Tracking net zero
Is technology the answer?
The 1.5 degree target cannot be achieved without technological assistance, says the Intergovernmental Panel on Climate Change.¹ We looked specifically at the technology fields that could make optimistic climate scenarios more realistic.
Tracking transition enablers: Where do we stand with technology?
To reach net zero by 2050, over 90% of global electricity generation in 2050 will have to come from low-carbon energy sources such as renewables, nuclear and biomass. Specific renewables of interest for our tracker are solar photovoltaic (PV) and wind, as together these account for over 75% of global electricity generation in the NGFS Net Zero 2050 scenario.
Within the area of energy efficiency and storage, the necessity of Electric Vehicles (EVs) and batteries for net zero transition is readily apparent considering that road transport accounts for over 18% of total CO2 emissions globally. Currently, the benefits of EVs are diminished by the coal-intensive electricity they use, both during manufacturing and exploitation. According to EDF, over a third of the lifetime CO2 emissions from an EV car comes from the energy used in production. Low-carbon electricity, alongside improving battery efficiency, will help cut both manufacturing emissions as well as day-to-day emissions.
Building efficiency includes technologies such as insulation, heat pumps, and on-site renewables. In 2021 the operation of buildings accounted for 30% of global final energy consumption and 27% of total energy sector emissions, according to the International Energy Agency (IEA). Building insulation reduces the heating required for buildings. Most of the energy used in both EU and UK homes, at just over 60%, is for space heating. Unlike many other technologies key to the transition, those technologies needed to achieve building sector decarbonisation are mature and widely available – such as energy efficient building envelopes, heat pumps, and on-site renewables. However, their adoption is hampered by multiple cost and non-cost barriers.
Hydrogen’s abundance and energy density make it the most useful molecular store of energy. While its importance in the net zero transition varies widely across different models and scenarios, at the very minimum it will be needed to fill the gaps where electricity cannot easily replace fossil fuels including in:
- steelmaking and chemical industries,
- the heavy transport sector,
- and peak power generation.
While currently hydrogen is primarily produced from fossil fuels, hydrogen produced from renewable energy (green hydrogen) could play a huge part in any net zero pathway. Blue hydrogen, where the resulting CO2 emissions are captured and stored, could also have a role in the transition.
Defining scenario thresholds for technology
What does this mean for investors?
There is reason for optimism. On technology enablers, there has been notable acceleration in renewables investment and green hydrogen expansion across the world in 2022. Key policy initiatives undertaken in 2022 in the US and Europe in particular should keep this momentum going. The technology and supply chains of renewables, and their differences to those of fossil fuels, are in themselves important global economic and geopolitical considerations. Investors should especially keep an eye on advances in battery storage.
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