As climate change and the energy transition drive fundamental shifts in technology, industry, investment and regulatory policy, innovation and technology have never played a more important role. In this article, we discuss how climate change and the energy transition are driving these shifts, the technologies needed to meet net-zero and how this is reflected by patent filings in renewable energy field. We gather the perspectives of leaders and decision makers in the fields of energy, technology, business and government, presenting at the recent CERAWeek 2021 conference.
Energy transition & climate change
We are now in the middle of a profound shift in the global economy away from fossil fuels. 9 out of 10 countries have renewable energy targets, almost four times the number just 10 years ago. At the end of last year, almost every country submitted more ambitious national plans for decarbonisation into the COP process. Global recognition of the risks associated with climate change, provides great incentive to deploy lower carbon options, but economic considerations also apply.
Bill Gates, in his role as founder of Breakthrough Energy, introduced the idea of ‘the Green Premium’ – the additional cost of choosing a clean technology over one that emits a greater amount of greenhouse gases. The Green Premium is useful because it helps to measure progress made toward addressing climate change and understand where there are still barriers to overcome. Technologies with low Green Premiums should be the priority right now. When the Green Premium is too high, that is an indicator of where we need to focus R&D investment. To drive the Green Premium down, governments can use policies to make higher carbon solutions more expensive and cleaner solutions cheaper. They can also make rules about how much carbon can be emitted, implement regulations that shape the financial markets, and invest in R&D. Companies and investors also have a role to play by committing to cleaner alternatives, investing in R&D, supporting clean-energy start-ups, and advocating for government policies.
Achieving low-carbon objectives requires partnerships and new ways of thinking. Energy and digitalisation technology players are teaming up to deliver lower-carbon solutions. A good example is the collaboration between BP and Amazon Web Services (AWS). BP has agreed to supply an additional 404 MW of wind power to Amazon while, AWS provides data and cloud services to BP. This has not only allowed BP to be more energy efficient, because running infrastructure in the cloud is much more energy efficient than running on premises, but has also freed up resources to work on renewable initiatives.
Innovation & technology for Net Zero
Analysis by the International Energy Agency (IEA) found that 75% of the emissions reductions necessary to achieve net-zero scenarios depend on technologies that have not yet reached commercial maturity. These targets depend on major acceleration of innovation in four key areas – electrifying heat and transport, carbon capture, utilisation and storage (CCUS), green hydrogen and bioenergy.
The electrification of energy is recognised as one of the most potent forces driving the energy transition, but faces challenges due to the high costs of implementing new infrastructure, and because many of the necessary technologies are not yet mature.
Reduction in emissions from existing oil and gas industry is also important, at least in the short term, and CCUS plays an important role in offsetting emissions in hard-to-decarbonise sectors. Encouragingly, the global Carbon Capture and Storage (CCS) institute last year witnessed a 33% combined average growth rate in CCUS projects.
David Eyton, EVP in Innovation & Engineering of BP, pointed out four challenging areas: 1. intermittency of renewable power supply; 2. replacing fossil fuels in ‘hard-to-abate’ sectors (e.g. heavy duty transport, high heat application in industry); 3. retrofitting low carbon heating and cooling into the built environment; and 4. enhancing carbon removal from the atmosphere through either natural or human actions. There is always a balance to strike – investment in improving existing infrastructure versus creating new infrastructure and new consumption devices such as Tesla. David also emphasised the importance of modularity – making small modules of solar PV cells, wind turbines and electrolysers that may then be scaled up, in order to improve flexibility and reduce the cost.
Ahmad O. Al-Khowaiter, CTO of Saudi Aramco, discussed three steps to reduce emission from the existing oil and gas industry. First is to achieve zero routine flaring. Flaring of gas emits CO2, black carbon and other pollutants. About 22% of the emission from the production of oil comes from flaring. Second is to introduce more renewable energy into the production of energy intensive processes, such as in heavy oil and tar sands. Third is the optimisation of reservoir production, minimising the energy of production and minimising fluid production. There are a variety of technologies that could be applied and incorporated in these steps.
Trends in renewable energy
Developments in wind and solar energy have rapidly increased in the past ten years. In the wind sector, bigger turbine blades, better and cheaper materials and better use of data have driven multiple efficiencies and cut costs. In the solar sector, huge increases in scale along with steady improvements and quality control have pushed prices down at an exponential rate.
Despite this, continuous demand for cost reduction, higher efficiency and political support are still driving a rapid growth in these sectors.
The market for clean hydrogen solutions has gained serious momentum over the last year, and global industries are eager to learn how to make hydrogen a part of their sustainability and operational efficiency plans. Hydrogen production, storage and utilisation are still challenging, leading to exciting opportunities in this field.
Offshore wind – moving wind turbines offshore brings with it the advantages of higher capacity and higher efficiency. Unlike onshore wind, which consumes land, offshore wind has a breadth of resources around the world. Felipe Arbelaez from BP expressed his confidence in the offshore wind industry. Although it comes to an inflection point of growth, the long term development of offshore wind is still promising, and is becoming more competitive. He foresees continuous growth in double digits by 2030. Steve Dayney from Siemens Gamesa pointed out the sustainability that needs to be realised by the technology as it heads towards industry maturity and supply chain growth. The logistics of wind turbine including transport and storage remains challenging. Siemens Gamesa plans to make further investment in technology and innovation relating to sustainable turbine installation and transportation across the globe.
Solar – The solar supply chain continues to invest in hardware and software to allow their products to remain cutting edge. Nathanael Esposito from RWE Renewables Americas and Jeff Krantz from Array Technologies both discussed the development of solar trackers. Constantly evolving core technologies are used to remove points of failure of components within solar trackers. Array Technologies is largely working on reducing installation costs using a clamping mechanism, and working on risk mitigation especially during different weather conditions. They also developed a machine learning software that improves the output of the plant which are more efficient and more related to data. Michael Irwin from Hunt Perovskite Technologies LLC, emphasised the advances in research relating to printable, high efficiency and low cost metal halide perovskite.
Hydrogen – Interest in low-carbon hydrogen as a decarbonisation tool reached unprecedented levels in 2020, driven by favourable policies and funding as well as the expectation of continuing cost reduction of low-carbon hydrogen, including green hydrogen produced by electrolysis powered by renewables.
Air Products & Chemicals plans to invest $7 billion in green hydrogen, aiming to produce 650 tons a day of green hydrogen in 2025. Siemens Energy, alongside several international companies, is carrying out the Haru Oni project in Chile to produce green fuels from wind energy and water. In this project, Siemens Gamesa delivers the key equipment such as 3.4 MW wind turbine and PEM Si-lyzer 200 based on a power rating of 1.5MW. This project aims to achieve 130,000 liters in pilot phase and then scale up output to about 55 million liters e-fuel by 2024 and 550 million liters by 2026. Mitsubishi Power Americas introduced the Delta Utah project to repower the power plant, capable of using 30% hydrogen. Another ground breaking project introduced is the underground hydrogen storage in a huge salt dome, aiming for commercial operation in 2025.
Patent filing trends
To add our own perspective, we have seen patent filings in renewable energy sectors such as wind and solar energy peak in 2018. However, although the numbers overall have been decreasing, there are still many new areas of technologies within the sector that are producing increasing number of patents. In offshore wind, we see potential growth in areas relating to floating structures suggesting increasing interest in the developing floating offshore wind sector. In the solar sector, research on PV cells based on novel materials or structures such as perovskite solar cells is still very active. As for hydrogen, a promising increase in the number of patent filings can be seen in energy storage, hydrogen production by water electrolysis, and the use of hydrogen technology in transportation (e.g. using fuel cells), etc.
In the progress of reshaping the global energy system, technology and innovation are critical tools for navigating the energy transition and achieving Net Zero. There are a huge number of challenges, but also opportunities for companies and investors to play a role. We foresee a rapid and sustainable growth in renewable energies and big potential for technology developers and investors in the next 10-20 years.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it
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Xiaoxi Zhu
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