Christoph Frei explores decarbonising the energy sector ahead of COP23

Posted on 29 November 2017

Is there a model for how national governments can create the right set of sustainable energy policies?

There is no doubt that the energy sector worldwide is undergoing a dramatic transition in which governments are playing their part. Many attribute this transition to the need to prevent, or at least plan for the potential impact of, climate change whilst enabling access for billions more, new energy users and this in a context of dramatic innovation fuelled by electrification of final demand, decentralisation and digitalisation. The drive to reduce greenhouse gas emissions has certainly been a critical stimulus to the development of new technologies such as solar and wind, which are becoming increasingly competitive with traditional energy systems based on fossil fuels and nuclear.

Focused, innovative, well designed energy policies are the key to tackling continued uncertainty and dynamic changes, if the goal of a sustainable energy future is to be achieved, as identified in our 2016 World Energy Council Energy Trilemma report presented at last year’s Clean Energy Ministerial.

The quest to finance the transition to a more sustainable energy system remains an issue that keeps energy leaders and policymakers busy at work, while there is a growing acknowledgement that adaptation to new resilience challenges, new digital solutions and smart innovation as well as regional interconnection will be key parts of the solution. If we are to successfully meet the Trilemma goals of security, sustainability and equity, leaders need to come up with innovative policies and look beyond the energy sector, which will require changes to the economy, to our transportation, manufacturing, construction and agricultural sectors.

The forecasts for growth in the renewable energy sector have confounded many expectations. Do you think the current high levels of capacity can continue?

We have seen a dramatic increase of unconventional resources and no less dramatic technology improvement in the renewables space over the past decade, in particular, driven by wind and solar. In 2015, the share of renewable energies in total global power generation was 23 %, exactly the same figure as in 1970.  That is going to change within the next 45 years. In our latest World Energy Scenarios report, which sets out three potential pathways for the energy sector to 2060, we see a strong increase in the share of renewable energies. The share being up to two third by 2060 – depending on the respective scenario. In other words, most of the new power generation will be covered by renewables, with the use of coal as a prime energy source in decline.

 What are the main issues renewable energy will face once it becomes a mainstream energy source?

Renewables such as solar, wind and hydropower now account for about 30% of the total installed power generating capacity and 23% of total global electricity production and will continue to grow. However, more progress is urgently needed to scale up action on energy efficiency. Given the intermittency of energy from renewable sources, we have to rethink the system from one where supply follows demand to one where demand follows supply. This will be enabled by progress in demand response, sector coupling, smart grids and ultimately an internet of things in energy, all different features of the digitalisation in energy. With a less concentrated, more materiel intense and more decentralised nature of the system issues such as recycling of (scarce) materials will also become more important.

Are there any sectors in particular which are facing real challenges in being able to make the transition to a low-carbon future?

Transitioning global transport currently forms one of the hardest obstacles to overcome in an effort to decarbonise future energy systems. Let’s take Germany for example: Between 1990 and 2016, a reduction in CO2 emissions of 24 % was achieved, but the transport sector contributed 0 % to this development.  However, according to our Scenarios work, globally, we will see an increase in the electric vehicle share of the light-duty vehicle fleet from 2.5 to 2.7 times by 2060. Oil’s share in transport will decrease from 92 % today to 60 % in Unfinished Symphony, 67 % in Modern Jazz, and 78 % in Hard Rock.

Advances in second and third generation biofuels make substantial headway in all three scenarios, ranging from 10 % in total transport fuel in 2060 in Hard Rock, 16 % in Modern Jazz, and 21 % in Unfinished Symphony. Modern Jazz and Unfinished Symphony see rapid penetration of electric and hybrid plug-in vehicles globally, which reflects 26 to 32 % of the light-duty vehicle fleet in 2060.

We have recently seen France and the UK announcing the end of diesel and gasoline by 2040, the German parliament having discussed a similar measure possibly before that. Most importantly, China’s government is considering such measure and if this happens it would be a game changer for transport as the world’s largest vehicle market would then march to a tipping point and pull others to follow.

The World Energy Council has just finished its world Energy Week and Executive Assembly.  Were there any clear themes on sustainability which emerged from the discussions?

Decarbonisation is only part of the transition story. Electrification of final demand combined with decentralisation and digitalisation define an incredible space of innovation in terms of technology and business models. Our 2017 World Energy Trilemma report assesses decentralisation and its potential impact on backbone infrastructure and discussions at the World Energy Week highlighted the related uncertainties and raise questions about solidarity, cyber security, and competition between incumbents and new players.

The research behind our Energy Trilemma report this year, has attempted to gauge the potential impact of the energy transition, and in particular, decentralisation, on the wide range of energy systems that exist in different countries around the world. Renewables and digital innovation open-up opportunities for new entrants who can compete to provide prosumers with an array of new services, act as aggregators, deliver new form of supply and system support products, and compete with existing assets. Implications and opportunities differ greatly in developed countries with established transmission infrastructures, compared with developing and emerging countries where access to energy is still a major obstacle to be overcome and where rural entrepreneurs offer solutions in a space that previously was simply left in the dark.

What is the World Energy Council’s role in promoting responsive and responsible leadership?

The Council is the largest global network of energy leaders and practitioners dedicated to delivering a sustainable energy system for the greatest benefit of all. Originally intended as an organisation to manage a gathering of energy experts, we have evolved into one of the world’s most influential energy organisations with our leadership dialogue focused on the energy transition.

We continue to deliver on our original goal by organising the world’s largest all-energy event, the World Energy Congress, in addition to global and regional Energy Leaders Summits and Ministerial Roundtables as well as national dialogues aimed at supporting policymakers, experts and industry leaders as they seek solutions to shape and successfully master the transition.  The Council also publishes authoritative studies – our World Energy Scenarios, Trilemma, Issues Monitor and innovation work – to help further the vision of a sustainable energy future and promote responsive and responsible leadership. As the UN-accredited global energy body, we work with governments, agencies and companies to help inform policy development and strategic decision-making and planning.

Are there any new technologies or innovations in energy which are exciting you, or could be transformative in the future?

If the Grand Transition is driven by a combination of factors including decarbonisation, electrification of final demand, decentralisation, digitalisation and resilience to new physical risks such as extreme weather, cyber or the energy water food nexus, a number of specific innovation areas capture particular attention.

The one thing above everything else that is keeping energy leaders awake at night is the impact of digitalisation on the future of the energy system. New business models and digitalisation will define momentum on a path of innovation which will change the way we produce and use energy in industrialised and developing worlds; and how the resulting transformation will drive new realities and priorities in global energy governance.

We see a world where big data, machine learning, and artificial intelligence enable automated system analytics and instant demand response is very different from the analogue world where many leaders started their careers. Predictive maintenance and supply chain management can dramatically decrease outage times and offers entirely new opportunities in traffic and congestion management. We also see a world in which the internet of things and blockchains will enable direct and low-cost transactions between parties and between appliances is fast approaching, with at its core precisely recorded transactions in unfalsifiable ledgers that also open new possibilities for supply chain tracing and product labelling by fabrication origin, materials used or emissions caused. Blockchain is an issue that is currently on the top of Energy Leaders list of critical uncertainties.

Other areas of critical interest are storage and e-mobility as these have great potential to accelerate decarbonisation in transport or new platform business models as these have the potential to leverage existing assets in new utilisation areas – think of fridges or electric boilers aggregated to electric storage services.

Last but not least, mobile banking supported by cloud technology is already today enabling micro-leasing schemes for rural household in the developing world and revolutionising opportunities also in the energy access space.

These new technologies and business models will not only change the way we operate the energy system but will revolutionise the potential for a sharing and leasing economy in energy.

Do you have any aspirations for what COP23 can, or should, achieve? Do you have a key message to attendees?

The UN Climate Change Conference (COP23 Fiji) in Bonn comes at a time when it is no longer sufficient to maintain the momentum.  In the past 45 years, the average rate of decarbonisation has been around 1% per year. To keep temperature rises below 2°C, this needs to be 6% per year. This requires a revolution, not an evolution. Another way of trying to put a value on the rate of decarbonisation is to look at fossil reserves. We currently have an equivalent of 2,800 Gt CO2 in proven reserves of coal, oil and gas, but to not exceed the 2°C target, we could only emit 1,000 Gt of CO2. Behind these figures hides potential for geopolitical tension, which has to be overcome. The Paris climate change deal got us one third of the way to meeting the temperature change target and we see many countries introducing concrete steps post Paris.

We now need to take the next leap in closing the ambition gap, delivering on implementation and accelerating on innovation. The world is now on a trajectory where only a climate of innovation will allow us to navigate the way to a truly sustainable energy future for the greatest benefit of all.

This interview was originally published in Climate Action magazine launched at Cop23.