The oil and gas industry showed its tenacity and adaptability by accelerating its energy transition to reduce emissions in the wake of COVID-19 pandemic, according to Deloitte.

In its 2021 Oil and Gas Industry Outlook, Deloitte said that a prominent immediate reaction to the oil price crash in March was that low oil prices would slow the energy transition.

“The logic is that with the oil price under US$40-45/bbl, green energy didn’t seem competitive, and oil and gas companies would have far less ‘extra’ capital to invest in the green energy business,” Deloitte said.

However, the opposite occurred when oil and gas companies announced their net-zero goals during the peak of the pandemic.

Countries around the world also committed to net-zero targets by 2050.

The World Economic Forum (WEF) described these announcements as a “most welcome set of New Year’s resolutions”.

“But as with our personal commitments to get in shape and lose weight, experience shows that most resolutions will fail unless they are accompanied by short-term actions and targets,” it said.

According to the WEF, world leaders needed to match long-term net-zero pledges with short-term goals for reductions through proven technologies until longer-term strategies such as hydrogen, carbon capture and storage, or direct air capture were proven economical and scalable.

It said that one of the biggest feasible opportunities was accelerating the transition away from coal.

However, energy security, particularly in developing companies, was a major challenge.

“To encourage developing countries to move away from coal electricity in the next decade will require a massive, unified effort to finance, equip and enable energy transition,” the WEF said.

“What is urgently needed now is for experts and development finance institutions to do the groundwork to prove that energy transition mechanisms are feasible and can work on a large scale.

“Only by accelerating this transition can we move renewables from the margin to the mainstream and avoid any further overshoot of climate targets.”

Head of solar research at Wood Mackenzie Ravi Manghani, in an interview for The Edge, said solar would be central to the energy transition.

“Solar is king of the low-carbon technologies,” he said. “Its new-found competitiveness makes solar central to decarbonising power markets and, in time, it can fuel green hydrogen’s push into hard-to-abate sectors.”

Mr Manghani said that cheap solar would drive renewables prices down, leading to more expensive coal and other thermal generation being pushed out of the market.

However, with the growing reliance of solar came what Mr Manghani described as the ‘duck curve’, where prices depressed during the day when solar was producing and bounced back when the sun set.

“The way to combat this is through building battery storage; a technology that is going to get much bigger,” he said.

According to Mr Manghani, an emerging green hydrogen industry would also help to combat the duck curve in the future.

“The next two decades are about power markets, but green hydrogen holds the promise of a second wave of potential growth for solar in the mid-2030s,” he said.

“The opportunity goes beyond the domestic market because hydrogen is transportable in liquid form.”

Clean hydrogen and energy storage technology were two of the five priority technology and economic goals listed in the Federal Government’s Technology Investment Roadmap.

In the roadmap’s first low emissions technology statement, Energy and Emissions Reduction Minister Angus Taylor said that although proven technologies played an important role in Australia’s energy future, they were not the focus of the roadmap.

“The Government will continue to invest in mature technologies where there is a clear market failure, like a shortage of dispatchable generation, or where these investments secure jobs in key industries,” Mr Taylor said.

“But the roadmap recognises that widespread deployment is primarily driven by the private sector, with a targeted role for public investment.”

Return to eNews