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Decisive action by governments is critical to unlock growth for low-carbon hydrogen

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Governments need to move faster and more decisively on a wide range of policy measures to enable low-carbon hydrogen to fulfil its potential to help the world reach net zero emissions while supporting energy security, the International Energy Agency says in a new report released today.

Currently, global production of low-carbon hydrogen is minimal, its cost is not yet competitive, and its use in promising sectors such as industry and transport remains limited – but there are encouraging signs that it is on the cusp of significant cost declines and widespread global growth, according the IEA’s Global Hydrogen Review 2021.

When the IEA released its special report on The Future of Hydrogen for the G20 in 2019, only France, Japan and Korea had strategies for the use of hydrogen. Today, 17 governments have released hydrogen strategies, more than 20 others have publicly announced they are working to develop strategies, and numerous companies are seeking to tap into hydrogen business opportunities. Pilot projects are underway to produce steel and chemicals with low-carbon hydrogen, with other industrial uses under development. The cost of fuel cells that run on hydrogen continue to fall, and sales of fuel-cell vehicles are growing.

“It is important to support the development of low-carbon hydrogen if governments are going to meet their climate and energy ambitions,” said Fatih Birol, the IEA Executive Director, who is launching the report today at the Hydrogen Energy Ministerial Meeting hosted by Japan. “We have experienced false starts before with hydrogen, so we can’t take success for granted. But this time, we are seeing exciting progress in making hydrogen cleaner, more affordable and more available for use across different sectors of the economy. Governments need to take rapid actions to lower the barriers that are holding low-carbon hydrogen back from faster growth, which will be important if the world is to have a chance of reaching net zero emissions by 2050.”

Hydrogen is light, storable and energy-dense, and its use as a fuel produces no direct emissions of pollutants or greenhouse gases. The main obstacle to the extensive use of low-carbon hydrogen is the cost of producing it. This requires either large amounts of electricity to produce it from water, or the use of carbon capture technologies if the hydrogen is produced from fossil fuels. Almost all hydrogen produced today comes from fossil fuels without carbon capture, resulting in close to 900 million tonnes of CO2 emissions, equivalent to the combined CO2 emissions of the United Kingdom and Indonesia.

Investments and focused policies are needed to close the price gap between low-carbon hydrogen and emissions-intensive hydrogen produced from fossil fuels. Depending on the prices of natural gas and renewable electricity, producing hydrogen from renewables can cost between 2 and 7 times as much as producing it from natural gas without carbon capture. But with technological advances and economies of scale, the cost of making hydrogen with solar PV electricity can become competitive with hydrogen made with natural gas, as set out in the IEA’s Roadmap to Net Zero by 2050.

Global capacity of electrolysers, which produce hydrogen from water using electricity, doubled over the last five years, with about 350 projects currently under development and another 40 projects in early stages of development. Should all these projects be realised, global hydrogen supply from electrolysers – which creates zero emissions provided the electricity used is clean – would reach 8 million tonnes by 2030. This is a huge increase from today’s level of less than 50 000 tonnes – but remains well below the 80 million tonnes required in 2030 in the IEA pathway to net zero emissions by 2050.

Practically all hydrogen use in 2020 was for refining and industrial applications. Hydrogen can be used in many more applications than those common today, the report highlights. Hydrogen has important potential uses in sectors where emissions are particularly challenging to reduce, such as chemicals, steel, long-haul trucking, shipping and aviation.

The broader issue is that policy action so far focuses on the production of low-carbon hydrogen while the necessary corresponding steps that are required to build demand in new applications is limited. Enabling greater use of hydrogen in industry and transport will require much stronger policy measures to foster the construction of the necessary storage, transmission and charging facilities.

Countries with hydrogen strategies have committed at least USD 37 billion to the development and deployment of hydrogen technologies, and the private sector has announced additional investment of USD 300 billion. But putting the hydrogen sector on path consistent with global net zero emissions by 2050 requires USD 1 200 billion of investment between now and 2030, the IEA estimates.

The Global Hydrogen Review lays out a series of recommendations for near term-action beyond just mobilising investment in research, production and infrastructure. It highlights that governments could stimulate demand and reduce price differences through carbon pricing, mandates, quotas and hydrogen requirements in public procurement. In addition, international cooperation is needed to establish standards and regulations, and to create global hydrogen markets that could spur demand in countries with limited potential to produce low-carbon hydrogen and create export opportunities for countries with large renewable energy supplies or large CO2 storage potential. 

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Renewable electricity growth is accelerating faster than ever worldwide

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The growth of the world’s capacity to generate electricity from solar panels, wind turbines and other renewable technologies is on course to accelerate over the coming years, with 2021 expected to set a fresh all-time record for new installations, the IEA says in a new report.

Despite rising costs for key materials used to make solar panels and wind turbines, additions of new renewable power capacity this year are forecast to rise to 290 gigawatts (GW) in 2021, surpassing the previous all-time high set last year, according to the latest edition of the IEA’s annual Renewables Market Report.

By 2026, global renewable electricity capacity is forecast to rise more than 60% from 2020 levels to over 4 800 GW – equivalent to the current total global power capacity of fossil fuels and nuclear combined. Renewables are set to account for almost 95% of the increase in global power capacity through 2026, with solar PV alone providing more than half. The amount of renewable capacity added over the period of 2021 to 2026 is expected to be 50% higher than from 2015 to 2020. This is driven by stronger support from government policies and more ambitious clean energy goals announced before and during the COP26 Climate Change Conference.

“This year’s record renewable electricity additions of 290 gigawatts are yet another sign that a new global energy economy is emerging,” said IEA Executive Director Fatih Birol. “The high commodity and energy prices we are seeing today pose new challenges for the renewable industry, but elevated fossil fuel prices also make renewables even more competitive.”

The growth of renewables is forecast to increase in all regions compared with the 2015-2020 period. China remains the global leader in the volume of capacity additions: it is expected to reach 1200 GW of total wind and solar capacity in 2026 – four years earlier than its current target of 2030. India is set to come top in terms of the rate of growth, doubling new installations compared with 2015-2020. Deployments in Europe and the United States are also on track to speed up significantly from the previous five years. These four markets together account for 80% of renewable capacity expansion worldwide.

“The growth of renewables in India is outstanding, supporting the government’s newly announced goal of reaching 500 GW of renewable power capacity by 2030 and highlighting India’s broader potential to accelerate its clean energy transition,” said Dr Birol. “China continues to demonstrate its clean energy strengths, with the expansion of renewables suggesting the country could well achieve a peak in its CO2 emissions well before 2030.”

Solar PV remains the powerhouse of growth in renewable electricity, with its capacity additions forecast to increase by 17% in 2021 to a new record of almost 160 GW. In the same time frame, onshore wind additions are set to be almost one-quarter higher on average than during the 2015-20 period. Total offshore wind capacity is forecast to more than triple by 2026.

The IEA report expects this record growth for renewables to take place despite today’s high commodity and transport prices. However, should commodity prices remain high through the end of next year, the cost of wind investments would go back up to levels last seen in 2015 and three years of cost reductions for solar PV would be erased.

Despite rising prices limiting growth, global biofuel demand in 2021 is forecast to surpass 2019 levels, rebounding from last year’s huge decline caused by the pandemic. Demand for biofuels is set to grow strongly to 2026, with Asia accounting for almost 30% of new production. India is expected to rise to become the third largest market for ethanol worldwide, behind the United States and Brazil.

Governments can further accelerate the growth of renewables by addressing key barriers, such as permitting and grid integration challenges, social acceptance issues, inconsistent policy approaches, and insufficient remuneration. High financing costs in the developing world are also a major obstacle. In the report’s accelerated case, which assumes some of these hurdles are overcome, average annual renewable capacity additions are one-quarter higher in the period to 2026 than is forecast in the main case.

However, even this faster deployment would still fall well short of what would be needed in a global pathway to net zero emissions by mid-century. That would require renewable power capacity additions over the period 2021-26 to average almost double the rate of the report’s main case. It would also mean growth in biofuels demand averaging four times higher than in the main case, and renewable heat demand almost three times higher.

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Energy Efficiency Hub launched to boost cooperation on world’s ‘first fuel’

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The Energy Efficiency Hub – a global platform for collaboration aimed at delivering the social, economic and environmental benefits of more efficient use of energy – was launched on 1 December at an event hosted at the International Energy Agency in Paris.  

The Hub’s initial 16 members are Argentina, Australia, Brazil, Canada, China, Denmark, the European Commission, France, Germany, Japan, Korea, Luxembourg, Russia, Saudi Arabia, the United Kingdom and the United States.

The Hub aims to facilitate government-to-government exchanges on efficiency policy, regulation and implementation, focusing on topics relevant to real-world challenges faced by its members. The launch event showcased digitalisation, efficient equipment and appliance deployment, best energy efficiency technologies, and energy management best practices as areas of collaboration. 

“Hub Members span the globe, from East to West and from North to South, together accounting for over 60% of energy use and carbon dioxide emissions,” said Ulrich Benterbusch, Deputy Director General of the German Federal Ministry of Economic Affairs and Energy, who will serve as Chair of the Hub’s Steering Committee.

“In fact, each Member has significant accomplishments in energy efficiency and understands how urgent it is to work together on it,” he added. “Meeting global challenges requires all countries to do better, and – working in concert with other international organisations – the Hub will strive to share its work more broadly and to learn from others.”

The Hub’s launch follows the previous week’s release of Energy Efficiency 2021, the IEA’s annual market report on the subject, which showed that while global energy efficiency improvements are recovering to their pre-pandemic pace, they are still far short of what is needed to reach net zero emissions by 2050.

“I consider energy efficiency to be the very ‘first fuel’ because it is crucial to address climate change and make our energy supplies more secure while also leaving money in our pockets,” said Fatih Birol, the IEA Executive Director. “I am very pleased to see countries coming together as part of the Energy Efficiency Hub to accelerate efforts in this critical area.”

“Being based at the IEA will enable the Hub to cooperate effectively with IEA experts and the other key initiatives and activities we host, including the Clean Energy Ministerial,” said Dr Birol. “The launch of the Hub is a clear and encouraging signal that momentum is building behind greater energy efficiency action worldwide.”

Brian Motherway, Head of Energy Efficiency at the IEA, said: “Governments need to work much harder if they are to deliver the full potential of energy efficiency and get their energy systems onto a pathway towards net zero. The Hub is an important instrument for countries to learn from each other and work together to strengthen their efficiency policies.”

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Colombia’s energy districts: an example for the region

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image: UNIDO

An energy district is a local institution that leads, implements and accelerates a locally-owned, inclusive and clean energy transition. In the process, energy districts create local jobs and retain and grow wealth, while simultaneously reducing carbon emissions and air pollution.

Colombia is a pioneer South American country in the promotion of this approach. Beginning in 2013, the United Nations Industrial Development Organization (UNIDO), together with Switzerland’s State Secretariat for Economic Affairs (SECO), has been implementing an energy districts project in cooperation with the Ministry of Environment and Sustainable Development (Minambiente) and the public utility of the city of Medellín (Empresas Publicas de Medellín – EPM).

In its second phase, beginning in 2019, the project has been working closely with national and city-level authorities and stakeholders to improve and implement national and sub-national policy and regulatory frameworks to promote further development of energy districts; reinforce knowledge and capacities for energy districts of all market players; and provide technical assistance to some 10 selected cities so that they can include energy districts in their urban planning and support the realization of two-three near-future mature projects.

From the 17-19 November, the UNIDO project and partners, ACAIRE (Colombian Association for Refrigeration and Air Conditioning) and CIDARE, the Centre of Research and Development in Air Conditioning and Refrigeration hosted the Third International Conference for Energy Districts, a virtual event bringing together national and international experts from industry and academia, and representatives from the public sector and international organizations.

Carlos Eduardo Correa, Colombia’sMinister of Environment and Sustainable Development, stated that the conference was the ideal scenario to show the achievements of the country in the implementation of district energy as a contribution to the Sustainable Development Goals.

“All of our actions, plans, projects and regulations, are geared towards the achievements of the Nationally Determined Contributions, the reduction of greenhouse gas emissions, and, at the same time, the contribution of low-carbon development. Here, Colombia has an important experience and is an example for the region,” he stated.

The progress of district energy in Colombia and the region, the importance of their implementation in urban planning, energy maps and clean energy transition, the mechanisms to finance these projects and the use of renewable energies in their execution, were some of the main topics addressed by more than 30 national and international speakers during the three days of discussions.

“The implementation of the project has, as a main component, the sustainability of knowledge and capacities in Colombia. That is why the support and work with academia are fundamental to strengthen the capacities of all the actors in the value chain and promote the education of professionals in the areas of sustainability and energy efficiency, among others,” noted Alex Saer, Director of Climate Change and Risk Management at the Ministry of Environment and Sustainable Development.

The conference was also the opportunity to celebrate the awards of the Second Competition for Universities in District Energy, with the objective of designing a business model for the sale of thermal energy applied to residential users.

The contest, which had the participation of eight universities from Colombia, awarded the first-place winner team with  fully funded attendance to the International District Energy Association Campus Energy in Boston in February 2022.

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