This article was originally published in FutureScot.
Anticipating the future has never been more important than today. Having foresight is a much-needed business capability that must be translated into business strategy. The horizon scanning team at the Net Zero Technology Centre is helping companies in the energy sector navigate these trends and drivers to help build business strategies.
Information from government policies, think tanks, NGOs, industry reports and projects, combine to provide foresight and enable us to identify potential industry trends that drive the energy transition.
The world is not on course to limit global warming to 1.5°C, and even a 2°C target currently looks out of reach. Cop26 made a good step forward but also highlighted this gap and asked all countries to return with revised commitments for Cop27. As a result, climate change is now at the forefront of the public agenda, and we must maximise this momentum.
The building blocks are in place, but we need rapid change to spur an upheaval of our energy system in line with the 1.5°C target. We need greater efficiency, electrification, and developments in hydrogen, carbon capture and storage (CCS) and direct air capture (DAC) technologies.
Governments and investors are committing to this by putting their money where their mouth is. For example, a coalition formed in Glasgow made up of more than 450 financial institutions in 45 countries, with assets worth £95 trillion, has pledged to ensure all assets are aligned with net zero emissions.
At the same time, the transition represents an opportunity for many businesses, and Microsoft founder, Bill Gates, expects the emergence of climate technology to generate “eight to ten Teslas, a Google, an Amazon and a Microsoft”.
The Offshore Wind Sector Deal has committed £48bn in investment in UK infrastructure, and the Climate Change Committee (CCC) says the Path to Net Zero requires over 75GW by 2050.
In addition, Crown Estate Scotland announced the results of its first ScotWind leasing round,
pledging a multi-billion-pound supply chain investment in 17 Scottish offshore wind projects. This will be a key enabler of Scotland’s energy transition ambition and kickstart Scotland’s global leadership in deploying large-scale floating wind and its associated supply chain and technologies.
The North Sea Transition Deal lays the foundation for collaboration to deliver a Net Zero UKCS;
again, where Scotland leads, the rest of the world will follow.
Investment in hydrogen and CCS will be vital to decarbonising the manufacturing sector. The UK’s Hydrogen Strategy, published in August last year, identified hydrogen as a key solution in decarbonising hard-to-abate sectors, including chemicals, cement, steel and iron. Hydrogen also plays a crucial role in decarbonising aviation, with electric and hydrogen-powered aircraft used for shorter flights.
British Airways and Shell are building a plant at Heathrow Airport to turn household and forestry waste into syngas for long-haul flights.
The use of hydrogen fuel cells is also expanding in heavy goods vehicles, buses and trains, with more than 300 hydrogen vehicles currently on UK roads, including the fleet of zero emission hydrogen buses being used in Aberdeen. The UK Government is anticipating low carbon hydrogen demand of up to 6TWh from the transport sector by 2030.
The sale of electric vehicles is soaring, with 28 per cent of all car sales either fully electric or hybrid. The decision by various governments to ban the sale of new petrol diesel cars from the 2030s provided certainty to manufacturers and investors that this was a key focus area.
As a result, technological development has accelerated, and manufacturers have created new models to meet market demand. Electric ferries will be utilised for shorter trips in the shipping industry, while hydrogen and ammonia are alternative options for long-haul shipping.
Biofuels are the main focus in this sector, with Maersk testing a blend made up of 20 per cent used cooking oil for a three-month roundtrip from Rotterdam to Shanghai. Unitrove is also delivering the world’s first liquid hydrogen bunkering facility for fuelling zero emissions ships.
Heating our Homes
Our domestic heat will also transition to a combination of heat pumps and hydrogen (which will reuse the existing gas infrastructure). Gas boilers will be banned from new housing in 2025, and by 2035 they won’t be on sale any more. Gas network operators have created a sector roadmap to transition to hydrogen, with demonstration and testing projects underway, beginning with testing up to 20 per cent hydrogen.
The transition for our homes doesn’t stop at heating. The construction industry is developing low carbon cement, while carbonnegative materials from biochar (made of 90 per cent atmospheric carbon) may be used in construction, interiors and furniture.
There are also opportunities to reuse many construction materials, including iron and steel. Newly built homes could reduce their CO2 footprints by up to 70 per cent in the construction phase by reusing these materials. All of these technologies are evolving, but the pace is too slow.
The International Energy Agency clearly states that the development of most clean energy technologies is lagging behind.
A new economic paradigm
Sustainability has shot to the top of the agenda for senior management and is now a corporate priority. This change has been aided by the profile of Cop26, a heightened consciousness created by the rising number of natural disasters, and increased media reporting. Workers and customers alike are demanding change from businesses of all shapes and sizes. Customers are demanding sustainable products, while the “great resignation” over the past year has illustrated that people want to work for companies that are a force for good.
We have also seen a massive shift in investors’ priorities, and sustainability will be an essential criterion to attract investment.
Larry Fink, chairman and chief executive of BlackRock, said that the net zero effort requires a transformation of the entire economy, and big pension funds have pulled the plug on fossil fuel investment without a credible net zero roadmap.
This year is likely to be a monumental one for climate related policies and commercial models, from CCUS and hydrogen to heating, constructions etc. That will be crucial to stimulate and guide investment and businesses.
Scaling digital transformation
While digital technology has come a long way, the best is yet to come. The development of Mark Zuckerberg’s Metaverse may be the next major workplace shift and virtual spaces and “offices” could lead to greater collaboration around the world.
Accenture, for example, bought 60,000 virtual reality headsets to help onboard new staff during the pandemic from their own homes.
Many companies are investing in digital technologies, increasing their use of artificial intelligence, machine learning and robotics. Distributed ledger/blockchain technologies are expanding beyond bitcoin, and quantum computing is making early but significant progress, with a landmark joint investment of £210m from the UK government and IBM.
As government and policymakers spark the creation of these new markets, organisations must be agile enough to adjust and transform, embracing technology and innovation and making decisions based on trusted data and analysis.
The mindsets of customers, workers and investors have shifted and will continue to do so. Companies that can embrace change, and adjust accordingly, will thrive. During these times of change, risk and opportunity, agile must become a mindset.
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