A New Dawn

Is the Sun Rising on Efficiency as the Gateway to Decarbonisation?

I am in Dubai for a very different COP.

The psyche in the build-up to this COP has, in many ways, been dominated by oil and gas. The UAE is a petrostate. The COP President is the CEO of the Abu Dhabi National Oil Company. The UAE is planning a significant expansion in production. It has been accused of using the conference to do deals to sell more, which it denies, amongst other things on the assertion that it doesn’t need the conference to do so. The CEO of Exxon is attending COP for the first time. Exxon is one of at least 50 top oil companies attending the conference, including Occidental Petroleum, ENI, and RWE. Exxon says that previous COPs have been too focussed on renewables rather than dealing with the emissions from oil and gas. Are they right?

The oil and gas companies contend that there will be “continued demand” for their product. On this, they must be right. Oil, gas and coal still represent 80% of the world’s energy supply. Electricity only represents 20% of energy. Only a third of electricity is green where renewables are doing well. This will require at least a tripling or quadrupling of renewable energy capacity to match demand, let alone cater for any margin of error, intermittency of supply or large-scale displacement of fossil fuels for thermal, transport and other uses that constitute the other 80% of energy demand that is not yet met by electricity.

In the transport sector, for example, which accounts for around 30% of global energy use, the entire global fleet of electric vehicles of any kind has only so far displaced some 2% of oil demand. Overall, while renewable energy capacity has been accelerating rapidly, the growth is still being overwhelmed by the increasing demand for fossil fuels. Carbon emissions continue to rise at much the same rate as they have for the last 20 years. Most of the world’s food still depends on the energy intense Haber-Bosche process to make ammonia for fertilizers from natural gas, and then fossil fuel-based transport to fly, ship, or truck it from the farm to the fork. (The round-trip energy efficiency is less than 10%, meaning that over 90% of the energy used in the food system can be lost in the process).

Exxon argues that all the focus on renewable electrons overlooks the role that hydrogen, biofuels and carbon capture solutions can play. Oil and gas companies are inclined to say that they are good at this. Of course, the bigger question is how good these solutions are, not just how good they are at doing them. In my last Substack, “A hole in the bucket” (26 November 2023), I explained that, all-in, only 20-40% of the energy used in the process of producing hydrogen for electricity makes it through to the end use, considering the reforming, electrolysis, conversion, compression, transmission and distribution losses. I also referred to the fact that carbon capture does not address the heat losses associated with centralised power generation and that it seems prohibitively expensive, estimated by the IEA to need $3.5 trillion per annum, which, however good oil and gas companies are, can be better spent. Biofuels show a lot of promise if the source of the fuel is sustainable, if it is available at scale and if emissions are controlled. Achieving any of these objectives has proven elusive.

Around 50 oil and gas companies used COP28 to pronounce a pledge, announced by the COP President Dr Sultan Al Jaber, to cut methane leaks to “near zero” by 2030. Methane matters a lot because it has been estimated to be up to 80 times more potent a greenhouse gas than carbon dioxide, measured over a 20-year period. Stopping methane leaks could make a double-digit percentage impact on emissions from production. The pledge was hailed by some, while the Environmental Defense Fund (which has been championing this approach at least since the dinner that they held on the subject and to which they invited me at Davos in 2012) and the International Energy signed on to monitor progress. However, over 300 organisations panned the pledge as greenwash. The UN Secretary General, Antonio Guterres told the oil and gas companies that they had taken a step in the right direction but had fallen short. The core issue, he highlighted, was emissions from use.

Indeed, while fossil fuels are considered ‘dirty’, responsible for some 80% of human made greenhouse gas emissions, the dirty secret of the global energy business is that most energy is wasted further downstream, after the losses associated with extraction, conversion, and leaks (10% of primary energy) at the production stage. Heat losses at the generation stage (50% of primary energy), and transmission and distribution losses (10% of primary energy) are primarily responsible. Indeed, every unit of energy saved in these processes, for instance through on-site generation (using renewables, green or natural gas, heat recovery, electrification, and other established methods), avoids the need for around 2.5 units of energy traditionally supplied into the system. And that’s before we get to the demand side.

70% of energy is used in buildings, industry, and transport, and too much of it – in my experience around 20-30 - is wasted. Losses in buildings and industry typically occur through sub-optimal mechanical and electrical equipment, such as lighting, heating, cooling, motors and insulation. In transport, the “well to wheel” efficiency of petrol vehicles can be as low as 20-30%, compared to up to 85% for electric vehicles. The International Energy Agency’s latest energy efficiency report, released the day before COP28, stated that improvements in the technical efficiency of buildings and equipment, materials efficiency, behaviour changes and greater electrification of buildings, industry and transport could achieve some 7 Gt of carbon emissions, equivalent to all of China’s final energy use in 2022, or 50% of emissions reductions by 2030. So, can COP28 be a ‘new dawn’ for energy efficiency?

This is the first COP at which energy efficiency, which is the largest, fastest, cheapest, and cleanest source of greenhouse gas emission reductions, is one of the primary stated objectives of a COP. While COP 28 calls for a tripling of renewable energy capacity by 2030, it also calls for a commitment to double the rate of energy efficiency improvements, making efficiency the new entrant to the limelight. The first time that energy efficiency made it into the headline narrative at a COP was 2021, at the end, in the Glasgow Climate Pact. They were words, extras, in the summing up, but they signalled intent. This is the first time that energy efficiency has had a starring role, a clear script and stage direction, and featured in the opening credits.

If COP 28’s focus on demand side energy efficiency offers a ‘new dawn’, I would dare to go one step further and consider that the ‘sun is rising’ if the final agreement calls for both efficient, and decentralised generation of, energy. Or what I call: ‘EDGE’.