To Save the Planet, We’ll Have to Plug More Things In

Source: By Jeremy Hodges, Bloomberg • Posted: Monday, September 14, 2020

1. What’s the situation now?

Oil, natural gas and coal currently are the source of 85% of the world’s energy, with nuclear, hydropower and renewables making up the remaining 15%, according to data from BP Plc. Fossil fuels now feed about 60% of electrical power generation, but that share is slowly falling, as the cost of generating power from solar and wind farms has made the case for electrification — also known as “sector coupling” — even more compelling. Norway has made great strides with electric vehicles, which accoun for almost 60%of new cars on the road.

2. What all could be electrified?

In theory, many of the things that use polluting fuels, beyond generating electricity, could run on electricity instead. Some changes would be relatively straightforward, if not easy to implement: Dozens of new electric car models are coming to market in the next few years, replacing vehicles that use gasoline and diesel. Gas boilers and oil furnaces could be replaced by geothermal heat pumps, systems dug under a building that tap into the natural warmth of the earth to heat homes and offices.

3. What would be harder?

Between them, the production of steel and cement account for 14% of global greenhouse gas emissions. The bulk of that comes from the fuels needed to raise temperatures above 1,000 degrees Celsius. The proposed solution is to use hydrogen as the heating fuel, since it emits almost no carbon dioxide when burned. Hydrogen can be produced by putting an electric charge into water. So-called green hydrogen, which is manufactured using electricity from renewable sources, could sharply reduce the emissions associated with manufacturing.

4. What’s the problem with all that?

Green hydrogen costs twice as much as hydrogen made using natural gas, according to BNEF. Those costs are forecast to fall though as hydrogen plays a key part in the European Union’s Green Deal. But more broadly, progress on electrification depends on getting a number of different stakeholders and vested interests to move in the same direction. Creating a huge new hydrogen industry, scaling up the production of heat pumps and installing electric-vehicle chargers across the landscape will all take time, while the needs for reliable fuel and heat aren’t going away in the meantime.

5. Is there enough electricity for electrification?

Not yet. The need is especially great for electricity from renewable sources, and only in Europe are utilities thinking hard about a future free of fossil fuels. Analysts say that the surge in demand for power in the EU as it pursues its climate goals will require a 75% increase in power generation. And even that won’t touch all corners of the economy.

6. What would be left out?

There are pockets of the economy that look far more difficult to electrify, like shipping and aviation, where no electric motor or battery is powerful enough to move the world’s cargo efficiently and economically. Researchers are looking atammonia, hydrogen, liquid natural gas, biofuels, methanol and nuclear power as alternatives for the shipping industry. Hydrogen is also being considered as an alternative in aviation.

7. What are the next steps?

To move forward, industry and government need to come together and agree who will take on the initial risks of developing commercial scale projects. That requires clear regulations either in the form of subsidies, tax breaks or even trade protection should costs jump. Companies will then feel confident they can take the risk of making big investments. Governments too will need to spend time and money to educate the public on the tradeoffs involved. That means warning about potential disruptions, rising bills and how new systems will work differently.

8. Who’s against this?

Opposition can be expected from big oil and utility companies reluctant to change. For the world’s largest oil and gas producers, the shift to renewable energy is an existential threat that has already led the likes of BP Plc and Royal Dutch Shell Plc to make plans to reshape themselves as green power companies. While utilities don’t necessarily oppose a move to electrification, the change would require a massive overhaul of how grids work and will take significant investment to get right — work that would all be pointless unless fossil fuels are eliminated as far as possible from all the world’s systems.

9. What’s needed in the long run?

Consistent policies — and lots of money. A suite of supportive government policies that encourage investment with a view to commercial-scale of technologies is crucial. While the European Emission Trading System has had an impact on carbonization industry and and transport to an extent the carbon price will need to be much higher to speed up the process. The U.K. has shown with the correct subsidies in place how fast renewable energy can be deployed, thanks to its contracts for difference auctions that has spurred an explosion in offshore wind capacity.

10. What else might be needed?

Governments also have to find a way to create new markets that allow green hydrogen to flourish, and cheaply. Signals like those from the German government earlier this year calling for as much as 5 gigawatts of industrial scale electrolysers — the machines that split hydrogen out of water — in a decade, are positive, but globally vastly more is needed.

The Reference Shelf

  • A BNEF report on “sector coupling” and the electrification of Europe’s economy.
  • A Bloomberg News story and a QuickTake on the future of hydrogen.
  • A QuickTake on “net zero” and what it means, and one on decarbonization.