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PwC: Green energy production must increase eightfold to achieve climate neutrality by 2050

20 August 2023

To achieve climate neutrality (zero net field-effect gas emissions) globally by 2050, renewable energy production would need to increase eightfold from 2021 levels, and annual investment in distribution systems to triple, according to a PwC analysis, based on data from the International Energy Agency (IEA). And all this while, until 2050, global energy demand is estimated to increase by up to 20% compared to 2021. However, global ambitions to aggressively reduce carbon dioxide emissions, while consumption of energy accounts for approximately 73% of total greenhouse gas emissions, highlighted large gaps between existing technologies, infrastructure and investments and the higher levels that will be needed in the immediate future to ensure the transition to a new energy paradigm.

In Romania, investments in renewable energy have intensified in recent years, but there is still a long way to go before reaching the commitment of the Integrated National Plan in the field of Energy and Climate Change 2021-2030 (PNIESC). According to the latest ANRE data, Romania has a production capacity of 3 GW of wind energy and 1.5 GW of solar energy. According to the current version of PNIESC, adopted in October 2021, Romania thus proposes that the share of energy from renewable sources reach 30.7% in the gross final energy consumption by 2030 by putting into operation new wind, photovoltaic and hydropower plants, as well as by increasing the number of prosumers. Through the version of the Long-Term Strategy for the Reduction of Greenhouse Gas Emissions (STL) notified by Romania to the European Commission in April 2023, the share of energy from renewable sources in the final gross energy consumption at the level of 2030 increases to 36.3%. In total, through the PNIESC 2021-2030, Romania has proposed that, in the period 2021-2030, install additional capacities of 6.9 GW of energy production capacities from renewable sources. The value of investments that Romania can achieve through co-financing from PNRR and the Modernization Fund exceeds 16 billion euros, in areas such as renewable energy, coal replacement, production and use of green hydrogen, nuclear energy, high-efficiency cogeneration, biofuels, modernization of the energy infrastructure. The PwC report analyzed the gaps that need to be overcome to build a reliable, affordable and green energy system.

The production gap

Currently, approximately 80% of primary energy demand is met by hydrocarbons such as oil, natural gas and coal. The remaining 20% is provided by the electricity sector and already 38% of this percentage is produced by technologies that do not emit CO2 – nuclear, hydro, solar and wind.

In recent years, with the help of subsidy schemes, tax credits and the decrease in the levelized cost of energy, the installation of electricity generation capacity from renewable sources (especially solar and wind) has increased greatly. Globally, between 2016 and 2021, 1,282 GW of renewable energy generation capacity was added to the power system, and the International Energy Agency (IEA) estimates that between 2022 and 2027, another 2,400 GW will be installed . However, to reach net zero net emissions globally by 2050, installed renewable resource-based power generation capacity will need to increase to more than 27,000 GW. Building them at a faster rate than today is necessary not only to decarbonize current levels of electricity consumption, but also to ensure that there are sufficient sources of primary energy for consumption.

The coverage gap

All electricity generated by wind turbines or solar panels must reach the user. Network expansion and consolidation is an expensive and time-consuming endeavor. Over the past decade, an average of $300 billion a year has been invested globally, but according to the IEA, annual investment will need to rise to between $560 billion and $780 billion by 2030. But money alone doesn’t solve the problem problem completely, as challenges to expanding networks also include long permitting periods, technical complexity, and lack of skilled labor and materials, which can contribute to increased costs. Governments have an important role to play in setting policies and permitting regimes, reducing the time required for project approval and development, and providing investment incentives.

The storage gap

Electricity from renewable sources tends to be intermittent – the sun doesn’t always shine and the wind doesn’t always blow – while demand for electricity is relatively constant and predictable. Therefore, to have an orderly transition to a decarbonized grid, significant increases in electricity storage capacity, in the form of batteries or hydroelectric power pumping systems, will be needed.

In 2022, 16 GW of grid-scale battery storage was added globally, and according to the IEA, a 143-fold increase is needed by 2050 to meet net-zero targets.

The transformation gap

Almost 20% of CO2 emissions globally are caused by four so-called “hard-to-eliminate” products, which represent a big challenge for electrification: steel, cement, ammonia and plastic. Finding alternatives to hydrocarbon-based energy production is difficult due to high costs and the scale and volumes of substitution required. Although it may seem paradoxical, companies in the hydrocarbon industry have the capital, know-how, technical skills and scale to be essential enablers of the energy transition. As such, their involvement is necessary for a smooth transition to a sustainable energy system.

Lack of critical minerals

While existing and planned energy production capacity is designed to meet global demand, the supply of several raw minerals remains insufficient and is therefore considered critical. These critical minerals, including lithium, cobalt, nickel, graphite, aluminum, copper, platinum group metals and rare earth elements, are essential for the manufacture of electric vehicles and battery storage capacity. Therefore, the lack of these minerals is likely to have a significant impact on the pace and extent of the energy transition. To stay on track to net zero by 2050, the IEA estimates that the world economy will need four times more critical minerals in 2030 than it produced in 2021.

Funding gap

According to BloombergNEF, investments in the energy transition reached parity with those in hydrocarbons in 2022, both amounting to $1.1 trillion. However, substantially greater investment is needed to achieve the goals of the global energy transition, with estimates ranging from $4 trillion to $6 trillion per year. The magnitude of this challenge underlines the significant role of the financial sector in supporting the transition to a sustainable energy future and the need to develop and implement policies that encourage investment

In conclusion, bridging these gaps is the big challenge, and to ensure an orderly transition, detailed and concrete steps are needed. States must align their national efforts with regional and global developments, as the degree of interdependence during the transition will increase, with policies and speed of execution in one country directly affecting others through energy prices and availability.

The right balance needs to be found between affordability, security of supply and sustainability. By simple math, hydrocarbons will exist in energy production for decades to come. During the transition, it will be essential to balance the objectives of affordability and security of supply with progress towards decarbonisation objectives.

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