THE ENERGY CHALLENGE

Globally, the 2015-2021 period has been the warmest on record. The global average temperature is +1.1°C higher than preindustrial levels, confirming the largest increase ever recorded in the last 100,000 years.

The 2015 Paris Agreement on Climate Change set 1.5°C above pre-industrial levels as the limit beyond which Earth’s ecosystems will deteriorate rapidly and irreversibly. However, under all scenarios examined, this limit is likely to be reached by 2040, leading to a +2.6°C increase in global temperature by the end of the century.

As stated by the 6th Assessment Report from IPCC’s Working Group 1, which analyses the physical science of climate change, the greenhouse gas (GHG) emissions produced by human action – its economies and societies – are the unequivocal cause of climate change, directly accounting for a +1°C increase in global temperature, with an additional marginal effect of natural drivers (i.e. solar and volcanic activity) and internal variability.

While in 2020 global energy demand had declined by 5% with respect to 2019, the International Energy Agency (IEA) has estimated a 4.6% rise for 2021. Industrial and services-related energy demand is climbing back to 2019 levels, offsetting 2020’s drop due to Covid-19 restrictions and lockdowns. Governments have been spending over $2 trillion for Covid-19 financial support plans, including investments in clean energy infrastructure totalling around $4 billion.

GDP is projected to rebound by +6%8 in 2021 and the global population is projected to grow steadily, increasing by up to 2 billion people by 2050.

Over 50% of this increase is expected to be concentrated in emerging countries and especially in Africa: a scenario that makes them an absolute priority in the global green transition.

 

In fact, 70% of the increase in energy demand will take place in emerging markets and economies (which will grow by +3.4% above 2019 levels), with advanced economies still above pre-pandemic levels. As for emerging economies, this surge is also due to the processes of urbanisation and industrialisation, which are historically very energy- and emission-intensive, as the IEA notes in the 2021 World Energy Outlook.

The energy sector has been the most emissions-intensive worldwide, accounting in 2020 for three quarters of total GHG emissions. A dramatic rise in energy-related CO2 emissions is predicted for 2021, with global coal demand set to exceed 2019 levels (+4.5%) and approach its 2014 peak. 80% of such growth will be in Asia. The IEA projection of a 2030 sustainable world economy calls for a 7% decrease in energy consumption, which is a challenging target considering the forecasted 40% growth of the global economy by 2030. Thus, a worldwide effort towards energy efficiency is key to further decouple energy consumption from economic growth, and it requires developing and scaling up clean energy technologies quickly.

A new energy economy is emerging, with electrification driving the change and covering over 20% of the world’s final energy consumption. Parallel to that, hydrogen is also developing and becoming a key energy vector to support the global transition towards clean energy. In the next few years, more than 350 large-scale hydrogen projects will be deployed at a global level, receiving $500 billion in public and private funding by 2030. In Europe, green hydrogen (i.e., produced from renewable sources) is considered key for attaining the EU Green Deal goals, especially thanks to its mobility and residential heating applications. Currently, clean hydrogen accounts for 2% of the EU’s energy consumption, and the EU Commission aims to increase it to 13-14% by 2050. The European Hydrogen Strategy, adopted in July 2020, is a milestone to promote large-scale adoption of hydrogen in the energy sector and to build the necessary regulatory framework for all EU countries. Synergies between private and public sectors are encouraged by EU funding dedicated to clean hydrogen research framework programmes and the establishment of a European Clean Hydrogen Alliance to guide investments. A specific workstream has also been established under this framework to investigate the prospects of hydrogen in the building sector, as a complement to renewable electricity and other decarbonised gases.

Under the IEA’s 2050 scenario, total final energy consumption is forecast to increase across all sectors, with the highest peaks in electricity and natural gas. Together with behavioural changes on the consumer side, the large-scale deployment of renewables in energy production and the electrification of consumption, combined with downstream energy efficiency, are key to decarbonise the energy system and reduce GHG emissions. In 2019-2020 the residential sector alone accounted for nearly 20% of global energy consumption. In Europe, heating and cooling represent the largest end-use of energy. By 2050, electricity will be the main energy source for the sector, accounting for two-thirds of total energy consumption in buildings. Meeting the net-zero target by 2050 requires the sector to reduce energy consumption by 18%. The upgrading heating infrastructure, 64% of which is comprised of obsolete appliances, includes switching from gas boilers to electric heat pumps for space heating to reduce GHG emissions. According to the IEA’s Roadmap to net-zero by 2050, no more fossil-fuel boilers should be sold after 2025, except where they are zero carbon-ready (i.e., compatible with hydrogen), and all new buildings must embed carbon-free heating, cooling and plumbing infrastructure by 2030. In parallel, 50% of existing buildings must be retrofitted to net-zero-carbon-ready levels by 2040, reaching 85% by 2050

 

Industrial and residential heat production, nearly half of which is used for water and space heating, accounts for about half of total energy consumption globally. The share of residential energy consumption is largely dedicated to thermal comfort, accounting for 11% of overall consumption. The increasing frequency of extreme weather events makes the trend in energy consumption even more variable. Introducing low-carbon high-efficiency heating technologies would help reduce average global heating energy intensity by around 4% annually by 2030.

More efforts are needed, as today electric heat pumps still meet no more than 7% of global heating needs in buildings. In Europe, renewable heating equipment sales increased by more than 7% in 2020 compared to 2019.

The IEA net-zero scenario projects that by 2050, two-thirds of residential buildings in advanced economies and around 40% in emerging markets will be fitted with a heat pump.