CERAWeek to address energy crossroads: IHS Markit Chief Energy Strategist Atul Arya

As the world transitions toward a low-carbon energy sector, traditional forms of extracting, generating, and transmitting energy are giving way to new and emerging technologies. Battery storage, fuel cells, and hydrogen are paving the way for a low-carbon future.

Policymakers, developers of emerging clean technologies, and energy companies, along with financiers, find themselves at a crossroads of a global energy transition. Some emerging technologies aiming to reduce the level of greenhouse gases aren't yet cost effective enough for mainstream markets, but the time for action has arrived.

IHS Markit Chief Energy Strategist Atul Arya shares his views on emerging technologies and the upcoming discussions at CERAWeek 2021, which will be held 1-5 March virtually. He said he sees CERAWeek as a "safe space" for all stakeholders to come together to discuss the most critical issues facing the globe today.

Which clean technology or energy transition technologies have attracted the most investment, and why?

Arya: If you go back for a few years, we used to talk mainly about solar photovoltaic and wind being the clean technologies, and both were focused on the power sector. They continue to attract a lot of investment, and there's no shortage of investment in that today, but we also are seeing new areas that are drawing investment.

One is electric vehicles, and other is battery technology for both electric vehicle and for energy storage applications. We're seeing tons and tons of investments going into that, and related areas like charging infrastructure, for example.

And even the big energy companies, because they have a presence in service and petrol stations, want to use the infrastructure for charging. The electric vehicle sector is moving at a very fast pace. In fact, Tesla's market cap is bigger than the next 10 auto companies combined. It's onto something, at least from a market perspective.

The other area, which has all of a sudden mushroomed at very rapid pace, is hydrogen. Everybody's talking about the hydrogen economy. It's kind of deja vu because we had the same enthusiasm some 20 years back. The difference this time is that the technology has improved and there is also much focus on climate change and decarbonization. We are seeing a lot of investment growth in what they call green hydrogen, which is hydrogen being produced from renewables, and also blue hydrogen, which is hydrogen produced from natural gas, with the carbon dioxide captured that comes off.

I will mention a few more technologies that are interesting. One is carbon capture and sequestration (CCS), which the world has tried working on for 20-plus years, but has never really scaled up. But in the last year or so, we are seeing a lot of activity, particularly from the big oil and gas companies who see that as something core to what they do. They can capture the gas and store it into the reservoir, which they do for other reasons. So that's the big focus. Even companies like ExxonMobil, which is not investing in other things, is investing in carbon capture and has set up a new business, which they announced a few weeks ago.

And the one which was surprising to me is geothermal, which has been around for a very long time, you know, forever, actually. And it then kind of disappeared because its scale wasn't that significant, and the costs were not that competitive either… and the opportunity was limited to some specific areas. But all of a sudden, geothermal is picking up again. One of the reasons is because it is one of the few clean sources of energy where oil and gas companies have very strong expertise. Some of the oil and gas businesses had very large geothermal businesses 15 years back and sold them because they thought it was not core for them. And now they're going back and reinvesting.

Can you talk about hydrogen as an energy source and the discussions CERAWeek plans to have around this low-carbon fuel?

Arya: In several panels, we're going to look at policy dimensions, we're also going to look at the technical dimension for hydrogen.

There is the blue hydrogen, which is mostly taken from reforming natural gas with the capture and storage of the ensuing carbon dioxide. Where power companies are leaping ahead is green hydrogen, which is very good because it involves the use of renewables. And the idea is to use dedicated renewables, which you can spare if you have too much renewable energy generation, to produce hydrogen, store it, or transport it. The key issue is that neither green or blue hydrogen is cost competitive.

One of the discussions during CERAWeek will be centered around how can we get the costs down, and then we have a session about the "colors" of hydrogen. Because there is not only green and blue, there's gray and also pink hydrogen, which is produced from nuclear power. So, clearly questions surround the environmental impact, and that will be a big part of the discussion. How do you reduce the impact if you are going to use fossil fuels to produce it? What are you going to do to reduce emissions?

What's the one burning question that you would ask a developer, an oil and gas company, a financier, or a policymaker?

Arya: I think the question would be which sector of the energy value chain is most attractive to you, and why? If the sentiment has shifted from oil and gas and the answer you get from a financier is "I don't want to invest in oil and gas," then that is a very important message and you will want to know why.

The question I would ask developers is about the majority of future growth in emissions coming from the emerging economies in Asia and Africa. I would ask what would be your strategy to have future growth and development in those countries be cleaner and greener. Less fossil fuels? What will you do to change that mix? Because, you know, there are still coal plants and coal consumption hasn't exactly come down. So, I would like to know what they're doing.

For policymakers, and this may be somewhat US-centric, my […] question would concern the fact that the public says they believe in climate change, and they want the companies and government to address climate change, but they have not supported paying for it. Here in the US, we have not been able, even in the greenest of states like Washington, to pass a carbon tax, twice. So, my question would be what are you going to do to change the minds of your constituents to have them agree to pay for some of the initiatives, which won't be easy. How do you convince your constituents that this is a good thing to invest in?

Posted 22 February 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst and

Cristina Brooks, Senior Journalist, Climate and Sustainability