Views around energy transition journey have changed. All who attended our recent London energy transition dinner agreed that the need to accelerate progress is needed, but a reframing of expectations across businesses, governments and individuals needs to happen. Out with grand, unrealistic and (as yet) unaffordable ideas such as green hydrogen, and in with pragmatic solutions including lower carbon fuels and a greater focus on energy efficiency.
When the energy transition started, businesses and organisations sprinted out of the gates, to create, develop and implement new projects and technologies. But with world events, difficulty obtaining capital and changing regulations and legislations, the industry is becoming more measured on what is achievable as we move towards net zero.
Over the course of the evening, our attendees discussed what can be done now and how we can combine what we have available to us now in conjunction with new technology and energy sources.
Aviation fuels
One example of using what we have now is Sustainable Aviation Fuel (SAF). This alone has been estimated by the International Air Transport Association (IATA) to help reduce around 65% of emissions needed by aviation in order to reach net zero by 2050. What’s more, SAF can reduce CO₂ emissions by up to 80% using a range of feedstock including waste fats, municipal solid waste, agricultural and forestry residues and can be produced synthetically. Synthetic fuels are thought to hold great potential, but the high level of investment to scale this is still a challenge.
Recently, the EU adopted ReFuel EU Aviation requiring aviation fuel suppliers to blend increasing amounts of SAF with kerosene starting with a 2% blend in 2025, rising to 70% in 2050. As noted in our previous papers, the EU has generally taken a ‘stick’ opposed to ‘carrot’ approach to initiatives, penalising businesses who do not comply, and their approach remains the same. This time, the penalties will be twice the yearly average of traditional jet fuel multiplied by the quantity of SAF that has not been uplifted for airlines, and twice the difference between the price of a tonne of SAF and the price of a tonne of kerosene for fuel suppliers. As a result, many airlines are now entering into forward purchase agreements for SAF worth around a total of US$45 billion, equal to €42.9 billion.
LNG the bridging the fuel
Making the switch to greener fuels will take time, which is why many are feeling deflated by the ‘hype-to-disappointment’ cycle. However, when it comes to managing expectations, it may be worth considering the development of LNG as a fuel market as a guide to the gap between hype and delivery.
LNG has made a significant impact on road freight in China. According to S&P Global Commodity Insights, it’s expected that China has either reached, or is close to reaching peak gasoil demand as growing sales of LNG-fueled heavy-duty trucks displace conventional powered trucks. As positive as this is, we need to remember that this didn’t happen overnight, it took more than a decade to become the success it is today.
Nuclear energy’s second chance
In our previous papers, particularly from our US events, the role of nuclear energy became a popular topic. Over in London, nuclear energy is being given a second chance with some significant examples raised.
Attendees noted that in September 2024, technology giant, Microsoft, signed a 20-year power purchase agreement with Constellation which is now restarting Three Mile Island Unit 1 in Pennsylvania, closed five years ago due to economic reasons. The nuclear plant will deliver 800 MW of carbon-free energy as part of Microsoft’s efforts to decarbonise the grid and become carbon negative.
Over in Japan, coal-fired power plants are being given a new lease of life, but this time with ammonia (NH3) which doesn’t produce CO₂. Introducing this into the Hekinan Thermal Power station, if successful, is expected to reduce coal usage and CO₂ emissions by 20% and as ammonia use increases to 50% to 60% in the future, coal usage and CO₂ emissions should decrease proportionately.
Efficiency is key
The conversations had at the London event all held the same theme; doing more with the energy we have, including better home insulation, smart energy grids and better hull designs. Being efficient with what we’ve got is paramount to moving towards net zero. Right now, power generation is only around 33% efficient, and there is plenty of scope for improvement to make every barrel do more. Efficiency is the way forward.
Director, Murray Fox’s, white paper, ‘Pragmatic optimism: Moving faster by focusing on what works now,’ is now available to download with all the insights following the London energy transition dinner.
