Reports highlight ongoing challenge of transition

Amidst all the discussion of the energy transition two new reports looking at energy use and options for the energy transition have highlighted the continued major challenge to reduce overall carbon emissions.

The latest data in the Energy Institute’s 2023 Statistical Review of World Energy[i] shows that carbon emissions continued to increase in 2022, while coal consumption increased 0.6 per cent in 2021 (the latest available figures), which at 161exajoules (EJ) was the highest level since 2014.

Overall carbon emissions from energy use, industrial processes, flaring and methane continued to increase to a new high (up 0.8 per cent in 2022 to 39.3GtCo2 with emissions from energy use up nearly 1 per cent to 34.4GtCO2).

Coal demand was driven primarily by China (up 1 per cent) and India (4 per cent) and their combined consumption growth offset declines in other regions. North America and Europe saw their coal consumption fall by 6.8 per cent and 3.1 per cent respectively. Coal production was also up (more than 7 per cent) in 2022 and reached a record level of 175EJ. China, India and Indonesia accounted for more than 95 per cent of the increased production.

Figure 1

Source: 2023 Statistical Review of World Energy

In terms of generation, coal remained the dominant contributor accounting for 35.4 per cent of total generation globally (this is down slightly from 2021 when it accounted for 35.8 per cent).

Overall electricity generation increased by 2.3 per cent in 2022. Wind and solar had a record 12 per cent share of power growth. Solar output was up 25 per cent while wind output grew by 13.5 per cent while solar and wind capacity grew by 266GW during 2022, with solar account for nearly three quarters of that additional capacity. China’s installation of new solar and wind generation accounted for around 37 per cent and 41 per cent of the world’s added capacity respectively.

Gas-fired generation remained stable in 2022, accounting for 22 per cent of electricity generated internationally.  See figure 2.

Figure 2: Renewables in global generation

Source: 2023 Statistical Review of World Energy

International natural gas demand fell 3 per cent in 2022 dropping just below 4Tcm. LNG supply was up 5 per cent to 542Bcm and the increase in global demand was driven largely by Europe, which is the result of the curtailment of Russian gas supplies to Europe following the invasion of Ukraine. LNG imports to Europe increased by 57 per cent, while natural gas pipeline net trade fell 15 per cent globally in 2022 with European pipeline imports of gas down 35 per cent. In contrast China increased the volume of gas piped into the country by 5Bcm. Gazprom supplies gas to China through the Power-of-Siberia pipeline under a 30-year, US$400 billion deal, which began at the end of 2019 and a new gas pipeline from Russia into China, via Mongolia, has also been proposed. Russian pipeline exports were down a total of 38 per cent. In contrast the Middle East increased its gas pipeline exports (up 12 per cent).

Looking ahead to the energy transition, Net Zero Australia released a report titled “How to Make Net Zero Happen” this month. The report models a number of scenarios the authors hope will be representative of different positions on the energy transition. The report models six scenarios, with its reference scenario maintaining policy settings from 2020 through to 2060. Other scenarios modelled include slow electrification, rapid electrification, full renewables rollout, constrained renewables rollout, onshoring iron ore and aluminium production (with renewable energy) and full renewables rollout. In an effort to expand upon the trajectory of renewables in Australia, we have included the two examples below.

While global consumption of fossil fuels has continued to rise, Net Zero Australia’s report provides suggestions on the amount of renewables required in the grid and the rate at which they need to be constructed. One of the more immediate firming technologies the report identifies for construction is a fleet of gas-fired peaking plants to backup renewables that are being built into the grid. As we read above, gas-fired generation remained stable globally at 22%. The report identifies a pipeline of 3.5GW per annum of gas peaking plants in Australia.

The report lists an addition of 6GW of gas peaking capacity per annum out to 2035 as the minimum pipeline required to support the energy transition, as can be seen in the graph below.

Figure 3

Source: How to Make Net Zero Happen

Storage, specifically battery storage, is also highlighted by the report as an essential technology to firm renewables in the grid. The report’s modelling assumes growth in storage duration from two to seven hours by 2050. To 2035, the report identifies a construction rate of 35GWh per annum. This represents an enormous increase on current build rates as you can see in the graph below.

Figure 4

Source: How to Make Net Zero Happen

The report calls for “government support”(read – subsidies) to make batteries at their suggested scale and capacity economically viable. There is also a focus on pumped hydro, including the identification of a need for additional transmission and again suggests government support.

The contrast of these reports underscores the challenges and opportunities of the coming years and decades as the energy transition progresses. The “How to Make Net Zero Happen” calls for decades-long commitments from government, in addition to increased bipartisanship and collaboration to enable the rate of the energy transition to lift. It identifies not only a need to increase the build speed but a need to increase the speed at which new technologies are adopted. However, as the energy transition progresses, the reports make one thing clear, the appetite for energy consumption is only increasing both locally and globally and this is also reflected in the global energy statistics.

[i] The Review was previously produced by bp.