As the world’s population continues to expand, our hunger for energy shows no signs of slowing. But it has become clear to (almost) everyone that the sources of that energy must change if we are to avoid the catastrophic impact of climate change in the next few decades.
Carbon dioxide (CO2) emissions from energy production, a key contributor to global warming, are still rising despite many efforts to promote greener habits. But with the world population forecast to exceed 9 billion by 2040, up from 7.7 billion today, energy demand growth of more than 25% is expected, according to World Energy Outlook 2018 by the International Energy Agency (IEA). That will require over US$2 trillion a year of investment in new energy supply.
This could jeopardise efforts to meet the Paris Accord goal to keep the temperature rise in this century below 2 degrees Celsius above pre-industrial levels.
More money is pouring into renewable sources that emit less CO2 than conventional sources. Still, there are challenges in integrating renewables into power generation systems that still rely heavily on fossil fuels.
Global investments in renewable energy capacity reached $272.9 billion in 2018 — the fifth successive year they exceeded $250 billion, according to Global Trends in Renewable Energy Investment 2019 by the UN Environment Programme (UNEP) and Bloomberg New Energy Finance.
The figures show that investment in renewable sources is outstripping that in new fossil fuel generation. Still, “we cannot afford to be complacent”, Inger Andersen, the UNEP executive director, is quoted as saying in the report.
“Global power sector emissions have risen about 10% over [the last decade],” she said. “It is clear that we need to rapidly step up the pace of the global switch to renewables if we are to meet international climate and development goals.”
Energy-related carbon dioxide emissions globally rose 1.7% to a historic high of 33.1 gigatonnes (Gt) last year, according to the IEA. The increase was the highest since 2013, and 70% higher than the average growth since 2010.
In addition to higher energy consumption resulting from a robust global economy, changing weather conditions in some parts of the world also led to rising energy demand for heating and cooling.
As a result, emissions from all fossil fuels have surged with the power sector accounting for nearly two-thirds of such growth. Coal use for electricity alone surpassed 10 Gt of CO2, mostly in Asia. Large and populous economies including China, India and the US accounted for 85% of the net increase in emissions.
The IEA said last year that CO2 emitted from burning coal was responsible for one-third of the 1C increase in global average annual surface temperatures above pre-industrial levels.
But while awareness of the urgency is high and the response from investors has been strong, it is still not enough, according to Svenja Schulze, Germany’s Federal Minister for the Environment, Nature Conservation and Nuclear Safety.
“We know that renewables make sense for the climate and for the economy. Yet we are not investing nearly enough to decarbonise power production, transport and heat in time to limit global warming to 2C or ideally 1.5C,” the UNEP report quoted her as saying.
Wind and solar accounted for only 4% of global electricity generating capacity in January 2010 when they were relatively expensive compared to fossil fuels. But a huge transformation has taken place since then as costs have plummeted. By the end the current decade, the two technologies are expected to account for 18% of global generating capacity. China accounted for over 40% of the growth in renewable-based electricity generation, followed by Europe at 25%. The US and India combined contributed another 13%.
In many countries, the cheapest source of new generating capacity in 2019 is either solar or wind. Since the second half of this year, the global levellised cost of electricity (LCOE) for solar has fallen by 81%. The decline is 46% for onshore wind and 44% for offshore wind. LCOE is a way to measure the real cost, including the timeline of the expenditure, that goes into the production of a kilowatt-hour.
Renewable generation capacity grew 4% in 2018, accounting for almost a quarter of global energy demand growth. Solar, hydropower and wind each accounted for about a third of the growth, with biomass accounting for most of the rest, according to the IEA.
The power sector is doing most of the legwork with renewables-based electricity generation rising 7% last year to almost 450 TWh (terawatt hours). Renewables made up almost 45% of all electricity generation growth and now account for 25% of global power output. They could reach 40% by 2040.
Natural gas is expected to remain a major contributor to meeting the energy needs of many countries. The Erawan natural gas field, operated by Chevron Thailand, is a major resource in the Gulf of Thailand. Chanika Suksomjit
THE TRANSITION
Across Southeast Asia, there are over 30 gigawatts of renewable energy installed, compared with less than 5 GW in 2017. But that is just a fraction of the total capacity of 240 GW. It will take a herculean effort to meet the target set out in the Asean Plan of Action for Energy Cooperation for renewables to have a 23% share of primary energy supply by 2025.
Somphote Ahunai, CEO of SET-listed Energy Absolute, said Asean is at a crossroads in its energy transition. But each of the 10 member states is moving toward renewables at a different pace.
“Thailand has a well-developed infrastructure so renewables is more of an add-on instrument to the system,” he told the Asean Energy Business Forum held in Bangkok earlier this month. “On the other hand, if you look at other countries such as Myanmar which still lack infrastructure, renewables can become a major player immediately.”
Olivier Duguet, founder and CEO of Blue Circle, a Singapore-based renewable energy player with wind projects in Vietnam, agreed, saying the energy transition in Asean is “very different” from the rest of the world. This is because nearly all countries here are already running on hydropower.
For example, Laos is planning to be the “renewable battery” of Asean, thanks to its exports of hydropower. Therefore, the energy transition will depend more on the new capacity to be installed.
Peerapat Vithayasrichareon, lead analyst for system integration of renewables at the IEA, said that when it comes to energy transition, there are three key factors: conversion from fossil fuels to renewables, reliability, and cost effectiveness.
“The transition should be technically viable and economically viable and this is context-specific based on the country and the resources that they have in each country,” he said, adding that sharing is the key.
In Europe, for example, energy infrastructure along many borders allows different countries to share resources in order to reduce the overall cost.
One of the challenges in energy transition, said Mr Duguet, is how to balance the grid with an energy mix of fossil fuels and renewables, as the latter can face shortfalls, especially hydropower.
“We have to educate the grid operator where hydro has a big swing in production between the dry and the wet season and this is a real issue that local utilities here are already facing,” he said. “Solar can only produce in the daytime and there is also the monsoon season, so you always need something to balance the other.”
Some European countries, such as Denmark, Ireland and the UK, can run on more renewables than fossil fuels even though they are not linked to the continental grid because renewables are linked directly to their national grids.
“This is possible because renewables are fully integrated into their national or regional grids which we don’t have here [in Asean] and we need education, which is a long, long road from now,” said Mr Duguet.
Chris Galpin, senior policy adviser at the UK Department for Business, Energy and Industrial Strategy, said renewables are inherently location-dependent, such as when the wind is blowing in one part of Europe, it is often not blowing in another part of the continent.
“But those challenges are all manageable with available technology that can deal with them, so it is a question of trying to deliver those technologies at low cost,” he added.
Mr Peerapat said some existing thermal power plants in Asean could be modified to make them more flexible to meet the increased variability that comes with renewables.
Pumped-storage hydropower (PSH) might be useful. Pumped storage projects store and generate energy by moving water between two reservoirs at different elevations. At times of low electricity demand, excess energy from coal and nuclear, or renewables such as solar, can be used to pump water to an upper reservoir.
During periods of high electricity demand, the stored water can then be released through turbines, flowing downhill from the upper reservoir and generating electricity. The turbine is then able to also act as a pump, moving water back uphill.
“Three years ago when we started on grid integration in Thailand, the word flexibility was not very familiar for everyone,” said Mr Peerapat. “So we introduced it because flexibility is the key approach that we need to consider, and it has already been considered in the nation’s power development plan.”
GASSING THE FUTURE
Energy producers argue that if we do not want shortages of electricity and energy prices to skyrocket, fossil fuels are still needed, led by natural gas, especially in the countries that are producing them.
According to Alun Yogi Lau, a member of the Group of Experts on Natural Gas at the UN Economic Commission for Europe, the energy source is the cleanest in terms of fossil fuels, because it has much less CO2.
“Of course, oil will always be there but the investment right now is mainly in gas,” he told Asia Focus on the sidelines of the Asean Energy Business Forum.
According to the Gas 2018 report by the IEA, the future for gas looks bright for the next five years at least thanks to a strong demand from China, greater industrial demand, and rising supplies from the US. It forecast that global gas demand will grow at an average rate of 1.6% a year, reaching just over 4,100 billion cubic metres (bcm) in 2023, up from 3,740 bcm in 2017.
The IEA also noted that natural gas is the cleanest-burning hydrocarbon as it emits between 45% and 55% lower greenhouse gas emissions than coal when used to generate electricity. Shell, one of the largest developers of natural gas, argued on its website that renewables “cannot provide all the world’s energy needs today”.
Shell notes that that renewables are used mainly to produce electricity, which meets only 18% of all global energy demand. For renewables to have a bigger impact, it says, electricity must play a larger role in other key sectors of the economy.
Irtiza Sayyed, the president of ExxonMobil LNG Market Development, told participants at the forum that natural gas is projected to supply about a quarter of the energy for industries and electricity generation in 2040.
“It is estimated that Asean needs approximately $540 billion in power sector investment by 2030, just to keep up with electricity demand … and today, oil and natural gas meet more than half of world energy needs,” he added.
Without saying that renewables are more expansive, he also argued that if energy became too costly, the global economy will suffer, harming not only those trying to escape poverty in developing nations, but also businesses and individuals in other economies.
Nevertheless, renewable energy costs are now at the point where almost every source can compete with power plants based on coal, oil or gas, according to the latest Renewable Power Generation Costs report by the Abu Dhabi-based International Renewable Energy Agency (Irena) in May.
For example, hydroelectric power is the cheapest source of renewable energy, at a global average of $0.05 per kilowatt hour (kWh). The average cost of developing new power plants based on onshore wind, solar, biomass or geothermal energy is now usually below $0.10/kWh.
The cost of developing new power plants based on fossil fuels normally ranges from $0.05 to over $0.15 per kWh. Therefore, a greener future for energy might not be that far away after all.
