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How EY and DNV GL see the future of energy

Thursday, January 23, 2020

Paul Bogenreider, energy futurist with EY, and Liv Hovem, CEO of oil and gas with DNV GL, present their vision of the future.

Paul Bogenreider, economist and 'energy futurist' with professional services firm EY, said he sees the future of energy as more evolution than revolution. 'As much as we might want to have a rapid transition, the energy transition is going to happen one car at a time, one solar panel at a time,' he said.

The key factor driving change - or not - is whether consumers can be persuaded to change, and what they really want.

The future of energy is ultimately determined by people's purchasing choices and what companies bring to the marketplace. Governments have some influence on this through their decisions about taxes and other policies, but maybe the climate change discussions focus too much on governments.

And we need to bear in mind that 'people like energy pretty much the way that it is,' he said. What people have now is what they like. Electricity from renewables has disadvantages over fossil fuels in terms of price, reliability and convenience. Persuading non climate enthusiasts to switch from a five minute gasoline fuelling of a vehicle to a 30 min electric charging won't be easy.

'The energy complex we have today has enabled enormous improvements in quality of life. It's going to be very difficult to give that up,' he said. Today's energy industry is also 'enormously profitable' for many companies.

In terms of technology, we are not far away from a point where electric vehicles can compete with gasoline vehicles, and society can function without climate change being a problem. But the bigger problem is likely to overcoming people's current habits, not technology.

The financial machine also needs to change. 'Energy is an efficient machine which funnels money out of savings accounts into the oilfield. The energy transition is the most significant capital re-allocation in the history of mankind,' he said. 'Capital markets are not equipped to move that quickly.'

The energy transition will not actually affect oil and gas people very much, Mr Bogenreider believes . Wells are already depleting faster than the demand for fossil energy is reducing, so the oil and gas industry still needs to attract investment for new developments, and so offer competitive returns.

Currently renewable energy is growing at a rate where it takes 10 years to supply a further 1 per cent of people's energy needs. To reach the targets, 'you have to go up 1 per cent every year for the next 20 years,' he said.

You don't need every business to become carbon neutral, because with carbon capture and storage, we can achieve zero carbon overall using offsets.

But getting CCS started needs 'some brave projects to move forward', he said, so the costs come down.
And without any carbon price, 'I struggle to visualise what the profit model [for carbon capture] looks like,' he said.

'My intuition tells me biofuels will be fairly critical,' he said. ' If you transition from petroleum to biofuels, you create a closed loop system.'

DNV GL's predictions

Liv Hovem, CEO oil & gas business area, DNV GL, said that the company wanted to make a single prediction of the future, not just a range of forecasts or scenarios.

In its 2019 'Energy Transition Outlook', published in September 2019. It predicts that global oil demand will peak in the mid-2020s. But gas will still account for 30 per cent of the energy mix in 2050 and oil 17 per cent. There will be 'significant uptake' for solar and wind, and electricity consumption will double by 2050. 63 per cent of energy will come from renewables.

Gas demand in 2050 will actually be higher than it is today - although we will see gas and renewables working closely together. 'Neither can make it by themselves,' she said.

A growing number of countries are setting targets to be zero emission, including Britain - although DNV GL predicts that Britain will miss this target.

Overall emissions will miss the Paris climate goals, leading to a 2.4 degree increase in temperature. DNV GL predicts.

DNV GL believes that the main reason carbon capture has not been installed yet is cost, but if technology was installed on a similar scale to renewables and wind, these costs could come down.
'It is a bit of chicken and egg situation. This requires some bold decisions,' she said.

'Our forecast says CCS will not be implemented at scale before 2040 unless there is a carbon price. So future lies largely in the hands of policy makers.'

But 'more than 40 per cent of oil and gas professional believe there will never be a global carbon price,' she added.

But can industry find other ways to implement carbon capture and storage? Ideas circulating include finding ways for hydrocarbons to support renewable energy, making hydrogen offshore by electrolysis from renewables or from gas + CCS,

She noted that offshore wind was barely being considered just a decade ago - that illustrates how fast things can change.

'Our industry is rapidly innovating towards a common goal. It is inspiring but we need much more of it,' she said.

Ms Hovem is a little more optimistic about persuading people to change, saying that 'people do adapt quickly to new technology. 'I see people around me do this. It is just a mindset.'

Ms Hovem said she is interested in technology which can be implemented using existing infrastructure - because one of the biggest obstacles to new technology is the need to build new infrastructure to support it.

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