According to the IEA special report ‘Net Zero by 2050 – A Roadmap for the Global Energy Sector’, the next nine years, before the first landmark in 2030, will be a critical period for reaching the net zero target. During these years, both energy-related regulation and the pace of investments need to be revised to limit the long-term global temperature increase to 1.5 °C. I fully agree that there is no time to waste. However, it is promising that in the big picture, the necessary technology already exists and simply needs to be scaled up.
At Fortum we also appreciate IEA’s approach, which takes into consideration all aspects of the energy trilemma: sustainability, affordability and security of supply. In a non-fossil world, electricity increasingly generated by intermittent renewables is at the core of the energy system. As IEA states, this will put increasing pressure on the electricity system flexibility, and consequently requires investments and development not only in renewables but also, among others, in batteries, demand response and hydrogen-based storage. It is vital from the point of view of energy transition acceptability and functioning of the society that the electricity system remains resilient and secure. Hence, while we absolutely do need to ensure that new intermittent renewable energy production is increased significantly, the society simultaneously needs to ensure that existing stable and flexible assets remain competitive and that new types and sources of flexibility are incentivised as needed.
Both new renewables and existing CO2 free production are needed
According to IEA, the global electricity sector has to be net neutral by 2040, but the deadline for developed countries is already in 2035. I am proud to note this is fully in line with Fortum’s strategy to reach net zero emissions in our European fleet by 2035.
So, how to make it happen? Let’s take a closer look at the calculations that IEA has made.
Solar and wind: Globally, IEA calculates that the annual capacity increase of solar and wind needs to be quadrupled compared to recent years. This sounds enormous, but it is doable. On the global scale, the emphasis in renewable energy production will be on solar power. In Northern Europe, however, sunshine is not as easily available as on lower latitudes, and consequently wind will be in a clearly bigger role.
Nuclear power: The IEA report also sees an increasing role for nuclear power worldwide: its capacity should increase from the current 2.7 petawatt hours to 5.5 petawatt hours by 2050, more than doubling today’s output.
This stance regarding nuclear power should also be acknowledged in EU’s taxonomy and related legislation. There is no room for technology bias when tackling a global challenge of this scale and priority. Countries that have decided to include nuclear energy in their national energy mix – as is their right based on EU treaties – should not be put at a disadvantage in the fight against climate change.
Hydro power: The IEA report also advocates doubling hydropower capacity by 2050. CO2-free and flexible hydropower is already an important component in the whole energy system, particularly in the Nordics. Unfortunately, there is not much new hydropower potential left in Europe. This underlines the importance of maintaining the current hydropower fleet in good shape both physically and economically.
Carbon capture, utilisation and storage (CCUS): As one technology where investments need to increase considerably, IEA mentions carbon capture, utilisation and storage (CCUS) – particularly in industries that are difficult to clean up. Geological storage of CO2 has proved to be challenging both technically and from the point of view of acceptability, so the focus must be on utilising the captured CO2. There are a number of possibilities, such as to combine it with hydrogen to produce synthetic aviation fuel ultimately needed as replacement for today’s fossil alternatives.
As we can see from above, the amount of investments needed across the energy system is huge, and it is crucial that we find the most cost-efficient means to carry out the required emissions abatement measures on market terms. CO2 pricing plays an important part in pricing the negative externality and setting the change in motion. IEA also points out that net zero pathway compliant annual energy investments, measured in trillions, could increase the global GDP by 0.4 percentage points per year. This is a tremendously positive message that also supports the feasibility and acceptability of the energy transition.
Hydrogen economy needs to be stepped up fast
According to IEA’s report, the hydrogen economy should be well on its way already in 2030 and take a major leap by 2050. The target electrolyser capacity in 2030 is 850 gigawatts – up from less than one installed gigawatt today. The next target in 2045 is a whopping 3,000 gigawatts. The increase is massive and producing this much hydrogen requires extremely high quantities of carbon-free electricity.
To reach all needed clean hydrogen volumes, it is not possible to rely solely on green hydrogen stemming from additional carbon-free electricity. We will need to make use of all existing decarbonised electricity production to meet the EU demand in a cost-efficient way. Blue hydrogen, which is made nearly 100% emission-free with Carbon Capture and Storage, will also play a role depending on the national specificities surrounding acceptability and technology-readiness. The next couple of years will be critical in terms of developing a clear, consistent and realistic regulatory framework to support the development of the European hydrogen economy, which represents an important pillar also in Fortum’s strategy – hence, we will promote it with all available means.
All hands on deck
The IEA report also calls for behavioural changes among consumers. In our view, this would require making the costs of fossil energy clearly visible to them. However, drastic changes need wide acceptance, and energy affordability is a question which cannot be ignored. Hence, smart policy measures like, for instance, recycling government-collected carbon-based revenues to low-income households are key in helping people embrace the change in a way that does not leave them in the dark – figuratively or concretely.
The IEA report says that in climate mitigation, it all comes down to global commitment. We strongly agree: we cannot operate in silos, not in Europe nor on the global scale. Much is expected from the United Nations Climate Change Conference, to be held in Glasgow in November. Increasingly ambitious political will needs to translate into concrete actions. The means and the technologies are already there; what we need is all hands on deck, everywhere.
