The World Economic Forum Annual Meeting started this week. This yearly gathering brings together the top leaders from around the world for four days in Davos, Switzerland to discuss the most pressing issues that threaten the world’s economies. Numerous initiatives have been launched in Davos such as the System Initiative on Shaping the Future of Energy and undoubtedly, the energy transition is present on the agenda.
One of the most energy-focused panels took place on January 22, where energy experts across sectors shared their insights on a strategic outlook. The discussion was moderated by Katherine Hamilton, Director of the Project for Clean Energy and Innovation and had the participation of Fatih Birol, Executive Director of the International Energy Agency (IEA), Iain Conn, Chief Executive of Centrica, Jean-Pascal Tricoire, Chairman and CEO of Schneider Electric and Zhang Jianhua, Minister of Energy of China’s National Energy Administration.
Electricity as the future of the energy system led the discussion. “Global energy demand grows stronger but electricity demand grows two times faster,” Birol stated. According to him, the main driver is air conditioning systems, mostly in Asia. The real problem is based on what kind of energy sources power these devices and how does its consumption could become more efficient. For instance, a large part of China’s electricity system is powered by coal plants. “Energy efficiency measures have been applied and if these actions were not taken, today we will be facing an additional 1GT of capacity impacting directly on global emissions,” he added.
Conn believes that the final consumer plays a critical role in this matter, as technological breakthroughs provide more options and empower the end-user. “Digitalization is accelerating things. Technologies such as digital control systems, integrated solution platforms for business customers and optimized dispatch through digital systems are becoming a real business,” he said.
He cited a case study of over 1.3 million consumers that are able to control their heating systems from their smartphones. It was found that over 55 percent of them are saving close to 12 percent of natural gas on their energy bills just for being more in control of their consumption. The same happens with blockchain, which now permits the sale of energy between neighbors for optimization. “Through the System Initiative on Shaping the Future of Energy, we are trying to connect the dots,” added Conn. “One country learns about policy intervention and can share it with others and as particular ways to solving problems are found, we can translate it to other geographies.”
“Every time we give a consumer access to his or her energy bill, they immediately save energy”
Jean-Pascal Tricoire, Chairman and CEO of Schneider Electric
But is happening on the oil and gas front to accelerate this transition? asked Hamilton.
According to Conn, resource optimization is the answer. “Using oil and natural gas more effectively,” he explained. “On the oil side, the obvious way is transportation. A significant introduction of hybrid vehicles and the penetration of EVs. For natural gas, the biggest challenge is the decarbonization of heat. This will take a long time and initially we are going to be more dependent to natural gas.”
This is already happening in large industrial countries, as seen in China. The country is the largest net importer of natural gas in the world. The driver behind this momentum is the need to decrease its CO2 emissions and clear its skies. “By 2020, non-fossil energy and natural gas will account for 15 and 10 percent of overall primary energy,” explained Jianhua. “By 2030, these numbers will grow to 20 and 15, respectively.” The country is fertile ground for international cooperation to ensure energy security.
Regarding the transportation revolution, the world has reached 5 million EVs on the streets and half of this amount belongs to China. “To put these figures into context, this year we expect global oil demand will increase by 1.3 billion b/d and the effect of five million EVs on the roads amounts to 50,000b/d,” said Birol.
But according to him, EV penetration is not the end of the oil era. However, he adds that, if we want to impact global emissions, the decarbonization of power generation is needed.