The new energy solutions paving the way for greener industries

Published on: May 30, 2024

The global energy sector is undergoing a profound transformation as it shifts towards renewable energy sources like solar and wind. This transition is essential for mitigating climate change and ensuring a sustainable energy future.

In 2023, renewable energy capacity grew by nearly 510 gigawatts, with solar energy leading the charge due to a significant drop in solar panel prices. By early 2025, renewable energy is expected to comprise more than one-third of total electricity production.

Additionally, nuclear power is set to achieve record levels, contributing alongside renewables to nearly half of the world’s electricity by 2026. However, this rapid expansion necessitates significant upgrades in transmission and distribution networks to handle the increased demand and ensure grid stability.

As the world electrifies and adopts renewable energy, strategic investments in storage solutions, green hydrogen and energy efficiency will be crucial in achieving a resilient and sustainable energy system.

This article explores the rapid expansion of renewable energy, the essential upgrades needed for grid infrastructure, the rising importance of energy storage and green hydrogen, and the critical role of energy efficiency in achieving a sustainable energy future.

Renewable energy – a prerequisite for a successful transition

The transition to renewable energy sources such as solar and wind is one of the most important aspects for the global energy sector.

The world is experiencing a continued rapid expansion of renewable energy. In 2023, capacity increased by almost 510 gigawatts, or 50 per cent, according to the IEA. Solar energy accounted for three-quarters of this increase, as the price of solar panels continued to drop by nearly 50 per cent compared to 2022.

Renewable energy will make up more than one-third of total electricity production by the start of 2025.

Nuclear power is also expected to reach record levels globally when production from France and Japan increases, at the same time as new reactors start up in markets such as China, India, Korea and elsewhere in Europe. By 2026, record electricity production from low-emission sources, including renewable energy (solar, wind and hydropower) and nuclear power, is projected to contribute to nearly half of the world’s electricity production — a substantial increase from the just under 40 per cent recorded in 2023.

The construction of offshore wind farms can have significant side effects on the marine environment if they are not designed and planned with careful consideration for ecosystems. These impacts include a potential reduction in marine biodiversity and the degradation of marine ecosystems as a result of both construction and operation of wind farms.

The electrification revolution

The global demand for electricity is expected to increase at a faster rate over the next three years and grow by an average of 3.4 per cent annually until 2026. Electricity’s share of final energy consumption is estimated to have reached 20 per cent in 2023 — up from 18 per cent in 2015 — but it must increase to 30 per cent by 2030, according to the IEA’s scenario for net-zero emissions by 2050.

Electricity prices for energy-intensive industries in the EU were on average almost twice as high as in the U.S. and China in 2023, despite an estimated price drop of 50 per cent from 2022. Electricity price disparities already existed prior to the war in Ukraine and the energy crisis, but they have since increased further. The IEA notes that this is putting the competitiveness of the EU’s energy-intensive industries under pressure.

As electrification advances and both the demand and supply of electricity become more reliant on weather conditions, ensuring electrical safety and reliability becomes crucial. Numerous power systems worldwide continue to encounter challenges in meeting the rising demand for electricity during periods of extreme cold or heat, compounded by the growing number of weather-related disruptions.

As power systems develop alongside digitalisation, protection against cyber threats will also become increasingly important. According to the IEA, the number of cyberattacks against power companies worldwide more than doubled between 2020 and 2022.

Storage – the holy grail

Renewable energy storage is crucial for the energy transition, addressing production issues faced by renewable technologies. Batteries, hydrogen, and other solutions are increasingly significant in this area.

By 2020, the EU had more than 48 gigawatts of pumped hydropower storage, with planned projects adding 20 gigawatts and constructions contributing 2.4 gigawatts. Italy led Europe with 7.9 gigawatts of storage, followed by Germany with 6.4 gigawatts.

Pumped-storage plants provide over 90 per cent of the EU’s storage capacity, offering higher efficiency than hydrogen and larger scale than batteries.

Sweden heavily invests in hydropower, with Vattenfall developing Juktan, the largest pumped-storage plant with 315 MW capacity, enough to power 300,000 electric cars.

“Today, we use hydropower as balance power. Several times more hydropower is produced in Norrland than consumed, but future needs will require new balancing solutions,” Axby adds.

The EU’s ETIP Hydropower programme launched in 2022, aiming to provide strategic advice on market opportunities, funding, and ecological continuity. The IEA emphasizes the need for significant battery storage growth to achieve net-zero targets, with Europe’s battery capacity expected to increase sixfold in the next decade.

Material availability is critical as the EU will need up to 18 times more lithium and five times more cobalt by 2030 for electric vehicle batteries and energy storage. Green hydrogen storage, though currently inefficient, is also essential, with European needs projected to exceed 466 terawatt hours by 2050. Hydrogen storage offers cost advantages over lithium batteries for large-scale energy storage.

Other technologies like compressed air and gravity storage play smaller roles in the current energy systems.

Large-scale battery storage is growing, with BloombergNEF projecting a tenfold increase to 411 gigawatts by 2030. However, this falls short of the 680 gigawatts needed for the IEA’s net-zero scenario.

Lithium-ion batteries currently dominate, but new chemistries like sodium-ion are emerging. Sodium-ion batteries are cheaper, more abundant in raw materials, and more environmentally friendly, making them ideal for large-scale storage.

Flow batteries are another option for large-scale storage. They can last 25-30 years without losing performance and can be scaled to meet energy storage needs with limited investment.

Hydrogen’s green promise for Europe

Currently, 95 per cent of hydrogen produced around the world is “grey hydrogen,” made from fossil materials such as natural gas and coal. For hydrogen to truly become a catalyst in the green transition, the first challenge is to scale up production of clean hydrogen from renewable energy sources.

As industrial energy consumption continues to rise, hard-to-abate sectors look for ways to keep up with demand and reduce carbon emissions at the same time.

Green hydrogen, produced from renewable energy sources through electrolysis, has emerged as a key element that many sectors hope will be a game-changer in the race towards net zero.

It offers unique business opportunities due to its efficient energy storage capabilities and low impact on the environment. Improved methods and increased access to clean energy have made green hydrogen an even more lucrative option for innovation and growth.

The green hydrogen race is on, with countries throughout Europe and the rest of the world increasing their investments.

The Finnish government’s plan aspires to generate at least 10 per cent of the European Union’s green hydrogen by 2030, doubling its current hydrogen usage within the next decade. Finland’s robust low-carbon electricity production and potential for wind power expansion position it as a key player in both domestic and international hydrogen markets.

Similarly, the Netherlands and Belgium are retrofitting their extensive gas pipeline networks to accommodate a new era of carbon-neutral hydrogen, aiming to fulfil a significant portion of the EU’s hydrogen import objectives.

Meanwhile, Germany’s industrial sector, particularly its steel industry, is committing to a considerable increase in green hydrogen capacity, with a dual strategy of domestic production and international imports.

However, the journey to a hydrogen economy is not without its challenges. The production, storage and transportation of green hydrogen can involve substantial energy losses, with efficiency rates sometimes dipping below 30 per cent. Despite these hurdles, the strategic investments in renewable energy infrastructure and international collaborations hint at a future where green hydrogen could be the linchpin of the industrial sector’s sustainable transformation.

Energy efficiency – still a lot to do

At COP 28 last year, more than 120 countries pledged to double global average annual energy efficiency. To achieve the goal of limiting global warming to the Paris Agreement’s target of 1.5 degrees, the IEA highlights the importance of this development in attaining net-zero emissions from the energy sector by 2050. Global improvements in energy intensity, a primary measure of energy efficiency, must thus double from a level of 2 per cent in 2022 to more than 4 per cent per year on average until 2030. Last year, however, global energy intensity improved by only 1.3 per cent.

However, in the wake of Russia’s invasion of Ukraine and the subsequent energy crisis, political momentum for energy efficiency has increased in many parts of the world. According to the IEA, investments in energy efficiency have grown by 45 per cent since 2020.

According to the industry forum Energy Efficiency Movement, systemic measures such as the Internet of Things, smart building management and industrial heat integration have the highest CO2 emissions savings potential from energy efficiency measures.

However, they identify industrial motors as having the highest potential of any single technology for reducing the energy intensity of light industry processes.

Power grids – a tangled bottleneck

Expanding renewables requires increased transmission and distribution networks. Smart grids and greater interconnectivity can mitigate renewables’ intermittency and stabilise networks. However, grid congestion and bottlenecks are increasing, while investment in grids has stagnated despite a near doubling of renewable investment.

The IEA estimates that 80 million kilometres of grid needs to be added or replaced in the next two decades, doubling grid investments by 2030. Grid development is complex, involving many stakeholders and lengthy timelines, often taking more than a decade due to bureaucracy and property rights.

Germany’s renewable energy production fluctuates significantly, requiring grid upgrades to handle variable outputs and prevent curtailments. Global investment in electricity grids, stagnant at around USD 300 billion annually, needs to rise to USD 700 billion by 2030 to meet climate goals.

A report by Sweco for Ellevio highlights dramatic changes in Sweden’s energy landscape, projecting a significant increase in northern electricity use by 2045. This will require SEK 668 billion in grid investments, with most needed in the next 10-12 years.

Large-scale energy storage and increased network capacity will be essential to balance supply and demand, especially with industrial demand flexibility and hydrogen electrolysis.