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September 10, 2020

DNV-GL report looks toward peak gas, nuclear, and total power

We spoke to DNV-GL power CEO Ditlev Engel about the peaks and innovations that the industry should expect on the road to net-zero emissions.

By Matt Farmer

A report by Norwegian maritime registrar and consultancy company DNV-GL has predicted the next 30 years of the energy transition. We spoke to DNV-GL power CEO Ditlev Engel about the peaks and innovations that the industry should expect on the road to net-zero emissions.

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On Wednesday, DNV-GL published its ‘Energy Transition Outlook 2020’ report, looking at expected changes to the power industry and Earth’s climate future. The company works across all power industries, and produced the report primarily based on technological advances.

Energy transition outlook programme director Sverre Alvik said that this was the result of the uncertain nature of attitudes and public policy, though these have increased in influence over the energy transition. He said: “But nothing is certain of course; none of us thought we would have a pandemic.”

We spoke to DNV-GL power CEO Ditlev Engel, who summarised this attitude: “We are technology optimistic, but regulatory pessimistic.”

Peak energy in 2032: Driven by efficiency savings

The report predicts total net energy demand to peak in 2032, declining thereafter because of efficiency savings. Engel said efficiency savings would become the ’silent hero’ of the energy transition, accounting for a 2.3% energy saving every year to 2050. By then, this would result in saving 36,100 TWh of power that would otherwise be lost in industrial processes.

Total energy demand is a product of every other change in the energy system, starting with the transition itself. Engel said: “We have to remember that running a coal fired power plant produces 50%-60% waste because it’s highly inefficient. Whereas, when you run renewables you have an efficiency rate of 80%-90%.”

A large portion of these savings come from ‘hard to transition’ sectors, such as construction, steel, aviation, and shipping. Changes in policy and standards will mean less power consumption, but technology will also help decarbonise these sectors.

Moreover, this peak is essentially linked to the rise in electric vehicles (EVs), which are predicted to make up half of passenger vehicle sales by 2032.

Engel continued: “We should not think of EVs as a form of transport to take us from A to B. In the future, when you connect an EV, it becomes an active player in the system. EVs or other storage can make sure that you never lose the electricity produced by a wind turbine or solar panel, even when there is no uptake. When you get to a certain penetration, it becomes an active player for utilities and transmission system operators to use in the balancing power.

“Once we get to a large scale, producing green hydrogen is the other way we can create fuel that can deal with hard-to-decarbonise sectors, but also to create demand that can store energy for use when you need it.”

Peak gas in 2035: “We can’t have everything running on renewables tomorrow”

As a first move in the energy transition, many countries phased out coal generation, often replacing it with gas-fired power. The report expects that gas will become the largest single source of power during the 2020s, and remain at the top until 2050. At that time, 13% of gas will be decarbonised.

The report expects OECD countries to gradually decrease gas use, but for demand to triple in south Asia by 2050.

Engel said: “To set the priorities straight, it will be most important to get coal out of the way as soon as possible. Gas will become the biggest source of energy for a while, and then in 2035, it will start to decline. We see it as an important part of the transition, because we can’t have everything running on renewables tomorrow.”

Peak nuclear in 2037, and renewables continue to rise

On the future of nuclear, Engel said: “Seen from a cost perspective, we don’t really see that nuclear will be a player, and therefore it has a very little role [in the future of energy].

“We have some already, but if it’s going to play a role, then it would be probably because of political decisions or wishes to build nuclear. The build-out of new nuclear is not something we will see a lot of.”

For renewables, Engel said he sees 2020 as ‘the end of the beginning’. Renewable generation will continue to rise, even after the peak of energy demand. The report states: “According to our best estimate, solar and wind will provide 24% of the world’s electricity in 2030 and 62% in 2050. By then they will mainly compete with each other.”

The inevitability of carbon pricing and the benefits of cost-efficiency

In its report, DNV-GL predicted average carbon prices to land somewhere between $20 and $80 per ton of CO₂. This would vary by region, with countries such as Russia enforcing the lower end of the scale, and European powers setting higher prices.

Engel: “It’s not just a question of a carbon price; the question is how high the carbon price is. Of course, if you go higher than $80, it will have a bigger impact. This is something many countries are wrestling with. Carbon prices are a very fast, effective way to accelerate the energy transition.”

While carbon prices would inflate prices for fossil fuels, the report expects renewable generation to continue decreasing in price. As an example, the report expects a unit of offshore wind generation capacity installed in 2050 to cost 38% of its price in 2019. In another recent report, concentrated solar generation appeared to start a much steeper price decrease, as recent investment spurred innovation.

Overall spending on energy would decrease from approximately 3% of global GDP in recent years, to approximately 1.5% in 2050.

The key points for power businesses during the energy transition

The energy transition depends on much more than just the energy business, and DNV-GL has called on industries to act in unison to speed up the change. For power businesses in particular, Engel concludes they must embrace technology further.

He said: “Our view is to look at technology, learn from how much it can evolve over a 10-year period, and build those expectations into your planning now. Don’t sit and wait, or say ‘I want to see before I believe it’. We need to have more faith in what technology can do.

“As an example of that, when offshore wind started, some people looked at it and just smiled, saying ‘This is nice, good luck’. Today, we have projects of about a gigawatt each. Those who were the winners at that time were the ones who already saw it and said, we’ve got to get ready for this.

“As an independent company, we believe those who will be the winners of this are the ones who already understand that the cost of electrical vehicles will come down so much over coming years. Don’t sit and wait to build out that infrastructure until you see the cars already, rely on technology as it will happen.”

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