Government must play a greater role in the global energy market, either through a direct stake or as a co-investor, to support the new emerging energy system, according to a new study by PwC.
The report, Inventing tomorrow’s energy system: The road ahead for molecules and electrons, finds that the growth in renewables, estimated to account for 90% of the global energy market by 2050, and scaling up of hydrogen, will lead to a greener but substantially more complex energy market.
Electrons produced by renewables are set to power factories, heat and cool buildings, fill up batteries that will capture power and become generators and, as electrification hits the transport sector, emerge as the major fuel for cars. While hydrogen will link the electricity and gas markets, allowing for large-scale storage, powering of heavy-transport, and the massive decarbonisation of industrial power demand. Consequently, sectors such as Oil & Gas, Utilities, and Chemicals, which are currently sharply delineated, will begin to converge and form into integrated energy systems over the next decade.
This enormous shift in the global energy sector and the players within it, will require greater coordination and collaboration between government and the market to successfully work towards a greener future.
Dr. Raed Kombargi, Partner, Strategy& Middle East, said: “From South Korea to the United States and Europe, massive economic stimulus is being aimed at building more resilient and sustainable energy systems, providing a new influx of investments aimed at strengthening decarbonisation efforts. The future points towards a much greener system than the one we have today and, from generation to application, a significantly more complex one.
“The development of the new energy system is too complex to leave to the market. Governments will need to take a far more active role in shaping the future and will need to take part either directly or as co-investor.”
To meet global emissions targets, government and business must work together in new, and untested, ways to realise the full potential of renewables. Getting the energy transition right is not only critical from an environmental perspective, but also an economic one.
The report estimates that the cost of transforming the electricity networks in Europe alone will be at least USD$2 trillion over the next 30 years.
It also cites the International Renewable Energy Agency’s forecast that USD13 trillion is required to be spent on power transmission and distribution networks across the globe in the years to 2050.
Dr. Raed Kombargi, Partner, Strategy& Middle East, continued: “As we look ahead to a low carbon future, market participants will need to fundamentally rethink the market-based approach to energy markets, and investors will need to accept the presence of a more ‘visible hand’ guiding and orchestrating the energy transition.
“Innovations from Green Bonds, directly investing in critical infrastructure, to scaling ‘smart’ technologies and modernising operational standards and regulations, all offer governments around the world the opportunity to demonstrate clarity, coordination and ambition in policymaking.”