A new report published by consulting company CapGemini has highlighted the need for sustainable energy sourcing to facilitate the energy transition and drive net-zero targets.
The 23rd edition of its annual report, the World Energy Markets Observatory (WEMO), was created in partnership with De Pardieu Brocas Maffei, Vaasa ETT and Enerdata, and analyses the state and trends of energy markets and technologies across North America, Europe, Asia, and Australia
It also provides insights on progress in the fight against global warming and the ongoing energy transition. The report explores the evolution of leading industry players and predicts major trends for the future.
There is a number of key findings in this year’s edition. Firstly, electricity spot markets are at record high levels, linked to sustained demand, lower generation capacity margins, high gas prices, and, in Europe, high carbon prices.
Also, the supply of renewable-based electricity has increased while renewable costs continued to decrease in 2020: both solar and wind power generation capacities rose in 2020, representing ten per cent of the electricity generation market. The downward cost trend could reverse in 2021 and in the following years.
There is also growing momentum around green hydrogen, which has the potential to decarbonise an additional 15 per cent of the world economy. Green hydrogen is costly, around three times more expensive than fossil-based hydrogen; however, decreasing renewable electricity and electrolyser costs could lead towards parity by 2030.
Competition in the electricity and gas retail markets has largely recovered since early 2021, however, presently, high energy prices are triggering consolidations. Whilst utilities demonstrated financial resilience in 2020, oil and gas players were more severely hit, though many have now recovered thanks to higher demand and prices for oil and gas. Stakeholders pressure on oil and gas majors has accelerated their diversification towards electricity, renewables and e-mobility and reinforced their carbon neutrality commitments, particularly for European International Oil Companies (IOCs).
Finally, energy and utilities players are moving quickly to decarbonise and harness the current energy transition to develop new models and reinvent themselves in valuable ways. By digitising and embracing low-carbon technologies, many are attempting to find the right balance between meeting stakeholders’ expectations and ensuring business transformation in competitive markets.
Whilst the appeal for clean technologies, essential to energy transition, begins to intensify, it is crucial to remember that achieving this means not compromising on security of energy supplies or energy affordability.
According to Colette Lewiner, Energy and Utilities Senior Advisor at Capgemini: “The impact of COVID-19 has been important. However, as we saw in the first half of 2021, the pandemic did not lead to a sustained decrease of greenhouse gas emissions compatible with the 1.5°C global warming objective for 2100.
“Efforts on low carbon technologies deployment, stationary storage increase, and electrification growth must be multiplied. It is important that sustainability of electrical generation, battery storage and hydrogen production be evaluated over their lifecycles. Renewables have changed the measurement metrics and new ones are needed. Net-zero trajectories for global businesses must rely on indisputable scientific measurement methods and accurate data that include all Green House Gases. Access to energy today is becoming a societal challenge: industry and governments must find the balance between decarbonizing and ensuring that global energy needs remain accessible for all.”
Philippe Vié, Group Vice-President Energy and Utilities sector at Capgemini, adds: “As energy consumption and greenhouse gas emissions are on the rise again, we need realistic affordable plans to accelerate energy transition.
“Curbing the climate change trajectory requires a shift in gears when it comes to investment, and a requirement to consider the right balance between investment and a tangible result. Every dollar invested must lead to a decrease in emissions. Much more investment in low carbon generation is needed now if we are to meet both the growth in electrification – two to three times current capacity required by 2050 – and at the same time, decarbonising electricity generation.”
There are five key recommendations from the WEMO report, designed to meet climate change goals whilst ensuring energy security of supply, and affordability for citizens. These include setting ambitious but realistic energy transition plans; accelerating research in to low carbon technologies; measuring the effects of actions taken; paying attention to cybersecurity; and implementing adaptation measures to cope with the delay in reaching climate objectives.