We take into consideration this report was issued before the worldwide outburst of Coronavirus. Yet, our aim is to provide you with a better understanding focusing on its main ideas and an insight about key conclusions.
THE SCOPE OF MONITOR REPORT 2010
In order to identify the main trends and topics that influence energy transition this report looks at 42 issues regarding the progress of this transition from:
- over 3,000 survey responses from energy leaders in 104 countries
- 550 responses from individual energy users in 50 countries *
*(for the first time the report includes the answers and perceptions of individual customers).
While decentralization, digitalization and decarbonization are key drivers in the energy transition issue, attention has to rest on shifting patterns that shape these energy transitions (Figure 1).
Macroeconomic and geopolitical issues lead critical uncertainties
Ongoing US-China trade dispute
The strained trade relations between the United States and China cause a high uncertainty all around. Facts as tariffs imposed on energy and other goods on both sides, and emerging technology tensions (e.g. with Huawei and 5G infrastructure) have an impact beyond the world’s two largest economies. Despite both countries signed a trade agreement in January 2020, the created uncertainty is still jeopardizing energy demand growth prospects.
China is the world’s leading energy consumer and importer, but also is a huge energy infrastructure investor: in Argentina, for instance, its investments make China an enabler of new business opportunities and growth.
On its side, the United States is a leading energy exporter and an active development partner. I.e. it provides financial support to growing economies such as Chile, also as a leading investor in infrastructure and innovation.
Growth prospects clouded by macroeconomic risks
The volatility of commodity prices generates instability for both energy consumers and producers. The US, world’s second largest energy consumer, is producing more oil and gas, thus reducing its external demand and affecting the supply and demand balance.
While consumer countries face economic challenges, countries with a high dependence on hydrocarbon exports are particularly exposed (i.e. Nigeria and Colombia) due to the oil price collapse of 2014.
To cope with energy price fluctuations, Governments have responded differently:
- reducing expenditure on infrastructure projects
- eliminating subsidies (i.e. fuel subsidies in Ecuador)
- raising import duties to manage trade balances
- raising domestic fuel prices (i. e. Algeria)
Climate issues are a priority… but there is still high uncertainty
Climate emergency crisis is a fact, but countries still hesitate on measures to mitigate the impact of intensifying extreme weather events, despite the countries more exposed to those ones show more concern. Although, at an individual scale, countries can reduce emissions, there is lack of consensus for collective global actions.
Target for cleaner energy goes from 20% renewables in the energy mix to complete carbon neutrality (the European Union 2050 objective). Key challenges are on the transport sector (the biggest emitter) and the need to protect industrial competitiveness and vulnerable communities.
Technology issues lead Action Priorities
Technology should contribute for greater affordability and sustainability
Governments start plans for a broader adoption of renewables, digitalization, energy efficiency, energy storage, and other technologies to foster energy transition.
Blockchain clearly is an enabling solution for affordability of distributed energy systems. While start-ups prove the usability of innovative technologies, governments start opening opportunities for them. I.e. Swiss start-ups are developing blockchain-enabled energy technology for smart meters and transactional power grids to reduce grid operation costs.
Smart cities concept develops especially in Latin America, balancing environmental impacts of fast urbanization with investments in smart grids, innovative transport and storage technologies (as an example, in 2019 Panama started an electric mobility project supported by the UN and the European Union).
Energy efficiency is a key theme worldwide
Energy efficiency brings high positive impact and relatively low costs. Thus, many countries are adopting plans to improve the performance of appliances, buildings, the electricity and gas distribution grids.
In Europe, building efficiency is a core theme, as buildings account for 40% of energy consumption and 36% of CO2 emissions. Governments are using tax incentives for building renovation to reduce energy consumption.
Focus on distributed systems for better accessibility and decarbonization
Distributed energy policies will be crucial to achieve universal energy access by 2030. Yet, in spite of supporting regulatory frameworks, financing is a curb in emerging markets usually relying on subsidies. While in Mongolia, the Asian Development Bank supports a 40.5MW distributed renewable energy system project, in developed countries like Sweden, distributed generation is promoted, and renewables generation as energy efficiency receive certificates as incentives.
Regional integration improves energy security
Strengthening regional integration
Energy integration can increase regional cooperation, securing and diversifying energy supply.
- In EU, Bulgaria, for instance, is investing in the Greece–Bulgaria (IGB) gas pipeline and the Alexandroupolis LNG terminal. It is also liberalizing gas market to create the Balkan gas distribution center.
- In Africa, regional electricity and gas integration can help countries’ growing energy needs. In September 2019, the World Bank approved a finance package to construct the Mozambique– Malawi Interconnector to enhance power generation capacity.
- China’s “One Belt, One Road” initiative supports infrastructure projects for regional integration.
National energy strategies to diversify the energy mix and reduce one energy source/supplier dependence
Besides regional integration, self-reliance is also a strong focus for countries. High oil and gas dependence make countries vulnerable to supply disruptions.
Energy mix diversification is key on countries reliant upon few supply sources. It requires increasing the share of renewables (like Belgium, planning to reach 18,4% of renewables share in 2030 in front of 8,65% in 2017).
Renewables to boost electricity production
Increasing renewables (especially solar and wind) is a key strategy to access to clean domestic energy supply. Lebanon currently imports most of its energy, but bets on renewables to increase domestic production to a 12% by 2030. Other coal producing countries also look at increasing renewables capacity to reduce coal emissions.
A NEW PULSE: The Decade of the Customer
The 2010s saw an automation and upgrading of energy systems to speed up energy transition. Digitalization led to a more customer-centric approach, through regulations to empower consumers. Now, the 2020s may see a transition from activism to action.
Interestingly, customers do not always appraise the contribution they can make to help to decarbonization. In 2019, a survey to 550 customers from 50 countries upon the impact of their actions on emissions reduction, showed (Figure 2) many do not link their individual behavior and overall energy demand. And yet, consumer behavior is key in reducing emissions from energy.
At the same time, many customers want to be more efficient and are prone to switch to more energy efficient domestic appliances.
The energy sector is investing a lot in renewables and distributed generation, equipping the customer with controls such as smart meters, time of use rates, etc.) to be aware of their energy use. More and more, customers will drive the direction of the energy transition, and that can be influenced by:
- financial incentives (“carrot or stick”) to encourage change,
- more information on emissions labelling on products
- information on the carbon footprint of products and processes
So, as customers are becoming more engaged than before, this decade will see an increasing active participation.
TREND TRACKING: Increasing relevance of CCS in the Oil & Gas sector
Surveys conducted over the years provide a perspective on the evolution of issues. This allows to determine scattered signals or solid global trends.
In comparing response from the Oil & Gas sector in 2015 with 2019, 50% of answers recognize Carbon Capture & Storage (CCS) as a high impact issue (30% in 2015). CCS is essential for continued hydrocarbon use although governmental support is needed to enable scalability and cost effectiveness.
Global CCS Institute reports now 19 large-scale CCS projects in operation globally and 32 in various stages of development or construction.
Different opinions about the importance of nuclear power in Europe
Today nuclear energy as a carbon-free resource is key for meeting electricity demand. Many European countries still recognize nuclear energy as a carbon-free energy source, essential in the future energy mix to reach net-zero carbon emissions by 2050, though not all European energy leaders see it the same way (Figure 6).