It has been “an unusual year”, especially for global energy markets and supply.
The global energy crisis that continued to deepen this year, due in large part to the disruption to Russian gas supply to other European countries after Russia’s invasion of Ukraine, could well lead to a recalibration of the energy transitions unfolding around the globe and the climate targets these transitions are set to contribute to.
Global resources analyst at Investec Wealth & Investment, Campbell Parry, told Business Day that the recent geopolitical developments have seen the “energy transition pushed to the back burner in favour of energy security”.
European countries, such as Germany, that are reliant on Russian gas supply for their own electricity generation and energy needs have had to revert to using more coal. This has had ramifications this year for the planet’s climate goals.
Within this turbulent geopolitical environment “keeping the dream of 1.5°C alive”, which is part of the Paris Agreement, “seems like a long shot now”, said Parry.
The Paris Agreement refers to the legally binding international treaty on climate change that was adopted by 196 parties at COP21 in Paris in December 2015 to strengthen the global response to the threat of climate change and to act to limit the temperature increase to 1.5°C.
But, said Parry, even if it was not for the recent geopolitical development, the world would probably have reached this point anyway — realising that the transition from carbon-intensive to low-carbon energy was not going to be as quick and easy as might have been anticipated when the Paris Agreement was concluded.
The world’s population will grow by about 25% between now and 2050 (also the date for when many companies and countries have set their net zero emissions goals). Most of that growth will be in Africa and parts of Asia, and enabling this growth, while giving more people access to energy in these regions, will to a large extent still rely on fossil fuels, Parry said.
This future demand for energy, and how this will be met amid an energy transition, has not been thought through carefully enough globally, he said.
“This [global population growth] will require energy production to increase between 35% and 50% by 2050. Which means all forms of energy will have to contribute to the mix. We, cannot just tear down coal-fired power stations and build solar parks and wind farms in their place — all of these are important, but they all need to contribute and work together.”
Replacing reliable, well understood baseload power, such as that supplied by coal, with renewables that “don’t work most of the time”, is going to be very difficult until there is technology that allows for the storage of electrons from renewables in an effective and cost-efficient way.
There are also other unintended consequences to consider because “the energy transition is not just about energy”.
“When you refine crude oil in a refinery one of the by-products produced in sulphur. This sulphur gets shipped around the world and converted into sulphuric acid — 80% of the sulphuric acid in the world gets made because of coal burning and crude oil refining. That sulphuric acid is the only thing you can use to manufacture phosphate fertilisers which is used to produce crops.”
Constraints
There are also some very real constraints to speeding up the rollout of renewable energy globally that may contribute to a slower than anticipated transition.
Current projections already indicate rising shortages of copper, nickel and lithium — all critical in the manufacture of parts for batteries, solar panels and wind turbines.
“Renewable [technologies] are incredibly materials intense, but this is not something that has, so far, resulted in a slowdown in the rollout [of renewables]. Now, because the rollout is going very quickly, and it’s accelerating, there's no doubt in future, it’s going to come up against physical raw material constraints,” said Parry.
There is now a growing awareness, said Parry, that the transition to low-carbon energy is going to be a monumental task and while the world needs to fade out fossil fuel consumption as best as possible, fossil fuels will still represent a vital part of the mix, particularly in the case of natural gas as an interim energy source.
Instead of an immediate shutdown of coal-fired power, countries such as SA should focus on running its exiting coal fleet as efficiently as possible — and while putting up wind and solar, embrace natural gas as much as possible as a transition fuel, Parry believes.
“We also have not thought carefully enough about nuclear.” According to Parry there are about 56 nuclear reactors being built around the world at the moment, we just don’t hear much about them because of the public perception of nuclear.
SA’s own ambitions for nuclear energy, as reiterated by the deputy minister of mineral resources, Dr Nobuhle Nkabane, at the General Conference of the International Atomic Energy Agency earlier in September, includes the procurement of 2,500MW new generation capacity from nuclear energy as provided for under the Integrated Resource Plan 2019. Nkabane said during an address given at the conference that the department was “finalising the procurement framework” for the new nuclear build.
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