WPC: Energy transition faces discord amid geopolitical pressures

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Geopolitical pressures — including rising resource nationalism and a year in which over 50% of countries will be having elections — as well as inflationary pressures have sent energy transition progress into "discord." A specialty chemicals panel session held March 19 at the World Petrochemical Conference by S&P Global in Houston, Texas, tracked the challenges and opportunities of the energy transition for the industry.

Speaking at the session, Roman Kramarchuk, head of climate markets and policy analytics at S&P Global Commodity Insights, said that if the short-term scenario continues, global temperatures could rise 2.4 degrees Celsius by 2100, far above the Paris Agreement’s goal of a 1.4-degree increase.

"Over the past few years, we’ve certainly been trending more towards our ‘discord’ scenario," Kramarchuk said. "We’re trending toward a longer runway for fossil fuels and less [greenhouse gas (GHG)] emission reductions. This is a case of less GDP growth, less trade and less technology transfer."

Since 1990, world GHG emissions have grown 45%, with mainland China, India and the Middle East representing the biggest increases in emissions, at 304%, 241% and 181%, respectively. Over the last 25 years, the Commonwealth of Independent States and the EU have cut their emissions the most, with decreases of 39% and 31%, respectively. The US has cut emissions 1% since 1990.

Of S&P Global Commodity Insights’ three energy and climate scenarios, only one, "green rules," has global temperatures near the Paris Agreement’s 1.5-degree goa, with an expected increase of 1.7-degrees Celsius by 2100l. The "green rules" scenario, however, assumes more technology transfer, cooperation and policy-driven outcomes than is currently happening.

"2030 is not that far away," Kramarchuk said, "and when you think about what the energy transition will take, solar panels can be constructed fast, but anything beyond that — like an onshore or offshore wind plant or a nuclear unit — we’re getting into lead times of 5, 10, or 20 years."

While the US Inflation Reduction Act has helped speed these transformational energy products along, there are still a lot of slowdowns in permitting, especially in Europe. "We joke that there needs to be a ‘Complexity Reduction Act’ in Europe to move things forward," Kramarchuk said.

Harald Schwager, deputy chairman of Evonik Industries AG’s executive board, added that companies are stuck in a hard place. Evonik has signed power purchase agreements (PPAs) to be powered fully by renewable energy by 2030. "The question will be, will production capacity be hampered by the regulatory process and will we have sufficient infrastructure in place to transport enough renewable power for site demand by then," Schwager said.

Distant peaks
Commodity Insights’ energy and climate base case pegs the peak years for coal, oil and gas demand to be 2022, around 2030 and 2040, respectively. "When there is a surprise need for energy," Kramarchuk said, pointing toward the COVID-19 pandemic and a drought in China, which caused a boost in coal usage, "fossil fuels fill that need."

However, "there’s more investment in renewable capacity than we’re seeing in upstream oil and gas," Kramarchuk said. Under all scenarios, renewable electricity will be the lion’s share of newly generated energy sourcing.

Rebecca Liebert, president and CEO of Lubrizol Corp., said that it is the duty of specialty chemical producers to be agile and proactive in bringing innovative and more sustainable products to market. "Political and technical factors are all things we must account for in our bring-to-market timelines. And we get it right a lot of times, but we get it wrong some of the time. Sometimes you get to market before the market is ready for your product. And I think that’s great, to have a solution on the shelf as the market comes along."

Schwager agreed: "In the specialty chemical industry, we have more good ideas than we have money. And there’s no regret on moves for improved efficiency."

While there has been little movement on target setting and market-based mechanisms for growing renewable energy, COP28’s first global stocktake committee called for "countries to contribute to triple global renewable energy capacity and double global energy efficiency by 2030."

"Even though we are heading for the discord path right now, with all the technology solutions and innovation pushes, we’ll be shooting up ahead towards the ‘green rules’ scenario in the long-term," Kramarchuk concluded.

This article was first published in chemweek.com.

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