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Looking back: a series focused on climate action

Welcome to the thirteenth series of the DNV Talks Energy podcast, hosted by Mathias Steck. In this series we explore the key insights from DNV’s latest Energy Transition Outlook and what they mean for the future of our planet. We explore the geopolitical developments affecting the energy transition, and what’s needed from technology, finance and policy in delivering net zero. Crucially, we explore: how do we move from ambition, to urgent action over climate change?

 

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In this final episode, Mathias shares his highlights from across this series. He provides his personal views on how our guests’ ideas can deliver urgently needed action over climate change.

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MATHIAS STECK    Hello and welcome to the 13th series of the DNV Talks Energy podcast. I'm your host, Mathias Steck. During this series, we have explored some of the key insights from DNV's Energy Transition Outlook, our annual independent model of the world's energy system, and what they mean for the future of our planet. We have spoken to leading industry guests who've all given us a unique perspective on the challenges and opportunities that the energy transition presents. We have explored topics from the geopolitical developments affecting the energy transition to what's needed from technology, finance and policy in delivering net zero. Crucially, we have discussed how, in each of these areas, we can move from ambition to urgent and positive action. In this final episode, as host, I take a look back at the fascinating discussions I have had with our guests across the series. I highlight what really stood out for me in terms of ideas, new ways of working or individual projects that I think can contribute to the leap forwards that we so urgently need. Listening again to what our guests told us, I give my views and analysis on what I think their ideas could mean for the future of our planet. We hope you enjoy the episode.

The forecast from DNV's Energy Transition Outlook is that the world is very far from securing net zero emissions by 2050, and we are on the way to 2.2 degrees warming by the end of the century. We started the series by speaking to Ditlev Engel, CEO of Business Area Energy Systems at DNV, about the huge global challenges in the transition to net zero and the need for a long-term approach when it comes to decision making.

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DITLEV ENGEL    The first thing is that all energy decisions are long-term. You cannot just change the energy mix in a short term. It is about long-term thinking, when you deal with energy. And we obviously see that now in Europe because we have a massive pressure due to the situation of gas. And that I think is actually one of the important messages as well, that a lot of people say, "In Europe we have an energy crisis", but that's not really true. We have a fossil fuel or a gas crisis at the moment because we cannot get the gas we used to get in Europe. And that, of course, also have taught us that dependency is something we have to take very seriously when we think about energy planning ahead.

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MATHIAS STECK    As part of this long term approach, we also discussed the importance of grid infrastructure buildout.

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DITLEV ENGEL    It would be a bit like buying a lot of cars and then not build the highways. And everybody is saying, "Well, that's stupid. Now we have all these cars. Why did you not look out for that?" But because the grid is normally underground, so we don't see it. But that is exactly what we need. So we need the, let's say, the electricity highways build-out. So there needs to be a massive build-out of the grid infrastructure, in order to handle all this electricity that we will see going forward.

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MATHIAS STECK    Kaz Fukui, Decarbonization Leader for Asia at GE Gas Power, gave further insights on what's required for the grid to be able to meet worldwide supply and demand.

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KAZUNARI FUKUI    The flexibility of the public supply becomes very important. And that's where, again, another value the gas technology brings is the flexibility. Renewable, we have to depend on whatever the weather takes. When you have the flexible power, you can actually manage the supply and demand much more effectively. So again, together with the energy storage method, we believe that kind of flexible generation supply is required. But we agree completely. There's a tremendous amount of investment required on the grid side and our grid business is significantly working on that area as well. And then leveraging technology like digital technologies, making the grid smarter and to be able to manage the supply and demand - certainly a very big topic that we will face.

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MATHIAS STECK    There are a number of drivers we need to address globally if we are to meet this worldwide supply and demand, including awareness, governance, finance, technology and innovation and the just transition. Another of our guests in the series, Mauricio Riveros of The Carbon Trust, emphasized the importance of these and the need for a more collaborative spirit across the world if we are to reach net zero. He made the important point that if some do this, but not others, then we have failed. Building on what Mauricio told us, my perspective is that humankind made a big step forward understanding the importance of the energy transition. But there is still confusion about the terms we use like net zero or carbon neutrality. And you can only be successful in the energy transition if we agree on the definition of this term so that we can define targets and measure success. So to be successful, what we need is a systemic approach and accountability across the whole economy, globally.

Now, another point I found very interesting Mauricio made was that from a scientific standpoint, the energy transition is relatively simple to achieve. We have all the technologies, we have finance. But in reality, of course, there's politics. There's geopolitical aspects, economic realities and pressures, disruptions like the Ukraine war or other competing challenges. And that makes this an incredibly complex matter. We also need to acknowledge that reaching net zero globally doesn't mean that every country can and needs to reach net zero. Some countries will not be able to do that, based on where they are at the moment. So that means that other countries even need to achieve negative emissions. And we also need to acknowledge that there are wealthier and less wealthy countries. So if we understand this race to net zero as a global ambition, also there, we need to see that the wealthier countries support the less wealthy countries to succeed.

But we also see many opportunities. We see, for example, some good progress in the transition of highly pollutant energy carriers, for example, the ambition to phase out coal earlier supported by the Coal Asset Transition Accelerator, or the progress we've made in the electrification of the heat and the transport sector. And we see technologies such as energy storage and demand-side response to help the grid with the increasing penetration of intermittent renewables. That, combined with new business models around providing, for example, flexibility, is an important enabler as well and we need to see that happening. DNVs Energy Transition Outlook highlights that no new oil and gas will be needed after 2024 in high income countries and after 2028 in middle and low income countries. However, renewables need to triple and grid investments need to rise more than 50% over the next 10 years. In this series, we explored the latest innovations advancing the renewable sector. We heard firsthand from Eduardo Karlin, Deputy General Manager APAC at Mainstream Renewable Power, about the importance of renewables and how we can accelerate their build-out.

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EDUARDO KARLIN    I think if we look at the very discussed energy trilemma: energy security, energy reliance and of course cost effectiveness, renewable energy plays a key role for these three elements. From an energy security perspective, which now is clearly on top of the agenda for many different countries, renewable energy does not depend on the import of any sort of fuels, right? So that gives tremendous security to governments and also to consumers. Second of all, there is the aspect of reliance. More and more, with the increased capacity of renewable energy in developed markets, there's no longer such a concern that there was in the early days around the so-called intermittent peculiarity of renewable energy. I think a lot has been done to overcome those challenges and even more is being done right now with new solutions being found, with smart grids being implemented, with transmission lines being enhanced. And so from a reliance perspective, we can see that renewable energy is becoming more and more reliant essentially.

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MATHIAS STECK    At the start of the series, DNV's Ditlev Engel highlighted that the technology is already there to meet renewables' upscale need, and that the economics will drive this transition. We will see a massive electrification of the world and that will be driven first and foremost by renewables, simply because that will be the cheapest way to electrify the world. One of the most fascinating examples given in this series of how technology and economics are already driving the transition was provided by Fraser Thompson, Co-Founder and Chief Strategy Officer of Sun Cable. Sun Cable's flagship renewable generation distribution project, the Australia-Asia PowerLink, is providing a model for how areas able to produce ample clean energy can supply it to those where resources are more limited. Who could imagine that building a subsea cable over thousands of kilometres just to transport electricity from Australia to Singapore would make sense? But it does. And the locations of the largest load centres and the locations of abundant renewable energy are far from each other. And geopolitics and security of supply become part of the equation. Singapore, for example, is a very attractive hub for the leading companies of the world. These companies have high sustainability ambitions, but the island-nation's territorial constraints make it increasingly difficult to ensure the supply of green energy to these companies. To maintain the relevance of Singapore as an international hub, it has to import green energy, and diversifying the sources of this green energy helps to maximize the security of supply over decades, also since Australia's Northern territory has ample land available to scale according to the increasing energy demand.

This example also marks the beginning of another important trend: cross-border electricity transmission and trade as an enabler of the energy transition. But in Europe today, 12% of the total electricity is traded cross-border. It is only 0.3% in Asia Pacific, in a region where we see a massive rise in energy demand and the opportunity to expand the existing grid infrastructure on a regional scale. The current ambition, for example, the ASEAN power grid that massive economies like Indonesia, Thailand, the Philippines and also Singapore are part of, needs to accelerate and an enabler to do so is the harmonization of regulations. In other words, the energy transition is also a transition of the way countries work together.

DNV predicts a steady, long-term decline in oil demand from an expected 2025 peak. However, as we heard in this series from Fauziah Marzuki, Head of Bloomberg New Energy Finance, APAC, Gas, Power and Carbon, there are challenges when large players start transitioning away from fossil fuels and shed off their carbon intensive assets to decarbonize. She explained that decarbonizing the oil and gas sector has two main angles: moving away from oil and gas as an energy source, for example, the electrification of heat and transport, but also reducing the carbon footprint of the operations of the oil and gas companies, for example, reducing CO2 emissions from offshore oil production. This is achieved by capturing and sequestering carbon in the ground through CCS or, for example, an LNG plant using solar panels or grid electricity as opposed to gas turbines for power generation. The pace of this happening is different around the world, with Europe being a trendsetter, where we see oil and gas companies which have now been rebranded as energy companies and heavily engage with renewables, green hydrogen, carbon capture and storage, and a still more traditional oil and gas industry elsewhere. Fortunately, the learnings and developed decarbonization technologies are location agnostic and can be applied anywhere. Fauziah also emphasized the behavioural change that's needed to transition away from fossil fuels.

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FAUZIAH MARZUKI    It's the behavioural change, it's education that I feel is the thing that we're kind of lacking as part of the energy transition. There's also the element of consensus, and it's very hard, but consensus about what that pathway is supposed to be like, what we need to do, and that's lacking. But it's also down to the individual. And I think, you know, we as individuals always want our governments or our big corporations to take care of us. But I think this energy transition, we're also the enablers, right?

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MATHIAS STECK    Fauziah also named hydrogen as a key technology that's going to get us on track to net zero in the hard-to-abate sectors like cement and steel production, for example, and other areas that still require a physical molecule and high-temperature heat processes. To have any chance of meeting our net zero target by 2050, we need to deploy hydrogen at mass scale in the next ten years. In addition, carbon capture and storage will have to take off rapidly. The technology in itself is not new to the industry anymore, but it will require more attractive business models if it is to be deployed at scale too. Several of our guests touched on the importance of the development of hydrogen as a replacement fuel for hard-to-abate sectors. Drummi Bhatt, Vice President of Market Intelligence and Strategy at Mitsubishi Power Americas, highlighted its significant potential in supporting decarbonization.

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DRUMMI BHATT    There are a lot of opportunities coming up, especially with all the focus right now on green hydrogen and decarbonization. One of the major ones would be to establish the role of hydrogen in the clean energy strategies for different sectors, including refining chemical industries and transportation. We need to speed that up. Apart from that, we have certain industrial ports such as Gulf Coast in the United States, which are ripe and ready to transition to a green hydrogen-based economy through use of the existing infrastructure, such as natural gas pipelines. So we could use that to spearhead the widespread adoption of hydrogen across different sectors. We have to expand hydrogen usage through transportation fleets, freights and corridors. That would actually, again, give a lot of boost on the supply side.

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MATHIAS STECK    DNV's Energy Transition Outlook includes a 'Pathway to Net Zero' scenario that outlines what needs to be done by 2050 for the world to close the gap from the most likely 2.2 degrees trajectory to the agreed 1.5 degree future. One aspect that is urgently needed is strong policy intervention. In the series, Jie Tang, Practice Manager for the Energy and Extractive Global Practice of The World Bank, shared his insights about the scale of financing needed to support net zero around the world. This includes developing countries which might not be major emitters but require a focus on investments in resilience. We also heard from Genevieve Ding, who leads the Sustainability Policy Strategy for APAC at Amazon Web Services, about the need for policy frameworks to encourage renewables development. Genevieve explained the options very clearly. Governments could incentivize the direct purchasing of corporate renewable energy, but in addition, they could also incentivize the migration of services to more sustainable platforms. Looking at digital services, Genevieve explained how moving workload from on-premises data centers to the cloud can reduce the energy use and associated carbon emissions by almost 80%. Combined, this has huge potential. She gives the example of Amazon Web Services, which has today 380 utility-scale renewable energy projects across the world totaling 2.8GW powering their operations.

Energy investments today in emerging and developing economies rely heavily on public sources of finance, but over 70% of clean energy investments are privately financed, especially in renewable power and efficiency. The critical question is how to establish the necessary environment to mobilize these funds, both domestically and internationally. International finance organizations like The World Bank play an important role in helping governments create the right environment, invest in risk mitigation and mobilize private sector investment. This is crucial as at least two thirds of the money required must come from the private sector. But cross-sector industry collaboration, as well as public-private partnerships, are ways to catch up. One of the examples Genevieve delved into is enabling the achievement of the 17 UN Sustainable Development Goals with the help of technology. She told us that cloud services can accelerate sustainability transformation in the agriculture sector. For example, as projects in Thailand and Pakistan show, farmers are able to increase their crop yields by almost 50% and their profitability by almost 40% by adopting cloud-enabled remote sensing technologies.

Staying with policy needs, the final idea I would like to return to came from Ditlev at the very start of the series. He gave a philosophical outlook on how we should view target setting and action plans if we are to move to a trajectory for success.

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DITLEV ENGEL    I would like to see that all the COPs going forward there would be an evaluation of how much has the emissions been lowered per each country and what are the plans for lowering them the next year, not in the next 20 or 30 years. Otherwise, you know, it would be a bit like I will tell you today, "Okay, you know what? I have planned to lose about 10kg in 10 years," and we'll talk about that. You're probably more impressed if I tell you that, you know, I'm going to lose 500g the next month and then 500g the month after that. And that's the kind of mindset we need to have, instead of saying, "Yeah, well probably a long time away, I'll do something." That is not working for us. So we have to be much more concrete, we have to be much more transparent and we have to be much more direct and we have to measure and discuss it every single year.

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MATHIAS STECK    With the help of all of our guests this series, we have uncovered the stories and fresh ideas behind the world's transition to clean energy. It was important to look beyond what the data tells us about what is likely to happen, to understand that progress will only be made if we continue to generate new and exciting ideas that push the boundaries and change perceptions. The move away from fossil fuels and towards renewables is not an inevitable path. We need to drive it. On a personal note, it's been a privilege to speak with guests who have such a range of insight and perspectives. To be able to do so in person once again, after COVID-19 changed the way we produced our podcast, was a real pleasure. Thanks to all of our guests this series for their time and for sharing their views. We hope you agree it made for a fascinating set of discussions about our energy future.

To listen to more episodes, visit dnv.com/talksenergy.

 

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