Gap between renewable energy and power demand: oil, gas, coal needed
Wind turbines off the U.K. coast
Lakeland-Photos | iStock | Getty Images
The world wants to “transition” away from fossil fuels toward green energy, but the difficult reality is this: Dirty fuels are not going away — or even declining — anytime soon.
Renewable energy is becoming more accessible. This is good news in a world that faces potentially catastrophic climate change.
However, the growth in renewable energy remains lower than global energy demand. A “transition” from fossil fuels may come someday, but for now, renewable energy isn’t even keeping pace with rising energy demand — so fossil fuel demand is still growing.
As markets recover from the Pandemic, “the global power market has seen a rapid increase in power demand. Despite all the capacity additions in renewables generation, the amount of power currently generated by renewables is still not enough to meet this increased demand,” Matthew Boyle, manager of global coal and Asia power analytics at S&P Global Platts, told CNBC.
Boyle estimates that while the world’s supply of renewable energy will grow 35 gigawatts by 2021-2022, its global power demand will grow 100 gigawatts. To meet the remaining demand, countries will need to continue to use traditional fuels. A gigawatt is 1 billion watts
The amount of oil and gas consumed has fallen as the price of crude fell in 2020. This was despite the growing demand from the industry to abandon dirty fuels. Total spending in 2021 was a little more than $350 billion – “well below” 2019 levels, said the IEA’s World Energy Outlook 2021 reportPublication last month.
“The world is not investing enough to meet its future energy needs … Transition-related spending is gradually picking up, but remains far short of what is required to meet rising demand for energy services in a sustainable way,” the IEA report said.
This shortfall is only going to get worse as countries reopen, travel resumes and demand rises back to pre-pandemic levels. According to the IEA the fast but uneven recovery from the pandemic has been straining the energy market, causing steep rises in natural gas, coal, and electricity prices.
However, even though major energy companies might be cutting their investment in fossil fuels, it doesn’t necessarily mean that these emissions are stopped.
Participating in the Green Horizon Summit, chaired during the CNBC-sponsored conference by Julianna Takebaum COP26 climate conferenceGlasgow, Scotland BlackRock Chairman and CEO Larry Fink expressed worriesThe public-traded oil companies have been selling some of their assets to companies which are more transparent than the big companies traded on the public market. This helps lower their reported emissions.
The problem with renewables, however is the fact that so many of them are dependent on the weather.
Anthony Yuen of Citi Research’s energy strategy told CNBC that you can build lots of wind farms. But what if your original planning assumptions are wrong?
Renewable energy sources tend to under-deliver during certain periods — such as for instance in the month of September, when there’s less wind power generated in Europe and China, according to Boyle of S&P Global Platts.
Yuen stated that countries must think of ways to provide reliable energy supplies. One common ground solution would be to continue using traditional fuels in the event that renewable sources fail.
Two things are required to make us more prudent: The first is that you build more capacity. [for renewables]He said that it was important to try and cover more. But the second point to consider is what backup systems are available? Because sometimes, you know, let’s say the hydro reservoir or wind doesn’t show up for days … So the battery system is probably not sufficient.”
Yuen said that you can use some of the “cleaner fossil fuels” such as natural gas as a backup.
Some would argue that fossil fuels are being used to continue. What then, is there a tradeoff between having enough energy and not? He stated. “And this means that carbon capture might still be possible until such a system becomes reliable that it doesn’t use fossil fuels.”
Carbon captureTechnology that captures carbon dioxide from activities high in emissions such as power generation, industrial facilities using fossil fuels and biomass to fuel.
It will be 2021 $750 billion will be spent globally on clean energy technologiesHowever, this is still far less than the amount required to reach climate goals, according to the IEA.
For temperatures to remain “well below” 2 degrees Celsius, such expenditures would have to be doubled in 2020s. To keep them at 1.5 degrees Celsius they would need more than three times as much.
Countries under the 2015 Paris Agreement agreed to limit the rise in global temperatures to 1.5 degrees Celsius — the threshold that scientists say could stave off the worst impact of global warming.
Getting the world on track for net-zero emissions by 2050 — a target set in the Paris Agreement — would require clean energy transition-related investment to accelerate from current levels to around $4 trillion annually by 2030, according to the IEA . It would represent a threefold increase in investment.
Cobalt, nickel, and lithium are essential metals for generating energy from renewable sources, as well to produce electric cars.
UBS recently estimated that the demand for lithium will rise by eleven times, three times and twice for cobalt in the coming decade.
The bank stated that there was not enough supply of the project information to support this demand projection.
The company estimates that there will be supply shortfalls in lithium, cobalt and nickel by 2024.
UBS also stated that China’s power restrictions are making it difficult to meet these shortages.
“The [electric vehicle]The bank stated in an October note that China is almost entirely dependent upon the supply chain for its upstream materials. Long-term power outages may lead to shortages. Materials needed in the production phase are called upstream.
— Lucy Handley contributed to this report.