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New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
Without decarbonisation intervention, industrial emissions will grow from 6.7bn tonnes of CO2 this year to 7.6bn tonnes of CO2/y by 2050, according to a new report from BloombergNEF (BNEF). Further analysis from BNEF has also found that at least $21.4tn will need to be invested in the electricity grid by 2050 to support a net zero trajectory for the world.
The production of steel, aluminium, petrochemicals and cement is due to increase in developing economies and stay flat, or only slightly decline, in most developed countries, according to the new report. While low-carbon options for industrial sectors remain expensive, to reach net zero by 2050 it is crucial that all future capacity is built with clean technologies, or with the option to easily make the transition in the future. If current production routes are maintained, billions of dollars’ worth of polluting assets could be stranded by net zero deadlines in 2050 and 2060, according to BNEF.
In the report’s ‘Net Zero Scenario’ (NZS), a combination of technologies could deliver more than 7bn tonnes of CO2 abatement by 2050, with a contribution of 29% from carbon capture and storage, 26% from electrification, 20% from hydrogen, 10% from bioenergy and 8% from recycling. However, the report’s ‘Economic Transition Scenario’ (ETS) shows that there will be virtually no emissions abatement in industry based on economics alone. A small amount of fuel-switching and hydrogen use occurs in the steel industry, but only in the 2040s, far too late to prevent catastrophic warming, the report says.
Claire Curry, Head of Technology and Industry at BNEF, notes: ‘Zero carbon materials are not yet economic, but many companies have committed to lowering their emissions. According to our research, 73% of aluminium production capacity, 62% of petrochemicals, 47% of cement and 38% of steel is covered by a net zero commitment. These commitments will drive investment and innovation, and ultimately bring down the costs of decarbonisation.’
The timing of the decarbonisation determines the technology mix. Electrification and hydrogen pathways have the best chance of competing with existing production routes on cost but will only become widely available around 2035. Recycling, fuel-switching, bioenergy and carbon capture can deliver emissions reductions today, and are deployed earlier in BNEF’s least-cost modelling, helping to keep global warming below two degrees. Hydrogen arrives later, but ultimately plays a crucial role in steel and petrochemicals as both a feedstock and a source of heat.
The report notes that the variety of process requirements and sources of emissions in industry means that no technology will ‘win’. A clean fuel will be chosen based on local supply chains and cost, and hydrogen used where it is needed for its chemical properties, in steel and petrochemicals. A large portion of cement’s emissions come from a chemical process where limestone is converted to lime. For this reason, carbon capture will play a major role in decarbonising cement.
Julia Attwood, Head of Sustainable Materials at BNEF and lead author of the report, explains: ‘To avoid stranded assets, it is crucial that all new industrial capacity is built clean, today. Low-carbon technologies can increase costs in the near-term, but locking a new industrial plant that would run for 50 to 100 years into coal, gas or oil will eventually lead to high carbon payments and uneconomic production.’
Major grid investment needed
Meanwhile, further analysis from BNEF has found that at least $21.4tn will need to be invested in the electricity grid by 2050 to support a net zero trajectory for the world.
The total investment comprises $4.1tn to sustain the existing grid and $17.3tn to expand the grid for new electricity consumption and production. Annual investment triples from $274bn in 2022 to $871bn/y in the decade preceding 2050. The report says that significant policy intervention is required to realise this scale of investment in the grid, including streamlining the permitting processes to reduce the number of permits required for a project, consolidating the review process among different agencies, and establishing clear time frames for approval. To ensure grid modernisation can accelerate, reforms are needed to create the right incentives for utilities to pursue digitalisation and grid flexibility.
The report notes that annual expenditure on distribution networks more than triples to about $533bn by 2050, from $147bn today. As renewables expand, grid expenditure leans towards building greater redundancy in the distribution grid, enabling bi-directional flow and enhancing remote monitoring. BNEF estimates 80mn km in grid growth between 2022–2050, more than enough to replace the global electricity grid today. This breaks down to about 68mn km of above-ground lines, 12mn km of underground cables and 0.2mn km of submarine cables.
‘We must effectively double the size of the global electricity grid by 2050. This future grid needs to be smart, flexible and responsive, enabling us to harness the full potential of renewable energy rather than be bogged down by it,’ says Sanjeet Sanghera, Head of Grids and Utilities at BNEF.
Digitalisation, which helps improve and extend the utilisation of the grid infrastructure, represents 24%, or $5.1tn, of total investment to 2050, the report says. Most of this goes toward implementing automation and control of the power system or to increasing monitoring and situation awareness.
Sanghera concludes: ‘The legacy grid was built for the industrial revolution and outperformed our wildest expectations. But the project ahead is to decarbonise the global economy by connecting terawatts of renewables and electrifying as much as possible of the end-use economy. The technologies, policies and strategies utilities will need to accomplish this goal are different from those that made the grid so successful in the past.’