{"id":79902,"date":"2023-02-06T11:25:06","date_gmt":"2023-02-06T11:25:06","guid":{"rendered":"https:\/\/www.globallogic.com\/uk\/?post_type=insightsection&p=79902"},"modified":"2024-11-05T10:00:10","modified_gmt":"2024-11-05T10:00:10","slug":"cop27-how-is-the-energy-sector-accelerating-the-energy-transition","status":"publish","type":"insightsection","link":"https:\/\/www.globallogic.com\/uki\/insights\/blogs\/cop27-how-is-the-energy-sector-accelerating-the-energy-transition\/","title":{"rendered":"COP27 \u2013 How is the energy sector accelerating the energy transition?"},"content":{"rendered":"
If the recent coronavirus pandemic showed us anything, it was that polarised systems are hugely vulnerable to systemic risks. The energy sector’s over reliance on hydrocarbons and nuclear power left it particularly exposed to the supply-chain shocks that have already sent shockwaves through global markets.<\/p>\n

This is just one symptom of the building pressure on the energy sector to diversify into more sustainable energy sources.<\/p>\n

The shift from fossil fuels to renewable energy is not merely an environmental imperative \u2013 it offers a host of economic benefits too. Renewable sources such as solar and wind power generate electricity without emitting any greenhouse gases, offering a cost-effective alternative to increasingly expensive and polluting fossil fuels.<\/p>\n

Furthermore, renewable energy sources often require less capital investment than traditional power generation methods, providing a more accessible option for areas with limited access to financing.<\/p>\n

These benefits, as much as the sociological pressure to move away from fossil fuels, have led to an acceleration in the transition to a greener future.<\/p>\n

But what exact role is the energy industry playing in that transition?<\/p>\n

What are the primary challenges of the energy transition?<\/strong><\/h4>\n

The most obvious challenge of a complete energy transition is capital expenditure. The cost of replacing old coal-fired power plants with renewable energy infrastructure is very high. Sticking to the Paris Agreement’s target of a maximum of 1.5\u00b0C global warming requires considerable investments in renewable energy, storage and grid infrastructure, to the tune of USD 5.7 trillion<\/a> per year until 2030.<\/p>\n

Most of this capital is expected to come from the private sector, but governments must provide incentives to ensure this transition happens quickly and efficiently. Additionally, getting rid of existing infrastructure is costly and challenging, as it involves dealing with legacy contracts, legal issues, and environmental impacts.<\/p>\n

Another challenge associated with the energy transition is grid stability. The current grid infrastructure was designed for a centralized electricity system based on steady generation from large power plants. With the rise of more decentralized generation from renewable sources, grid stability is becoming increasingly difficult to maintain as energy production fluctuates in response to changing weather conditions.<\/p>\n

Finally, there are regulatory and policy issues associated with the energy transition. Many countries have yet to adopt policies that facilitate a quick and efficient shift away from fossil fuels. Without the right regulatory framework, energy transition initiatives can be difficult to implement and sustain.<\/p>\n

The energy sector is uniquely positioned to overcome these challenges<\/strong><\/h4>\n

As mentioned, the energy transition is capital intensive, but the energy sector is not short on resources. As the 8th largest industry in the world, the energy sector has access to massive amounts of capital.<\/p>\n

Many energy companies have invested heavily in renewable technologies, such as solar and wind power, over the past few decades. They are now well positioned to leverage this investment to make further progress towards a clean and sustainable energy system.<\/p>\n

In addition, many countries have put in place incentives for businesses to invest in renewable energy. This has opened up opportunities for energy companies to access more funding and accelerate the transition to a low-carbon economy.<\/p>\n

Furthermore, advances in technology have drastically reduced the cost of renewable energy production, making it more accessible as well as profitable. For the first time in history, solar energy is cheaper than coal, and the worldwide renewable energy sector is expected to be worth over $1.5 trillion<\/a> by 2025.<\/p>\n

Investing in renewables not only benefits the environment, but also materially benefits those energy companies that make the switch. Renewable energy sources provide a steady and predictable source of income, which also undercut<\/a> the cheapest fossil fuels on cost.<\/p>\n

The business opportunities presented by the emerging renewable energy sector will only continue to grow in the years to come, as the world is increasingly looking for sustainable forms of energy.<\/p>\n

How is the energy sector already accelerating the energy transition?<\/strong><\/h4>\n

The COP27 is an excellent example of how the energy sector is already accelerating the energy transition. Some of the initiatives announced include:<\/p>\n