Category: Energy Transition

Can the energy transition help EU energy needs?

August 11, 2022

As the EU grapples with the challenge of displacing Russian oil and gas and meeting immediate needs as Russian supplies are cut, the question of the scale and speed of the energy transition emerges. How fast can Russian supplies be displaced by the transition itself?

The two charts below show the current situation. Prior to the Russian invasion of Ukraine, oil and gas supplies from Russia and into Europe contributed to about 40% of overall European demand, with local production making up much of the balance in the case of gas, but just about half the balance in the case of oil. In the case of gas, the flow to Europe is about a quarter of Russian supply, but for crude oil and oil products it’s nearly half.

Both charts show that European production has declined over twenty years and in the case of oil reached an apparent plateau around 2012. It’s unlikely that local production increases could make up for the cut in Russian supplies, so that leaves three immediate options;

  • Immediately cut overall energy demand, which in turn could translate to a reduced need for Russian supply.
  • Find supplies elsewhere.
  • Accelerate the energy transition to reduce the overall need for oil and gas in the energy mix.

While it’s clear from recent announcements that the EU strategy will embrace all three options in the short term, the longer term strategy will almost certainly rest with the transition itself. But such a transition could well take all of this decade, and probably longer, to complete.

Gas supply is perhaps the more problematic issue, as supply is less flexible globally than oil due to pipeline constraints, LNG capacity (the availability of shipping, liquefaction and regassification facilities) and long term storage. While gas has become a flexible commodity in the 21st century, it still remains easier to reorganise, redirect and store oil. However, gas may be faster to displace than oil from an energy transition perspective.

The gas chart above also shows how the rapid deployment of wind energy across Europe could be used to offset Russian gas requirements, but it’s a journey that takes the best part of a decade. This assumes a compounding growth rate in wind deployment of 10% per year, slightly above current levels of 8%, but equivalent to the growth rate from 2010 to 2017. However, with a much larger installed base, 10% growth in 2029-2030 means installing some 50 GW of wind in that year versus the 15 GW installed in 2017 and again in 2021. So the annual installation rate has to at least triple. Of course wind isn’t the only technology, there is solar PV as well, at least for the southern latitudes of Europe.

Further to the above, if rapid growth in renewables is focussed entirely on displacing Russian gas or filling the void left by the absence of Russian gas, less progress will be made in displacing the current use of coal in the EU. This could make meeting the EU 55% by 2030 emissions reduction goal more challenging, as eliminating coal for a given electricity production can deliver twice the emissions reduction versus the same shift for gas.

By contrast, displacement of Russian oil through the energy transition looks to be a slower process, although it may turn out to be less necessary. Oil is a more flexible commodity in terms of source and destination, although there could still be pinch points in the system, for example inland east European refineries tied to Russian crude via pipelines. The largest portion of EU oil demand is for transport and within that the capacity for replacement in the 2020s sits with electrification of passenger vehicles, vans and city buses. Alternatives for larger trucks, ships, barges and planes are not yet mature enough for fast large scale deployment.

If we assume a very rapid deployment of electric vehicles (EV), to the extent that all new sales are electric by late in the 2020s (a rate faster than the current goal of 2035 for all EV sales), only about 50 million tonnes per year of oil is displaced by 2030, or about a fifth of the oil that comes from Russia. This is because of the time it takes to turnover the exiting stock of vehicles. Within Europe there are some 250 million passenger cars (Source: Eurostat), but new car sales are in the range 12-16 million vehicles per year, so in eight years only about half the total stock will be replaced anyway. With EVs currently comprising about 10% of new sales, albeit that share growing rapidly, replacing even half the total vehicle stock with EVs will take longer.

In the end, a rapid energy transition can contribute significantly to the EU weaning itself off Russian oil and gas, but this won’t happen in the next few years. By the end of the decade significant progress can be made, especially for gas, but it will likely be well into the 2030s before the same is achieved for oil.

Could the transition drive emissions up?

July 12, 2022

One question that comes up quite regularly about the energy transition is the amount of energy, and therefore emissions, required for the transition itself. This is the energy required for making solar PV modules, wind turbines, batteries and so on. Further up the supply chain there is also the energy required for the additional minerals, such as the lithium, nickel, cobalt and copper found in an electric vehicle (EV). These not only have to be mined, but also go through extensive industrial transformation and refining processes to make the actual materials required for the end use. Today, most of these processes use oil, coal and gas for energy, giving rise to carbon dioxide emissions.

Perhaps the most energy intensive part of the energy transition is the manufacture of lithium-ion batteries, now being widely deployed in EVs. Some commentators have even questioned the effectiveness of the EV as a mitigation route, particularly when the battery is made in China (currently a heavy reliance on coal for energy) and the vehicle is driven in a country with a high electricity emissions intensity (e.g. a country like Poland still largely dependent on coal fired power stations). The problem with this argument is that transitioning in a series of steps (e.g. first decarbonise the electricity supply, then start deploying electric cars) would take decades longer than transitioning in parallel steps (i.e. decarbonising the electricity supply at the same time EVs are deployed). Nevertheless, the parallel approach could drive up emissions in the short term, the question is by how much?

The manufacture of batteries for EVs provides a good example of the problem. In a recent article, MIT report that the Tesla Model 3 holds an 80 kWh lithium-ion battery and the CO2 emissions for manufacturing that battery would range between 3120 kg (about 3 tons) and 15,680 kg (about 16 tons), depending on the manufacturing location. The article notes that the vast majority of lithium-ion batteries—about 77% of the world’s supply—are manufactured in China, where coal is the primary energy source. That means most batteries are currently made with CO2 emissions at the higher end of the range, although as battery factories spring up across the world and particularly in the EU and US, that picture will change.

Bringing together a few assumptions about battery manufacture, EV deployment and embedded CO2 in both manufacture of EV batteries and driving EV cars, it is possible to get a back-of-the-envelope view of the scale of the issue. I will assume the following;

  • EV production rises from current levels (some 7 million vehicles per year) to all EV production globally by the mid-2030s (i.e. no more internal combustion engine cars are built after that time). This is an aggressive transition, but probably the minimum that is required for a 1.5°C goal.
  • Higher CO2 emission battery manufacture is currently at 77%, but the share declines to 40% by 2060 and the higher CO2 emissions also fall by 75% over the same timeframe as the manufacturing system decarbonises.
  • Lower CO2 emissions manufacture is therefore 23% now, but rises to 60% by 2060 and the manufacturing CO2 emissions fall to zero by 2050. Decarbonising industry to such an extent will require a variety of technologies, with carbon capture and storage playing a critical role.
  • The 80 kWh battery delivers 300 miles of range and the average vehicle travels 10,000 miles per year.
  • The electricity supply which EVs use is on average 0.4 tonnes CO2 per MWh now, falling to zero by 2060. The actual global average grid intensity is higher than 0.4 today, but EVs tend to be driven in lower intensity regions at the moment, e.g. the EU, California etc.
  • An EV produced today has a 15 year life.
  • The EV mitigates emissions from internal combustion engine vehicles at a rate of 120 gms/km. As a simplification, this doesn’t change throughout the calculation. It assumes that smaller cars are replaced earlier and that the average fleet efficiency of internal combustion vehicles improves over time.
  • The battery represents a net increase in car manufacturing emissions with other emissions in the manufacturing process about the same for both EVs and internal combustion vehicles.

The calculation is for net-emissions, which is;

[Battery manufacturing emissions] + [Indirect EV emissions during driving] – [Gasoline / Diesel emissions backed out by EVs] = Net Emissions

What we see from the charts below is that global passenger car emissions rise before they start falling when net-emissions cross the zero line. This happens in 2035. Clearly the year in which this happens depends on the assumptions made, with the CO2 from internal combustion vehicles not being used being a key determinant. For example, if this is raised to 180 gm CO2/km, the crossover point is around 2030.

The outcome certainly points to the longer term benefit of the EV transition, with global cumulative emissions over 25 Gt lower in 2060 than they would otherwise be. This is a material reduction when thinking about a 500 Gt carbon budget for 1.5°C. However, it also highlights an issue with the current global goal to reduce emissions by 45% by 2030 relative to 2010, as set out in the Glasgow Climate Pact; the EV revolution that we are currently in the midst of is unlikely to contribute to that reduction. If anything, it could make the task even more difficult.

In a post some time back I noted that the only real opportunities for change which could make a material difference to global CO2 emissions by 2030 are where replacement technologies are already being manufactured at scale or where governments are prepared to create social change. This quickly reduces the options to only three major opportunities: 

  • Significantly curtailing coal-fired power generation through replacement with renewables; 
  • Replacing internal combustion engine vehicles with electric vehicles; and 
  • Ending deforestation. 

Passenger vehicle emissions account for 4 Gt, or 10%, of global CO2 emissions today. If change in this sector can’t deliver any net reductions by 2030 and potentially adds to global emissions, then it calls into question any possibility of a 45% reduction in 8 years. Almost perversely, if EV production could be ramped up in the short term, the problem for 2030 gets worse while the longer term net global cumulative emissions picture gets better.

None of the above is to meant to argue against an EV transition, it is clearly the right way to go. But like many other aspects of the energy transition, it is more complex than it looks.

Plunging into Islands?

March 13, 2022

I, no doubt like you, am deeply concerned about Russia’s war against Ukraine and horrified at the resulting loss of life and humanitarian crisis enveloping millions of people. The protection of people should be everyone’s primary focus. But we are also seeing the impact of the situation on the world’s energy supply.

Just over a year ago the Shell Scenarios team launched the Energy Transformation Scenarios. The set of scenario stories looked at three possible pathways forward, built on societal trends that we saw emerging from the pandemic in our earlier work, Rethinking the 2020s. Those trends, illustrated below, were Wealth First, Security First and Health First, described as follows;

  • Wealth first: A focus on wealth and economic recovery, but this results in a late start to the rapid transition required to reach net-zero emissions around the middle of the century. Rather, the energy required to support growth in the 2020s comes from conventional sources. This led to the Waves scenario.
  • Security first: National sentiment shifts inwards and security issues prevail. The transition slows along with economic growth. Domestic energy resources prevail and while some countries proceed with a transition, the global pace of change required for the Paris Agreement just isn’t there. This thinking underpins the Islands scenario.
  • Health first: The pandemic leads to structural change across society, significant green investment and a realization that the broader health and well-being of society is fundamental. In this context the goals of the Paris Agreement are met under the Sky 1.5 scenario.
Shell Energy Transformation Scenarios

Islands always struck me as being a rather dystopian view of the world, but it emerged from a robust scenario development process as a very possible world. In more recent publications, such as our Singapore Sketch, it has been featured and discussed but not particularly emphasized. Both Waves and Sky 1.5 seemed more in tune with the times. Yet here we are, looking at the prospect of a world becoming very distracted from the energy transition by security issues.

While Islands is framed in the context of the pandemic and how it is dealt with, it nevertheless points to trends that are becoming visible in the world order as each day passes. As a nationalistic islands-type mentality takes hold in the scenario, growth in the global economy begins to stagnate, and efforts to address the climate challenge slow. Islands involves the triumph of the nation state and nationalism, while the forces behind globalization weaken. It is a more challenging economic environment where technology innovation and its diffusion are slow, and efforts to address climate change fragment. Geopolitics are re-calibrated and shift in tandem with increasing attention on national security and trade barriers. Security of energy supply and domestic socio-economics dominate agendas.

Even in Europe, with its strong focus on climate action, efforts to reduce emissions slow in Islands, particularly compared to Sky 1.5. Coal in primary energy remains high through to 2050 and the electric vehicle revolution stalls badly with no significant uptake until the late 2030s.

These trends may feel extreme in that, for example, there is already a visible shift towards electric vehicles in Europe. But scenarios are designed to push thinking to extremes, not forecast the future. Importantly, because they aren’t forecasts, we shouldn’t sit back and just imagine that Islands in now inevitable. Rather, we should take heed of the signals it is giving. There is the very real possibility of domestic security issues enveloping the world and slowing the energy transition, particularly if governments choose a path of rearming and shoring up their own borders. But other outcomes are also possible.

Sky 1.5 is built on strong international cooperation, which could be a possible silver lining in the current crisis. We imagined when developing the story that such cooperation emerged through actions related to the pandemic, but actions in response to the Russian invasion of Ukraine could also bolster the focus required for a major energy transition. What is hard to imagine is a rapid energy transition when governments are also deeply focused on security matters. That is perhaps the underlying Islands story.

Creating a 21st century energy hub in Singapore

February 17, 2022

About a year ago the Shell Scenario Team released the Energy Transformation Scenarios, which looked in detail at possible pathways the world might take in this century as society responds to climate change and other pressures. The scenarios were built on earlier work that focused on the more immediate changes that society could see in the 2020s as a result of the pandemic. But the global story is just the tip of the iceberg; there is a wealth of national and regional detail below the surface of the Energy Transformation Scenarios thanks to the team’s energy modelling capacity.

One region that is of particular importance to the energy system is Asia and within the region Singapore is a key oil products supply and distribution hub. Given its unique geographical location and history as a major trading port, Singapore supplies some 20% of global marine bunkers, 3% of aviation fuel and exports a sizeable portion of the oil products used throughout the region.

Singapore is a major oil products supply hub today (Source: Shell analysis of various data sources)

But as the energy system shifts and oil products are replaced with electricity and fuels such as hydrogen, how might Singapore adapt to the transformation and what might this mean for its role as an oil products supply and distribution hub? To help people think about these key questions for Singapore, Shell has released a new Scenario Sketch, Singapore: A 21st Century Energy Hub. The Sketch makes extensive use of the regional and country data within the Energy Transformation Scenarios, setting out three possible scenarios for the region.

These scenarios are not forecasts, predictions or plans, but possible pathways that could emerge if certain trends take hold. Only one scenario meets the goals of the Paris Agreement, which implies that very deliberate steps will need to be taken to ensure the goals are met. Scenarios can help craft our thinking about the future and catalyse the actions required to shape a particular outcome.

The three scenarios are known as Waves, Islands and Sky 1.5 and they reflect the underlying trends that can be seen across society as a result of the pandemic.

  • Waves: A focus on wealth and economic recovery, but this results in a late start to the rapid transition required to reach net-zero emissions around the middle of the century. Rather, the energy required to support growth in the 2020s comes from conventional sources. The transition is rapid from the 2030s, with a clear focus on ending fossil fuel use rather than directly managing emissions. Net-zero emission is reached around the end of the century.
  • Islands: National sentiment shifts inwards and security issues prevail. The transition slows along with economic growth. Although the transition eventually takes hold, net-zero emissions is not reached until well into the 22nd century.
  • Sky 1.5: The pandemic leads to structural change across society, significant green investment and a realisation that the broader health and well-being of society is fundamental. In this scenario the goals of the Paris Agreement are met.

All three scenarios see the role of electricity expanding, for example in transport, the further emergence of biofuels and the introduction of hydrogen as an energy carrier for certain applications.  But the time lines are very different. However, these shifts in the energy system all challenge the supply and distribution model that Singapore has established for oil products and tend to favour local production. This is certainly the case for electricity, but may also be true for biofuels where feedstocks are available on a local level and hydrogen should electrolysers become the preferred mode of production. However, hydrogen supply may also lend itself to a distribution model if significant renewable electricity is available in a particular area, although this is not currently the case for Singapore.

The more immediate change for Singapore comes in the aviation and marine sectors, where airlines and shipping companies are beginning to plan and implement strategies to make use of sustainable fuels and develop possible roadmaps for hydrogen as a future energy carrier. Although progress is slow in Islands, both Waves and Sky 1.5 see early developments. This opens up the prospect of Singapore leading the way in supplying such fuels, maintaining its role as a supply hub.

In Sky 1.5 another opportunity emerges for Singapore through Article 6 of the Paris Agreement. A feature of Sky 1.5 is significant activity to develop carbon removals, both through reforestation and carbon capture and storage technologies. The use of removals to balance continued use of fossil fuels in some sectors is an important part of the global strategy for limiting warming to below 1.5°C in 2100, but catalysing the investment required for removals and directing the benefit to emitters requires a carbon trading market to emerge. With it’s strong history as a commercial and financial centre, Singapore could lead the way here, particularly as the region holds significant opportunity for removals and Singapore itself is a centre for the two sectors that may make greatest use of them, namely aviation and marine.

Singapore could become a major carbon trading hub

A feature that does emerge across the stories is just how long Singapore may find itself as an important regional distributer of oil products, even as the transition gather pace. The Asian region is still developing rapidly, with some 2 billion people (ASEAN and China) moving from modest to middle income and making use of a broader range of energy services in the process.  Immediate growth in the region will draw heavily on existing energy sources and services, given their availability and scalability. Only in the fastest of transitions is this trend overcome with new energy sources scaling quickly enough to match new demand.

Where Singapore stands as an energy hub in 2050 and beyond has yet to be established. But now is the time for the bold decisions necessary to create the best possible future. Scenario analysis is a useful tool for understanding new trends and directions. We hope this publication helps inform readers about an otherwise uncertain future and positions them for the journey ahead.

Also check out the scenario infographic here.

Shell’s scenarios, including this Singapore Sketch, are not intended to be projections or forecasts of the future and they are not Shell’s strategy or business plan. When developing Shell’s strategy, our scenarios are one of many variables that we consider. Ultimately, whether society meets its goals to decarbonise is not within Shell’s control. This Singapore Sketch is based entirely on the data and findings of the Shell Energy Transformation Scenarios, released in February 2021. Please read the full cautionary note at: http://www.shell.com/investor and http://www.sec.gov

Battery trends

August 2, 2021

Two key advantages of fossil fuels are the energy density of the fuel itself and the ease of storing energy that a molecule based fuel offers. Most homes have a huge energy store sitting in the car gasoline tank in the garage, or perhaps in an LPG / propane tank in another part of the house. The ease of storage makes transport relatively simple, with everything from passenger cars to A380 planes dependent on the need to carry fuel with them. But as the shift away from fossil fuels gathers pace and electricity grows in importance as the energy carrier of choice, one critical technology emerges that we all already use but will grow in size and scale – battery storage. We need batteries to store electricity for portable use and to store electricity at city level scale to manage the power grid, particularly as intermittent renewable sources become prevalent.

Battery technology dates back to around 1800, but domestic batteries were made popular over 100 years ago with the introduction of the AA battery in 1907 by the American Ever Ready Company, following on from their successful D cell flashlights. Today, we use batteries for a variety of household devices, but battery use across society is set to expand rapidly as the energy transition gathers pace. Further, as battery technology improves, these handy energy stores are making their way into more and more devices and applications.

In 2010, global battery production was less than 5 GWh, but with the arrival of the electric car and the growth in grid storage, production in 2020 was nearly 400 GWh (Source: Wood Mackenzie). There is also a significant and growing pipeline of Gigafactory projects, with manufacturing capacity around 1.3 TWh by 2030 based on known and expected projects. But what about the demand potential?

Numerous auto manufacturers have signalled their intent to bring internal combustion engine (ICE) passenger car manufacturing to an end, with dates between 2030 and 2040 often cited for the full switch to electric vehicles (EV). As a stretch, let’s assume that all passenger ICE production ends by 2035, which by then might mean 70 million EVs produced globally per year. If each car requires an 80 kWh battery, then that’s 5.6 TWh of new capacity required each year. Although recycling of batteries and battery components will eventually change the manufacturing landscape, that won’t be the case in the first half of the 2030s. At that time the availability of material for recycling will be the result of production today, which is a tiny fraction of our assumed production in 2035.

Grid storage requirements are a significant unknown. In a report published earlier this year by the research firm Frost & Sullivan, they predict additional global grid battery storage capacity additions will likely reach 135 GWh (0.14 TWh) in the next nine years from the 8.5GWh annual capacity additions that were recorded last year. But capacity additions are scaling rapidly, with the much talked about Tesla installed 100 MWh facility in South Australia in 2016 now easily eclipsed by multiple 300-400 MWh projects. In a 2020 study released by RethinkX, they estimated that for areas of the United States, a shift to 100% wind and solar would require some 40-90 average demand hours of battery storage. In 2020 US electricity demand was 4300 TWh, which would imply around 30 TWh of battery storage. However, it is possible that there is overlap between grid storage and EV storage, which by 2035 might have reached 12 TWh sitting in US garages and at charging points (assuming at least 50% EV penetration by then).

Assuming a rapid transition, the US alone might need 20-25 TWh of installed storage capacity by 2035, with global installed capacity perhaps reaching 100 TWh by that time. That would require a 35% year-on-year expansion of battery production capacity for the next 15 years as shown in the chart. That means in 2035 global battery production is close to 100 times current levels. It also requires manufacturing capacity in 2030 of 8 TWh, six times that of the current project pipeline for new facilities.

Batteries require particular minerals and chemistry, which today consist of lithium, nickel and cobalt in the current generation of Li-Ion batteries. The chemistry of batteries is the subject of extensive research, which points to much lower requirements for these minerals per kWh of storage. A recent analysis by  the European Federation for Transport and Environment (Transport & Environment (2021), From dirty oil to clean batteries) states that over the period 2020 to 2030 the average amount of lithium required for a kWh of EV battery drops by half (from 0.10 kg/kWh to 0.05 kg/kWh), the amount of cobalt drops by more than three quarters, with battery chemistries moving towards a lower cobalt content (from 0.13 kg/kWh to 0.03 kg/kWh). For nickel the decrease is less pronounced – around a fifth – with new battery chemistry moving towards a higher nickel content as a fraction of the total, but still a decline per kWh (from 0.48 kg/kWh to 0.39 kg/kWh).

On the basis of the 2030 numbers above, production of 20 TWh (20,000 GWh in the chart above) battery storage per year in the early 2030s would need;

MetalEarly 2030s additional annual demand, million tonnesCurrent global production, million tonnesRequired increase in global production
Lithium1.00.0910 times
Cobalt0.60.154-5 times
Nickel7.82.74 times

This is a significant step-up in metals production, with history pointing against achieving it.

Data Sources: BP and statista.com

Metals supply could well become a limiting factor in the energy transition given the potential demand for electricity storage. These levels of production increase are feasible over time, but in the space of 10-15 years they represent double to triple the historical trend, although that is true for almost everything in attempting to reduce emissions by 40+% in a decade. The above analysis also doesn’t account for other demands on batteries; from vans and trucks, small ships, barges, small planes, household and commercial devices and so on.

Equally, we shouldn’t discount innovation and different directions of travel. Apart from a slower energy transition, other factors that might influence the outcome are a more rapid evolution of battery chemistry towards more widely available minerals and/or a shift away from chemical batteries to other storage and balancing solutions in the electricity grid. However, don’t expect to see a truly novel solution scale sufficiently in just a decade. The first commercial Li-Ion battery was marketed in 1991 and has taken 30 years to scale to current levels. it was based on research and development over the previous 20 years.

In any case, the decade ahead could well be a period of rapid change and expansion for the global mining industry.

Are we now range bound on temperature?

July 6, 2021

In my last post I discussed the recent IEA 1.5°C Scenario that sets out what is required to reach net-zero emissions by 2050 and manage the transition within a carbon budget of 500 Gt CO2. The IEA have shown that while this is a relatively straightforward calculation to do (and last year I presented a similar one), the resulting energy transition pathway is extraordinarily difficult to imagine, let alone achieve. While such a pathway might be technically possible, is it actually plausible? Is society socially ready to embark on such a journey and inflict such large scale change upon itself?

A new report coordinated through the University of Hamburg’s Center for Earth System Research and Sustainability (CEN) in close collaboration with multiple partner institutions and funded by the Deutsche Forschungsgemeinschaft (DFG) attempts to answer the question of plausibility. In the annual Hamburg Climate Futures Outlook, researchers make the first systematic attempt to assess which climate futures are plausible, by combining multidisciplinary assessments of plausibility. The inaugural 2021 Hamburg Climate Futures Outlook addresses the question: Is it plausible that the world will reach deep decarbonization by 2050? The authors discuss the outcome in their own blog post, found here.

The methodology employed isn’t a direct technical analysis of the pathway steps, but rather an assessment of a number of social drivers that would be required to underpin such a transition. The authors conclude that deep decarbonisation by 2050 isn’t currently plausible, meaning that warming will exceed 1.5°C. None of the drivers show enough momentum to bring about deep decarbonisation by 2050 and they find that some drivers are currently inhibiting progress.

The authors combined their assessment of social plausibility with the latest set of socioeconomic future emissions scenarios (SSPs) and the latest physical science research on climate sensitivity to show that warming lower than 1.7°C and higher than 4.9°C by the end of the century as currently not plausible. The lower figure of 1.7°C relative to pre-industrial levels corresponds to the lower bound of the 90% uncertainty range in a low emissions IPCC scenario (SSP1-2.6) and  the higher figure of 4.9°C corresponds to the upper bound of the 90% uncertainty range of a higher emissions IPCC scenario (SSP3).

Source: Hamburg Climate Futures Outlook 2021

Reframing this around central estimates for the scenarios gives a plausible range of 1.8°C to 3.8°C for warming by the end of the century. The original Shell Sky 2018 scenario also had a central estimate of about 1.8°C.

While the lower end of the range was analysed by the Hamburg team in terms of social plausibility, the upper end was not (see chart below); presumably that is a task still to be done.

Source: Hamburg Climate Futures Outlook 2021

However, the upper end of the range has been the subject of social plausibility analysis in a recent paper released by the MIT Joint Program on the Science and Policy of Global Change and discussed in this blog. That analysis was led by MIT, with me and my colleague Martin Haigh as contributing authors. A scenario called Growing Pressures was developed to illustrate how and why there is now an inevitable trend towards near zero emissions, catalysed by the physical reality of a rising average surface temperature. Near (net) zero emissions means that warming will stop and the temperature will plateau, but only a rapid shift to near (net) zero emissions will deliver the 1.5°C. The question the analysis sought to answer was what the highest plausible warming outcome might be given that an energy transition is clearly underway and there is real concern growing across society around the issue of climate change.

While political trends, such as populism or leaning to the left or right, tend to come and go over time and social norms shift around as the decades pass, the temperature trend is essentially a monotonic increasing function. As such, the influence it has on our consciousness will only grow over time.  The cascade can be simplified as follows;

  • Climate changes;
    • Global surface temperature continues to rise, and impacts become more apparent.
    • Sea level keeps rising with visible consequences.
  • Concern rises;
    • Voter pressure on cities, states and countries to develop ‘green’ policies.
    • Shareholders pushing companies to take on net-zero emission goals and targets.
  • Local and national governments pursue (piecemeal) interventions;
    • Ongoing actions under the UNFCC under the banner of the Paris Agreement and the emergence of net-zero emissions (NZE) as a framing concept.
    • Incentives and mandates drive down the cost of new energy technologies and lead to further uptake.
    • Large established NZE policy frameworks continue to operate (e.g. EU, California) and some new NZE policy frameworks emerge (e.g. China by 2060).
  • Technology marches on;
    • Renewable energy access becomes cheaper.
    • Developments in physics, chemistry and materials sciences (e.g. PV, storage).
    • Rapid and broadening digitalization of society.
  • Markets rule;
    • Financial markets distance themselves from fossil fuel investments, but particularly coal, and climate-related financial disclosures bring increasing transparency.
    • Demands by businesses and consumers for lower carbon footprint products and some preparedness to pay for this.
    • Development of markets to support low-carbon investment (e.g. nature-based solutions).
    • Alternatives to coal, oil and gas becoming increasingly competitive.

While each of these will undoubtedly vary over time, their ongoing combined effect gives rise to a scenario of continuous change and transition. The central estimate temperature outcome for Growing Pressures is 2.7°C in 2100 leading to a 2.8°C plateau in 2150, well below the 3.8°C central estimate upper threshold discussed above.

Source: MIT Joint Program

Combining the findings of the these two separate analyses indicates that at the current stage of the energy transition, the warming outcome is now range bound between 1.8°C and 2.7°C in 2100, based on central estimates. That range is partly dictated by the development and availability of energy technologies, but is perhaps overwhelmingly driven by social plausibility, as discussed by the Hamburg team and in the MIT report.

The range may well narrow as time goes by. In the short term, if emissions don’t fall quickly, society will rapidly consume the available carbon budget for 1.5°C and then upwards. As was shown in the IPCC 2018 Special Report on 1.5°C (SR15) report and again by the IEA in their own NZE2050 scenario, that budget is less than 500 Gt CO2 for 1.5°C of warming and is currently being consumed at the rate of over a gigaton every ten days (41 Gt per year). However, as the temperature rises and it becomes apparent to society critical thresholds are being passed, that in turn increases the drivers in the Growing Pressures scenario, as well as opening the social plausibility for nearer term reductions. Under such circumstances, repeating the two analyses in 2030 could well see a much narrower range, perhaps 2.0°C to 2.5°C.

None of the above is meant to argue that such a range is a good thing; the IPCC made it plain in their SR15 that we need to stay as close to 1.5°C as possible. However, the analyses are nevertheless important as they act as a signpost to help guide us forwards and they demonstrate that the energy transition is having an impact.

You can read the MIT report here.

Featured image courtesy of the UK Met Office.

Note: Scenarios don’t describe what will happen, or what should happen, rather they explore what could happen. Scenarios are not predictions, strategies or business plans. Please read the full Disclaimer here.

Pathways to 1.5°C

June 11, 2021

In 2018 when the IPCC released their Special Report on 1.5°C, they presented four archetype scenarios to help readers understand that there were fundamentally different approaches to limit long term warming to 1.5°C or below. The scenario pathways are shown below and vary significantly in their approach, time horizon and use of sinks.

Source: IPCC SR15

All four scenarios (P1, P2, P3, P4) are based around the same carbon budget, or total cumulative emissions of 420 Gt from 1.1.2018 consistent with providing a 66% chance of limiting warming to 1.5°C. Whether the carbon budget is aligned with 420 Gt (67th percentile) or 580 Gt (50th percentile), it represents a very limited amount given that annual CO2 emissions are in excess of 40 Gt, so these represent 10-15 years of emissions at current levels. Since this IPCC publication, a further 160 Gt will have been emitted by society by the end of 2021, meaning that the budget is reduced to 260 – 420 Gt.

Source: IPCC SR15

In attempting to align with a very limited carbon budget, the P1 scenario imagines a world of falling overall energy use and a very rapid shift away from fossil fuels. There is no use of geological storage of CO2 and a modest reliance on natural sinks, although in doing so the world must shift away from net-deforestation by the 2040s. By contrast, the P4 scenario sees increasing demand for energy and as a consequence, a much more difficult decarbonisation journey that involves considerable use of sinks in the second half of the century. Notably, the P4 scenario exceeds the carbon budget by quite some amount with peak emissions to the atmosphere of 900 Gt, before reining in the amount to 200 Gt by 2100. This results in P4 being a so-called overshoot scenario, in that the world exceeds 1.5°C during the century before returning to 1.5°C and below by the end of the century.

Source: IPCC SR15

All the above might seem a bit academic, but it became very real recently when the IEA released their 1.5°C scenario and some commentators began comparing it to one of the very few other 1.5°C scenarios, notably Sky 1.5 from Shell.

In fact, the two scenarios are at near opposite ends of the P1 to P4 spectrum.

The IEA 1.5°C scenario looks at the period from 2020 to 2050 and presents a proposal for the problem of containing emissions to a 500 Gt carbon budget (the 580 Gt IPCC number less 80 Gt for the years 2018 and 2019). Apart from recognising that the land based system is likely to reduce this budget by a further 40 Gt over the period (i.e. reducing it to 460 Gt), the analysis limits itself to the energy system and the changes that would be required to meet a 460 Gt cumulative emissions constraint within a 30 year time frame. As is the case in similar scenarios, including Sky 1.5, their analysis assumes rapid electrification of final energy (e.g. electric cars instead of gasoline) and makes use of renewables  and nuclear power generation to produce the electricity. They introduce hydrogen as an energy carrier, make use of bioenergy and include carbon capture and storage (CCS) where fossil fuel remains in use. For the latter, the IEA deploy CCS directly on facilities that use fossil fuels and indirectly through direct air capture for fossil fuel use in applications such as aviation.

All the above steps are well understood, but even given rapid and stretching deployment rates of all technologies, these steps are unlikely to contain emissions to less than 500 Gt in under thirty years. This is because of the expected increase in overall energy use, a consequence of economic growth, the general rise in population and the shift of billions of people from very low energy use lifestyles to at least modest energy use, a simple outcome of development and the provision of basic services like lighting, clean water, food refrigeration and some mobility.

As such, energy modelers looking at a very constrained time frame of 30 years must make the assumption that energy growth can be contained or even fall, as in the IPCC P1 scenario. This is exactly what the IEA have done to meet the carbon constraint. In the 1.5°C Scenario primary energy demand falls from 612 EJ in 2019 to 543 EJ in 2050, a drop of over 10%. Efficiency will certainly help deliver such an outcome and the use of renewable electricity gives the story a big boost as the thermal losses in power stations vanish, although new losses emerge through the use of transmission and storage. But the big story is the widespread assumption of behavioural change across society to reduce energy demand. The chosen measures include steps such as;

  • Ride-sharing in all urban car trips
  • Reducing motorway / freeway speeds to below 100 kph / 60 mph.
  • Increasing temperatures in air conditioned vehicles and buildings.
  • Lowering temperatures in heated buildings.
  • Replacing short flights with high speed rail.
  • Limiting long haul air travel to 2019 levels.

With low energy demand and high deployment rates of new energy technologies it then becomes possible to resolve the carbon budget within a 30 year time frame.

At the other end of the spectrum is the Sky 1.5 scenario, which tackles the problem of a limited carbon budget in a very different way. Sky 1.5 looks at the period from 2020 to 2100, an 80 year time frame, and starts with an expectation of rising global energy demand, even assuming significant energy efficiency improvements across society. The growth in population and the demand for energy services, including significant new demand from developing countries for basic services, cannot be contained and energy demand rises. This immediately poses a challenge in that rising demand more quickly consumes the available carbon budget at the front end, when alternative energy technologies and sinks have not been deployed.

Sky 1.5 also recognises that for many energy technologies, the 2020s still remain a period of development and limited deployment and even for more mature technologies such as solar and wind, a period of early growth where change on a global scale will remain limited.

The solution to this approach is to accept that, at least in the short term, the carbon budget may be consumed and the temperature it is linked to (1.5°C in this case) potentially surpassed for a period of time. The subsequent rapid deployment of sink capacity, both manmade in the form of air capture with geological storage and natural as reforestation, then offers the possibility of a period of net-negative emissions later in the century, to redress the imbalance and reduce cumulative carbon dioxide emissions and therefore temperature. This is the approach that Sky 1.5 takes, as do the IPCC P3 and P4 scenarios. Sky 1.5 takes this approach out of necessity, in that the scenario reaches a limit on energy technology deployment and does not foresee a fall in energy demand.

The end carbon budget for both the IEA 1.5°C scenario and Sky 1.5 are similar, but the IEA restricts itself to a thirty year time-frame, whereas Sky 1.5 operates over an eighty year time-frame. Sky 1.5 is also remodeled by MIT within their integrated assessment model to give a temperature outcome, rather than simply using the IPCC central estimate for a carbon budget. The two scenarios are attempting to answer the same question, but take very different approaches to doing so. There is no right or wrong here, just different ways of solving a tough problem.

Note: Scenarios don’t describe what will happen, or what should happen, rather they explore what could happen. Scenarios are not predictions, strategies or business plans. Please read the full Disclaimer here.

An ambitious step-up on transport

May 21, 2021

Last week the German government announced a step-up in their ambition to reduce emissions, with a new target date for net-zero emissions of 2045. This will bring with it an even faster transition in the coming decade to 2030, which the government outlined by sector as follows;

Sector2019 reductions from 19902030 reduction goal relative to 1990
Electricity generation45.5%62.5%
Buildings41.9%66.7%
Transport0.6%42.1%
Industry33.8%50.7%
Agriculture24.4%35.6%
Other76.3%86.6%
Overall ambition35.7%56.5%

While most sectors have made significant progress to date, transport stands out as having not changed since 1990. The reality here is that the same basic energy service technologies are still in place for planes, trucks, ships and automobiles and that efficiency improvements have been broadly offset by demand growth, meaning no change in thirty years. In 1990 personal transport demand in the Eastern part of Germany would have been quite low, albeit rather inefficient, so the demand increase over the years would have been a factor. This is illustrated in the figure below (Source: Car ownership and usage trends in Germany – Response to the Commission on Travel Demand’s Call for Evidence: Understanding Travel Demand, Tobias Kuhnimhof, Institute of Transport Research at the German Aerospace Center (DLR), May 2017).

Key car stock and vehicle kilometres traveled trends in Germany since the early 1990

The goal for 2030 represents a very sudden and fast paced deployment of battery electric vehicles (BEV) or hydrogen fuel cell vehicles (FCEV), although the auto industry in Germany is not approaching this from a standing start. Over the past few years the likes of VW, Audi, BMW, Daimler and Porsche have been developing a new range of electric vehicles and releasing them into the market. In a recent statement by the CEO of Volkswagen Passenger Cars, he noted that 2020 was a turning point for Volkswagen and marked a breakthrough in electric mobility. Last year, the brand delivered nearly 134,000 battery electric vehicles (+197 percent versus 2019). However, despite a challenging market environment, Volkswagen delivered around 5.328 million vehicles across all drive systems to customers around the world, so this represents 2.5% of their production.

In Germany, transport emissions are 95% road based, with internal aviation, barges, coastal ships and trains making up the rest. Within the road sector, this breaks down to about 65% passenger vehicles, 25% heavy freight and 10% light commercial (N.B. this breakdown is approximate based on a variety of articles and EU data sources). As noted, many models of passenger BEV are now available to purchase and this is also becoming a reality for light commercial vans and small trucks, although the range isn’t as extensive at the moment. However, it is not the case for heavy freight trucks, where some BEVs and FCEVs have been demonstrated, but commercial availability is very limited.

So if we assume little change in the 5% non-road transport emissions and large scale rollout of heavy freight BEVs and FCEVs from 2025, the heavy lifting for the transport goal will have to be done by rapid uptake of passenger EVs and light commercial EVs. The overall picture from 2020 (pre-COVID) to 2030 could look like the table below;

Mode of transport2019 total emissions (scaled to 100)2030 emissions relative to 2020 scale
Passenger vehicles6230
Light commercial95
Heavy freight2418
Non-road transport55
Total10058
  (or 42% reduction)

Based on the above, the deployment calculation is relatively straight forward. In 2019 the sale of passenger BEVs in Germany was 65,000 units in a total market of 3.6 million units. However, in 2020 this number tripled to 194,000 units, so we enter the decade with BEV sales at around 5%. There are some 47 million vehicles on the road in Germany with, at best, 1% being electric (470,000 vehicles) at the start of 2021. Although sales of cars at between 3 and 4 million and a 47 million car fleet points to an average age greater than 10 years, assume nevertheless that 10% of the fleet is turned over each year – perhaps the German government will introduce policies to accelerate the retirement of older less efficient vehicles. The calculation will also assume, as a starting point, that 10% of the sales in 2021 are battery electric, or double the 2020 number.

The chart below shows how the fleet emissions change as sales change. As indicated in the table above, passenger vehicle emissions need to halve by 2030 such that Germany reaches its transport sector goal. That doesn’t happen until the deployment annual growth rate of BEVs reaches nearly 50%, or a doubling of sales every two years until 2027 when all passenger vehicle sales are BEV from then on.

A deployment rate that requires doubling production every two years is a formidable task. Although EV sales tripled in 2020 vs. 2019, this was from a very small base. Such a rate won’t be maintained as numbers climb. For rapid BEV growth it isn’t just about retooling the existing auto plants but also building new battery plants, sourcing the necessary minerals for the batteries (e.g. lithium, nickel, cobalt), ensuring sufficient infrastructure is available for battery recharging and most importantly, building customer confidence in the product. Should Germany fall behind this rate of deployment, the only remaining option will be much higher turnover rates for vehicles later in the decade, but that will mean temporarily producing new cars at a rate that is unsustainable in later years.

By 2025 Germany will need to produce nearly two million electric cars per year for domestic use, which will also mean battery production capacity of some 160 GWh (assuming an 80 KWh battery for each car). At the moment the battery ‘gigafactory’ pipeline for Germany has several projects, with the total approaching this sort of scale and there are plans for future production increases. The Fraunhofer Institute for Systems and Innovation Research ISI, even suggests that EU production capacities of 300 to 400 GWh could be achieved by 2025. The website Battery-News.de anticipates that the German market alone will account for more than 170 GWh of production capacity. By way of comparison, Europe currently has around 30 GWh of production capacity.This ambitious German plan for e-mobility is getting underway!

A ten year reduction challenge for the USA

May 4, 2021

In April, at the opening of the White House Climate Summit, President Biden announced the United States Nationally Determined Contribution (NDC) for the period up to 2030, encompassing a target of greenhouse gas reductions 50-52% below 2005 levels. The US Greenhouse Gas inventory is available on the US EPA website and is summarised in the table below.

Sector and gases(Mt CO2e)2005Latest data for 2019
CO2 Fossil Fuel Combustion5753.54856.7
CO2 Non-Energy & Industrial381399.1
CH4 from all sources686.1659.7
N2O from all sources455.8457.1
HFCs, PFCs, SF6, NF3 from various industries146.5185.6
Total Emissions (Sources)74236558.3
LULUCF Emissions16.823.5
LULUCF Carbon Stock Change(804.8)(812.7)
Net Emissions (Sources & Sinks)6635.05769.1

Given a baseline of 6635 Mt CO2e, a 50% reduction in 2030 would require US emissions to be 3318 Mt or lower in that year. The 2019 data represents a reduction of 13% over 2005, so the reduction in the next 10 years must be nearly triple that of the last 15 years. The reduction seen to date from fossil fuel combustion is running slightly ahead of the overall improvement, with a reduction from 2005 to 2019 of nearly 16%.

The goal that President Biden put forward is aligned with a strategy that is designed to achieve a goal of net-zero emissions for the US in 2050. Recently, the Shell Scenario team released a US Sketch outlining one possible pathway to such an outcome. The Sketch is illustrated below (N.B. 2020 figures are a pre-pandemic view of US emissions which the US is approaching again as the recovery gains momentum).

The Sketch provides the opportunity to look at the nature of the transition required in the 2020s for the NDC. The Sketch energy system emissions in 2030 are 3440 Mt against a 2005 baseline of 6030 Mt (small differences in baselines result from different categorizations of emissions), or a reduction of 43%. While this isn’t exactly aligned with the NDC, it could be in that the NDC makes specific reference to a major expansion of sink capacity through enhanced soil carbon uptake in the agricultural sector.

Key elements of the journey to 2030 outlined for the US in the Sketch are as follows;

  • In 2020 (pre-COVID calculation) the US generated 3970 TWh of electricity, with 80% from coal, gas and nuclear. Solar and wind made up less than 10% of the total. By 2030 in the Sketch, the generation mix has shifted to natural gas and solar each making up about 25% of the total, with wind, nuclear and coal combined at around 40%. Notably, total electricity generation has increased to 5720 TWh, or 43% over 2020. This is in a pathway that still sees electricity system emissions at 600 Mt in 2035, the year President Biden has targeted for a zero emission system. His goal is about 5 years ahead of the Sketch.
  • The increase in electricity consumption comes from an increasing proportion of electricity in final energy, displacing gasoline in cars, natural gas in homes and coal in industry. Electrification is a major lever for decarbonisation. The proportion of electricity as final energy rises in a decade from 22% to 35%, breaking a near century long trend which if continued, would otherwise see it rise to 25% at most.
  • Over the 2020s, solar generation of electricity grows fastest, increasing by a factor of nearly 12 in a decade. The U.S. installed 19.2 gigawatts (GWdc) of solar PV capacity in 2020 to reach 97.7 GWdc of total installed capacity. With a utilisation factor of 15-20%, this could be expected to generate around 150 TWh of electricity, although the Energy Information Agency reported a total of 130 TWh (perhaps because the capacity at the start of the year was 79 GWdc). In any case, capacity by 2030 will need to grow to at least 1 TWdc, assuming some efficiency improvement in new installations compared to existing facilities. With a year-on-year installation growth of 30%, the US could be installing some 260 GWdc per year by 2030, bringing the total installed capacity to 1.2 TW by the end of that year. Very large scale energy storage will also have to deploy to support solar.
  • The Sketch also shows a three-fold increase in wind generation throughout the 2020s and importantly, no decline in nuclear generation. The latter becomes increasingly important as other non-intermittent generation sources decline in use.
  • Electric vehicle (EV) deployment is an important part of the trend towards electrification and it emerges rapidly in the Sketch. By 2030 the US will need to see 20% of all passenger vehicle use as electric, with hydrogen fuel cell vehicles rapidly appearing in the large SUV sector. At the moment, there are about 1.5 million EVs on the road, out of a total US passenger vehicle fleet of some 280 million. To reach a level of 20% EVs in terms of use, sales will need to climb rapidly from some 400,000 vehicles per year now, to over 13 million in 2030, or nearly 80% of all sales. This represents a year-on-year growth rate in EV sales of 42% through the decade.
  • Road freight makes less use of electricity, although it does impact the lighter end of the freight market. For larger, longer haul freight trucks, hydrogen emerges during the 2020s, with some 200,000 trucks on the road by end of the decade. This is still relatively small, but the sector is non-existent today. In the second half of the century in the Sketch, hydrogen becomes the dominant fuel for heavy road freight.
  • Natural gas, propane and oil are used widely in the US for cooking and/or heating in homes. Although the majority use electricity for cooking, heating is provided mostly by gaseous hydrocarbon fuels. In the US Sketch, heating and cooking in residences shifts from 13% electricity to 42% electricity in just a decade. Of all the transition tasks ahead, this may be the most challenging in that it involves convincing millions of households, individual consumers and landlords to change their behaviour, refit existing properties, invest money for the change and in some instances make use of a less preferred energy option.
  • While electricity already plays a significant role in light industry, this is not the case for heavy industry where very high temperatures and high thermal loads are often required for conversion processes. Heavy industry energy use in the US is currently three-quarters gas, coal and biomass and one quarter electricity. This begins to shift rapidly and by 2030 in the Sketch, 40% of energy demand for heavy industry is supplied by electricity. In addition, hydrogen is emerging, with the first industrial installations making commercial use of this fuel. While the amount is small in 2030 it could mean significant development, design and engineering of new processes in a limited amount of time. Alternatively, the amount could point to natural gas being topped up with hydrogen as a mixed fuel for industrial furnaces, prior to converting whole processes over to hydrogen based fuels.
  • The many changes across the energy landscape result in steep decline in the use of fossil fuels in the Sketch, with coal falling fastest. By 2030 there is a 40% reduction in coal use, a 14% reduction in natural gas and a 25% reduction in oil within the economy, compared to 2020 (pre-COVID) use.
  • But even by 2050 in the Sketch, natural gas and oil still play an important but significantly diminished role in the US economy. That points to the need for carbon capture and storage (CCS), both directly linked to facilities and indirectly as an atmosphere removal mechanism (e.g. BECCS). The US already has the most mature CCS industry in the world, underpinned by years of enhanced oil recovery using carbon dioxide. But an order of magnitude change is required here as well during the 2020s, with a shift from some 30 mtpa carbon dioxide stored to some 300 mtpa.

While the Sketch does not require nature based solutions (NBS) for the US energy system to reach net-zero emissions by 2050, natural carbon sinks do provide an additional lever to support the transition and the NDC also discusses this aspect of emissions mitigation. In the US, national forests cover 193 million acres, an area larger than Texas. Apart from their significant bioenergy potential, forests act as natural carbon sinks. The US could reduce CO2 emissions by up to 300 million tons a year by 2050 through afforestation – the planting of new trees where there were none before. While new forests represent significant additional sinks, there is also potential to expand areas such as wetlands and mangrove swamps, and perhaps most importantly to encourage farmers to adopt practices that enhance soil carbon. The US NDC references this opportunity. 

The rates of change outlined above are substantial, with year-on-year growth rates for several new energy technologies of 20-50%, depending on the sector. While growth at this level can be sustained when a sector is very small and this has been observed for renewable energy deployment, it becomes increasingly difficult as the sector grows and absolute levels of deployment become very large. Many of the sectors mentioned will face this issue during the 2020s. Nevertheless, the Sketch was designed to show what is possible given the right policy levers for innovation and deployment, sufficient and targeted financing and overall transition design.

Note: Scenarios don’t describe what will happen, or what should happen, rather they explore what could happen. Scenarios are not predictions, strategies or business plans. Please read the full Disclaimer here.

A very different pathway forwards for India

March 31, 2021

As COP 26 approaches, the UK government (as President of the COP) and the UNFCCC are encouraging as many countries as possible, in accordance with Paragraph 36 of the Paris Agreement Decision Text, to communicate mid-century, long-term low greenhouse gas emission development strategies. These should ideally include a net-zero emissions goal for the same time period as such ambitious national contributions are required from all countries to meet the 1.5°C goal of the Paris Agreement. To date, about 30 such strategies have been posted on the UNFCCC website.

For India, a mid-century goal of net-zero emissions points to a fundamentally different development pathway to one that might have been imagined just a few years ago. While the busyness and intensity of traffic and commerce in Indian cities like Mumbai and Delhi give the impression of a country bound to fossil fuels, the reality is very different. With around 1.4 billion people in total and a large rural population engaged in agricultural activities, per capita CO2 emissions – at 1.8 tonnes per person in 2015 – are around a ninth of those in the USA and around a third of the global average of 4.8 tonnes per person.

However, overall, India is now the planet’s third-largest emitter of CO2, behind China and the USA. Some costs of the country’s dynamic growth are increasingly visible, namely major congestion in urban centres and declining air quality.

The emissions focus should be on where India might go, rather than where it has been. For example, there are about 3 billion tonnes of steel in use within the country, in buildings, cars, appliances, pipelines and industrial plants. But as India aspires to be a developed economy, that number will likely rise to around 15 billion tonnes. Every other country has built its steel infrastructure with coal as the energy source, but if India does the same that could add another 24 billion tonnes of CO2 to the atmosphere globally, based on production emissions of about 2 tonnes of CO2 per tonne of iron. A good proportion of this would come from smelters in India, many of which may not have even been built yet. This is 6% of the IPCC 1.5°C carbon budget globally and would create a significant emissions spike, even considering efficiency improvements in smelting and optimised recycling. It will also add to the local environmental stresses that people in India feel each and every day. So a different smelting pathway should be considered and that is just one aspect of India’s future national development.

Similarly, the Indian electricity sector is largely based on coal fired generation, but here there are visible signs of change as solar and wind become the preferred choices for new generation capacity. By 2020, India had all but met its Nationally Determined Contribution goal of 40% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030 (solar, wind, nuclear, hydro, biomass). Whether its cars, trucks, housing, factories or commercial buildings, the story is largely the same; what is yet to come far exceeds what is already there.

This points to a strategic emissions focus for India that is very different to countries with substantial legacy infrastructure. Rather than needing to dislodge the status quo, India has the opportunity to embark on a different development pathway based around cleaner energy technologies and efficiency. These future choices will be important, not just at the national level when making important infrastructure decisions, but also in homes. At the household level, ownership of domestic appliances such as washing machines, refrigerators and air conditioners is relatively low, varying between 15% and 30%, depending on the appliance. As the country develops over the coming 30 years, appliance ownership may well head towards the 90% level seen in much of the world. Once in use these appliances will consume energy, so the choice of model and efficiency rating will be important. These appliances could add 300-500 terrawatt-hours a year to electricity demand, nearly a third of that generated in 2019, but lower efficiency choices might double this amount.

But what might such a development pathway look like? Over recent months the Shell scenario team and Shell India have worked with The Energy and Resources Institute (TERI) of India to illustrate what the future could hold. In this collaboration the team developed a Net-Zero Emissions (NZE) scenario, the principle focus of the work, to examine whether adequate opportunities exist to fully decarbonise the energy sector; areas where India’s energy sector does not have enough choices for full decarbonisation by 2050 are also highlighted. From a second scenario, Towards Net-Zero (TNZ), barriers to change that might emerge are revealed. Energy efficiency, electrification and a switch towards decarbonised fuels are the three main pillars of India’s energy strategy, with the need for a transformative move towards renewable electricity, hydrogen and bioenergy as key fuels. This analysis indicates that the industrial and heavy transport sectors are likely to face limits in achieving full decarbonisation, primarily due to technological constraints which leave residual emissions in the system. This necessitates the need for carbon removal options to achieve net-zero emissions, including both technical and natural solutions.

An overview of the pathway reveals both radical and very rapid change. For example, in India today, there is a successful programme of solar PV installation under way, but by 2030 as solar starts to dominate the generation mix in the NZE scenario, it will need to be matched by large-scale energy storage to manage intermittency. More than 1,000 gigawatts of solar PV, 700 GW of which with matching storage, needs to be installed through the 2020s, far exceeding the amount of solar PV installed over the last decade. This level of deployment is challenging, even in global terms. In 2019 global solar module production was about 140 GW, but growing at some 20% per year. Even if growth continues at this rate through the 2020s, the demand in India for modules under NZE would still equate to 20% of global supply. Embodied within the pathway is a monumental challenge, but one that is worth aiming to achieve.

The scenario analysis was released last week and can be found here. The analysis incorporates both the pathway forwards and the policy framework required to get there.

Note: Scenarios don’t describe what will happen, or what should happen, rather they explore what could happen. Scenarios are not predictions, strategies or business plans. Please read the full Disclaimer here.