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ISSN 2753-7757 (Online)
Picture of lightbulb with green leaf inside Photo: Pixabay
Although energy security has been neglected in favour of the fight against climate change in recent years, the current crisis provides an opportunity for global energy markets and governments to address the two issues concurrently

Photo: Pixabay

A balance must be found between two equally important imperatives: security of affordable energy supply and the fight against climate change, according to a recent report from Capgemini.

Global energy markets are in a state of profound transformation. Winter is now fast approaching in the northern hemisphere and many state players are examining interventions to avoid energy brownouts. In the longer-term, the climate crisis is visibly worsening and interventions need to happen today.
 

As a result, the latest World Energy Markets Observatory (WEMO) report published by Capgemini says a balance must be found between affordable energy supply security and the fight against climate change. It explores how this might be possible through the combination of short-term action and long-term decisions on the reform of the energy market design, on the sustainability of energy supplies, and on favourable financing conditions for long-term green investments.
 

The report, now in its 24th edition, focuses on the triggers and impact of several successive energy crises, including the Russia-Ukraine conflict and the consequences of the increase in inflation, most notably for Europe, coupled with the need to reduce greenhouse gas (GHG) emissions to advance net zero ambitions, the closure of nuclear plants following the Fukushima incident and other economic considerations.
 

The report suggests that the current energy crisis can be addressed in the short term through a reduction in energy demand and increased storage. It notes that security of gas supply over the coming winter will depend on three factors – the filling of capacity storage facilities (European Union legislation has dictated that gas storage sites must be filled to at least 80% of their capacity by 1 November 2022); identifying gas import flows (including through the Baltic Pipe and an uptick in LNG from suppliers like the US, and in the longer term from Africa, Azerbaijan and Australia); and, most importantly, the effectiveness of energy demand reduction campaigns, such as those recently launched in Germany. Incentives for energy savings, already launched in many European countries, have the potential to trigger meaningful change, it says.
 

The report also highlights the need to intensify renewables development in the mid-to-long-term. Under new EU plans to accelerate the rollout of renewables to achieve independence from Russian supply and electrification of the economy, an additional €210bn will be needed for energy investment between now and 2027, it says. At present, wind and solar technologies are the most promising solutions, although solar and wind energy sources are intermittent and so require electricity storage to stabilise the electricity grid.
 

The report also notes that there is a need to be realistic about the efficacy and use cases of hydrogen, which ‘for economic and technical reasons’ is ‘not on track to fulfil its net zero role by the mid-century’. As a result, it suggests that green hydrogen should be reserved for industries where CO2 is difficult to abate.
 

Investment in carbon capture, use and storage (CCUS) technologies is key to reducing CO2 emissions, which are on the rise from the coal resurgence, says the report, which also warns against ‘swapping one dependency for another’. It stresses that while progressing on renewables like solar, the EU and other players must not swap a reliance on Russian gas with a dependence on China for certain energy transition components like solar PV panels, rare metals and minerals.
 

Meanwhile, nuclear power is undergoing a renaissance, recognised as a domestic energy source central to the decarbonisation of electricity and stability of the electricity grid. The report suggests that, in the short term, countries like Germany and Belgium should keep existing reactors open, while, in the medium term, governments in the UK, US, Japan, EU and China should continue to build nuclear plants. In the longer term, remuneration systems for nuclear electricity should be put in place to encourage private players to invest in this industry, it continues.
 

Lastly, the report calls for a doubling down on climate action, noting that the political will to combat climate change, especially from the largest emitters like the US, EU, China, and India, ‘must continue (and re-start) to achieve meaningful progress’.
 

Commenting on the report, James Forrest, Global Energy and Utilities Industry Leader at Capgemini, says: ‘Though energy security has been neglected in favour of the fight against climate change in recent years, the current crisis provides an opportunity for global energy markets and governments to address the two issues concurrently. By activating solutions like energy reduction, solar and wind in the short term, and continuing to unlock the biggest climate packages in history, we can achieve meaningful progress between these equally important imperatives.’

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