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Natural Environment

The long road to decarbonised electricity

In recent years, renewable energy has taken great strides forward. Nonetheless, fossil fuels remain the primary source of energy generation across the world. Policymakers and investors must act decisively if the international community is to meet its climate obligations.

Fabrizio Varriale
10 June 2021

The clean-energy transition is one of the great challenges of the 21st century. Coal, oil and gas are undeniably finite resources, although how much fossil fuel is still available for extraction remains a matter of debate. In any case, as the conventional wisdom states, the stone age didn’t come to an end because the world ran out of stones. Fossil fuels are responsible for a large proportion of global greenhouse gas emissions; they have caused, and continue to cause, enduring harm to the planet. Motor vehicles, building services and electricity grids are all predominantly fossil fuel powered, but vehicles and buildings are gradually switching to electricity as their main energy source. Accordingly, the decarbonisation of power generation and supply is of paramount importance. Without the transition to green grids, we will fail to meet the climate objectives set out in the Paris Agreement.

Reducing the carbon intensity of electricity is not easy. Firstly, such a massive change in energy infrastructure comes with technical challenges that will require significant investments of time and resource. Secondly, the fossil fuel industry continues to stall the energy transition in order to protect its interests, and is still in receipt of generous subsidies from multiple sources. Thirdly, global energy demand continues to rise – especially in developing countries; this means new plants are constantly needed to reach what is effectively a moving target. Although the COVID-19 crisis caused a decrease in global energy consumption in 2020, the International Energy Agency (IEA) forecasts an increase of 10% by 2030 compared to 2019 levels.[1]

Increasing energy demand does not necessarily mean more carbon emissions but, so far, the two have been closely related. The IEA expects global demand for electricity to rise by 4.5% in 2021 following the post-pandemic economic rebound. Globally carbon emissions from all uses (not just electricity generation) are expected to rise by nearly 5%. The increase in electricity demand will be met largely by a rise in fossil fuel consumption, but the demand for renewable generation is forecasted to increase by 8%. This would equate to the largest ever annual demand growth in absolute terms.[2]

The International Energy Agency expects global demand for electricity to rise by 4.5% in 2021 following the post-pandemic economic rebound. The increase in electricity demand will be met largely by a rise in fossil fuel consumption.

Electricity generation from renewable sources has grown dramatically over the last two decades, with an almost four-fold increase in the total installed capacity from 2000 to 2020.[3] However, this still falls far below required levels: globally, renewables accounted only for around 11% of electricity generation in 2019. There is considerable variation among regions, with Europe leading the way (21%) and the Middle East lagging behind (3%).[4] Overall, coal and natural gas still represent the lion’s share of global electricity production, with 37% and 23% respectively. And while coal use has started to decline in recent years, gas use has steadily increased since the start of the 1990s. Global oil use for electricity peaked at 12% in 1990, and has since declined to around 4%. The share of nuclear energy also declined, from a peak of around 18% in the mid-1990s to 10% in 2019.

When it comes to sources of renewables, generation from hydroelectric plants takes the largest share (43% in 2020) in terms of installed capacity. Onshore wind and photovoltaic each account for about 25% of installed capacity. The remaining share is taken largely by biomass plants (4.5%). Offshore wind, solar concentrated, marine and geothermal plants only add up to a total of 2% of installed capacity globally. It must be noted that while the cost of hydro energy has slightly increased in the last decade, the costs of onshore wind, biomass and especially photovoltaic energy have all decreased.[5] It also must be clarified that no energy source can be entirely zero-carbon across its lifecycle. For example, building a wind farm or a nuclear plant requires substantial quantities of carbon-intensive materials such as concrete and steel. Thus, energy sources should always be compared in terms of their lifecycle carbon intensity, instead of considering only the carbon released during the use phase.

Looking at the data, we can confidently say that the world is moving in the right direction. And there is plenty of untapped potential to scale up renewable energy generation to meet current and future demand. The Carbon Tracker estimates that if the entirety of global energy demand were generated by photovoltaic, the plants would cover 0.3% of global land area. This is significantly less than the land footprint currently needed for fossil fuel infrastructure.[6]

Questions remain, though, about the speed of transition, and the extent to which renewables can fully replace fossil fuels as our main sources of electricity generation. Sources whose outputs depend on variable weather conditions, such as wind and solar, will always need to be backed up by stable sources, such as gas or biomass. But the availability and affordability of stable sources can be affected by global production and demand, as well as political conditions. It is, then, sensible to maintain a diversity of sources in order to compensate for changes in supply.

The speed of the transition to decarbonised electricity is also a complex matter. Firstly, countries and regions differ greatly in terms of climate conditions, and access to natural resources crucial to energy generation. Secondly, economic development and opportunities vary across countries. Existing energy sector supply chains can represent a significant segment of local economies, as well as ‘sunk investments’ that must be repaid. It is unfair to expect every country to decarbonise its electricity at the same speed and in the same way.

The speed of the transition to decarbonised electricity is a complex matter. Countries and regions differ greatly in terms of climate conditions, and access to natural resources crucial to energy generation. And economic development and opportunities vary across countries.

Recent friction among EU Member States point to the scale of this problem. The exclusion of nuclear fission and natural gas from the list of sustainable economic activities in the EU Taxonomy for Sustainable Finance was contentious. Those Member States – mostly Eastern European – whose energy production is still heavily coal-based have argued that shifting to gas plants would lower the carbon intensity of their national grids. In response to these concerns, new proposals will be drafted that would see both nuclear fission and gas plants categorised as ‘transition activities’ – though only under certain circumstances. This move would not be without precedent: in 1990s Britain, the shift away from coal, or the ‘dash for gas’, led to dramatic reductions in carbon intensity. But while it is true that lifecycle emissions from gas plants are lower than coal equivalents, photovoltaic, wind and hydro are all much lower still.[7]

Nuclear fission is comparable to wind[8] and photovoltaic[9] in emissions terms. As such, it might be considered by some to be a sustainable energy source, but the case is far from clear cut. Serious concerns around the long-term safety of radioactive waste disposal remain. And, wherever they have occurred, nuclear accidents have caused catastrophic and long-range damage. Nuclear fusion, on the other hand, is potentially game-changing, but the technology is still in its infancy. It is simply too soon to tell whether it is a viable option in green energy transition strategies.

Overall, when it comes to the energy mix, greater diversity correlates with greater stability. But truly “green” renewables should be prioritised by lawmakers and investors alike. Only that way can we make good on our promise to the planet and future generations.