After years of study and two reports analysing the depth of the climate crisis, the third part of the Sixth Assessment Report (AR6) by the Intergovernmental Panel on Climate Change (IPCC) is out. The report represents the most extensive and collaborative investigation ever undertaken on climate change and global warming. It shows why the energy industry must act now, and how it can mobilise to end its contribution to global warming.

The three IPCC reporting groups examined studies of global emissions, their effects, and the human changes they invite, over several years. This latest report marks the last instalment from the IPCC in this assessment, covering how all human activity must change to prevent the continuation of climate change.

The report’s sixth chapter covers the changes needed to energy systems over 219 pages. On the first line of its executive summary, the report states: “Warming cannot be limited to well below 2°C without rapid and deep reductions in energy system CO₂ and GHG emissions”.

“Immediate, rapid, deep” energy system CO₂ and GHG reductions

AR6 shows solar power generation as having the greatest single impact of any technology, in any industry, in reducing greenhouse gas production. Wind power follows in a close third, after preserving existing ecosystems and notably before agricultural carbon sequestration.

Solar and wind have this level of impact because of the immediate need to start a decline in overall net emissions. Climate researchers behind the report have said that overall emissions must fall now in order to maintain a liveable planet.

Beyond this, the energy system “will require substantial changes” over the next 30 years. Unmitigated coal power generation must fall by at least two-thirds in the next eight years, and low-carbon generation must produce at least 93% of power by 2050.

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For those following the progress of the climate science behind the energy transition, these summary findings may sound familiar. However, the IPCC report presents these with a far greater body of evidence than ever before. Beside this, the report shows the specific changes the power industry will need to make to continue working on a liveable planet.

Some of the conclusions are obvious to anyone: fossil fuels must go, and current investments risk being stranded and unprofitable.

The report authoritatively states that without changes to the current energy infrastructure pipeline, the world remains on course for an unliveable amount of warming. It states: “Limiting warming to well below 2°C will strand fossil-related assets, including fossil infrastructure and unburned fossil fuel resources.”

It also acknowledges that different countries will have different approaches to net-zero energy systems. However, all net-zero systems will have some common factors: “widespread electrification of end uses”; “use of alternative energy carriers”; “more efficient use of energy than today”; “greater energy system integration across regions and components of the energy system”, and “use of CO₂ removal”.

Renewables and stranded assets

With prices falling 62% since 2015, photovoltaic solar panels are the first given example in any economic argument for renewable energy. The report predicts another 16% price fall by 2030 with “low confidence”, though it has “medium [levels of] evidence” to support this prediction.

The report matches this economic argument with a technological one, stating: “The global technical potential of direct solar energy far exceeds that of any other renewable energy resource.”

Between 2010 and 2019, Europe’s share of solar power capacity fell from 74% to 24%, as Asian development took off. At the same time, wind power growth in Asia has surpassed that of Europe, which had 50% of all development in 2010. However, much of Asia still relies significantly on coal power, and the risks associated with it.

Report authors expect the move away from fossil fuels to result in “stranded assets”. This term covers currently valuable resources, infrastructure, and investments that would see “unanticipated or premature write-offs, downward revaluations, or conversion to liabilities”.

Already, some large mining companies have divested from coal production, considering it a liability. When limiting global warming to 2°C, the upper limit for preventing total climate breakdown, the report states that approximately 80% of coal reserves “will remain unburnable”. The same would apply to 30% of oil assets and 50% of gas assets.

Unless they can have potential for adaptation, the report states that “practically all long-lived technologies” could share this fate. It continues: “Scenario evidence suggests that without carbon capture, the worldwide fleet of coal and gas power plants would need to retire about 23 and 17 years earlier than expected lifetimes, respectively, in order to limit global warming to 1.5°C and 2°C.”

This, in turn, could destabilise countries with a large reliance on fossil fuels, preventing a “just transition”. Report authors recognise the incentive to keep polluting assets in operation but say that enforced sustainability reporting and better risk communication will make it easier to justify retiring these assets.

How to transition

Researchers state, with high confidence, that “without additional efforts to reduce emissions, it is very unlikely that energy system CO2 emissions will decrease sufficiently to limit warming to well below 2°C”. The report defines “very unlikely” to have a chance of less than one in 10, making the goals of the most recent COP conference seem both more urgent and more unlikely.

Comparing decarbonisation policies with policies relying on technological innovation to drive down emissions, the report concludes that the energy sector will not be decarbonised without explicit policy actions to reduce emissions.

The “most cost-effective” energy transition will come from electricity generation decarbonising before the rest of the energy sector. In order to limit global warming to 1.5°C, net CO₂ emissions would need to reach zero between 2044 and 2055. However, the report states that this remains unlikely.

In this strategy, renewable and low-carbon power generation would most likely create between 74% and 82% of electricity by 2050. Currently, this percentage sits at approximately 20%. In this time, global electricity demand is expected to double.

At this point, solar and wind will dominate low-carbon generation. More reliable clean power generation will continue to play a role, though this will mostly be for more decarbonised economies, looking to eliminate the last 20%-30% of their greenhouse gas emissions. Given the rate of decarbonisation in most places, the report expects more diverse clean power generation development from 2030 onwards.

How much can we rely on future fuel technologies?

Electrification of transport, heating, and cooking remains “a critical near-term mitigation strategy”. This would lead electricity to directly supply 48%-58% of all energy end uses by 2050 when limiting global warming to 1.5°C. Limiting global warming to 2°C would require electricity to provide 36%-47% of end-use energy, from the current level of approximately 20%.

The future of “Power-to-X” solutions, such as hydrogen and ammonia, remains less certain. The report says that use of these will depend on local circumstances. “Most scenarios,” it continues, “find that hydrogen consumption will grow gradually, becoming more valuable when the energy system has become predominantly low carbon.”

However, the report emphasises these technologies as having the ability to “substantially improve the economics of net-zero energy systems”. Long-term decarbonisation costs “are not well understood”, decreasing business confidence in the transition. However, advances in power-to-X systems, synthetic fuels, and new biofuels have the potential to change this.

Turning the problem on its head, efforts to reduce energy demand will naturally reduce pollution. However, governments and industries generally dislike this strategy because of its perceived impact on freedoms. Simultaneously, new energy tariffs and changing distribution systems have promised to make consumers think more about their energy consumption. In this way, grid operators hope to reduce system demand from the consumer side.

Report authors have “high confidence” that the difficulty of measuring energy efficiency prevents them from predicting how it may change. Even so, current papers expect energy efficiency to “make an important contribution” to net-zero energy systems. Part of this will come through greater integration with other sectors, providing mutual benefit. Otherwise, integrating power with decarbonisation presents new opportunities, but enables overall inefficiency.

Relying on direct decarbonisation: boon and burdens to the energy industry

Some papers suggest that limiting energy demand is the only way to eliminate the need for CO₂ removal systems. Immediate rapid cuts to emissions would lessen the need for these systems, but according to the report, “a number of studies suggest that carbon dioxide removal is no longer a choice, but rather a necessity to limit warming to 1.5°C”.

This need for CO₂ removal can benefit power systems by incentivising CCS-linked biomass plants. On the other hand, CCS plants’ thirst for water makes them difficult to operate in some regions due to seasonal scarcity. “Power plants with CCS could shutdown periodically due to water scarcity,” the report states. “In several cases, water withdrawals for CCS are 25%–200% higher than plants without CCS.”

In scenarios that would likely limit global warming to below 2°C, such power plants would need to cumulatively remove approximately 328 billion tonnes of CO₂ by 2100. This is equivalent to approximately 10 years’ global emissions at the current rate, and approximately 3% of global potential capacity.

In comparison, direct air capture (DAC) plants would capture approximately 11 times less over the same period of time. However, this would still require the massive expansion of an industry that currently operates on a handful of sites. In these places, such as Iceland, DAC incentivises renewable power generation. It may also give renewable power plants another source of “midstream income” via carbon offsetting contracts, but this remains at early stages.

Ultimately, the speed of the energy transition will come down to how it combines with the overall improvement of living standards. The report measures these via the UN’s Sustainable Development Goals, but also emphasises the importance of “just transition” and linking the energy sector to other industries. It’s energy chapter concludes: “Overall, the scope for positive interactions between low-carbon energy systems and sustainable development goals is considerably larger than the tradeoffs.”