The shift away from hydrocarbons and towards sustainable forms of energy continued in 2021, with new renewable generation capacity set to reach an alltime high and the international community committing to reduce carbon emissions at the latest UN Climate Change Conference (COP26).
For emerging economies, this transition heralds a specific set of challenges as well as potential benefits.
- This year to set an alltime record for new renewable generation capacity
- Emerging markets have a key role to play in the global shift to net zero
- Energy transition heralds specific challenges and benefits
- COP26 highlighted the need for an equitable approach to decarbonisation
This has been a pivotal year for the global energy transition.
In midMay the International Energy Agency (IEA), a Parisbased intergovernmental organisation, released the “Net Zero by 2050” report, the first comprehensive energy roadmap detailing how the energy sector can achieve netzero carbon emissions by 2050.
This was indicative of the growing influence of environmental, social and governance (ESG) standards on the energy industry, as well as everincreasing investor appetite for more stringent ESG guidelines and a faster transition to renewable energy sources.
It called for an immediate ban on investment in new fossil fuel projects globally, along with the prevention of sales of new internal combustion engine passenger cars from 2035.
To meet demand, the report foresaw a massive rollout of renewable energy, which, according to the roadmap, would account for almost 90% of electricity generation by 2050.
In another report released on December 1, the IEA noted that new renewable generation capacity was set to reach an alltime high of 290 GW this year. In a sign of the scale of the energy transition, the agency noted that it expects renewables to make up 95% of all new global power capacity through to 2026, with solar alone providing more than half of this.
Other milestones over the course of the year included the US’ return to the Paris Agreement and China’s firstever carbonneutral target, set for 2060.
However, while the use of renewable energy continues to grow, much more needs to be done to reach net zero by 2050. Emerging markets have a key role to play in this.
Energy transition and emerging markets
The IEA report stated that emerging markets would account for the majority of electricity demand over the coming decades, as economies industrialise and grow.
In this sense, the push for carbon neutrality and improved environmental sustainability places a unique set of pressures on emerging markets. The essential question is: how can such economies fulfil their economic potential while at the same time striving for net zero?
Perhaps equally challenging is the fact that many of the world’s large oil and gas producers are emerging markets in the Middle East and Africa. However, while the energy transition will undoubtedly require significant economic restructuring from countries that derive large portions of GDP from oil and gas, there are also considerable economic benefits to be gained.
The IEA estimated that while some 5m jobs will be lost globally in the shift away from fossil fuels, 14m are set to be created as a result of the development of and investment in renewables.
To take an example, a report published by the UN Environment Programme estimated that Latin America and the Caribbean as a whole could save up to $621bn annually and generate 7.7m new jobs if the energy and transport sectors achieved emissions neutrality by 2050.
Among hydrocarbonsexporting countries, the UAE and Saudi Arabia are leading the renewables charge, with the former looking to increase renewables’ contribution to its energy mix from the current level of 13% to 31% by 2025.
Throughout 2021 the UAE has continued to make progress on the Al Dhafra Solar Plant which, once completed next year, will be the largest singlesite solar plant in the world, capable of providing enough electricity for 160,000 homes and mitigating 2.4m tonnes of carbon emissions annually.
Meanwhile, in Saudi Arabia, April saw the launch of the 300MW Sakaka solar power plant, the country’s first utilityscale renewables project. This was followed in August by the announcement that Saudi energy company ACWA Power had finalised financing for the 1.5GW Sudair Solar Plant, slated to be one of the world’s largest upon completion.
Certain regions will see other benefits. For example, subSaharan Africa is expected to benefit from the growing market for minerals that are central to the shift towards renewable energy.
Among them is cobalt, a key component in the lithium ion batteries that power electric vehicles and store energy from solar, wind and other renewable sources.
Cobalt demand is set to grow by 60% by 2025, according to recent research from McKinsey. Given that an estimated 6070% of the world’s cobalt supplies are located in the Democratic Republic of the Congo, the country stands to benefit from this development, though Zambia, South Africa and Morocco also have significant cobalt reserves.
Other renewables
While solar and wind are the dominant segments in the transition to renewables, a number of emerging markets are looking to other renewable sources to meet future energy needs.
One such resource is geothermal energy, whereby pipes drilled into the earth’s surface supply steam to power electricity turbines.
The US is the world’s leading producer of geothermal energy, but a number of other emerging markets play key roles on the international scene, with Indonesia and the Philippines alone accounting for around 25% of the world’s geothermal energy production.
At an installed capacity of around 2100 MW, Indonesia is the world’s secondlargest producer and is on track to overtake the US by the end of the decade: the country’s geothermal development roadmap foresees a rapid of expansion of geothermal capacity to 8000 MW by 2030.
Some emerging economies are also looking to hydrogen and in particular green hydrogen, the most environmentally friendly form of the fuel as a lowcarbon alternative to wind or solar.
Gulf countries are especially well placed to benefit from an increase in the use of hydrogen.
Some have taken significant steps to develop their capabilities, and the UAE is among the region’s leaders in this regard.
In May Khalifa Industrial Zone Abu Dhabi, a unit of the publicly owned Abu Dhabi Ports, announced plans to develop a green hydrogen and ammonia production facility in the zone.
Special project vehicle company Helios Industry will invest $1bn in the construction of the plant, which will be powered by solar energy. Once fully completed in 2026, the plant will have the capacity to produce 40,000 tonnes of green hydrogen annually, which will be converted into 200,000 tonnes of its carrier fuel, green ammonia, for transport.
Elsewhere, in May Consolidated Contractors Company, an international construction firm focused on the Middle East, announced it had struck a deal with Ireland’s Fusion Fuel Green to develop green hydrogen plants across the Gulf, namely in Oman, Kuwait and Qatar.
Diplomatic hurdles
COP26 was one of the hallmark events of the year in terms of the energy transition.
While it was criticised in some quarters, others have highlighted a number of positive outcomes.
For example, a growing consensus has emerged around global carbon markets and carbon trading, seen as key tools in the transition towards decarbonisation.
Proponents say that carbon trading will ultimately increase investment in environmentally friendly solutions, while at the same time incentivising lowcarbon energy sources such as wind and solar.
Another positive outcome of COP26 was a surge in support for the Global Methane Pledge.
Launched in September and led jointly by the US and the EU, the pledge represents the first coordinated international effort to address methane emissions. Its seeks to precipitate a 30% drop in global emissions before the end of the decade.
While more than 100 countries are signatories, China, India and Russia which together account for around onethird of methane emissions refrained from signing the pledge.
Indeed, the absence of China’s President Xi Jinping and Russia’s President Vladimir Putin from the COP26 meeting was seen by many as an indication of how difficult it could be to achieve global consensus.
Another indication of the difficulties of reaching a multilateral consensus on emissions came in midOctober, in the form of a statement released by the LikeMinded Developing Countries group which includes China, India, Egypt, Indonesia, Saudi Arabia and Vietnam. This statement described the goal of netzero emissions by 2050, which has been embraced by many developed nations, as being “antiequity and against climate justice”.
The group accused wealthier nations of refusing to address their historic responsibility for climate change, and of trying to shift responsibility onto developing nations.
The stance further highlighted the need for developed economies to work closely with emerging markets to reduce emissions and achieve the goal of net zero.
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Source: Thailand business News