Page 127 - CW E-Magazine (31-10-2023)

Point of View

Meeting energy needs while decarbonising

The World Energy Outlook (WEO), 2023, released last week by the Paris-based International Energy Agency (IEA), sees a peaking of
global oil demand by 2030 – much earlier than the forecast by OPEC, the cartel of oil-producing countries. While there are uncertainties in any
forecast – and especially one as complex as energy systems – WEO’s comes with the caveat that the pledges and government targets set to
limit carbon emissions are fully met. The study needs to be taken seriously for its implications, be it directly, or indirectly in terms of availability
of feedstock for the petrochemical industry.

While energy markets are no longer on the boil as they were about a year ago following the war in Ukraine, the risks of disruption have
not disappeared. The recent conflict in the Middle East, and the possibility of escalation, are playing on market sentiments. While fuel prices
are down from their peaks in 2022, this is the consequence of poor demand and the continued rise in greener energy sources – notably solar
photovoltaics (SPV) and electric vehicles (EVs).
Rising investments in clean energy
Since 2020 global investments in clean energy (of all sorts) has risen by 40%, driven by the need to bring down carbon emissions. The
price parity of several of renewable energy sources – SPV, in particular – with conventional fuels is factor. In countries like India, with limited
resources to hydrocarbon resources, the desire for energy security, is driving significant investments into green energy. Generous fiscal and
policy support from governments – for example, in the US (through the Inflation Reduction Act), and in India (more on this later) – is bringing
a flood of investments.
Globally, about 500-GW of renewable energy capacity is expected to be added this year – a record – prompting the IEA to note that while
the pathway for limiting global warming to 1.5°C is very difficult – it is still open. In this optimism the IEA is at odds with other experts who
argue that this target set in Paris is unachievable and/or has even been crossed.

Peak fossil by 2030?
One of the forecasts of the WEO is that the share of fossil fuels (coal, oil and natural gas) in global energy supply – stuck at about 80% for
decades – will start to edge down and reach 73% by 2030 in a Stated Policies Scenario (STEPS), which provides an outlook based on the latest
policy settings. Although demand for fossil fuels has been strong in recent years, there are signs of a change in direction, evident from the
slowing of the rate at which new assets that use fossil fuels are being added to energy systems globally. For examples, sales of cars and
2/3-wheelers with internal combustion engines are well below pre-pandemic levels, and the worldwide addition of power plants firing coal or
natural gas has halved from its peak.

The changes ongoing in China are also seen to have a sizeable impact on energy markets. The country accounted for nearly two-third of the
rise in global oil use and one-third of natural gas over the last ten years. But with economic growth slowing, China’s energy demand is expected
to peak around the middle of this decade, which along with the expansion of clean energy capacity, will result in and fuel demand and carbon
emissions declining.

The WEO, however, cautions that the end of the growth era for fossil fuels does not mean an end to fossil fuel investment, though the business
case to make them will get tougher. At the same time, it states that transitioning to a net zero emissions (NZE) scenario will require much faster
energy shifts than now ongoing.
Meeting energy demands of India
India is expected to be the second largest source of energy demand growth to 2050, ahead of South East Asia and Africa. Finding and
financing low emission ways to meet energy demand in emerging economies will be key to the speed at which global fossil fuel demand falls.

This is not a trivial challenge in India, given the social and economic necessity of providing energy to the masses still unserved or
under-served. How the country provides the energy needed to uplift economic growth, while still maintaining its carbon emission commitments
is possibly one of the most complex challenges in the world today and a key determinant of the effectiveness of the global energy transition.
While considerable progress has been made in improving access to energy, while lowering the carbon-intensity, there are miles to go. Since
2000, India has brought electricity to 810-mn people – larger than the population of the US and EU combined – and provided clean cooking gas
(LPG) to 655-mn. But how much of the task is unfinished is evident from the fact that another 430-mn people still continue to live in households
that use traditional biomass for cooking. Giving them access to affordable energy is a priority that cannot be compromised. As far as electrification
is concerned, India has seen the single-largest light-emitting diode (LED) adoption campaign in the world, with 370-mn LEDs distributed
by 2023. And over the last five years, new SPV capacity has accounted for nearly 60% of all new electricity generation capacity.

Chemical Weekly October 31, 2023 127

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