2020 was a tumultuous year, but despite the turmoil, significant progress was made in decarbonizing our global energy economy. Yes, there is a long way to go, and tens of trillions remain to be spent to accomplish this global transition – the largest effort humanity has ever collectively attempted. At the end of this year, it’s a good time to take stock, assess what was accomplished in the energy sector (with a focus on electricity), and to attempt to prognosticate what we will see in 2021.
Let’s look at a few major sectors and accomplishments. Perhaps a lens for that approach is to review progress in the de-carbonization of developed nations’ power grids, transportation, and industry, as well as some of the government commitments setting the stage for tomorrow.
Renewables are getting ever cheaper: As costs of wind and solar resources continue to fall, they are muscling their way further into the grid. The International Energy Agency now projects renewables will grab 80% of the market for new generation by 2030. IHS Market echoes a similar sentiment, seeing a cumulative $1.3 trillion (!) going into renewables by 2025, as they represent 18% of global electricity supply, and overtaking the amount of natural gas generating capacity in the next three years.
It’s about both carbon and cost: Wind energy costs have fallen by 78% in the past decade, while solar has declined by 89%. Lithium ion batteries – which jumped into the game nearly a decade later – are following the same aggressive cost curve. That’s important because batteries are the next critical ingredient in the decarbonization of both transportation and the power grid. Hundreds of megawatts of batteries were installed in 2020, but those numbers will pale in comparison to huge numbers of projects we see in 2021. And an increasing number of these will begin to pop up on the customer side of the meter. 2021 will be the year energy storage really begins to make its mark.
Transportation is also becoming cleaner: COVID slowed down EV adoption to a limited degree, but there is no question which way markets and manufacturers are heading. In fact, over 500 models of electric passenger vehicles are expected to be available by 2022. Just this month, VW announced it was converting its main factory to produce EVs. We will see many more such pronouncements in the coming year, as electrified transportation begins to truly move into the mainstream.
Governments are becoming more aggressive in their clean energy targets: We will look back at 2020 as a year of historic pronouncements. The following are some of the key goals established by various nations states: The UK announced it was advancing its ban on internal combustion engines by five years, from 2035 to 2030; Japan and the European Union (minus Poland stated they would become carbon neutral by 2050; and China articulated a similar goal by 2060. The United States is not quite there yet in terms of a formal pronouncement, but President-elect Biden has suggested some aggressive targets, including a carbon-free power grid by 2035. 2020 will see more countries make similar pledges, and the ones that have done so will continue to define and refine what that actually means.
Corporations are following suit: Not to be left behind the world’s corporations are picking up the carbon-cutting banner as well. As a sign of the rapidly changing times, consider the growth of the RE100, a global group of Fortune 1,000-sized companies committing to getting 100% of their power from renewable sources. To date, it includes 261 companies, with electric consumption roughly equal to that of Australia. Up from 211 in 2019, more than 20 companies joined in the last three months of 2020 alone. Expect more companies – especially the public-facing ones – to make similar pledges in the coming year.
And hydrogen is looking like a solution in the long game: The electricity sector can decarbonize to a great extent with the existing wind and solar technologies, combined with a liberal dose of energy storage. But that doesn’t address the last mile of the power grid, which is longer duration storage for periods when wind and solar are not available. And it doesn’t address the toughest nut on the decarbonization tree, which is heavy industry. That’s where green hydrogen may come into play. Green hydrogen can be derived from low-cost renewables driving electrolyzers to split water into hydrogen and oxygen. There are many challenges to solve in this area, both technical and economic. However, many billions are being lined up to create a hydrogen economy that may help us significantly cut global carbon emissions. Some significant projects were announced in the second half of 2020. Expect to see some remarkable hydrogen initiatives come to the fore in 2020 as companies and countries continue to engage in the race to preserve a habitable planet.