This image shows an onshore wind turbine in the Netherlands.
Mischa Keijser | Image source | Getty Images
Discussions about the energy transition, what it means and if it’s even happening have become big talking points in recent years.
How the transition – which can be seen as a move away from fossil fuels towards a system dominated by renewable energy – will be shaped remains to be seen.
It depends on a variety of factors, from technology and finance to international collaboration. While vitally important, all come with a great deal of uncertainty and risk.
The above issues were discussed in depth during a panel moderated by CNBC’s Dan Murphy at the Atlantic Council’s Global Energy Forum on Tuesday in Dubai.
“At the heart of the energy transition is digitalization,” said Leo Simonovich, vice president and global head of industrial cyber and digital security at Siemens Energy.
“The energy sector will add 2 billion devices in the next few years,” he said.
“Each of these devices could represent a potential vulnerability that could be exploited by malicious actors.”
Read more about clean energy from CNBC Pro
Simonovich expanded his point and explained the possible consequences of the above event. “In an increasingly connected and digitized system that contains legacy assets that require digital assets, this could have cascading implications,” he said.
“And what we’re talking about isn’t just data loss, what we’re really talking about is a security issue, one that could bring down large parts of the network, or, as we saw with the attack on the Colonial Pipeline in the United States, parts of [the] gas network.”
Cybersecurity, Simonovich argued, is important, both as “an opportunity to accelerate the energy transition if we get it right because it builds trust, and as a big source of risk that we need to address quite urgently.”
geopolitics
In addition to cybersecurity, geopolitics will also play a role if the planet is to transition to a low-carbon energy system, a point strongly emphasized by Abdurrahman Khalidi, Chief Technology Officer, GE Gas Power, EMEA.
“It took the world several decades until 2015 to almost reach a consensus in Paris that global warming is happening and is due to greenhouse gases, and the commitments have started to flow,” Khalidi said. “We needed a lot of discussions.”
Khalidi’s mention of Paris refers to the Paris Agreement, which aims to limit global warming “to well below 2, preferably 1.5 degrees Celsius above pre-industrial levels”, and was adopted in December 2015.
“For decarbonization to happen – as we saw at COP26 – you need… cooperative and collaborative world governments,” he said. “I see the risk right now [is that] the world is highly polarized and the world is split into ‘with’ and ‘against’.”
Khalidi’s comments come at a time when Russia’s invasion of Ukraine has highlighted just how dependent some economies are on Russian oil and gas.
While the war in Ukraine has created geopolitical tensions and divisions, it has also prompted a number of initiatives marked by cooperation and shared goals.
Last week, for example, the US and the European Commission issued a statement on energy security, announcing the creation of a joint task force on the issue.
The parties said the US would seek to secure at least 15 billion cubic meters of additional LNG for the EU this year. They added that this is expected to increase in the future.
President Joe Biden said the US and EU would also “work together to take concrete action to reduce dependence on natural gas — period — and … maximize the availability and use of renewable energy.”
Invest wisely
Given that fossil fuels play such an important role in modern life, any transition to an energy system and economy that focuses on renewable energy and low-carbon technologies will require a lot of money.
During Tuesday’s panel, where that money should be invested was addressed by Kara Mangone, global head of climate strategy at Goldman Sachs. Among other things, she emphasized the importance of integration and cost-effectiveness.
“Our research estimates it will take somewhere between 100 and 150 trillion [dollars] of capital, about 3 to 5 trillion per year – just an astronomical sum, we are nowhere near that today – to achieve the goals set out in the Paris Agreement,” she said.
About half of that capital would need to be focused on renewable energy and technologies that are already on a commercial scale, Mangone explained.
“But the other half, which is very important, has to go into CO2 capture, into hydrogen, into direct air capture, into sustainable aviation fuel and e-fuels – technologies that aren’t yet being rolled out on a commercial scale because they aren’t yet.” price point where that can happen for many companies.”
The trillion-dollar numbers Mangone is referencing can be found in a report titled “Climate Finance Markets and the Real Economy” published in late 2020.
Mangone outlined how goals could be achieved in an economically viable manner.
“We can’t pull funding out of … the oil and gas sector, metals and mining, real estate, agriculture — these sectors that are really critical to the transition, that actually need the capital, that need the support to be able to make that happen. “
The above view follows comments made Monday by Anna Shpitsberg, deputy assistant secretary for energy conversion at the US State Department.
“We always came out and said [the] The oil and gas industry is critical to the transition,” said Shpitsberg, speaking during a panel moderated by CNBC’s Hadley Gamble.
“They are players in the energy system, they are key players,” she said. “They’re the ones who are going to push mitigation options, they’re the ones that are going to push hydrogen options.”
“And to be perfectly honest, they’re among those making significant investments in clean energy, including renewable energy.”
If these “critical stakeholders” were not engaged, Shpitsberg argued, methane reduction and efficiency targets would not be met.
“The message was that oil and gas companies need to be part of the conversation. But we want them to be part of the transition conversation as well.”
work to do
Securing a successful energy transition is an enormous task, especially considering the current state of affairs. Fossil fuels are an integral part of the global energy mix, and companies continue to discover and develop oil and gas fields in locations around the world.
Earlier this month, the International Energy Agency reported that energy-related carbon dioxide emissions rose to their highest levels in history in 2021. The IEA found that energy-related global CO2 emissions rose 6% in 2021 to a record high of 36.3 billion tonnes.
In its analysis, the world’s leading energy authority identified the use of coal as the main driver of growth. Coal was responsible for more than 40% of the total growth in global CO2 emissions last year, hitting a record 15.3 billion tons.
“CO2 emissions from natural gas rose well above 2019 levels to 7.5 billion tons,” the IEA said, adding that CO2 emissions from oil were 10.7 billion tons.