Energy transition has accelerated

Overall the energy transition has accelerated as a result of innovative advancements in industry technology according to the 22^nd edition of Capgemini’s annual study, the World Energy Markets Observatory (WEMO) report, created in partnership with De Pardieu Brocas Maffei, Vaasa ETT and Enerdata.

Among the key findings, the report shows that while energy consumption slowed in 2019, growing at a modest rate of 0.7% in 2019 and energy-related CO₂ emissions were down 0.4%, total global greenhouse gas (GHG) emissions rose 0.6%. Even in Europe, the most advanced region in terms of climate change, the study suggests that current policies and measures fall well short of long-term decarbonisation objectives and the 1.5–2°C scenario identified by the International Energy Agency (IEA).

The report also notes that the use of renewables will accelerate as generation and storage technologies continue to mature. In 2019 worldwide investments in wind and solar climbed 3% while European capacity surged by 42%. Batteries remain a critical enabler of at-scale adoption of intermittent renewable generation – a promise that may be realised as production costs continue to fall and new megafactories are being planned worldwide, says the study.

Meanwhile, green recovery packages related to COVID-19 could help accelerate the climate change agenda if governments leverage economic stimulus bills and recovery packages to accelerate and prioritise ‘green’ initiatives. The research indicates some leverage in recovery packages to do this, including increasing the share of renewables and green hydrogen, especially within the mobility sector; electrifying some usages, such as EV development; refurbishing buildings to support energy efficiency measures; enabling the smart grid at scale to support industry transformation as well as commodities and networks convergence; and encouraging incremental behaviour change among consumers, including a reduction in travel.

The report also shows that oil and gas majors are diversifying their business, although many need to invest more outside the core. It notes that unprecedented levels of disruption and volatility within the oil and gas industry have significantly impacted organisations’ profitability and put pressure on their licence to operate.

As carbon pressure on core products continues to mount, oil and gas companies will need to develop a long-term strategy to diversify their revenue from traditional production, says the study. For many organisations, this means pursuing options outside the core area of business of pure oil and gas exploration and production. At present, the majority of organisations – with the exception of EU majors – invest just 1% outside the core business.

The study also calls for utilities’ transformation roadmaps to be reconsidered post-COVID. As the energy sector grapples with the effects of the global pandemic, a transformation strategy based on the shift to energy services is no longer a viable growth opportunity. Organisations must refocus their digital transformation agenda around the acceleration and the prioritisation of energy transition, it says.