Tuesday, June 18, 2024
HomeNewsGlobal temperatures to hit 2.5C if no quick remedial actions – Analysts...

Global temperatures to hit 2.5C if no quick remedial actions – Analysts warn

  • US$2.7 trillion a year investment needed to achieve net zero by 2050

The world is currently on a 2.5-degree Celsius warming trajectory, says Wood Mackenzie’s latest report on energy transition, referred to as “Energy Transition Outlook, made available to Energy Window International, one of world’s most authoritative energy industry report channels. Wood’s Energy Transition Outlook, described as a “milestone assessment” of the global journey towards a lower carbon future, has attempted to weigh the level of transformative action taken so far, aimed at ascertaining the reality or otherwise of limiting the average temperature increase to below 1.5-degrees Celsius, within the time allotted.

The report had outlined key findings to include, the optimism that achieving 1.5C was still possible but with limited temperature overshoot, which also will be contingent on the level of actions to be taken within the decade. Also critical is the need for low carbon power supply and infrastructure needs to be scaled up at least twice the pace at which it was built in the last decade – made more difficult though by the current delays faced by renewables assets due to limited grid interconnections.

It also means, from this standpoint, that a minimum of US$1.4 trillion a year (base case) must be invested in renewables, infrastructure and energy transition technologies, as annual spend into the sectors is expected to rise to US$2.4 trillion for net zero target to be met. Of particular mention was the critical role the oil and gas sector has to play to manage this transition because, as natural depletion as low carbon supply begins to develop, the oil and gas supply would have to be replenished, to help move the world closer to net zero. Spending will hover around US$0.5 trillion a year, Woodmac’s base case, and US$0.2 trillion a year for net zero.

Electricity is expected to become the major energy market, with renewables as the main driver of power supply. Power demand will double every 10 years to support road transport electrification and green hydrogen production, which also means that energy will have to be used much more efficiently in a net zero scenario, with demand-side management a major component, while softening the impact or rising electrification in other sectors.

Carbon Capture, Utilization and Storage (CCUS) and DAC (Direct Air Capture) must get the best attention so as to abate industries and help restore the carbon cycle longer term. This will be besides the rapid development of copper, nickel and lithium supplies, all of which are essential to support renewables, electric vehicles (EVs) and transmission infrastructure, with lithium demand projected to double by 2030.

“The pathway to net zero was always going to be challenging, but Russia’s invasion of Ukraine has made it more difficult especially in the near term. The conflict quickly curtailed the global supply of energy and metals, amplifying the impact of underinvestment in the resources sector over the last decade. Supply security fears increased around the world, and higher prices across energy and mining commodities have fueled inflation”, says Simon Flowers, chairman and chief analyst at Woods.

“The supply of low carbon energy has grown by a third since 2015, but the world’s energy demand has grown much faster with rising incomes and populations. The good news is that sustainability is alive and kicking, spurred on by policy including the introduction of the US Inflation Reduction Act and Europe’s REPowerEU. Achieving 1.5C is going to be extremely challenging, but it is possible and greatly depends on actions taken this decade”, Flowers added.

In Woodmac’s base case, energy related emissions will peak in 2027 and fall roughly 25% by 2050 from 2019 levels, with low carbon energy’s share of final consumption growing to 14% by 2030 and 28% by 2050.

“Net zero pledges now cover 88% of annual global emissions. But no major country is on track to meet their 2030 emissions reduction goals, let alone net zero. Policy landscape is shifting to direct incentives and targeted support to accelerate the development of new technologies, but countries need to urgently address obstacles including permitting restrictions and constraints in the electricity supply chain,” Flowers added.

To limit global warming to 1.5 degrees, VP Scenarios and Technologies Research Prakash Sharma, said urgent action towards building low carbon power supply and infrastructure at a very fast pace was not negotiable. Adding that low carbon supply today accounts for 42% of power generation, and this is expected to rise to 78% by 2050.

“The share of wind and solar increases from 13% today to over 53%, undoubtedly double of today’s total power demand in the same time period, this is also with the hope that the supply chain and inflationary pressures currently faced by renewables developers are expected to ease in a few years.”

Power transmission infrastructure according to the report, also needs to expand alongside renewables, with growth which will require grid connectivity expected in the next phase.

Carbon pricing is required to close the gap in cost of low carbon supply, in order to drive adoption in difficult sectors such as steel, cement and chemicals. Wood Mackenzie expects that a carbon price of US$150 to US$200 per tonne is required by 2050 from the current global average of US$25 per tonne, the report reveals

“Electricity will become the largest energy market, overtaking oil and gas as a fast-response, low cost, and efficient energy source,” Sharma adds.

In its base case, the team maintain that electricity’s share in final energy demand will rise from 20% to 22% by 2030, and to 30% in 2050.

For EVs, global stock is expected to rise from 43 million cars currently to 1.02 billion cars by 2050, in the base case. An additional 20% growth in stock is projected in the country pledges scenario and 60% in net zero.

As a core material for EVs, lithium demand is projected to increase two-fold by 2030 in the base case and three-fold in a net zero scenario. Copper and nickel supplies will also need to be developed quickly to support renewables, EVs and transmission infrastructure. The urgency of investment is further underlined by seven to 10 years build time for new mines.

On emerging technologies: hydrogen and CCUS, low carbon hydrogen and CCUS projects are moving out of the pilot phase and becoming mainstream. Wood’s net zero scenario requires 515 million tonnes (Mt) of low-carbon hydrogen by 2050, as the technology will see 11% share in final energy demand by 2050, 4% in the base case, phasing out fossil fuels in chemicals, steel, cement and heavy-duty mobility.

CCUS and DAC abate fossil fuels use while low and zero carbon energy supply is developed. In Wood’s base case, CCUS and DAC capacity is projected to rise from 100 Mt in 2023 to 2 billion tonnes (Bt) by 2050. The deployment needs to reach around 7 Bt by 2050 in a net zero scenario, which also requires substantial expansion in developing transport, shipping and storage infrastructure.

About oil and gas, Sharma said: “Oil and gas still have a role to play as part of a managed transition. There will be a natural depletion to be low, as zero carbon options develop, but supply still needs to be replenished as we move towards net zero.”

According to Wood’s base case, fossil fuels will account for 69% of end-use energy demand in 2023, falling to 53% by 2050, triggered by greater end-use efficiency and electrification.

Oil peaks over the next decade in all scenarios are expected, primarily driven by the significant uptake of EVs. In Wood Mackenzie’s base case therefore, peak comes at 108 million barrels per day (mb/d) in 2032 and falls to 90 mb/d in 2050, with expectation that it will fall to approximately 50 mb/d, and to 30 mb/d in the country pledges and net zero scenarios, respectively, by 2050.

Growth in LNG markets will see natural gas increase its share of primary energy supply to 25% in 2023, whereas coal and oil stagnates or declines. Gas demand is projected to grow for 10 years in all scenarios due to its wide range of application. Demand weakness in buildings and industry is offset by increased coal-to-gas switching in power and feedstock for blue hydrogen production.

Woodmac’s base case on investment sets the total investment needed to decarbonize the energy sector at US$1.9 trillion a year, and needs to increase by 150% – or US$2.7 trillion a year – “if we are to meet the 1.5-degree target.” More than 75% of this investment is needed in the power and infrastructure sectors.

“Sustained investment is critical for both the existing and new supply of zero and low carbon energy sources. Global cooperation and an institutional framework are essential in driving innovation and technology development. COP28 can build the consensus for commitment amongst member states to meet the 1.5-degree climate target and ultimately shape the outcome of the global energy transition,” Flowers concluded.




Please enter your comment!
Please enter your name here

Most Popular