ENERGY TRANSITION OUTLOOK 2023
El informe anual Energy Transition Outlook (ETO) de DNV, presenta seis puntos claves:
1 La transición aún está en el punto de partida.
2. Desde mediados de la década de 2020, las energías renovables superan a las fósiles.
3. La seguridad energética está pasando a ocupar un lugar destacado en la agenda.
4 La política progresista está teniendo impacto
5 El estancamiento ralentiza la transición.
6 Las emisiones globales caerán, pero no lo suficientemente rápido.
Descargue el reporte aquí:
Para más detalles: Visite www.dnv.com/eto
Contacte con: Eckhard Hinrichsen, Market Area- and Country Manager Mexico
eckhard.hinrichsen@dnv.com
BHP selects DNV GL for Verification, Classification on Trion FPU
DNV GL will verify that the new infrastructure built for the BHP Trion project is compliant with local and global safety, as well as other requirements. The Verification Body and Classification contract specifies DNV GL, the leading independent expert in risk management and quality assurance, to participate in design review activities and site surveillance during construction, commissioning, and installation of the floating production unit (FPU).
DNV GL announced it has been awarded a multidisciplinary contract by BHP Billiton Petróleo Operaciones de México, S. De R.L. De C.V. (BHP) to provide classification, verification, and independent analysis of the Trion FPU. Located approximately 19 miles (35 kilometers) south of the U.S./ Mexico border and approximately 112 miles (200 kilometers) from the Mexican coastline, the FPU will be installed in a water depth of approximately 8,200 feet (2,500 meters). BHP holds a 60% interest in the development and PEMEX a 40% interest.
“The Trion oil field development is historic in the Mexican gulf and a milestone for all of us involved,” said Antony DSouza, Executive Vice President and Regional Manager, DNV GL Maritime Americas. “It is indeed a recognition of DNV GL for our competence in professionally executing mega projects of this scale internationally. DNV GL is honored to be the Classification Society involved in such a significant project, and we look forward to the growth of our partnership with BHP for years to come.”
The contracted verification scope DNV GL will carry out includes full project compliance to the Mexican offshore regulations, NOMs (Official Mexican) standards and BHP’s safety case requirements. The scope of work also includes several independent analyses from DNV GL to be conducted during the front-end engineering design and detailed design phase of the project
“I am delighted BHP has recognized that we possess the technical expertise and knowledge, particularly with respect to local regulatory requirements, to assure the safety and compliance for this deepwater project,” said Frank Ketelaars, Regional Manager, Americas, DNV GL - Oil & Gas. “We have worked with BHP on many different projects around the world and this contract win is a sign of the strength of our relationship with BHP in the Americas.”
Mexico Country Manager | DNV Energy Systems
DNV’s 2023 Report Raises Questions Around a Decarbonized Future
Q: How would you describe Trilemma and Transition, DNV’s latest report for 2023?
A: The latest DNV Energy Industry Insights report (DNV publishes many reports) covers content for a decarbonized future, where secure, clean and affordable energy play a major role in defining the energy transition. These concepts are very important in today’s world because one of the main objectives in this transition is to have accessible renewable sources as well as clean energy. Today, I would say the industry is focused more on energy security, which has been triggered by the war in Ukraine and the aftermath of the pandemic.
Q: How was the report prepared and who participated in its development?
A: For its elaboration, 1,385 senior energy professionals from 93 countries were surveyed. In addition, the report showcases in-depth interviews with leaders and experts. It is developed and created by teams from DNV and FT Longitude (a Financial Times company). We have been elaborating this report for the past 13 years. In its early editions, the content of the report was a bit different since it dealt mainly with oil and gas and the renewables segment was in its early stages and just starting to develop.
The report is divided into subsectors, such as oil and gas, renewables, electrical power, and energy consuming industry. In addition, the report covers topics that include energy security, energy transition, strategic divergence, policy changes and a smarter energy system.
Q: What would you consider to be the main advantages of this report?
A: This report is aimed principally at the main stakeholders in the energy sector, from industry but also the public sector. DNV is a leading service provider in the energy space that works with most of the big companies. We provide consultancy and advice to industry players. People who were interviewed in this report represent our clients and they participated because they know the insights from the report will be useful for them and the industry. Our clients benefit from reading what their peers are saying regarding the energy transition and the outlook for 2023.
Q: The report indicates that the energy transition is moving forward without a detailed map in regard to decarbonization. What is your take on this?
A: We all agree where we want to be in 2030 or 2050, we know the goal. It basically comes down to the Paris Agreement – the goal is to limit global warming to 1.5 degree Celsius by 2050. Nevertheless, the direction we should take to get there is always changing and adapting. What I found interesting about the report this year, as opposed to past editions, is the discussion concerning investments in green hydrogen and whether it is more realistic to go to blue hydrogen, i.e., produce it from methane with carbon capture and storage. In addition, this year only 39% of participants feel optimistic about reaching their organization´s decarbonization targets.
Eckhard Hinrichsen
Q: When it comes to the energy transition, there is a strong focus on short-term rather than long-term strategies. Why is that?
A: Last year, the oil and gas industry had record profits, this was due to the rise in oil prices triggered by the war in Ukraine. Industry leaders are saying maybe we should not give up on hydrocarbons just yet. Some International Oil Companies are realizing that developing renewables is not as easy or as fast as they once thought, and you cannot make the same margins with renewables as you can with oil and gas. As a result, the industry is expecting to invest less in solar and wind and more in hydrogen and carbon capture and storage. It is easier to go that route with blue hydrogen, since that is much more aligned with what they have been doing in the past and where they have experience and know-how.
In addition, there are many constraints with renewables, amongst them are missing transmission lines in many parts of the world, like in areas of Mexico. The supply chain is another obstacle that must be dealt with. For instance, getting panels from China has been challenging, since the pandemic created supply chain barriers in addition to the higher cost of materials. These projects are in a rough spot at the moment.
Another barrier for renewables is permitting. In certain parts of Europe, it takes up to 10 years to get all the permits for a wind farm. I believe politicians should show leadership and regulators should make the process much more streamlined and quicker than it is right now. It can be done if everybody wants it.
Q: Industrial consumers also see challenges in the development of renewables and have chosen to produce their own energy. What lessons will emerge from this in 10 years?
A: These developments are happening in Mexico. For example, carmakers install solar farms close to their new plants due to a shortage of green energy from the grid. Unfortunately, regulations limit the amount of energy that can be selfproduced. These companies have very strong internal requirements and commitments to use renewable energy in their operations.
Q: There is a great deal of debate concerning where capital should be allocated. What is your take on this issue?
A: How and where to allocate the money is changing constantly. For instance, there was the case of a green hydrogen plant in Chile where they could not find offtakers willing to pay more for green hydrogen. Currently the market for green hydrogen is not existing because prices have not yet been established. In other words, it is difficult to make a business case for the next 20 years. As a result, you struggle to find a bank to finance your project, despite most banks wanting to go green and having strong ESG requirements.
Q: The report touched upon public policies, which despite challenges will still play an important role. Do you expect a major change in Mexico in the next 10 years?
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There is a great deal of debate given the elections next year and companies are getting ready to start their projects in 2024. Today’s political forerunners may continue the president’s energy policy, where 54% of the energy should come from CFE, which is quite challenging to achieve. Nevertheless, this policy might change to a more renewablesfriendly posture. Other candidates might be more pragmatic as far as energy policies are concerned. I would say the sector is very much banking on 2024 and the start of new projects.
Q: What is your conclusion in regard to the report?
A: The good thing is that 74% of the sector is optimistic for growth and that the energy transition is developing. Nevertheless, the transition is not accelerating as fast as some would have thought, since industry leaders are now getting a bit more realistic by deciding to focus on things that work and putting aside things that may not work so well. Energy security has come to the forefront in the energy trilemma and will stay there at least in the short term. The energy transition has many moving parts that are difficult to digest. We are now in a phase where we are seeing things a bit more clearly, especially in what we need and what needs to be done; for example, establishing energy transition policies and streamlining all processes.
As the global population increases, we need to generate more energy. There is no way around it, otherwise the whole system will collapse. In the end, the world is based on market economies and these markets will drive the energy transition; therefore, we will need to place incentives and allocate funds where they need to be.
The ‘Energy Transition’ Has Yet to Start: DNV
The celebrated energy transition many sectors and industries across the world have been working to implement has unfortunately lost momentum and results have been discouraging to say the least, according to DNV’s Energy Transition Outlook (ETO) 2023 Executive Summary.
“The transition has happened in some regions and for many communities and individuals, but globally, record emissions from fossil energy are on course to move even higher next year. Up to the present, renewables have met some, but not all, of the world’s additional energy demand,” said Remi Eriksen, group president and CEO of DNV.
The main objective of DNV’s ETO is to communicate to its clients and stakeholders the current outlook for the energy transition and to highlight some of its most relevant points and state of industries.
“Optically, the transition seems to be in stall mode, with high oil and gas prices fueling an exploration surge while many renewable projects are experiencing an increase in cost due to inflationary and supply-chain pressures,” said Eriksen.
For DNV, it is a fact that this energy transition has not really started and according to Eriksen, DNV expects that emissions from oil use will peak in 2025 and those from natural gas in 2027. Nevertheless, there is good news to report: electric vehicle (EV) uptake and solar PV installations are at record levels and expected to continue strongly.
Highlights From 2023 ETO
The transition has not started: Over the last five years (2017–2022), renewables have met 51% of new energy demand and fossil sources 49%. In absolute terms, fossil-fuel use is still growing, reports DNV. One of the reasons this has occurred is due to the “grab for gas” resulting from Russia’s invasion of Ukraine as well as the disruption of the oil market. This has led to higher oil prices and a surge in new oil and gas projects. Unfortunately, as a result of these oil prices, other countries have developed coal-fired power generation in the past 18 months, driving emissions even higher.
Renewables outsprint fossils from the mid-2020s: One interesting fact is that it will take 27 years to move the energy mix from the present 80% fossil 20% non-fossil split to a 48%-52% ratio by midcentury. DNV forecasts that from 2025 onward, almost all net new capacity added will be nonfossil. Wind and solar will grow tenfold and seventeenfold, respectively, between 2022 and 2050. Another interesting forecast is that coal use peaked in 2014; nevertheless, it has come close to that level in recent years. However, its share of primary energy is expected to fall from 26% today to 10% in 2050.
Energy security at the top of the list: Despite these gloomy numbers, DNV says that energy security for the most part
is moving to the top of the agenda. For instance, energy produced locally is being prioritized over energy imports and as a result, it is favoring renewables and nuclear energy in all regions and coal in other regions. On a positive note, governments today are willing to pay a premium of between 6% and 15% for locally sourced energy. Moreover, reshoring and friend-shoring policies are adding to supply chain complexities and costs already strained by inflation.
“In the long term, energy security and sustainability will pull in the same direction, with decarbonizing energy mixes — with wind, solar, and batteries as the main sources — increasingly shielding national energy systems from the volatility of the international energy trade,” said the company.
Impact of progressive policy: Another breakthrough is that progressive policy is making an impact. On a favorable note, important decarbonization policy packages rolled out last year are supercharging the transition regionally and pushing it forward globally. For instance, in the United States, the Inflation Reduction Act is accelerating the transition in that country, with US$240 billion already committed to clean investments in response to the broad array of incentives under the Act. In the European Union, similar initiatives are taking place. For instance, the EU Green Deal, REPowerEU, and Fit for 55 policy packages make Europe’s net-zero goal more realistic. Shipping is set for a faster transition due to the inclusion in the EU’s emissions trading system and the IMO’s ambitious new decarbonization strategy aiming for net zero by 2050, according to DNV’s ETO 2023.
To speed up this energy transition, DNV reports that the “race to the top” in clean technology among the advanced economies will drive global learning benefits, for example, in hydrogen and carbon capture and storage technologies.
Gridlock impeding the near-term expansion of decarbonization technologies: Despite inflationary and supply-chain headwinds, the good news is that solar installations reached a record 250GW in 2022, while wind power contributed 7% of global grid-connected electricity, with installed capacity expected to double by 2030.
DNV reports that the global grid — transmission and distribution combined — will double in length from 100 million circuit-km (c-km) in 2022 to 205 million c-km by 2050. The objective is to facilitate the fast and efficient transfer of electricity. However, in the near term, transmission and distribution grid constraints are emerging as the key bottlenecks for renewable electricity expansion and related distributed energy assets, such as grid-connected storage and EV charging points, in many regions, including the United States, Canada, and Europe, said the company.
In regard to permitting delays, the European Union and the United States are addressing advancing policies, but a deeper policy response is needed, which may include expropriation and financing to ease cable manufacturing production constraints.
Global emissions will fall, but not fast or far enough: DNV forecasts global energy-related CO2 emissions in 2050 will
be 46% lower than today, and by 2030, emissions will only be 4% lower than they are today. The company highlights the emissions that are forecasted are associated with 2.2°C of global warming above pre-industrial levels by the end of this century.
Starting in 2024, the share of renewables in the primary energy mix will grow by more than 1 percentage-point per year, resulting in a 52% non-fossil share by 2050, up from 20% today, reports DNV.
Unfortunately, the development and pace of the energy transition is not fast enough to achieve a net-zero energy system by 2050. In order to obtain such an objective, it would require roughly halving global emissions by 2030, but the DNV ETO forecast suggests that that ambition will not be achieved even by 2050. Therefore, limiting global warming to 1.5°C is less likely than ever, said the company. In addition, the consequences of climate change are becoming more visible and impactful every time emissions rise, with extreme weather events becoming more frequent and damaging.
Mexico and the energy transition: Mexico plays an important role in this energy transition where progressive politics have had a positive impact in other countries, but not in Mexico. “Energy policies have been less favorable for renewables for the past five years; nevertheless, the market expects a change in the next administration,” said Eckhard Hinrichsen, country manager and market area manager of DNV Energy Systems Mexico.
Hinrichsen added that limiting global warming to 1.5°C (the goal established by the Paris Agreement in 2015 and ratified by Mexico in 2016) seems almost impossible today. Most likely, global warming will reach 2.2°C. This means increasingly severe weather events and a faster rise in sea level.
“The energy transition has been developing slower than we had expected. We must all do our part to accelerate it. Renewables had a boom in Mexico in the second half of the past decade, but they have slowed down in recent years,” said Hinrichsen.
Solar: On average globally, solar PV has grown from 1GW in 2004 to 250GW in 2022. In Mexico today, there is 10GW installed. DNV expects that to grow to 15 GW in the next five years. At a global level, a seventeenfold increase is expected between now and 2050. Nevertheless, the cost of solar energy continues to drop, panels are becoming more efficient and soon, solar will be the cheapest energy of all, explained Hinrichsen.
“One problem is intermittency; there is no generation at night, and to mitigate this we generally combine solar with battery systems and/or wind generation. The solar resource in Mexico is very good in practically the entire country and there is a great deal of available land. This energy can be used off-grid, such as for domestic generation (limited to 0.5MW) or for factories,” said Hinrichsen.
Wind: At a global level, wind generation is expected to grow ten times by 2050. In Mexico there is less than 8GW installed
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at the moment. Like solar, the wind resource in Mexico is among the best in the world, particularly in the Isthmus of Tehuantepec and Tamaulipas, said Hinrichsen.
“In Europe and in the United States, there is substantial investment in offshore wind, bottom-fixed in shallow waters, in addition to many projects for floating offshore wind. Nevertheless, research is lacking and it is not yet competitive. In Mexico, we still have great opportunities to build onshore wind farms due to the available land,” said Hinrichsen.
Producing Energy Locally
DNV said that the major shift the company forecasts is a transition from a world where energy is extracted in a handful of nations and traded over long distances to the rest of the world, to a situation where energy is produced locally, largely through renewables, and consumed locally in the form of electricity.
“Our forecast is that electrification will more than double over the next 30 years. This trend has intensified in recent years owing to energy security concerns that militate against dependence on energy through trans-national pipelines and trans-ocean shipment. That, in turn, has prompted us to directly factor in energy security as a driver of change in the coming energy future,” said the company.
“Achieving a net-zero energy system by 2050 to secure a 1.5°C warming future is more difficult than ever. That does not mean we should not be aiming for that target. With more expansive policies promoting renewable electricity and other zero-carbon solutions, not just in the high-income world, but globally, we have the means to keep the world on track to be at, or very near, net zero by midcentury,” noted Eriksen.
