrines the 2050 climate neutrality goal and sets an inspirational goal to reach negative emissions thereafter. However, despite the attempt by the European Parliament to make these objectives nationally binding, it remains an EU-wide target. The law also integrates the updated 2030 target as defined by EU leaders in the December 2020 European Council meeting.

Negotiations of the mid-term target have been the most political and controversial throughout the trialogue process. The European Commission and the Portuguese Council Presidency wanted to achieve a deal on the 2030 target in the same way they achieved a deal on the 2050 target simply by incorporating guidelines received from EU leaders.

On the contrary, the European Parliament pushed until the very end of the negotiations for an increased ambition of the proposed 55% net emissions cut. The final compromise confirms the concept of a “net” target, which implies counting the removals in the calculation of at least 55% goal.

Beyond the agreed number, legislators accepted to limit the contribution of removals to the 2030 objective to 225 million tons of CO2-equivalent. In other words, this means the emissions reduction goal is effectively set at around 52.8% in absolute terms by 2030. This deal is particularly relevant for the upcoming June Package, which will have to deploy sufficient efforts to reach the objective.

Secondly, regarding governance, these provisions are usually common elements across existing national climate laws. This reveals the importance of a more general debate on political decision-making in an increasingly complicated future. Europe’s management of the pandemic teaches an important lesson: politicians will increasingly have to face pressures that, if not properly addressed, risk blocking or slowing down the energy transition.

With the agreement on the European Climate Law, and in particular, the establishment of an independent advisory board, the European Union recognises the need to bring scientific and independent knowledge closer to political choices. The board will provide the scientific and economic arguments to help citizens and politicians understand the importance of making necessary and timely decisions.

EMISSIONS BUDGET 

Another achievement is the establishment of an emissions budget for the period 2030-2050. While a climate target sets an objective to be reached by a given year, it does not impact the specific amount of greenhouse gases emitted in the meantime. Agreeing on a greenhouse gas budget was therefore necessary to ensure that the Member States take action to reduce emissions early on, instead of postponing them to the last minute.

With current annual emissions of about 4 gigatonnes, the EU would consume its 1.5°C budget by about 2032. The greenhouse gas budget mechanism is a crucial governance tool for safely navigating the EU towards the target and incentivising early action. A transparent and quantified emission budget after 2030 can help to assess progress and direct EU climate policies where necessary.

Despite the efforts of campaigners, the European Parliament had to drop its amendment on access to justice in the final agreement. This provision would have been essential in keeping every Member State accountable by its civil society, as seen through recent climate justice rulings in the Netherlands and in Germany. However, MEPs have increased pressure on the EU to strengthen the Aarhus Convention, which enables challenges to EU decisions impacting the environment.

The agreement on the European Climate Law confirms the relevance of discussing institutional reforms together with future political commitments. This also sets an important and positive precedent in view of the upcoming June Package.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

New supply chain law could help spur the energy transition

The US needs to upgrade its transmission system to fully realise its offshore wind potential

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Federal leadership can continue the momentum gained at state level

The year 2021 will be remembered as a pivotal year for the US offshore wind industry. For a decade, the industry has made slow but steady progress via increasing state procurement commitments, record-breaking lease auction prices and port infrastructure upgrades in the hundreds of millions.

Now, with the support of the new Biden Administration, the industry can finally take off, helping to achieve our national clean energy goals and create tens of thousands of well-paying jobs in the process. The Biden Administration’s ambitious, yet realistic, goal of 30 gigawatts (GW) of deployed offshore wind capacity by 2030—up from today’s 0.048 GW—reflects just how far the industry has come along in just the past couple of years.

To make offshore wind and other clean energy sources a reality, however, the Administration must leverage the full weight of the federal government to help alleviate long-standing hurdles to development. This will facilitate a steady, predictable, and sustainable pipeline of offshore wind projects.

This includes needed port infrastructure improvements to sustain the logistical needs of the new industry, more clarity in the federal permitting process, and concerted support for the localisation of the US offshore wind supply chain.

GRID UPGRADES

The Biden Administration has already taken significant action in recent weeks to address these issues but consistent support and clear messaging from the White House, Congress, and the Federal Energy Regulatory Commission (FERC), the US electricity regulator, will prove critical to fully realising the industry’s potential.

Upgrading our electricity grid is a perfect example of an issue in dire need of federal support and leadership. To reliably operate electricity grids on renewable energy sources, the infrastructure of the grid needs major upgrades to be able to move large quantities of power regionally.

Offshore wind is no different. In its present condition, the electricity grid in coastal areas simply cannot handle the enormous power generation ability that offshore wind will bring onshore; the grid was only designed to bring the small amounts of power needed by local shore communities to homes. Europe needed 28 years to deploy 22 GW of offshore wind capacity, and much of the required associated transmission capacity—President Biden wants to install more capacity in a third of the time.

FEDERAL LEADERSHIP

To accomplish this herculean task, coordination, funding, and leadership are all needed. The Biden Administration has brought significant attention to this issue, especially after the failure of the Texas grid earlier this year. In his new infrastructure plan, President Biden proposed $100 billion in funding to modernise and harden the US electricity grid—which will also lower energy bills, improve air quality, and create well-paying jobs.

Intergovernmental coordination is needed just as much as funding. Offshore wind facilities will be physically sited on federally regulated waters, yet these same projects compete for power contracts through state government solicitations. Overlaid on this federal-state mix is the fact that there are three segregated regional electricity grid operators in the Northeast United States—PJM, NYISO, and ISO-NE. A complicated and highly fragmented regulatory picture emerges.

Effective, long-range transmission planning that more holistically quantifies all the benefits associated with proposed transmission upgrades can save ratepayer dollars in the long-term, while enhancing overall system reliability and minimise environmental impacts.

The Brattle Group, a US consulting services firm, found coordination of offshore and onshore transmission improvements in New England would lead to $500 million in construction savings, $55 million in annual savings from reduce power loss, and potentially $300 million more in other savings by more effectively delivering power to high-demand areas. Another recent study in the United Kingdom found that a coordinated approach there could produce estimated savings of $8 billion and a 70% reduction of cable landfalls.

In the United States, regional grid operators are regulated by FERC, but transmission build-out is heavily influenced by state energy policy. While FERC has authority to direct interregional planning for offshore wind grid integration. the Department of Energy (DOE) and national laboratories could support FERC’s decision-making authority.

INFRASTRUCTURE COORDINATION

In its proposed infrastructure bill, the Administration asked Congress to create a new Grid Deployment Authority within DOE, which will provide “better leverage of existing rights-of-way and support” and “creative financing tools to spur additional high priority, high-voltage transmission lines.” The creation of this authority would be a step in the right direction, and some industry experts have raised the potential of creating an offshore wind-specific offshore grid operator.

The US offshore wind industry has a bright future, but significant hurdles must still be surmounted. Resolving these issues will require a concentrated coordinated effort by developers, stakeholders, and the federal government. Failing to resolve the transmission question may well stifle the full expansion of the US offshore wind industry.

In proposing its infrastructure bill, the Administration said it plans to “invest in American in ways we have not invested” since the birth of the highway system. In order to fully harness renewable energy resources, like offshore wind, the US now needs to rebuild its electron highway. Doing so will save ratepayers down the road and will smooth development timelines and allow this future American industry to flourish and grow good-paying jobs.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

A climate council should marry policies with ambition

Energy storage is the perfect partner to decarbonise remote areas

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

The versatility of battery storage can support the take-up of off-grid systems

There are many communities and industrial sites around the world where connection to a utility grid is either impractical or uneconomic. Remote islands, mining or oil and gas sites and military bases are a few examples and have historically relied on generators running on diesel or other fossil fuels—at significant environmental and financial cost.

Operators now want to maximise the use of renewable energy but this has been limited by the natural variability of wind and solar power. Renewable sources can drop by more than 50% in just a few minutes—a challenge that needs to be overcome when providing power continuity for critical equipment.

Battery energy storage is one solution that can provide services such as frequency support, spinning reserves or peak shaving. They require relatively little storage capacity but enable microgrids to maximise the usage of renewable generation, ensure stable grid conditions and avoid unnecessary and inefficient diesel operation. Microgrid operators thus benefit from increased resilience and reduced reliance on imported fuel for thermal generators.

CORDOVA CITY

The city of Cordova in Alaska’s wilderness, with a population of around 3000, gets most of its energy from 7.25 megawatts (MW) of run-of-river hydropower and has a thriving salmon industry. However, during the winter freeze, it has to rely on diesel generators capable of delivering 10.8 MW. Then, when multiple fish processing plants start up during the spring, electricity demand spikes unpredictably.

Local utility company Cordova Electric Cooperative (CEC) has traditionally managed this by running some of the generators in parallel to hydropower during the spring and autumn transition periods, as well as in the peak summer demand period. This approach to providing spinning reserves was losing more than 1 MW from river hydropower while burning expensive fuel.

CEC wanted to build greater self-reliance and make the most of its hydropower. It installed an energy storage system (ESS) with 1 MW power and 1 MWh storage capacity to ride through the spikes in demand, enabling full use of its hydropower capacity. It is now meeting 90% of electricity demand from renewable energy during the peak fish processing season of May to August, whilst saving 250,000 litres of fuel annually and reducing the wear and tear on the generators.

PUBLIC SUPPORT AND LEGISLATIVE LANDSCAPE

Operators of remote grids can use energy storage in combination with renewable generation to reduce their carbon footprint in response to the raft of new government targets to reduce greenhouse gas emissions. Furthermore, in many places, higher energy and carbon taxes are driving up the cost of fuel and encouraging operators to invest in renewables.

Incentives and funding are also available. Whereas tax incentives are a well-known tool used in the US to favour investments in renewables with storage, the European Union is planning to make funding available for climate-friendly projects under its Green Deal and post-covid recovery plan. Large greenhouse gas-reducing investment projects (including those embracing energy storage) can be supported under the new Innovation Fund, an EU funding instrument financed with resources from the EU Emissions Trading System.

Other sources of funding may be on offer, particularly where there is potential to help support industry and business for remote communities. For example, government funding is available for rural electrification projects in Africa, as well as for remote indigenous and industrial communities in north America and Australia.

GRID-CONNECTED SITES

For less remote sites, microgrids integrating energy storage can be deployed for industrial and commercial operators who want the flexibility to switch between grid-connected and island mode. The primary motivation being resiliency in case of grid outages. But such solutions also enable maximum self-generation and electricity bill optimisation, for instance, by avoiding peak demand charges or monetising demand flexibility.

For the future, we expect decentralised storage systems to generate additional revenue through participation in grid services markets, through demand response programmes and with the injection of active power back to the grid when financially attractive. Market designs are changing in many places in order to enable aggregation and monetisation of such services. Once firmly implemented for the long term, these mechanisms will improve the business case for decentralised self-generation and storage and favour a much broader adoption.

However, “double taxation” still applies in many jurisdictions and considerably hampers this business model as grid utilisation fees apply both during charging and discharging, considering energy storage both as a consumer and a producer. There is hope that the next revision of the EU’s Energy Taxation Directive avoids such double charging of storage facilities, especially when providing services that benefit the grid.

Do you have a thoughtful response to the opinion expressed here? Do you have an opinion regarding an aspect of the global energy transition you would like to share with other FORESIGHT readers? If so, please send a short pitch of 200 words and a sentence explaining why you are the right person to deliver this opinion to opinion@foresightdk.com.

Wind turbines in a race to become even cleaner

Differing pasts will provide alternative hydrogen futures

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Some markets are more prepared than others for the hydrogen revolution

As more countries publish net-zero plans, hydrogen is taking centre stage to help achieve carbon targets. The EU and the UK have set targets for net-zero emissions by 2050, which involves switching energy consumption across the whole economy to zero-carbon sources.

Hydrogen could play an important role in reducing emissions particularly in hard-to-abate sectors such as industry, heating, and heavy-duty transport. Research based on analytical modelling of hydrogen economics suggests that Europe’s appetite for hydrogen will grow eight-fold from today’s 300 terawatt-hours (TWh) to up to 2,500 TWh by 2050.

There will be significant demand for low-carbon hydrogen in industry, with this alone doubling to 700 TWh by 2050. In the 2030s and 2040s there is significant potential for hydrogen use in transportation (particularly in heavy-duty vehicles such as buses, trucks, trains and potentially planes) and heating (replacing natural gas).

Hydrogen is already used extensively in industrial processes such as ammonia production and refineries, with European demand concentrated in Germany, the Netherlands and France. However, this hydrogen is produced from fossils fuels, mainly natural gas and coal, producing significant greenhouse gas emissions. In this case, where the CO2 from the generation is not captured it is known as grey hydrogen.

Though there are numerous ways of producing low-carbon hydrogen, the two most visible and promoted types are “green” hydrogen, which uses renewable electricity in electrolysers, and “blue” hydrogen, which involves reforming natural gas and capturing the CO2 by-product. Today, “grey” hydrogen is the cheapest type of hydrogen, but the costs of green and blue hydrogen could fall significantly.

Making blue and green hydrogen more cost-competitive to grey hydrogen will be enabled by reducing the costs of carbon capture and storage (CCS) technology, and increasing renewables investment, respectively. At the same time, government subsidies for green and blue hydrogen, as well as incentives and penalties geared towards decarbonising overall, will further increase the competitiveness of low-carbon hydrogen with its fossil fuel incumbents.

Currently, the cost of blue hydrogen is lower than green hydrogen, largely due to the high infrastructure cost of electrolysers. However, as electrolyser technology scales, capital costs are expected to drop quickly. This is similar to the drop in costs seen in solar and wind technology in the past 20 years. On top of this, the cost of electricity will also fall. Beyond 2030, flexibly-operated electrolysers could produce green hydrogen and undercut blue hydrogen prices on a subsidy-free basis.