The global energy system is at a tipping point on its path to a net-zero emission future. With the ongoing Conference of Parties (COP28) conference in Dubai, Rystad Energy has outlined 10 critical steps required to accelerate the transition, limit global warming, and ensure a clean and reliable energy future.
The global shift from fossil fuels to clean energy is progressing, marked by the significant adoption of clean technologies globally. However, a faster expansion is needed, and leaders in both government and business will be pivotal in setting the pace, the energy research firm said.
Challenges such as slow infrastructure development, insufficient investment in new technologies, and suboptimal grid optimisation hinder substantial progress. In addition, recent global tensions and conflicts have impeded international collaboration, posing setbacks in recent years.
“Recent energy and climate policy trends reflect a shift towards protectionism, with a growing emphasis on sovereign energy. This shift focuses on promoting domestic industry, reducing reliance on international trade, attracting investments and creating local jobs, as well as controlling the supply chain,” Lars Nitter Havro, senior clean tech analyst at Rystad Energy, said.
“To navigate this transition effectively, it is essential for the global community to avoid moving further down the energy pyramid due to conflicts that may arise from energy security concerns.”
Also, Jon Hansen, senior vice president of global energy systems, Rystad Energy added that the ten steps can significantly accelerate the world’s energy transition while keeping the most ambitious goals of the Paris Agreement within reach.
“These steps aim to target low-hanging and impactful decarbonisation options that can speed up renewable deployment, enhance energy efficiency, address market failures and incentivize the investments necessary to achieve net-zero emissions,” he said.
Fast-track renewable developments
According to Rystad, the global renewable energy supply chain is ready for rapid expansion, but it needs to accelerate to meet the required target of nearly 11.2 terawatts (TW) by 2030. Shortening permitting times and addressing financing barriers are essential. Solar photovoltaics is expected to contribute 65 percent to the expansion, but more efforts are needed.
“Existing projects and policies indicate that global renewable capacity may only reach eight TW by 2030, delaying the 11.2 TW goal until at least 2034. Accelerating developments requires permitting reform, policy support in Asia, and supply chain optimisation, with Contracts for Difference playing a crucial role in high renewable penetration markets,” the energy firm said.
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Double down on energy efficiency
The research firm added that out of 500 exajoules (EJ) of primary energy from fossil fuels, only 250 EJ is utilised, whereas solar, wind, or hydro as primary sources could provide about 440 EJ to end users. When burning molecules for electricity or motion, only 30-50 percent of chemical energy is converted, with the rest lost as heat. In contrast, renewable sources offer 70-90 percent of primary energy to end users, even after considering storage and distribution. Rystad sees transitioning from fossil fuels to renewables as a potential revolution in energy efficiency. Additionally, improvements in energy efficiency have grown by one percent annually, but stronger regulations and policy incentives are needed to align with ambitious climate goals.
Meaningful action on methane
Rystad Energy emphasised the need to address methane emissions, accounting for 15-20 percent of global greenhouse gas emissions. While methane is over 25 times more potent than carbon dioxide, it is often overlooked in net-zero strategies.
The key recommendations include clear targets, monitoring, penalties, and incentives for methane capture. Agriculture and landfills are major sources, and investing in emerging technologies can mitigate livestock emissions.
The oil and gas sector contributes significantly, mainly due to production and transportation leaks. Implementing leak detection best practices, minimising flaring, and deploying modern air pneumatics can significantly reduce emissions.
Put a price on carbon
The energy consultant proposes that an evolving carbon value will effectively compel polluters to cut emissions, especially in hard-to-abate sectors. The value of carbon plays a pivotal role in driving the adoption of clean technology, particularly in sectors like cement.
“For instance, a carbon price strengthens the business case for carbon capture, utilisation, and storage (CCUS) in cement production. Although CCUS is currently expensive, advancements in the chemical absorption process are expected to significantly reduce costs,” Rystad Energy said.
“Chemical absorption leads in CCUS technology adoption within the cement sector, representing 32 percent of upcoming projects, including Heidelberg Cement’s initiative targeting 400,000 tonnes per annum.”
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Scale up cleantech investments
The energy research firm added that cleantech investments, including solar and wind, will surpass oil and gas investments by 2025. However, it is crucial to accelerate the process, particularly in emerging countries and technologies, such as green hydrogen.
“In 2023, 70 percent of low-carbon investments were made in eight countries, with 50 percent in China and 20 percent spread across the G7 countries. The remaining 30 percent were made mainly in developed economies, except for India, which accounted for 2.5 percent of global low-carbon investments,” the energy company said.
“Therefore, it is essential to stimulate early market demand for low-carbon products in emerging economies by investing in mature end-user technologies that can boost demand for electrification and clean technologies.”
Optimise grid utilisation
According to the energy firm, the limitations of power grids often hold back renewable energy sources. It is commonly believed that integrating new variable renewable energy requires massive investments in grid infrastructure, but that is inaccurate. Only 40-50 percent of grids are actively utilised, so increasing grid efficiency could significantly reduce the required new capacity.
“By implementing existing and affordable technologies such as topology optimisation and dynamic line ratings, transmission capacity can be increased by 30-40 percent and 20 percent, respectively. This would significantly enhance grid resilience, flexibility, and efficiency. In addition, robust energy storage solutions could manage demand spikes during heat waves and cold snaps,” the research firm said.
Embrace electrification of road transport
The energy consultant added that the shift to electric vehicles (EVs) is crucial to reduce our dependency on fossil fuels. Road transport alone accounts for 19 percent of global final energy demand and 15 percent of global CO2 emissions.
To be on track for a 1.6-degree warming scenario, an ambitious but achievable target of 70 percent EV penetration should be set. In addition, to facilitate an accelerated transition in the sector, financial incentives like the US Inflation Reduction Act’s $7,500 subsidy per vehicle are crucial, as well as expanding the charging network.
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Reduce, reuse, recycle
According to Rystad Energy, the circular economy is vital for an effective decarbonisation strategy, emphasising material reuse and increased recycling rates, such as repurposing EV batteries for energy storage.
Specific actions and supportive policies are crucial to capitalise on sustainable industry practices. Recycling plays a pivotal role in hard-to-abate sectors like steel production, where recycled steel significantly reduces emissions by 70 percent, emphasising its importance in environmental sustainability. Policymakers should prioritise and support these initiatives.
Cut inefficient fossil fuel subsidies
“Inefficient fossil fuel subsidies distort global energy markets, promoting increased fossil fuel use and hindering the transition to clean energy. The direct financial impact is compounded by environmental and health issues,” Rystad Energy said.
“A structured phase-out is necessary to level the playing field, realign market dynamics toward sustainable energy, and ease the transition for economies and consumers accustomed to subsidised prices.”
Avoid trade tensions setting back progress
To tackle climate change effectively, the energy consultant suggests that global leaders must face the risks of trade tensions and the trend of homeshoring supply chains. While localising production boosts domestic industries, it can significantly slow the energy transition by encouraging subsidy races in key clean tech sectors like batteries, hydrogen, and solar PV. Additionally, injecting funds into these industries is not the cure, especially given the associated skill shortages.
