The Energy Transition Has Reached A Critical Inflection Point

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The transition to net zero is a complex process that requires significant changes in the way we produce, distribute, and consume energy. Renewable energy is expected to play a significant role in the global energy transition, and many countries and companies have set net zero targets to reduce their greenhouse gas (GHG) emissions to zero by 2050 or earlier.

But the energy transition is simmering with challenges.

The term “energy transition” refers to the global energy sector’s shift from fossil-based systems of energy production and consumption — including oil, natural gas, and coal — to renewable energy sources like wind and solar, as well as lithium ion batteries. We need to plunge into this energy transition if we are to achieve net zero emissions, which is the target of negating the GHGs produced by human activity.

The pathway to net zero, though, is continually evolving.

Grid Beyond’s Global Energy Trends 2024 is a white paper that looks at the reality of, expectations for, and pathways towards net zero. It evaluates whether the world is on the right track and contextualizes net zero. The white paper is intended to help policy makers, regulators, industry, and other constituents to move the energy transition from targets and trajectories to net zero.

Let’s look at some of the white paper’s highlights and try to wrap our heads around what it means to engage in an energy transition and to achieve net zero.

The Enormous & Underappreciated Energy Transition

The most recent estimates show that the global temperature seems likely to exceed 1.5°C of warming, relative to 1850-1900, by 2030. Despite broad consensus on the need to reach net zero, global energy-related GHG emissions are still heading in the wrong direction, and carbon-intensive industrial sectors are facing a critical inflection point. A number of countries already acknowledge the demands of the crisis and are taking action to decarbonize while moving to protect industry from high carbon competitors.

The Intergovernmental Panel on Climate Change (IPCC)’s 2021 Sixth Assessment Report, Climate Change 2021: The Physical Science Basis, indicated that climate change was occurring much faster than previously predicted. The report recognized:

• the interdependence of climate, ecosystems and biodiversity, and human societies;
• the value of diverse forms of knowledge;
• the close linkages between climate change adaptation, mitigation, ecosystem health, human well-being, and sustainable development; and,
• reflected the increasing diversity of actors involved in climate action.

Yet the latest edition of the Statistical Review of World Energy found that, in 2022, carbon dioxide emissions from energy use, industrial processes, flaring, and methane (in carbon dioxide equivalent terms) continued to rise to a new high-growing 0.8% in 2022 to 39.3 GtCO2 e. Emissions from energy use rose 0.9% to 34.4 GtCO2 e.

“As the energy markets stabilize into their new ‘normal,’ this presents an opportunity for stakeholders of all types to take longer-term steps to accelerate the changes in energy markets that create a net zero future, which ensures supplies are available at a price that is affordable for all consumers,” says Michael Phelan, CEO, Grid Beyond.

The focus on sustainability and environmental reporting has been augmented by the “Greta effect”  — people started taking more notice about climate change and carbon emissions. For major energy users, adopting a flexible approach to energy became a key asset in staying competitive in a net zero future. The path to net zero “is achieved when [emissions released] – [emissions removed] = 0 (i.e. the emissions removed from the atmosphere completely cancels out the emissions released).”

Targets already exist for EVs, heat pump installations, and renewable energy capacity, but governments will need to translate these targets into concrete geographical capacity that can meet future needs. Net zero pledges now cover 92% of GDP and 88% of emissions worldwide. Nonetheless, the white paper indicates that the definition of net zero and the path to get there have been interpreted in “different and inconsistent ways.”

The Move toward Electrification across Multiple Sectors

According to the IEA, electrification holds great potential to reduce final energy demand because the efficiency of technologies is generally much higher than fossil fuel-based alternatives. The Grid Beyond white paper cites data where the growth of electricity will rise to about 30% from 2020 to 2035 as a result of increased building heating, vehicles, and industrial processes. With significant potential to mitigate emissions and decarbonize energy supply chains, electrification is an important strategy to reach net zero goals.

The transport sector has seen significant movement towards electrification in the last 12 months, with increasing consumer demand and the greater availability of electric models, the number of electric cars is growing at a rapid rate. In all sectors, however, the cost of going electric translates into high initial investment costs.

Combining battery storage with any on-site generation or load assets can further reduce a carbon footprint and help increase the volume of renewables in the energy mix, according to the Grid Beyond white paper. If onsite generation exceeds overall needs, batteries offer the option to store surplus energy or export electricity to the grid. However, the cost of equipment can be significant. Despite this, many businesses have already made or are planning to make investments in energy assets.

According to GridBeyond’s research, 66% of respondents have or are planning to make investments in battery storage and/or renewables technology and a further 17% in fleet electrification.

The Original Paris Agreement Goals & COP28

When 193 countries signed on to the Paris Agreement, they committed to 3 goals:

1. reduce emissions enough to hold global temperature rise to “well below 2 degrees C (3.6 degrees F)” above pre-industrial levels, and ideally 1.5 degrees C;
2. build communities’ resilience to the impacts of climate change; and,
3. align the world’s financial flows with low-carbon, climate-resilient development.

They also agreed to assess their progress toward these goals every 5 years (beginning in 2023) and strengthen their action in response, a process known as the “Global Stocktake.”

Enter COP28.

The first-ever “Global Stocktake” took place at COP28, which assessed the world’s collective progress toward addressing the climate crisis. The Global Stocktake synthesis report released in September, 2023 revealed that the world is far off track from its goal of holding global temperature rise to 1.5 degrees C (2.7 degrees F) to avoid some of the most disastrous impacts of climate change.

The Stocktake determined that:

• implementation of the Paris Agreement is lacking across all areas and calls for a systems transformation, which follows a whole-society and whole-economy approach that mainstreams climate resilience and development aligned with low greenhouse gas emissions;
• a growing gap exists between the needs of developing countries and the support provided and mobilized for them; and,
• there needs to be an unlocking and redeployment of trillions of dollars towards climate action and climate-resilient development.

Then the most revelatory consensus occurred.

A deal was approved that would, for the first time, push nations to transition away from fossil fuels to avert the worst effects of climate change.

The UAE Consensus calls for “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner … so as to achieve net zero by 2050 in keeping with the science.” It also calls for a tripling of renewable energy capacity globally by 2030, speeding up efforts to reduce coal use, and accelerating technologies such as carbon capture and storage that can clean up hard-to-decarbonize industries.

COP28 president Sultan al-Jaber hailed the deal, which was approved by almost 200 countries, as an “historic package” of measures which offered a “robust plan” to keep the target of 1.5C within reach.

US climate envoy John Kerry said, “This document sends very strong messages to the world.”

UK climate minister Graham Stuart exclaimed, “This is the beginning of the end of the fossil fuel era […] this outcome is something we can genuinely celebrate.”

Wopke Hoekstra, EU climate chief, told the meeting that “humanity has finally done what is long overdue. Thirty years we’ve spent to arrive at the beginning of the end of fossil fuels.”

Mary Robinson, chair of the Elders and former president of Ireland, outlined, “If 1.5C is our north star, and science our compass, we must swiftly phase out all fossil fuels to chart a course towards a livable future.”

The accolades are wonderful, but governments now need to provide clear pathways so renewable energy investments can be made in a timely manner.