Fast, but not fast enough. That is the verdict on the pace of the global adoption of renewables which, while dramatic, is not accelerating quickly enough to lower carbon emissions and meet global warming targets.
In 2018, renewables made up around 25% of the world’s total power generation. In Europe, this was even higher at 35%, with 95% of all capacity added in 2019 being renewable generation. Advancing technology and falling costs are making clean energy cost competitive with that generated by fossil fuels in most markets.
Despite over $2 trillion investment in new renewable energy in the past decade —adding a combined 1215 gigawatts — the share of low-carbon technologies in the overall generation mix has, however, not changed. Instead, this new capacity is meeting increasing global energy demand and compensating for the declining role of nuclear.
The aspiration set in Paris to constrain temperature rises will require unprecedented efforts. The problem is what governments commit to and what is actually taking place in our cities is not the same. Despite pledges to phase out fossil fuels, their use is on the rise. Economic expansion and population growth mean coal use is increasing in Asia and gas is booming. As a consequence, emissions and temperatures are increasing too. In 2018, carbon emissions grew at their fastest rate since 2011 – and the peak is not yet in sight.
While some countries have pledged carbon neutrality by 2050, with many others considering it, commitments made by national governments under the Paris Agreement fall far short of what is required. Taken together, they would still condemn the world to an estimated temperature rise of more than 3°C above pre-industrial levels by the end of the century. This huge misalignment between aims and actions is highlighted in the UN’s latest Emissions Gap Report, which concludes that countries must reduce their greenhouse gases (GHG) by about 7.6% a year for the next ten years to stay within the 1.5°C limit.
Scientists say only carbon neutrality by 2050 can avert our current trajectory, but achieving this will require a drastic reduction in emissions from all sectors and an increase in electrification. We must take bolder action, faster.
POSITIVE PROGRESS TOWARDS AN ELECTRIFIED WORLD
As the global electricity system becomes cleaner, cheaper and more efficient, the electrification of transport, heating and cooling and other energy-intensive sectors, is required and will accelerate. This will lead to a doubling of electricity demand by 2050. The value of electrification lies in its efficiency and cost-effectiveness.
But even as these factors position electricity as the world’s fuel of choice, the pace of electrification must increase if we stand a chance of meeting climate targets. Even under a deep electrification scenario, the best projection is that electricity will cover around 40% of final energy demand. The challenge is to green the remaining 60% of energy demand which is heavily tied to fossil fuels.
The good news is that progress is evident, with a number of forces converging. Economically viable technology, customer demand and growing investor appetite are coming together to accelerate efforts to reach a net zero emissions goal.
ENERGY COMPANIES MUST BALANCE NEW OPPORTUNITIES AND RISKS
This new energy future opens up huge opportunities for energy companies.
Energy companies that do not move fast enough and invest more to achieve carbon neutrality will be exposed to new risks in a transformed energy world.
GOVERNMENTS ARE KEY TO ACCELERATING CHANGE
The energy sector has a major role to play in accelerating the energy transition, but progress will remain limited without unprecedented political will and far greater cooperation across regulators, governments, investors, energy companies and consumers.
Governments must act with more agility to keep up with rapidly advancing technology, industry changes and consumer behaviour and to align policy with climate goals. Climate commitments grab the spotlight, but too often ambitions fade with time and political will. To meet the goals of the Paris Agreement, strong action is needed on multiple fronts to deploy new technologies, invest in energy efficiency and advocate for carbon pricing that is high enough to meet climate mitigation targets.
Decarbonisation will require profound change in almost every part of the economy. To win, we must look ahead beyond the forces that are driving us in the immediate term. The key driver will come from governments accepting the need to meet CO2 targets and having national plans to achieve these goals.
For EY’s latest insights and analysis on the energy transition, visit https://www.ey.com/en_gl/nextwave-energy
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms.
The views expressed in this opinion are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy
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Much as in the energy transition debate, the big question is who pays for carbon removal
The European Green Deal, launched in December 2019, is an ambitious policy proposal that will try to agree a carbon emissions reduction target for Europe of up to 55% by 2030 compared to 1990. Two questions appear: is it possible and how much will it cost. But both could be misleading, says Julian Popov, Fellow at the European Climate Foundation and former Bulgarian Minister of the Environment
The Green Bank Network has committed almost $15 billion of predominantly public capital to mobilise a total of $50 billion towards the low-carbon transition
Industry leaders need to change their way of thinking, social and environmental impacts be integrated in investment decisions and capital redirected to support a rapid transition to a low carbon economy for New Zealand to meet its Paris Agreement commitments, says Jane Taylor from The Aotearoa Circle
“Electrification is the most efficient way of decarbonising”