As the world continues to naively negotiate with the urgent need to address climate change, power companies find themselves on the front lines of the battle.
The energy sector plays a crucial role in achieving global net-zero targets and the key to success lies in a fundamental shift toward renewable and low-carbon energy sources.
Power companies must transition to renewable sources
Fossil fuel combustion, the predominant method of power generation, stands as the primary contributor to greenhouse gas (GHG) emissions in the power sector. To combat this, power companies must transition to renewable sources, not only to reduce Scope 1 emissions from their operations but also to mitigate Scope 3 emissions associated with the energy sold to end-users.
Learning from power success stories
Leading the charge in this transition is Ørsted, a company that has strategically adapted its business structure to predominantly sell renewable energy by investing heavily in developing offshore wind farms. The results of its transition speak volumes. Ørsted has showcased significant reductions in both Scope 1 and Scope 3 emissions and reduced its GHG intensity by 54% from 2018 to 2022. This success story serves as a beacon for other power companies aiming to align their operations with sustainable practices.
Renewable power plants, once online, boast lower production overheads compared to their fossil-fuel counterparts. In regions operating on the merit order system for setting wholesale electricity prices—such as the EU, UK, and various US states—companies supplying renewable energy are incentivized. This results in higher wholesale costs for electricity supplies, providing compelling financial incentives for companies to invest in carbon-free energy sources and accelerate the decarbonization of their energy portfolios.
Triple renewables and double energy efficiency by 2030
The global stock take at COP28 brought together over 120 countries, including the EU and the US, in a pledge to triple renewables and double energy efficiency by 2030. This commitment has been backed by substantial financial support, with the EU allocating $2.5bn (€2.27bn) from its budget to drive the global energy transition over the next two years.
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Center stage in the renewable revolution: wind and solar
Wind power can be harnessed via onshore and offshore wind farms to produce electricity. Onshore farms are cost-effective and closer to end consumers but face planning restrictions due to community objections. Offshore farms are predominantly constructed in shallow waters with unobstructed wind flow using large turbines. Significant investment has been directed towards offshore wind farm construction, taking advantage of the strong wind power source available out at sea.
Solar power, abundant in equatorial, tropical, and subtropical regions, is a key player in the renewable energy landscape. China leads in both the production and deployment of solar power equipment. Solar energy can be harnessed through various methods, including solar PV, which converts sunlight into electricity through photovoltaic (PV) cells; solar thermal, which uses mirrors and lenses; and solar CPV, which combines concentrated photovoltaic (CPV) techniques for efficient electricity generation.
As power companies navigate this pivotal moment, the imperative to embrace renewable and low-carbon energy sources cannot be overstated. The success of Ørsted and the global commitment from COP28 underscore the viability and urgency of transitioning to a sustainable energy future. The path forward is clear, and power companies must take bold steps today to ensure a cleaner, greener tomorrow.