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Challenges of the Energy Sector

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A. K. Shyam, PhD's picture
Assessor National Accreditation Board for Education & Training (NABET

I am Dr. A. K. Shyam, intellectual acumen offering 44 years of established career in Environment, Health & Safety sector. Presently I am associated with NABET, Quality Council of India as an...

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  • Feb 9, 2021 4:28 am GMT
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This item is part of the Special Issue - 2021-01 - State of the Industry, click here for more

INTRODUCTION:

The current scenario looks better than 0.1% growth in China and 0.5% expansion considering the primary energy consumption growth by 2.5% between 2018 & 2050 globally.  Similarly, the oil consumption would double to 10 million barrels by 2050 and gas demand from 58 to 357 billion cubic meters. Although the partial pandemic impact persists, global energy demand continues to grow perhaps driven by increasing prosperity.  But, the increasing share of renewable energy over fossil fuels would be the shift that the world is likely to witness. This transition to low carbon energy system will be the fundamental restructuring with diverse energy mix, consumer choice, localized energy markets and increasing levels of integration.

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The sharp increase of renewable by 7% in 2020 while global energy demand declines by 5%, access to grid and continuous installation of new projects point to strong renewable electricity growth India, in this regard will be one of the greatest contributors in 2021 as it has defied pandemic and continued to grow.

The lockdown due to pandemic in many countries including India as safety regulations restricted mobility and disrupted supply chains delaying renewable projects.  However, the capacity additions with an increased 10% seem to be on track in 2021 globally as exemplified by US doubling the capacity and increased installation pace in Europe.

There is also a possibility that renewable capacity additions in 2022 may see a small decline due to mainly policy uncertainties – onshore wind and solar subsidies expire in this year which may lead to an atmosphere of uncertainty for 2021-2025 on the expansion schedule of renewable.

INDIA

The situation is no different in India due to the financial condition of Distribution Companies (DISCOMs) which might slow down in 2022.  Total overdue payments owed by DISCOMs rose to 28% for all electricity generators and 10% for renewables between January and June 2020.

The first half of 2020 witnessed nearly 50 GW (about 13 countries) of new renewable capacity to be operational during 2021-2024 with China’s solar auction accounting to 25 GW in 2020.  India similarly auctioned 11.3 GW solar and almost 1 GW wind capacity despite sharp decline in construction activities.

Global solar capacity is likely to reach almost 107 GW in 2020 and average annual solar capacity additions during 2023-2025 is expected to be in the range of 130 to 165 GW.  With an additional decline in generation costs, solar looks like the most cost-effective energy source in many countries.

The annual net wind capacity addition similarly, is likely to reach 65 GW in 2020, an 8% more than 2019 and offshore capacity will reach 15% in 2022 – 50% more than 2019.  India’s wind capacity additions may drop almost 60% from 2019 level.  India added just 0.3 GW of wind with supply chain disruptions and lockdown disruption of construction activities.

The above developments strongly indicate that the renewable will overtake coal to become the largest source of electricity generation - 95% of the net increase in global power capacity through 2025.  Renewables will expand almost 50% to almost 9745 TWh in the next five years.

While heat consumption in the industrial segment is more than the residential segment, global renewable heat consumption is projected at 20% higher in 2025 with robust increase in the residential segment than industry.

The impact of Covid-19 has been felt at – decreased energy demand of 5%; decreased carbon dioxide emissions by 7% and energy investment itself dropping by 18%.  There seems to be greater emphasis on solar PVs estimated to grow by 13% (average) per year between 2020 & 2030.

Transformation in Energy Sector:

The world currently embarks on growth opportunities not only in the energy sector but even other critical resources as well – a warning which did not get enough attention for various reasons. There are multiple factors contributing to this change – climate change, government targets and incentives in renewables.  One could expect not only regional policy changes but also, national, industrial and even company driven initiatives with greater commitment on Sustainability goals.

The energy sector would attract greater opportunity for decarbonized electricity system with the preference to coal diminishing.  The renewable is undoubtedly gaining importance but, more importantly residential and commercial solar PV system would witness strong growth in combination with battery storage.   Electricity demand for Transportation, in addition to buildings and energy efficiency would dominate industrial processes.

The disruptions to business, mobility and everyday life due to pandemic has stamped everlasting implications for energy transformation from fossil fuels.

The magnitude and recovery orientation combined with stimulus policies would shape growth and energy consumption pattern in addition to GDP.  This is not simple as there are stark differences regionally, nationally and even locally.  The disruptions to business, mobility and everyday life due to pandemic has stamped everlasting implications for energy transformation from fossil fuels. Despite reduction in fossil fuel consumption and a shift to renewable would do some good, it may not be enough to achieve 2 degree global warming target.  It is in fact, the right time to pool all the options – hydrogen to carbon capture and biofuels - apart from just renewable.  In addition key players – policy makers/energy companies and end users need to come together in arriving at appropriate solutions.

The impact of pandemic is not just restricted to energy supply, demand and prices in the immediate years but also on long term projections.  As an example, the reduced outlook of 27.5 gigatons over 2020-2050 could demand more than ten times to meet 2 degree target under the Paris climate accord. Therefore, macroeconomics, behaviors and policies both individual and holistic could be the focus on energy demand both from short and long term perspective.

 

Transition:

Fossil fuel consumption is likely to drop by more than 5% after the pandemic reduced electricity demand and market helped renewables assert in the energy mix.  But, coal is likely to bounce back by 3% in 2021 is what one of the reports indicate due price hike in natural gas prices. Demand growth could outpace increase in renewables and nuclear with room for coal and gas expansion in the emerging and developing economies.  China and US are likely to contribute to emissions with an anticipated increase in coal generation.

The fall of electricity demand by 2% seems biggest annual decline since the 20th Century - Major decline being in Europe (4%).  China although records a 2% up year-on-year, this will be below its annual average of around 6.5% since 2015.

Wind and Solar will continue to set new records with new capacity additions in developed economies helping to expand their share to 29% compared to 28% in 2020. Nuclear may grow by 2.5% through resurgence in France and Japan and new reactors coming online in China and UAE. Advanced economies may witness continuation of renewable and nuclear to narrow the gap with fossil fuel generation.

The key principle of Concentrator Photovoltaic (CPV) is the use of cost efficient concentrating optics that reduce cell area, allow use of more expensive, high efficiency cells and potentially levelized cost of electricity competitive with Concentrated Solar Power and standard PV technology in areas with high direct normal irradiance (more than 2000 kWh/(m 2 a). There is an advanced version in high concentration PB (HCPV) with two axis tracking has significant increase in the efficiency and reduction of area related system cost.

The price including installation for CPV of capacity 10 MW is estimated between 1400 Euro/kWp to 2200 Euro/kWp depending upon the technology and regional variations.   Accordingly, LCOE values range between 0.1 and 0.15 Euro at locations with DNI of 2000 kWh/ (m 2 a) and 0.8 to o.12 Euro with 2500 kWh/ (m 2 a).  The research on modules has shown efficiencies up to 43% highest of all existing PV technologies.

There seems a special interest in Solar and CSP and CPV from financing world with Cool Earth Solar that they have attracted finance of $21 million.  A beginning has been made to convince that solar would be the option in view of oil running out and prices becoming instable. Germany has set an example in this regard and their environmental consciousness brought jobs, wealth and strong revolutionary industry.

There is a strong belief that large scale solar (5 MW & more) is better than wind which is a competitor to fossil fuel generation.  About 50,000 MW of large solar projects proposed in Southern California comprising of trough, dish and power tower CSPs as well as truly massive PV projects.  Considering the entire installed capacity for California at 70,000 MW, this is truly an incredible proposal.

Offshore wind

As per the Inter-Governmental Panel report, renewable may account for 80% of the world’s energy supply by 2050 and win will play a major role.  India has the 4th largest installed capacity in wind after China, US and Germany.  The National Institute of Wind Energy (NIWE) shows a wind energy potential of 302 GW at 100 m hub-height as against leader China’s capacity of 221 GW.  The onshore wind farm in China accounts for 7965 MW which, is five times the nearest rival.  US is second with 96.4 GW of installed capacity.

According to NIWE, challenges of offshore wind could be handled with proper planning, knowledge through tools and resources available.  The key met-ocean phenomena – wind velocity and shear; low-level jets; tidal and current velocities; wave characteristics, geotechnical data relating to surface and subsurface characteristics, seasonal and diurnal variations and interaction among these conditions become very vital.  Current models may fail to predict more vital inputs like, turbulent mixing, boundary-layer, fog/cloud dynamics and dynamics of shallow internal boundary layers in offshore flow.

Climate change

European economy has witnessed a crisis that triggered fiscal and monetary policy support to regain GDP loss of 15% in order to contain Covid-19.  Climate change forces them to focus on energy transition as a key option.  Their commitment of Carbon neutrality by 2050 seems to be undeterred by the pandemic.  Some of the EU countries like, France and Germany are allocating more resources to even ecological transition. Similarly, countries like Poland and Czech Republic are likely to spend more on climate friendly energy transition.

US with the number of cases topping 6 million, more than 22.2 million losing their jobs and unemployment rate being twice its pre-pandemic, there is hope that this may cause absolute reduction in carbon dioxide emissions.

China and India will shape Asia-Pacific Covid-19 recovery – China to low-energy-intensity economy fuelled by renewables; declaring carbon neutral by 2060.  India will have a greater impact of the pandemic.  Though they plunge into reducing energy use, policymakers are unlikely to facus on energy transition until economy is regained.

Hopefully, demand shock caused by Covid-19 may ease with the vaccines beginning to make appreciable progress.  Asia Pacific especially China & India spearheads this recovery with demand set to climb by 5.2% and 3.6% respectively compared to 2020. Among the south-east Asia the demand is expected to increase by 5.4% year-on-year.  There could still be uncertainty in 2021 depending upon measures taken by Governments and distribution of vaccines

Despite reduction in fossil fuel consumption and a shift to renewable would do some good, it may not be enough to achieve 2 degree global warming target. 

Conclusion:

While there would be a major shift in the strategies on energy for future, the pandemic indirectly seems to have presented a few advantages not only to individuals but even the industries/corporates. Work from Home (WFH) may turn out to be the future trend despite increased working hours.  In a few cases, added responsibilities to cover those affected.  The time seems to have been ideal for training and skill (business development, digital marketing, Artificial Intelligence, Professional progression, part time graduate and post-graduation.

The corporates equally have been thinking hard on turning office space into collaborative learning and customer briefing while providing employees flexible workspaces – this may reduce office footprint by 30% and economical by $48 million by the end of 2021.

Business travel though spurred by lockdowns similarly, may edge out in accepting virtual solutions.

We humans are comfortable and confident when we know everything BUT, uncertainty is pretty uncomfortable.  Pandemic seems to have taught us that though expertise and experience is important for a profession, adaptability and flexibility perhaps are more important.  Innovation happens through experimentation when prepared to fail, as well.  Young minds are open and curious and we need to be flexible to enjoy whatever we do – reading, meditation or even dancing which will help us to that mindset.

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Vladimir Vinogradov's picture
Vladimir Vinogradov on Feb 15, 2021

Hello,

"Similarly, the oil consumption would double to 10 million barrels by 2050 and gas demand from 58 to 357 billion cubic meters." - is it about India's energy sector, I hope?

A. K. Shyam, PhD's picture
A. K. Shyam, PhD on Feb 16, 2021

I am afraid that is the global scenario, Dr. Vladimir please.

Vladimir Vinogradov's picture
Vladimir Vinogradov on Feb 17, 2021

Hmmm....

A. K. Shyam, PhD's picture
A. K. Shyam, PhD on Feb 19, 2021

Good morning Dr. Vladimir,

I had sent a message thanking you for the link you shared and educating me.  Hope you got my response.  Thanks and with regards,

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