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COVID-19 and the Global Oil Market: Analysis and forecast for the Oil Industry
In the first quarter of 2020, the oil market was as turbulent as a hurricane hurting the US Gulf Coast. The dramatic collapse of oil demand pushed oil prices to new territories. The situation sets a gloomy future for weaker oil producers in the upstream sector. This led to a fragile coalition between crude oil producing countries.
Figure 1: Weekly crude oil price for Brent and WTI.
Global situation on the supply side
On March 6, as the demand collapsed, OPEC+ members had to conduct a meeting to decide to cut a portion of their domestic oil production . Meetings like this are not unusual in the OPEC decision-making system but this time it was different as they had to agree on the biggest cut in oil production ever made. The talks collapsed as Russia, which is not an original member but was invited to the talks since 2017, did not agree with the OPEC members to reduce the output. This decision led to a decline of the oil price from $45.27 for Brent the day of the meeting to $22.76 on March 30.
In April, WTI fell into negative territory for the first time in history, obliging producers and traders to pay buyers to take oil off their hands. The reason is that storage capacity at Cushing, Oklahoma was just weeks away from full capacity. This location is a landlocked choke point where traders have to take physical delivery of crude oil. WTI rebounded to around $15/barrel during the following days , still far away from the $45 to $50/barrel required by the shale industry to break even , meaning that below this threshold, oil producers are losing money as they cannot cover their fixed and variable costs.
Figure 2: Location of oil production that is uneconomic at different Brent prices.
The main regions at risk with a persistent low price for oil are the ones with a higher cost of production per barrel or producing lower quality crude oil.
Situation for oil-producing countries
North America is particularly exposed to oil crisis, with shale in the US requiring 45-55$/barrel to break even and make a profit and tar sands in Canada requiring 60$/ barrel to break even and make a profit. Other countries like Russia and Saudi Arabia are more protected against a drop in oil price. Saudi Aramco (National Oil Company from Saudi Arabia) has a cost per barrel of 2.80$ and Rosneft (National Oil Company from Russia) is profitable even with a barrel of Brent trading at 10-15$. Despite having very low production costs, Russia and Saudi Arabia need a sustained oil price at acceptable levels (above 60$/bbl) as oil accounts for a large share of their GDP. In Russia, 40% of the state’s budget comes from oil and gas revenues while in Saudi Arabia, it’s close to 70%.
One can easily understand that even if NOC companies from these two countries are profitable at extreme low prices, their economies are extremely sensitive to oil volatility. The state budget differs considerably year-on-year and this may have an impact on the services provided such as budget for ministries, subsidies for companies, social benefits for citizens, domestic projects and so on.
A particularly representative example is to compare the price of Brent between 2014 to 2016 and Saudi Arabia’s GDP over that period. When Brent fell from 110$ a barrel to less than 50$ during these 2 years, Saudi GDP fell from $756 billion in 2014 to $645 billion in 2016, equivalent to a 15% drop.
Situation for oil-producing companies
For private companies such as the oil majors (Exxon Mobil, Chevron, Shell, BP, Total), the situation materializes as a stress test for the industry. Companies exposed to this historical low oil price need to postpone or cancel some of their future projects in order to reduce their expenses in times of uncertainty. This may also result in less dividends paid to shareholders as companies have to re-examine the allocation of their free cash flow. Large corporations are more resilient to these shocks as they have accumulated tremendous wealth over the past decades. Things are more complicated for smaller independent upstream oil companies, relying on a higher cost of production and debt. As the Figure 2 shows, the lower the price of oil, the more exposed oil producers (particularly US producers) are. The recent surge in the shale industry was only possible because Wall Street and bankers supported companies a few years ago and provided them with easy-to-access loans to drill across Texas or the Appalachian Mountains. But the bill is coming due for this industry, with $200 billion of debt maturing over the next four years and bankruptcy looming ahead for several shale players .
The US is particularly hit by consistent low prices due to the impossibility for its oil industry to break even with a barrel below $45-50. The longer term view should be more promising for oil producers, due to the easing of global lockdowns, voluntary cuts in oil production for some, forced ones for others. One should keep in mind that the end of the epidemy is unknown as well as the recovery of the demand. Only the most robust oil producers will make it through this period of uncertainty, with State aids for most of them.
Future outlook for the oil market
The original OPEC members, alongside Russia and some non-OPEC countries, decided in April to cut oil production by 9.7 million barrels per day at a May-June horizon. Each of the countries involved in this historical deal will have to reduce their own domestic production to match the metrics from the Figure 3. Saudi Arabia and Russia will take most of the burden by removing more than 2 million barrels per day of their own production from the market. This strategy is aimed at driving oil prices to more sustainable levels to ensure that the oil industry will make it through this crisis and to fund the states that rely on the “black gold” to fund their domestic policies. The projected oil cuts are supposed to last for some time. The idea is that, when demand is back to normal levels, oil producers will benefit from a rising, profitable oil price.
Figure 3: OPEC+ Production cuts.
On the non-OPEC side, some cuts in the oil production are likely, but it is not clear to which extent and if it will be voluntary or driven by market forces as the US suggests. The US and Canada in particular will be forced to decrease their production due to the low oil price environment. American production reached almost 13 million barrels per day at the end of 2019 but the Energy Information Administration warned that output will be down to 11 million barrels per day by 2021. According to one of the biggest shale producers in the US, Pioneer Natural Resources, output could be reduced by 3 million barrels per day with a $35/barrel environment and by 7 million barrels per day with a $10/barrel environment, highlighting the sensitivity of the US oil industry to oil crises. Even if the US, Canada, Norway and Brazil agreed that global oil cuts are required to maintain oil prices at a certain threshold, it is not certain whether their own reduction will result from a Government-driven decision or by the market itself.
Figure 4: Expected declines from other key producers.
Based on the estimated oil cuts, global oil supplies should decrease by almost 10% compared to their pre-crisis level through 2020 , the biggest drop ever observed in the oil sector. According to the International Energy Agency, by the end of the third quarter of 2020, oil consumption will rise steeply, due to the expected recovery of the economy and the end of lockdown measures. As the graph suggests, the rebound of demand will surpass oil production as the decided oil cuts are not supposed to end by 2020. This means that potentially, the price of oil may rise to levels seen before the crisis, close to $60 per barrel or even higher depending on the level of oil inventories and the length of the oil cuts. The oil industry severely suffers from the ongoing crisis, but the $100/barrel era is maybe not gone forever.
Figure 5: Oil Demand/Supply balance.
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Switch On: To Decarbonising Upstream Oil and Gas
It’s become a well-known fact that an increase in global average temperature of 2℃ above pre-industrial levels can lead to dangerous climate change . However, energy demand is projected to grow by more than 25% to 2040  due to growing world population and increasing standards of living in developing countries. Energy from renewable sources is expected to make up 31% of global electricity generation and meet 14% of heat demand by 2035 . The current focus on climate change has encouraged action: the UK has pledged to achieve net zero greenhouse emissions by 2050, businesses and politicians made numerous climate action plans during the 2019 UN Climate Change Summit and countries like Norway are leading the way when it comes to electric cars. But, as Figure 1 shows, fossil fuels are still needed today and will continue to play an important role in the energy mix 30 years from now. Research shows that as recently as 2015, oilfields that contribute to nearly all global crude oil production emitted greenhouse gases equivalent to 1.7 gigatons of carbon dioxide. To put that number into perspective, the greenhouse emissions from upstream activity alone approximately equalled 5% of the total emissions from fuel combustion that year . Thus, the decarbonisation of oil and gas extraction is important.
Figure 1: Projection of global energy demand by fuel type .
The upstream sector, encompassing all activities from exploration of oil and gas to surface processing, emits greenhouse gases during the flaring and venting of gas, combustion (to power turbines and compressors) and other activities such as well testing. Flaring is the term used to describe the burning or disposal of unwanted gas. One potential solution to reduce emissions from combustion is to ‘couple’ renewables with oil and gas platforms. Hywind Tampen is a project based on this principle: a floating offshore wind farm will be used to power oil and gas installations off the coast of Norway. Although the project is still in its infancy, the wind turbines are expected to reduce carbon dioxide emissions by 200,000 tonnes per year . It’s important to note that this is the first project of its kind, and so it could pave the way for other platforms worldwide to cut back on the use of gas turbines to power platform operations. There’s still a long way to go; Hywind Tampen will only be able to provide 35 percent of the nearby platforms’ annual power demand . Moreover, there are other things to think about – how will this installation affect other industries like fishing? Will it impact marine life? How reliable will the system be? As Stephen Bull of Equinor writes, “There remains a lot still to be done to pull the whole concept together to produce power by 2022” . Nevertheless, such projects seem to be an important step in the decarbonisation of the upstream sector.
Other technologies can also help — in the Summer 2019 edition of this journal, an article explored the concept of solar thermal enhanced oil recovery (EOR), which is another example of coupling renewable technology with existing oil and gas infrastructure. Solar EOR reduces combustion of natural gas by utilising solar energy to generate steam. The Summer 2018 edition featured a technological overview of Carbon Capture and Storage, which has the potential to reduce emissions from flaring. These technologies can be combined with more efficient systems onboard the platform. For example, the size of existing gas turbines can be reduced. Smaller turbines typically generate less power, but in many instances gas turbines are oversized, even when compared with power demands at peak conditions. As turbine efficiency increases with increasing load, the most obvious benefit is a more efficient turbine towards the end of life operations when power demand is much lower. Carbon dioxide emissions can be reduced by up to 5% when optimum turbines are used . Clearly, the technology and knowledge for more efficient systems is already available in many cases. The question then asked is should such ‘swaps’ be voluntary, or should they be demanded by regulators?
The world’s continued use of oil and gas in the near future is inevitable, but there’s huge potential to decrease emissions. Advances in technology cannot be the only answer. Government policy, or implementation of tighter regulations have a role to play as well. Progress is being made – the UK’s Oil and Gas Authority recently published steps such as platform electrification to collaborate with renewables and support the energy transition . Countries like Canada already restrict production if the imposed flaring limits are breached , and the World Bank has introduced a ‘Zero Routine Flaring by 2030’ initiative, which encourages governments, oil companies and other institutions to take steps to eliminate routine flaring . Innovative and complex projects like the Hywind Tampen show that the industry is switching on. As Bull puts it, the hope is to see “new, major developments where renewable technology coupled with oil &s; gas operations leads to further reductions in greenhouse gases” . Perhaps, this will be the most effective way to decarbonise the sector and continue the energy transition.
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The New Generation of Solar PV
The Sun: a virtually unlimited energy source that irradiates the earth with more energy in one hour than annual human global energy consumption. Fuelled only by photons, solar panels provide a dependable, non-carbon emitting and increasingly affordable method of satisfying our planet’s runaway energy demand. Edmond Becquerel discovered the photovoltaic effect – the ability of a material to generate electricity in response to light - in 1839, and since then worldwide growth of PV has seen it contribute 500GW of capacity into the energy mix; enough to power 350 million homes worldwide. 
Not only is PV technology environmentally friendly, it is fast coming into the realms of being economically attractive. A report by Lazard into the levelized cost of energy  (or LCOE - a metric that compares the cost of energy production) shows how PV can compete with conventional power plants, and this is promising to transform global energy markets. Last year, India cancelled plans to build 14GW of coal power stations in face of the free-falling costs of solar tariffs.  While solar currently only contributes 2.5% to the global energy mix and many hurdles remain for the momentum of solar to be maintained, the integral role that solar PV will play in the future energy mix is unquestionable. BP’s 2018 Outlook report predicts that between up to 70% of power growth until 2040 will be provided by solar PV. 
Figure 1: LCOE’s in $/MWh of different energy generation methods shows renewables are beginning to compete in price .
The impending solar renaissance begs the question, what will the solar technology of the future look like? Solar panels can be made with different materials. Silicon based panels are the incumbent technology with over 90% of the market share , but a key area to watch is the development of alternative emerging 3rd generation materials vying to outshine silicon and broaden the contribution of solar to the energy mix.
The 1st generation technology, crystalline silicon (c-Si), dominates the PV market and is the most mature PV technology. Average commercial panels weigh in at around the 15-21% efficiency mark  and they are generally non-toxic, stable to environmental conditions and operate reliably. On the flip side, pure silicon crystals are typically made from sand in the energy intensive Czochralski processn  that requires exceedingly high temperatures. They must also be made to an immaculate level of purity, as defects dramatically compromise device performance. Another key drawback of silicon is its poor sunlight absorbing ability, which necessitates using thick, heavy and brittle layers of silicon to absorb incident sunlight. This results in heavy solar panels that drive up installation costs. Indeed, over 50% of the costs of installing residential solar panels derives not from the cost of the actual silicon solar cells, but from the cost of installation. 
Even with no further technological advances, current c-Si PV technologies will reach terawatt deployment levels by 2050.  Silicon has proven to be a worthy workhorse in bringing solar from obscurity to the forefront of renewable energy investment. However any future cost reductions to this technology will be incremental economy of scale improvements, rather than ground-breaking efficiency improvements. For solar to excel in the long-term, silicon will need a helping hand.
2nd generation technologies, also known as thin film (TF) solar cells, incorporate materials such as cadmium telluride (CdTe) and amorphous silicon (a-Si). [5e The market share of TF peaked at 15%  in 2010 in the face of supply issues with conventional c-Si solar panels but has since declined to 7% where it is expected to remain for the medium-term future. There were initially high hopes for these TF technologies due to the fact they absorb light up to 100 times more efficiently than silicon, meaning the solar cells could be as thin as a few nanometres. This translates into a flexible, lightweight and low-cost material. But despite their promise, todays commercial TF solar cell efficiencies range from 12-15% in contrast to the 15-21% of crystalline silicon. 
Most certainly, all is not lost with TF technologies. Recent years have seen plenty of research and development in 3rd generation emerging TF technologies. Of these 3rd generation technologies, perovskites stand out amongst the rest as a possible contender in the quest to outshine silicon. 
Solution processible perovskites have become the poster child for emerging PV technologies due to their spectacular potential.  The term perovskite refers to a class of compounds with the crystal structure shown in figure 2.  The A, B and X constituents of the crystal can be an assortment of different elements, the most widely used initially being methylammonium lead triiodide (CH3PbI3). Since their discovery in 2009 they have evolved from 3.8% to 23.7% efficiency making them the fastest developing PV technology in history , and they are vying to revolutionise the photovoltaic industry by uniting low cost with high efficiencies.
Figure 2: Perovskite crystal structure and conversion efficiency progress compared to silicon .
It’s one thing to make perovskite solar cells in a research lab - it’s a totally different ballgame trying to scale the technology up to commercial levels with industry suitable fabrication techniques. The solar cells need to be stable enough to survive in real world conditions for 20-25 years - which until recently proved problematic as perovskites are prone to degradation when exposed to moisture and other ambient conditions.  But progress has been encouraging, and current state of the art perovskites are composed of a more robust ‘mixed cation’ composition which has improved both performance and stability.  A pioneering perovskite company, Oxford PV, claims to have made their perovskite solar cells stable for 25 years and to have passed industry approved IEC stability tests. The formulation of these solar cells is understandably being kept a secret within the company, but this is a feat which firmly places perovskites on the road to commercialisation - expected in 2019.
A key issue that will need addressing will be the scepticism of the public to any lead- containing material. Lead is a well-known toxic element. The last thing perovskites need to secure market share would be a lead based ecological incident. It is worth remembering that this is a thin film technology and the perovskite layer is only 0.5 µm thick meaning there is very little lead in each solar panel. A life cycle analysis by SmartGreenScans  of perovskite solar cells has shown that even if all the lead in Oxford PV’s solar cells were to leach out into the environment, it would contribute less than 0.27% to total freshwater toxicity. Steps must clearly be taken to avoid any leakage at all, but in comparison to the environmental impact of silicon solar panels perovskites are a far greener alternative.
Silicon is the technological standard that the market has already selected and invested over 400 billion U.S dollars into.  Perovskites will have their work cut out to overcome the technological lock-in of silicon. Even if perovskites proved to be a superior technology it would be a huge struggle to compete against such a well-established industry. Therefore, Oxford PV have decided it makes commercial sense to join the silicon PV industry rather than try to beat it by developing a tandem silicon-perovskite solar cell.
When photons reach Oxford PV’s tandem cells they first encounter the perovskite layer which absorbs shorter wavelengths. The longer wavelengths not absorbed by the perovskite are absorbed by the silicon layer. The result is that a higher fraction of light is absorbed by the device, which produces higher efficiencies that are currently reaching 28% compared to the 26.7% record of a silicon solar cell. 
Figure 3: Oxford PV's silicon perovskite tandem cells .
Oxford PV have made the enormous silicon PV industry customers rather than competitors, and as the solar industry has such tight margins even incremental improvements in efficiency will be welcomed with open arms.
“We’re at a disruption point in history,” Chris Case, Oxford PV’s Chief Technology Officer says. “Right now, in most places in the world, solar PV without subsidies is cheaper than any other form of electrical generation. Perovskites will ensure solar power’s conquest. You can be the largest oil company in the world, but you can’t stop this.” 
Developing emerging nanomaterials for solar energy conversion that can unite stability, low cost and high efficiency will provide a pathway for solar to achieve greater penetration of the energy market. Solar prices have been falling steadily for the past 50 years and will continue to do so.  They are finally getting to the stage where they can compete in cost with conventional energy generation methods, and with the coming of age of third generation materials such as perovskites there lies a promise of a product that will quickly penetrate and impact the established PV markets and drive solar prices down even further. The future is bright for emerging third generation solar technologies and the role they will play in the undergoing energy transition.
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Switch On: A Woman's Role
It is no news that the world is currently in a state of emergency . Climate change is now threatening not only the resources we rely upon for sustenance, but the very lives of the global population [3,4]. There have been several solutions suggested, with most governments and the public agreeing on the need to transition from fossils fuels to renewable energy resources to supply our businesses and homes. This in itself is a large and complex problem, but could a better way out be found by incorporating more women into the development of a solution?
At first glance, it may seem far-fetched to assume that a single gender may be the key to solving these problems, however, a closer look at the statistics puts it into context. As of May 2019, globally, 22% of employees in the oil and gas industry were female, and the gender diversity decreased with seniority, as 17% of these women were in senior/executive-level roles and comprised 1% of CEOs . There is a clear deficit of females in senior decision-making roles, even though representation in senior leadership is increasing, from women making up 8% of the executives in the top 20 energy companies in the Fortune Global 500 to 10% in 2014 . But why does this matter?
The lack of women in senior roles could mean that we are missing the bigger picture. Research shows that companies with more gender-diverse teams have ‘better teamwork, communication and great creativity in solving business and technical problems than homogenous work forces’ . Studies suggest that teams with diverse members are more likely to be critical of others’ points of view and offer new perspectives on decisions . Women in senior management have also been shown to have a positive effect on motivation, teamwork and cooperation, as well as offering a different leadership style: one that is typically more forward-looking and consensus-building than that of men . It is also interesting to note that, while this is not always the case, men may come onto boards of directors through social connections whereas women tend to be lacking in the same level of access to these connections, and therefore may also have fewer reservations in holding peers accountable on their performance . Given all of this information, we can infer that incorporating women into senior management roles encourages lateral thinking and critical evaluation, and creates an environment that incorporates different perspectives. This could lead to the development of new and creative solutions, which could ultimately lead to greater success in the energy transition.
In order to better understand the role of women in the energy sector, we must also consider the women who use and source energy. Energy usage differs between men and women, due to the roles and responsibilities they both have . In developing countries, women are widely responsible for domestic and care work , which suggests that sourcing energy for their household mainly falls to them. It is estimated that 1.1 billion people in 2017 were without electricity, which comprised 14% of the global population . For households that don’t have access to electricity, kerosene lamps are relied upon for lighting, while traditional energy sources such as biomass are used for cooking . It is clear that there will be exceptions to the trend, with men also helping to source household energy, such as in Madagascar , but it is usually the women who bear the majority of this burden. Bearing this in mind, it is apparent that these women know what is needed from their energy sources at a local level, and therefore will have invaluable insight on how best to implement and adapt any methods of transition from fossil fuels to renewables to benefit local communities and best suit their needs.
In conclusion, incorporating women in the decisions surrounding the energy transition at both public and corporate levels will bring new sets of skills and perspectives into a male-dominated sector, and will lead to more creative solution development and more effective solution implementation. It’s safe to say that while women may not solve the problem, their involvement will most definitely allow us to reach the correct solution faster.
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CCS: Switch on… or off?
Since the publication of the IPCC’s fifth assessment report (AR5) in 2014, the increasing need for carbon dioxide removal (CDR) technologies has been clear. The metaanalysis of emissions pathways conducted in AR5 showed that most scenarios which are likely to keep the planet below 2°C of warming by the end of the century employ bioenergy with carbon capture and storage (BECCS), a type of CDR, with many requiring net negative carbon emissions . The reason for using CDR rather than reducing emissions in the first place is cost; mitigation pathways which exclude CDR are substantially more expensive than pathways which include CDR .
Figure 1: Four possible pathways of CO2 emissions as shown in AR5. Only the purple line represents a pathway which is likely to result in less than 2°C of warming by the end of the century .
In light of the IPCC’s Special Report on Global Warming of 1.5°C (SR15), published in 2018, the 2°C warming target has since been updated to 1.5°C . SR15 found that all pathways which limit warming to 1.5°C use CDR to mitigate emissions from sources which are not easily decarbonised, e.g. aviation. 1.5°C degree pathways require a faster reduction in net CO2 emissions than 2°C pathways. This is achieved primarily through reduction in emissions of CO2 from point sources, rather than increased investment in capture technologies with continuing emissions.
Analysts are skeptical of placing a large reliance on CDR in emissions pathways due to the uncertainty in deploying the technology at a large scale. Multiple CDR technologies to enable negative CO2 emissions have been proposed with some examples are shown in Figure 2.
Figure 2: Proposed methods for removing CO2 from the atmosphere .
The most popular methods included in emissions pathways are BECCS and afforestation/reforestation . Scale-up of both strategies presents difficulties due to the competition with other sustainability objectives arising through increased land, energy and water use. In the long term, BECCS trumps afforestation/reforestation since there will be no more land available for tree planting.
While CCS enables the burning of fossil fuels with net zero carbon emissions, BECCS achieves net negative carbon emissions with the burning of biomass, such as wood chips. As the trees grow they soak up CO2 from the atmosphere. Normally, when wood is burnt, the carbon is rereleased back into the atmosphere - an effectively carbon neutral process. With the incorporation of CCS into the burning of wood, the carbon is stored. The burning of wood, or other biomass, with BECCS is thus a carbon negative process overall. The UK is well endowed with geological storage sites for CO2 in which there is minimal risk of leakage .
In May 2019, the Committee on Climate Change (CCC) published its Net Zero - Technical Report, looking at ways in which the UK can reach net zero carbon emissions by 2050 . The UK Government has since implemented this target into law. The report found that if BECCS was deployed to its maximum in the UK, then it could remove CO2 equivalent to 30 million round trip flights from London to New York, more than any other option.
The Drax power plant near Leeds is currently leading the way with a £400,000 BECCS pilot launched at the beginning of 2019, the first of its kind in the world . This builds on Drax’s previous achievement of producing two thirds of its power from bioenergy without carbon capture. Drax has since secured a £5 million grant from the Government to expand the BECCS programme for two years . The Government has plans to extend CCS schemes all over the UK, as is outlined in their action plan on “Clean Growth - The UK Carbon Capture Usage and Storage development pathway” .
Future emissions pathways that incorporate CDR will alleviate the financial burden often associated with the transition to renewable energy. However, the implementation of CCS is still not a lucrative endeavour. Why store the carbon dioxide, which can often prove costly to transport and inject into geological sites, when its properties can be harnessed to make money? This is where CCUS (Carbon Capture, Utilisation and Storage) comes in.
Currently, there are several applications in development for the re-utilisation of captured CO2 including chemical feedstock; fuels; mineral carbonation; enhanced oil recovery (EOR); as well as other applications .
For EOR, CO2 is pumped into saturated oil fields in order to decrease the viscosity of otherwise unrecoverable oil reserves, increasing overall extraction yields. The CO2 resurfaces along with the extracted oil, however, some of which is inevitably released back into the atmosphere . Despite providing the potential for profit, EOR may not be an ideal use for anthropogenic CO2 emissions as its viability is contingent on carbon capture costs, not to mention its inadequacy as a means for carbon storage.
Through another process called mineral carbonation (or mineral sequestration), CO2 reacts with metal oxides to form carbonates. This can be used to store carbon, which can then be used as a construction material. Blue Planet, a California-based company dedicated to “economically sustainable carbon capture” , have devised a concrete encased by an artificial limestone (Calcium Carbonate). CO2 is mineralised via carbonation, which is essentially the most stable form of carbon sequestration . Furthermore, carbonation does not require purified CO2 (as impurities do not interfere with the carbonation reaction), meaning raw flue gas can be used .
The examples above demonstrate two very different modes of utilising captured CO2. However, they vary not only in their approach but also in their purpose. Blue Planet are using CCS to catalyse a reduction in the total emissions of the construction industry. On the other hand, EOR via captured carbon seems to use CCS as a means to circumvent stringent emissions targets and continue business as usual. CCUS has the potential to create “shared value” between industries and stakeholders but in order to do so, their own values must be identified.
If capital can be generated via the reutilisation of CO2, and as we tend towards negative emissions, is there a reason to push for the investment in renewable technologies, such as solar and wind? The mass deployment of sustainable BECCS plants could rule out the need for other CDR options such as afforestation. Will industrial workers become complacent with this profitable method in mitigating our emissions, ceasing their investment in alternative technologies? If so, what are the implications? In the Government’s own words, being able to deploy CCUS at scale will extend the “longevity of our offshore oil and gas and chemicals industries” . This may be alarming to some, given the worldwide push to renewable energy sources. Continued dependence on oil and gas perpetuates the risk of oil spills and other environmental mishaps.
Perhaps the Government sees CCUS as a stepping stone to a truly sustainable energy future. After all, North Sea oil and gas is bound to run out eventually. With the costs of renewables tumbling, is this stepping stone really necessary? A Government funded feasibility study has shown that a CCUS power plant in Grangemouth, Scotland, could generate electricity at a strike price of £80 to £90 per MWh . Although slightly less than the strike price agreed for Hinkley Point C, this amount is more than double the cost of producing electricity in the lowest cost offshore wind farms in the UK (£39.65/MWh) . Higher prices can be expected from reliable sources of power, as opposed to unreliable wind power.
Even with such stark price differences, the Committee on Climate Change  has found that not using CCUS could double the cost of adhering to the 2008 Climate Change Act. Given its current unprofitability, Government investment is required to drive down costs.
It is difficult to tell whether the British Government is truly committed to a truly sustainable energy future, using CCUS as a short-term transition buffer, or if it intends to capitalise on CCUS, leaving the transition to renewables as an afterthought.
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The Carbon Marketplace
Scientists estimate that to maintain a ‘safe’ level of warming (keeping the rise in global temperatures under 20C) we must stabilise the atmospheric concentration of carbon dioxide (CO2) at around 350 parts per million (ppm).
This year, we reached about 415 ppm . Therefore, in order to create a secure climate for future generations it is not enough to simply reduce emissions; additional measures need to be taken. One such measure that has recently captured scientists’ attention is the safe storage of CO2 pulled from the atmosphere. One method for the safe storage of CO2 is through a process known as Carbon Capture and Sequestration (CCS). With CCS, CO2 is pulled directly out of the air and buried underground in saline aquifers .
The 2017 paper in Nature Climate Change  estimates the total “mitigation burden” (i.e. the total amount of emissions that need to be avoided between now and 2050 to stay under 2℃) at 800 gigatons. The abovementioned paper estimates that even if emission reductions are successful, between 120-160 gigatons of CO2 will need to be sequestered during that period.
Thus, the 2017 paper concludes, by 2030 humanity needs to be compressing, transporting and burying an amount of CO2, by volume, that is two to four times the amount of fluids that the global oil and gas industry currently deals with. And to build an industry of that scale, by that date, we need to begin research and deployment today.
However, the issue is that burying CO2 has no short-term economic benefits; there is no incentive for companies to do it and thus no incentive to develop CCS technology. There are two potential ways to solve this: a) by governments putting a global price on carbon or b) bolstering the market for buying and selling carbon.Carbon Utilization
Most CO2 used by industries today is a by-product of fossil fuel processes. But, if CO2 pulled out of the air became more plentiful and cheaper, it could begin competing these terrestrial sources.
Using CO2 from the air for products and services is known as carbon capture and utilization (CCU). By some estimates, it is a potentially $1 trillion market by 2030 .
This market could reduce CO2 emissions, in part by sequestering some carbon permanently in durable products and in part by substituting for carbon-intensive processes, thus avoiding emissions that would have otherwise occurred. Still, CCU will never reduce enough CO2 to avoid the need for CCS (burying carbon).
This demand for CO2 driven by CCU could also help scale up carbon capture technology and reduce costs, so that it is ready when policymakers finally get around to supporting CCS.Varieties of Carbon Capture Technology
There are a wide variety of ‘natural’ processes that absorb and sequester carbon on land (forests and soil), on the coasts (wetlands and mangroves) and in the ocean. The carbon-absorbing capacity of these processes can be enhanced with clever human management (e.g. the US Geological Service’s LandCarbon program ). However, the focus on this article is on industrial carbon capture.
CO2 can either be pulled out of flue gases (waste streams produced by power generation or other industrial processes) or it can be pulled out of the ambient air through a process known as direct air capture (DAC) .
Figure 1: This artist’s rendering shows Carbon Engineering’s design for an ‘air contactor’ to pull carbon dioxide from the atmosphere [Credit: Carbon Engineering] 
The advantage of drawing from flue gases is that the CO2 is more concentrated there than in the ambient air. Thus, it requires less energy and CO2 from flue gases will be cheaper than CO2 produced by DAC.
In addition, the CO2 in the ambient air is equally concentrated across the world. Therefore, DAC can be built wherever the CO2 is needed. This eliminates transport costs and allows the technology to be smaller, more modular and more adaptive.
Furthermore, DAC is limited only by costs; it can scale up to any size. Therefore, many in the field believe that DAC is the most promising long-term negative-emissions technology.Uses of CO2
There are a variety of ways that carbon dioxide is currently used. It can be used directly in greenhouses, to carbonate beverages or for Enhanced Oil Recovery (EOR). It can also be transformed into materials, feedstocks, or synthetic hydrocarbon fuels.
Most of these options only sequester CO2 for a short period of time. For instance, if captured CO2 is used to make synthetic fuels, the fuels are then burned, at which point the CO2 is released back into the atmosphere. Therefore, this is carbon recycling (or upcycling) not carbon sequestering. Of the rest of the categories of CCU, only construction materials can claim to sequester CO2 semi-permanently.
Again, this means that CCU will never substitute for CCS and at best can only help lay the foundation for CCS.Enhanced Oil Recovery (EOR)
Enhanced oil recovery is currently the largest industrial use of CO2. The process involves injecting pressurised CO2 into existing oil and gas reservoirs to squeeze more hydrocarbons out. Today, EOR is the only current carbon sequestration industry of any scale; it uses a lot of CO2 and leaves a lot of it permanently buried .
However, there are many complexities and controversies surrounding the topic of pursuing EOR as a dominant mode of CCU. On one hand, it uses infrastructure that could easily be repurposed for carbon sequestration in areas that tend to be suitable for carbon sequestration. On the other hand, it empowers oil companies by depending on them to stabilise our climate.
So, is it possible that digging more oil and gas out of the ground can help fight climate change? In theory, it is possible .
When oil companies dig wells, there are three phases of production. During primary production, the natural pressure built up within underground reservoirs pushes oil to the surface; about 10% of the oil in the reservoir is recovered this way. During secondary production, a fluid, usually water or gas, is pumped through the reservoir to flush loose more oil; that can recover anywhere from 20 to 40% of the oil. Tertiary production is anything done after that.
The most common form of tertiary production is EOR, whereby high-pressure CO2 is injected into wells to bond with the oil and carry more of it to the surface. EOR can recover up to 60% of the oil in a reservoir (EOR is different from hydraulic fracturing or “fracking” which opens new fissures in the rock rather than ‘scrubbing’ existing channels which EOR does).
Figure 2: Cross-section illustrating how carbon dioxide and water can be used to flush residual oil from a subsurface rock formation between wells [Credit: NETL] .
When CO2 is injected underground for EOR, most of it, around 90-95% stays there. If the CO2 comes from the right source and an adequate amount is buried, it could amount to substantial carbon sequestration.
However, the CO2 used in EOR operations typically is pulled from terrestrial rather than anthropogenic sources (i.e. CO2 that was already sequestered). Furthermore, EOR operators view CO2 entirely as a significant cost. Therefore, they want to minimise the amount they buy, use and the amount that remains sequestered.
Still, EOR is the only form of large-scale permanent carbon sequestration that currently makes a profit. Under the right policy regime, the profit-making motive could be harnessed in service of carbon purchase. In the process, EOR could help scale up CCS and help reduce costs. Moreover, the oil companies already have the equipment, experience and capital to manage a huge industry like CCS. It’s just up to the policymakers to help make capture CO2 cheaper.
Nonetheless, climate change is an emergency. Therefore, we need to start burying a lot of carbon as soon and as quickly as possible and cannot let the oil and gas industry continue to control the pace and terms.
Sooner or later we are going to have more carbon to bury than EOR can handle and we are going to have to figure out how to bury it in saline aquifers. Rather than slowing luring private capital into the enterprise by subsidising oil and gas production more money should be invested to do CCS at large scale.Policy Suggestions
Tax credits for EOR should undeniably be strengthened, as well as the monitoring and verification standards required to obtain these credits. There could also be regulatory requirements where all EOR operations required to switch to captured CO2. Governments could also require oil and gas companies to offset the carbon content of their products, forcing them to pay to bury carbon equal to the amount of their fuels produced (e.g. the national low-carbon fuel standard in California). More drastically, oil and gas companies could be nationalised and set, by policy, on a path that would steadily phase out production of hydrocarbons and steadily scale up carbon sequestration. Eventually, they would become large, publicly owned sequestration companies.
Although these ideas have limitations, the point is that both industries and governments should take mutual steps towards the environmental emergency that we face, even if this means that compromises need to be made by both parts on their current benefits.
The climate emergency we are facing means that political disturbance is inevitable. We need to stop shaping our environmental plans and policies according to the current interests of oil and gas investors, see beyond towards a greener future and switch on our thinking to what is best for our planet.
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The King is Dead, Long Live the King
Coal plants first started producing electricity in the UK during the 1880’s, at which time we were the most polluting country on the planet . Nearly 150 years later we’ve seen low carbon fuels come to produce the majority of our electricity, coal remain off the grid for weeks on end and Britain become the first major economy to pledge net zero emissions by 2050 . The phase-out of coal (shown in figure 1) is a welcome and key step in avoiding catastrophic climate change.
Figure 1: Coal generation from 2009 to 2019.
Much of the success seen over the last decade can be attributed to the Climate Change Act in 2008, but the underlying driver has been the consistent price reductions in solar and wind . This has led to renewables being the cheapest new source of electricity in many parts of the world . Coupled with the merit order effect, which leads to suppression of the wholesale market price as renewable penetration grows, thermal plants are finding it more and more difficult to compete .
The transition has been harsher on some more than others though. Coal, which historically operated in a baseload capacity, has suffered the most under increased volatility in the price of electricity, primarily owing to the intermittency of renewable sources.
Gas on the other hand has seen a resurgence since 2015 and has taken up around half of the displaced coal generation. The flexibility provided by gas plants has allowed them to remain profitable in the new energy landscape, clearly shown by the increase in variability over the last few years (shown in figure 2) .
Figure 2: Gas generation from 2009 to 2019.
While gas remains cleaner overall compared to coal, concerns are growing around methane leakage related to O&G exploration and transportation . Methane decomposes into carbon dioxide in the atmosphere but before it does so its effect is far greater than that of CO2, with a global warming potential 86x larger over a 20-year period. Despite this, for the foreseeable future gas remains a crucial element in ensuring stability of electricity supply.
The coal free weeks were particularly windy, leaving some groups concerned that while the Western HV link remains unreliable, and electrical storage capacity low, we will be unable to deal with the highly correlated spikes and lulls in wind across the country . Floating offshore wind, further out to sea where winds are stronger and more consistent, is one way in which renewables are likely to become more reliable and increase their capacity factors. The first commercial offshore wind farm just started selling up to 30 MW of electricity in Scotland .
King coal may be dead, and gas merely a temporary fix, but solar and wind are here to stay. The next auction for Contracts for Difference is expected to see the price of wind fall to £57.50/MWh, almost half that of Hinkley Point C . Similarly, PPA’s in the solar sector have continued to create low risk paths for its deployment, most recently with Tesco announcing a 5MW installation across their UK supermarkets this month .
Many rightfully raise the issues surrounding further production from renewables into the network, with the inability to dispatch in a flexible manner and difficulty to forecast set to create large problems in the operation of the grid. Despite this the system operator has a far more optimistic outlook, recently announcing that the UK would be able to cope with 100% renewable electricity by 2025 .
Part of their solution is linked to a new deal landed by the company GreenSync, the Melbourne based company is leading a project to see a decentralised energy exchange deployed across the UK. Controlling more than 500MW of distributed, partly domestic, flexible energy capacity it is hoped that issues such as the large drop in demand seen over midday due to solar (shown in figure 3) can be mitigated against in an economic manner .
Figure 3: The UK ‘Duck Curve’.
Digital solutions which help enable further growth of renewables are also drawing attention on the production side. Deep Mind, the Google owned company most well known for creating an AI which beat the world’s best Go player, have recently focused on how their technology could be use in the energy sector. Using machine learning they were able to predict the output of 700 MW of wind capacity with an increased accuracy of 20% .
New groups such as Open Climate Fix are aiming to use similar techniques to improve the accuracy of nowcasting, the problem where the national grid is unaware of where much of the country’s solar power is being produced . Hoping to aid the development of these types of new methods the government formed an Energy Data Taskforce; they recently published a report proposing that the data needed to train these models be made more accessible and transparent . Given these advances and the positive steps being made in Westminster, it may be possible to make the transition to a cleaner electricity network with less pain than previously imagined.
To conclude, whilst it should be welcomed that Britain has decarbonised its grid quicker than any other major economy, the government should not rest on their laurels. The removal of the Feed in Tariff, the ban on onshore wind, and lack of action in the stalling of the capacity market don’t add confidence to the new zero emission commitments. At the same time the effects of climate change only continue to increase in consequence.
Coal is on its way out and progress is going in the right direction, but there’s a long way to go yet!
* All data was sourced from Electric Insights
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From Concept to Commercialisation
Bridging the ‘Valley of Death’
Political systems must grapple with the role of government in every aspect of public life. The government’s role in conducting and supporting scientific and technological research is no exception. At least in the United States, there is widespread agreement that there is room for government involvement in moonshot research programmes – important research agendas that private companies simply wouldn’t embark upon independently. In addition to the original moonshot, the government has set ambitious goals in fields ranging from cancer research, to defence technology, to energy.
In 1957, President Eisenhower authorised the Defence Advanced Research Projects Agency (DARPA) . The Soviets had just launched Sputnik and the U.S. was losing the Space Race. DARPA was designed to re-establish American leadership in strategic defence technology by conducting transformative research. By any possible measure, DARPA was a success. The agency’s research has given rise to technologies like the Internet, voice recognition software and GPS .
Decades later, DARPA’s success inspired a bipartisan group of lawmakers to create a similar agency, housed in the Department of Energy, that would be tasked with undertaking high-risk, high-reward research into new energy technologies . Congress authorised the Advanced Research Projects Agency-Energy (ARPA-E) in 2007 and allocated its funding through the American Recovery and Reinvestment Act of 2009.
ARPA-E’s mission is to ‘create a new tool to bridge the gap between basic energy research and development/industrial innovation.’ This gap between ‘basic energy research’ and ‘development/industrial innovation’ is particularly perilous for new start-ups and technologies. It is common for a cutting-edge technology to show great promise in the lab but to face a steep climb in scaling up to compete with established players . Competing in the energy sector means contending with traditional energy firms which have the benefit of existing infrastructure and networks. Consequently, the so-called ‘incubation period’ for energy start-ups is longer than for biotech or software . Venture capitalists are put off by the longer incubation, resulting in a critical shortage of early-stage funding . By providing this support, ARPA-E funding aims to build a bridge over the so-called ‘valley of death’ between the lab and the market.
For an agency that is by its nature tasked with making risky investments, ARPA-E has a remarkable success rate .As of February 2018, ARPA-E has awarded $1.8 billion to more than 660 projects . Seventy-one of these projects have gone on to form new companies and 136 have attracted more than $2.6 billion in follow-on funding, according to its website. ARPA-E funding has also resulted in 1,724 peer-reviewed journal articles and 245 patents. A 2017 National Academies assessment found that ‘ARPA-E is making progress toward achieving its statutory mission and goals .’ At the time of the review, 25% of teams raised follow-on funding, about 50% published scholarly articles and 13% earned patents. Furthermore, the agency’s grant scheme prioritises projects that are in the public interest and fulfil current needs in the energy sector. For instance, as wind and solar capacity grow, storage is increasingly seen as the primary constraint on growth in renewables. In 2018, ARPA-E issued $28 million in research grants for energy storage systems like thermal storage and flow battery technologies .
Despite these successes, there is a growing sense among some in the industry that the support ARPA-E offers isn’t enough to get emerging technologies off the ground. According to the MIT Technology Review, an ARPA-E grant isn’t enough to bring a new energy technology to full-scale production . Compounding these issues is the fact that both venture capital funds for energy technologies and public investment in energy research, development and demonstration (RD&D) have been falling . The National Academies also notes that despite the potential of some ARPA-E grantees, none of them has succeeded in transforming the energy sector (which, the authors note, would be unreasonable to expect in fewer than ten years).
In order to bring new technologies to scale and actually transform the energy sector, ARPA-E may need to undergo structural adjustments that allow longer-term funding. The National Academies assessment recommended a series of improvements, including developing a system for measuring its impact and extending the three-year time frame for projects. ARPA-E could also implement a new funding scheme for projects that have entered the market but need help scaling up in order to compete.
- About DARPA. Defense Advanced Research Projects Agency. [Online] https://www.darpa.mil/about-us/about-darpa.
- ARPA-E About. ARPA-E Department of Energy. [Online] https://arpa-e.energy.gov/?q=arpa-e-site-page/about.
- Orcutt, Mike. Where's the Money for Energy Startups? MIT Technology Review. [Online] November 23, 2015. https://www.technologyreview.com/s/543421/wheres-the-money-for-energy-startups/.
- Orcutt, Mike. Why ARPA-E Needs to Grow Up. MIT Technology Review. [Online] March 1, 2016. https://www.technologyreview.com/s/600896/why-arpa-e-needs-to-grow-up/.
- Sopher, Peter. Commentary: Examining the role of early-stage venture capital investment in energy. IEA. [Online] August 30, 2017. https://www.iea.org/newsroom/news/2017/august/commentary-the-role-of-early-stage-venture-capital-investment-in-energy.html.
- Roberts, David. A tiny, beleaguered government agency seeks an energy holy grail: long-term energy storage. Vox. [Online] October 4, 2018. https://www.vox.com/energy-and-environment/2018/9/20/17877850/arpa-e-long-term-energy-storage-days.
- Temple, James. Scientific Panel Concludes ARPA-E Is Working. Will It Matter? MIT Technology Review. [Online] June 13, 2017. https://www.technologyreview.com/s/608097/scientific-panel-concludes-arpa-e-is-working-will-it-matter/.
- Bennett, Simon. Commentary: Declining energy research budgets are a cause for concern. IEA. [Online] October 16, 2017. https://www.iea.org/newsroom/news/2017/october/commentary-declining-energy-research-budgets-are-a-cause-for-concern.html.
Hype and Energy Technologies Development
There is rising concern about climate change. Scientists know it. There has been a remarkable increase in the number of papers on the topic. But the issue is not intrinsic to academia. The public is also concerned with it, and the hype is real.
Figure 1. Wind, just a load of hot air?
In the news, in social media, even among friends, the issue of climate change is discussed from time to time. It is something of general concern. The growth of our societies has been based on fossil fuels, and we have come to know that this model has seriously damaged the planet. The good news is that new technologies are being developed, which could potentially lead to a more sustainable and green future while assuring our quality of life… if properly managed.
When asking the general public how the future will look, you will probably hear of solar and wind when it comes to electricity and battery electric vehicles for transportation. The field of heating and cooling is the great unknown: solar thermal will be the best-known technology, but you are lucky if you know anyone who mentions heat pumps or CHP.
How come these are the most popular technologies? The hype may well be a big contributor. News and media give us information about these technologies, while other ones are left completely unknown. Media and the general public typically praise their benefits and put them as “the solution” or “the path to follow”.
This is not an unknown reaction towards a promising technology. This kind of hype had appeared before, with biofuels for example. It is a proof of the willingness of society to seek better solutions, and the desire to adopt them. Literary creativity, without a comprehensive understanding of the pros and cons of the technology, boosts this effect. Finally, figures like Elon Musk with Tesla and its marketing pro-electric vehicles make a huge contribution too.
There is a beneficial outcome from hype: the more attractive and popular a technology is, the more public interest it gets. This interest often translates into more investment and more research, making it easier for the technology to reach a suitable level of maturity. It also may lead to supporting policies and regulations, which will reduce uncertainties and promote development.
However, this dynamic highlights the potential benefits without taking into consideration the physical, technical and economic disadvantages. This is a problem, leading to a smaller positive impact than expected. Moreover, hype does not only raise expectations of a specific technology but also can eclipse or completely erase the development of others. Breakthroughs, showcased through media, draw public attention and investment. Those specific technologies, widely covered by the media, receive supportive policies, investment and more research time. Therefore, less mature technologies are not given chance to succeed.
Even if technologies are given time to mature, the hype is always subject to change. The transport industry is a clear example. Research is now all about battery electric vehicles, although it was biofuels before, and previously fuel cells; there has never been support at the same time for more than one technology. Furthermore, batteries themselves won’t solve the issue with fossil fuels in transportation; there are concerns about their real potential, especially as improvements need to be made to the global energy mix.
The idea I am trying to elaborate here is not that we shouldn’t invest in these “mainstream” technologies. There is enough research to ensure that they are a key part in the energy transition of different sectors, and it is important to keep working on their development. However, one has to bear in mind that the hype is not always real.
The kind of transition required cannot be compared to any previous one and is going to require of huge investments in a wide number of areas and technologies, according to the IPCC special report from last October. Strong government support will be needed, as well as learning from the past. There is no point in targeting a single technology, as there is no one that, by itself, can solve all the challenges of climate change.
Regardless of the hype that is naturally related to breakthroughs and developments of a promising field, we need to have a broader scope. Bearing in mind the limitations of a specific technology, we can more easily find a comprehensive solution. A solution that, by acknowledging the gaps in a given technology, can integrate different ones by adding their advantages.
Hype is a natural reaction in our societies, but we need to learn how to cope with it. It can prove useful to support technological development, but the scientific and critical approach should be of the utmost priority. Therefore, experts in academic fields should work to provide a broader view of technologies and development, stressing the limitations of each one, so public can develop a more nuanced idea. In addition, governmental support should not be based entirely on these trends and needs to promote a range of different technologies, if we are really looking for a greener and more sustainable future.
World Energy Outlook 2018
What does the future hold and how is it modelled?
Each year the International Energy Agency (IEA) develops the World Energy Outlook (WEO), a report based on the insights from arguably the most comprehensive energy model in the world. Aimed at decision makers in governments and industry, the Outlook assesses the evolving energy landscape and creates scenarios based on current actions and commitments. The report also develops a global pathway which has the potential to meet the UN sustainable development goals.
In today’s post we’ll be looking into the key trends foreseen in the Outlook, the limitations to these forecasts, and the challenges in using large scale energy models.
Scenarios and Key Trends
The IEA produces three scenarios: Current Policies Scenario (CPS), New Policies Scenario (NPS), and Sustainable Development Scenario (SDS). The CPS is based on policies already enshrined in legislation whilst the NPS incorporates announced policies such as nationally-determined contributions in the Paris Agreement. The SDS takes a different approach: it uses the targets set by the Paris Agreement and UN Sustainable Development Goals (SDGs) and attempts to find the least-cost energy transition paths to meet them. From here on we will focus on the NPS and the likely future we face without ratcheting up climate action.
The NPS sees global energy demand rising more than a quarter by 2040. Whilst this may seem like a large increase, demand would more than double if not for continued improvements in energy efficiency. This growth is led by developing nations, primarily India and China, with the rise in EVs and demand for air conditioning and refrigeration making up a significant portion of electricity consumption.
Figure 1. Total primary energy demand sources up to 2040 (IEA/World Energy Outlook 2018).
Electricity is set to rise from approximately 20% share in final energy consumption today, increasing at higher rates in countries with light industry which focus on services and digital technologies. Although greater electrification allows us to decarbonise more efficiently, today’s grids are ill-equipped to deal with the rapid changes in renewable generation without measures such as demand side response (DSR) being put in place to improve resiliency. The need for greater flexibility will also be met by batteries which are becoming increasingly more competitive with gas, but conventional power plants will remain the main method of keeping the lights on.
Even with less flexibility from gas combustion, emissions fail to peak before 2040, in stark contrast to the sharp decline called for by climate scientists. The Paris Agreement 2˚C emissions limit could be breached as early as 2030 with the NPS leading to a total temperature rise in the region of 2.7˚C. The impacts of this failure are even more significant in the wake of the latest report by the Intergovernmental Panel on Climate Change (IPCC) with projected substantial loss in biodiversity, stronger and more erratic weather, dangerous heatwaves and significant reduction in land mass due to rising sea levels.
Scenario Criticisms and the Difficulties in Long-Term Energy Modelling
The NPS is the core scenario made by the IEA; it is also the one which receives the most criticism. This primarily stems from the difference between historic predictions and the realities of the energy mix we see today (see Figure 2). Personally, I believe these critiques to be mostly unjustified. By basing the assumptions for the models on policies which have only been confirmed or assured, the forecasts are unable to take into account the effect of inevitable policy revisions and ratcheting up of climate action over the 20+ year horizons they’re made over. It does however highlight a key issue in the two scenarios, namely a lack of communication in what they represent.
Figure 2. Disconnect between IEA projections and deployment of PV (Auke Hoekstra).
The reasoning behind making these assumptions comes down to two key factors:
- Without knowing where their current policies are leading them, governments and industry can’t make informed decisions on what to change in order to meet their targets.
- If the WEO models tried to incorporate all of the possible policies which could be made there simply wouldn’t be enough time to create meaningful analysis on an annual basis.
The second factor is due to the over-arching issue in long term forecasts, uncertainty. In his book Superforecasting, Philip Tetlock discusses the outcomes of a study he ran looking at the response of financial experts when asked whether the economy would improve, stay the same or get worse. To his surprise they were correct less than a third of the time when making forecasts more than 3-5 years ahead, i.e. they’d have performed better by choosing at random. Thankfully the energy sector doesn’t face quite the same level of volatility and speculation as financial markets. However, it is nonetheless a complex system with numerous stakeholders and interactions, making forecasting not just difficult but in some cases dangerous.
To get around this the IEA instead creates scenarios which, in their own words, “do not aim to forecast the future, but provide a way of exploring different possible futures”, allowing them to observe the effects of large shifts in politics, technology etc. One example which fits this brief is in carbon capture and storage (CCS). Currently CCS is in a deadlock between governments waiting for industry to develop the technology and investors waiting for governments to incentivise its deployment. Technologies such as CCS face massive uncertainty when faced with traditional forecasting methods, but scenario-based forecasting allows the effect of specified subsidies or cost reductions to be quantified with increased confidence.
Despite its limitations and criticisms, the WEO remains the most comprehensive and frequently updated view into the energy landscape’s future, with this post merely scratching the surface of the findings in the full report. More information and their other work can be found here.
Following the WEO launch, there was key message stressed by the UKCCC, and echoed by the IEA and IPCC. We cannot return to business-as-usual. If we do, we face damaging the environment further and raising costs for governments and businesses. Whilst the Outlook highlights the challenges we face, it also shows us there is a path to a cleaner and more prosperous world, so long as we face up the scale of the issue and act now.
All views expressed are the author’s and not necessarily those of the Energy Journal
Demand Side Response:
Demand side response is where consumers of electricity change how and when they use electricity, most commonly to reduce peak demand. Utility companies are looking to time-of-use tariffs to promote demand side response amongst consumers.
Final Energy Consumption
Final energy consumption is the total energy consumed by end users. It is the energy which reaches the final consumer's door and excludes that which is used by the energy sector itself
Sustainable Development Goals:
The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. - United Nations
Bright Network Society of the Year Awards 2018
The Energy Journal Team were amongst societies from universities across the country to be nominated for the Bright Network Society of the Year Awards.
The Energy Journal was shortlisted in the Innovation category due to their unique concept for a cross-university collaboration, their use of technology for publication and advertising, and their ambitious plans for future growth. Other award categories included Diversity and Representation, Impact on Campus and Community Outreach. Societies from across the UK were invited to the awards ceremony, held in the Rumpus Room on the South Bank.