Annual Global Investment in Energy Transition Tech Touched Record Level of US$ 1.1 Trillion in 2022

In 2022, Annual Global Investment in Energy Transition Technologies Touched Record Level of US$ 1.1 Trillion

Deloitte’s recent report on India’s energy transition pathway, highlights three pillars of the energy transition pathway. The report mentions three important components in energy transition: grid decarbonisation, industrial decarbonisation, and transport transition.

Investments in Energy Transition 
In 2022, annual global investment in energy transition technologies touched a record level of US$ 1.1 trillion, witnessing a 31 percent annual gain. Renewable energy (contributing 45 percent to investments) has been the primary focus areas 

The report cites examples of the European Union, the US, Japan, and Korea, which are the frontrunners in unveiling directives, regulations, and support programs. The report applauds these countries to drive a holistic energy transition. The report says that India is a fossil fuel dominated economy, with primary energy consumption of 880 million tones of oil equivalent (Mtoe). The report elaborates that the electricity, industry, and transport industries account for more than 70 percent of the primary energy demand. It composes part of 85 percent of the energy-related Greenhouse Gas (GHG) emissions.

Industrial Contribution:

The report cites that the industry sector is likely to be 65-70 percent to the total energy demand. Within the transport sector, the report finds that the passenger and freight demand is expected to increase by 3−5x by 2070. However, the report forecasts that the energy demand will remain moderate due to a high uptake of Electric Vehicles (EVs) with higher energy conversion efficiency. As mentioned before, the report elaborates that India’s energy transition is anchored by three fundamental pillars – 1) Grid decarbonisation, 2) Industrial decarbonisation, and 3) Transport transition.

Three pillars of Energy Transition:

Grid Decarbonization

The share of electricity in the final energy mix is expected to increase from 18 percent in 2020 to more than 50 percent by 2070. Grid decarbonisation will hinge on a significant increase in RE penetration in the current mix. To achieve net-zero by 2070 and decarbonise grid operations, 2000 GW of grid scale RE (wind + solar) and another ~1,000 GW of RE for green hydrogen production is required. This translates into capacity addition of 50 GW/year of RE in the future from a historical average of 15–20 GW annually. An accelerated pace of capacity deployment is critical to achieve energy transition and net-zero ambitions.

Resource Sharing

The report adds that to achieve this, the states should also focus on faster grant of open access to industrial consumers. With these consumers. They can prepare short-duration energy storage (two- and four-hour battery storage systems, and pump storage projects), and subsequently build a significant amount of Long-Duration Energy Storage (LDES) systems. For example systems are six-to-eight hours of battery storage, pump storage projects, and H2 storage (to be fired in gas turbines and used for seasonal storage solutions). Existing gas stations may be retrofitted with a hydrogen turbine that will act as a long-duration seasonal hydrogen storage.

Annual Global Investment in Energy Transition Tech Touched Record Level of US$ 1.1 Trillion in 2022

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Industrial Decarbonization

The second pillar (pillar 2), industrial decarbonisation will be crucial to abate 30 percent of energy-related emission. The report evaluates that, despite having no single solution to industrial decarbonisation, companies should exercise a broad portfolio of options to reduce carbon footprint. The report mentions the industrial sector, steel, cement, aluminum, and fertilizer contribute 70 percent to the total emission.

The report deep dives into decarbonisation of these sectors. It evaluates each industry sector at different levels for decarbonisation, depending on technical feasibility, economics, and scalability. It cites examples of steel – Green Hydrogen based Direct Reduction of Iron (DRI), renewable energy, and CCUS; cement – CCUS and renewable energy; aluminum – renewable energy; and fertilizer – green hydrogen, CCUS, and renewable energy. Green Hydrogen (GH2) for fertilizer, refineries, steel production, and transport. The study finds that a substantial amount of energy demand is expected to be met by GH2 by 2070, with total demand for GH2 reaching 50 million tons (MT).

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Global investment in energy transition

Enablers for Transport Transition

The (pillar 3) transport sector is required to transition completely to low-emission technology, such as Battery Electric Vehicle (BEV), Fuel Cell Electric Vehicle (FCEV), Hydrogen Combustion Engine (H2-ICE), and biofuel to achieve transport transition. The report gives details on the widespread development of charging infrastructure and efficient urban planning are keys to transition to low carbon transport. Key recommendations to encourage Public-Private Partnership (PPP) to set up charging infrastructure and hydrogen refueling systems.

Conclusion

Energy Transition for a developing nation such as India would be an expensive proposition, with an estimated requirement of an average annual spend of ~US$ 300 billion between 2022 and 2070, warranting significantly higher outlay in the initial years. Given the large magnitude of investment required, government and concessional funding would not be sufficient. Innovative financing models need to be adopted for attracting private investment into the market and bridging the funding gap.