Innovation for the Energy Transition

Preliminary Findings

May 2017

1
Introduction
Innovation agenda to decarbonise the energy sector

• Objectives:
 Goal is not to create a roadmap set in stone, uncertainties to 2050
are huge
 Create a flexible framework that nurtures innovation

• Expected outcomes:
 Identify innovation gaps
• Gaps by sector, application and technology
 An innovation timeline (roadmap)
 Contribution to ongoing international efforts: Mission Innovation,
Clean Energy Ministerial, UNFCCC and others

3
Innovation agenda to decarbonise the energy sector

• Starting point:

 Innovation is more than research and development (R&D), from

technology push to market pull
 Major increase in R&D investment is needed.
 Technology innovation must be accompanied by innovation in
infrastructure, system operation, business models and regulation
 While the renewable power sector is attracting significant attention, end-
use sectors continue to be overlooked

4
Need for a holistic
innovation approach
Energy sector innovation ecosystem

The emergence of urgently needed solutions to decarbonise the global energy sector
requires combining various policy instruments across the whole technology lifecycle, from
R&D to market scale-up 6
R&D spending on renewable energy in 2004-2015

There is an urgent need to increase R&D investment

R&D for renewables is not currently growing
Most R&D investments directed to the power sector | end-use sectors overlooked 7
Innovation for power sector transformation

The technology to push a global renewable power transition in the next two decades is
already here, but more innovation is needed in enabling infrastructure, system operation,
and business models to scale up deployment 8
The role of renewables in
the decarbonisation
Renewables are a crucial part of the solution

Renewables would account for half of total emission reductions in 2050

10
 Increased investment needs by sector and technology

Meeting the 2oC target requires investing an additional USD 29 trillion between 2015 and 2050
compared to the Reference Case

End-use sectors dominate increases in investment needs to 2050 by sector and technology 11
Power sector transformation is ongoing

Renewables account for more than half of annual power generation capacity additions
since 2012
Renewable energy share in power generation growing at 0.7% per year 12
End-use sector transformation is lagging behind

Main sources of
emissions in 2050

By 2050, total energy-related CO2 emissions will need to decrease to below 10 Gt/yr

CO2 emissions from power and buildings sectors will be almost eliminated 13
Breakdown of global CO2 emissions by sector in 2015
District heating
and cooling
Industry
DHC
3% Iron and Steel
6%
Cement
7%
Power Chemical
5% Aluminium
1%
Paper
0%

POWER Others Others

38% 8%

Space Heating
5%
Water Heating
2%
Cooking
2%
Freight Passenger car Buildings
Sectors today with no economically 8% Passenger_ Road Other 9%
viable option for deep Other 2% 3%
decarbonisation
Transport

Around one third of energy-related emissions in the Reference Case in 2050 currently have
no economically viable options for decarbonisation 14
 Annua l growth ra te of RE sha re in globa l energy
mix must dra ma tica lly increa se

 Reducing energy-related CO2

emissions to below 10 Gt/yr by 2050
will require an increase of about
1.2%/yr in renewables’ share
between 2015-2050
March 2017

 This represents seven-fold growth

TPES nearly flat in 2015-2050
compared to 0.17%/yr in 2010-2015

2/3s of TPES is renewable energy

 R&D spending on renewable
energy is around USD 10 billion per
year. Would a doubling of R&D
support such a deployment growth
rate?

15
Innovation agenda
Preliminary findings
Innovation agenda: guiding questions

• Energy and emission scenarios include large uncertainty in technology deployment, but what does
this mean for R&D planning?
• Will there be a single technology solution for each sector?
 E.g. can hydrogen cars survive alongside EVs? Can DHC survive next to NZEB and heat pumps?
• Why do some sectors achieve rapid innovation while in others progress is slow?
 Power sector is on track, moderate developments in transport, and none in industry
• Where are today’s major innovation gaps and the main areas that require innovation?
 VRE integration in the power sector? What is possible today, where is more action needed?
 Gaps for heavy industry (e.g. high-temp heat, NEU), transport (trucks, aviation, shipping), waste
management, storage (thermal, seasonal), biomass
 Systems thinking: sector coupling, grids, interaction of EE & RE & access
• What would be the investment needs for R&D, demonstration and learning?
• Which priority areas beyond technology require innovation?
 Business cases, enhanced performance/comfort for consumers, SDGs
• What is the timeline for innovation to realise a decarbonisation of the energy sector?
17
Mitigation potential and costs by sector

CO2 mitigation potential (Gt CO2/yr) CO2 mitigation cost (USD/t CO2) Contribution to the total CO2
reduction (%)
Industry 9.5 81.7
30

Power sector 11.2 -2

35
Transport 7.1 37.2
22
Buildings 4.2
115
13

Total 32 57 100%

• Largest emission reduction potential exists in power and industry sectors

• Average abatement cost of technologies are highest in the building and industry sectors
• Options in the power sector are economically viable and for the transport sector nearly viable
• While power and transport may require continued improvement of available technologies, building and industry sectors may
require breakthroughs
18
Mitigation potential and costs by sector

CO2 mititgation potential and costs per sector

140 Size of the bubble indicates
the additional investment
120 needs
Mitigation cost [USD/ t CO2]

100 Buildings Industry

80

60 Transport
40

20 Power
0
0 2 4 6 8 10 12 14
-20

-40
Mitigation potential by sector [Gt CO2/yt]

The power sector has a strong business case for deployment of renewables, accounting for a significant share of
the emission reduction potential. Industry is the most challenging sector where more attention is required to utilise
its potential and reduce the costs of technologies. Largest investments for decarbonisation will be needed for
buildings. 19
Mitigation potential and costs by technology
CO2 mitigation potential (Gt CO2/yr) CO2 mitigation cost (USD/t CO2) Contribution to the total CO2
reduction (%)
RE 15.73 76
50
EE-heat 4.51 104
14
ELEC 4.28 22
14
EE-power 3.72 -53
12
CCS 1.24 120
4
Other 1.72 390
6

Total 32 57 100%

Renewable energy will represent half of all the emission reductions required for decarbonisation. Renewable energy technology costs
vary, with RE grid integration measures and biomass-based heating/transport technologies requiring further development focus on
cost-reduction as they raise the average cost of renewable energy

Energy efficiency accounts for bulk of the other half, followed by CCS and other low-carbon technologies such as material efficiency
improvements

Electrification leads to savings, assuming that electric vehicle costs will be on par with internal combustion engines 20
 Mitigation potential and costs by technology

What it means for innovation?

CO2 mitigation potential and costs per technology in Industry, Power,
• Urgent R&D needs for RE Transport, and Building sectors
solutions in buildings and 200 Size of the bubble indicates the
RE additional investment needs
transport sectors
Power sector
150
• Power sector going Ok RE Industry

Mitigation cost [USD/ t CO2]

Transport
• A CO2 price above 60 100
USD/tCO2 may unlock most Building
60 USD/tCO2
of the RE potential
RE
EE-heat
50 Other RE
• Transport may require EE -heat
regulation | Buildings may ELEC ELEC
0
require breakthroughs
0 1 2 3 4 5 6 7 8 9

-50
EE-power

-100
Mitigation potential by sector [Gt CO2/yt]

21
 Analysis looked at 110 technology solutions in power
and end-use sectors
Cumulative CO2 reductions curve
CO2 mitigation potential Cumulative CO2 reductions
3500 100%

90%
3000
CO2 mitigation potential [Mt CO2/yr]

80%

Cumulative CO2 reductions

2500 70%

60%
2000
50%
1500
40%

1000 30%

20%
500
10%

0 0%
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
55
58
61
64
67
70
73
76
79
82
85
88
91
94
97
1
4
7

100
103
106
109
Technology solution

Top 10 low-carbon technologies account for two-thirds of emission reductions needed for 22
decarbonisation.
 Materiality of technology solutions

CO2 mitigation potential Cumulative CO2 reductions

3500 50% What it means for innovation?
CO2 mitigation potential [Mt CO2/yr]

45%
3000 Wind, solar PV and EVs are

Cumulative CO2 reductions

40% •
2500 35% the key technologies for the
30% decarbonisations: R&D to
2000
25% focus on system integration
1500 20%
and continued cost
15%
reduction
1000
10%
500
5%
• EE technologies are
0
available but not
0%
implemented | would

Efficiency - others in OTH

Wind in POWER

Electric 4-wheeler in CAR

Savings in carbon stored (recycling +

Efficiency electricity - others in OTH

Solar PV in POWER

Renewable energy - others in OTH

Efficient appliances in APP
regulation help?
biomass feedstock) in CHEM

• RE in industry is significant
Power sector but cost is too high |
Industry Breakthroughs and R&D
Transport urgently needed
Building

Top 8 technologies represent half of the total emission reductions needed. Wind, solar PV, electric
mobility for passenger cars, plastics recycling and efficient appliances represent more than 1/3 22
 CO2 mitigation potential [Mt CO2/yr]

1000
1500
2000
2500
3000
3500

0
500
Wind in POWER
Solar PV in POWER
Electric 4-wheeler in CAR
Savings in carbon stored (recycling +…
Efficient appliances in APP
Efficiency - others in OTH
Renewable energy - others in OTH
Efficiency electricity - others in OTH
Solar cooling in SC
Renewables for district heating in DHC
Geothermal in POWER
Solar water heating in SH
CSP in POWER
Electric bus in FRE
Improvement in waste management in…
Energy efficiency in CAR
CO2 mitigation potential

CCS - cement in CEM

CCS - iron/steel in STEEL
Energy efficiency in PASS_OTH
Biokerosene in PASS_OTH
Plastics recycling in CHEM
Charcoal for blast furnaces in STEEL
Energy efficiency in ROAD_OTH
Biofuels, waste and alternative fuels…
Emerging - iron/steel in STEEL
Clinker substitutes in CEM
Cumulative CO2 reductions

Hydrogen in FRE
Steel recycling and material efficiency…
Emerging - chemicals in CHEM
Emerging - cement in CEM
Heat pumps in SH
Electric bus in ROAD_OTH
Biomethane in FRE
Hydrogen in CAR
Contribution to mitigation by technology and sector

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%

Cumulative CO2 reductions

Industry

Building
Transport
Power sector

22
End-use sector transition: untapped areas

Transport
• Will traditional car-makers be able to
catch up?
• Significant biofuel trade
• Materials needs (e.g. rare earth for EVs)

Industry
• Industry is the most challenging sector

Buildings
• Significant acceleration of buildings
renovation
Power
• Growing equipment industries
• Materials needs (e.g. for batteries,
inverters)

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