While renewables are chugging along quickly enough that fossil fuel demand is likely to soon peak, the trajectories of frontier technologies like hydrogen and carbon removal remain uncertain, said the International Energy Agency in its annual outlook on how the global energy transition is going.
Renewables deployment (especially for solar, but also to a lesser extent for wind) is accelerating rapidly, with a record-setting more than 500 gigawatts set to be installed this year. Combined with the policies and investments of governments worldwide, this momentum — as IEA executive director Fatih Birol shared in an op-ed last month — means that demand for coal, oil, and natural gas is set to peak before 2030.
“But a full clean energy transition will require progress in all areas, including those where emissions are harder to address,” said the report, released Thursday. “This necessitates policy support for innovation and early deployment,” especially in areas like low-emissions hydrogen and carbon management.
Low-emissions technologies are certainly making progress, with 400 GW of electrolysis for hydrogen and over 400 million metric tons of carbon capture capacity “vying to be operational by 2030.” But follow-through remains in question.
These projects, the report said, could potentially meet the milestones of the so-called announced pledges scenario (which captures all national ambitions and targets as of the end of August 2023), “but cost inflation and supply chain bottlenecks could hamper progress.”
Getting prices down and supply up for low-emissions technologies like green hydrogen (produced via electrolyzer) is particularly vital for industrial decarbonization.
“Pricing emissions from industry remains important to stimulate the switch to clean energy because it helps to improve the cost competitiveness of clean energy technologies and boost their adoption,” the report said, citing the potential of carbon pricing and subsidy reform to raise the cost of conventional steel and encourage adoption of green steel instead.
The outlook for carbon management and other new technologies like new battery chemistries and ammonia as fuel for ships is similarly uncertain. A scenario in which we reach net zero by 2050 “relies on an extremely rapid pace of innovation,” and demands that governments “give a high priority to research, development, demonstration and deployment activities in these areas, especially at a time when capital markets are becoming more expensive to access.”
The report cited the Inflation Reduction Act as an example of “unprecedented” policy support for the deployment of low-emissions technologies like hydrogen and carbon management.
The overall market uncertainty for these and other technologies underscores the central alarm in the report: while major progress is underway — so much so that limiting warming to the 1.5 degrees Celsius target of the Paris Agreement is still possible — we still aren’t moving fast enough, or investing enough.
“Simply cutting spending on oil and gas will not get the world on track” for net-zero emissions, the report found; “the key to an orderly transition is to scale up investment in all aspects of a clean energy system.”
