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What Significant Changes Await the Future Energy Sector

Energy industry
Green development is a global shared goal, and green energy is becoming a central focus for achieving this objective. Currently, the world is undergoing the third energy transition from fossil fuels to new energy sources, and technological innovations are expected to bring about significant impacts on the trends in the energy industry.

How Does Technological Innovation Affect the Development of Green Energy?

The term “green energy” has gradually become a focal point in response to climate change and environmental protection. In academic terms, there is no clear scientific definition, and it is more often used as discourse expressing political policies in government and corporate planning reports, as well as in media news reports, complementing concepts like “green new deal,” “green development,” and “green economy.”

Closely related to the concept of green energy are terms like clean energy, low-carbon energy, and renewable energy. In this context, green energy primarily refers to environmentally friendly and sustainable energy resources that can be commercially developed on a large scale under existing technological conditions. This includes solar energy, wind energy, hydropower, biomass energy, ocean energy, geothermal energy, and green hydrogen, among others. Nuclear energy is a controversial source; relative to traditional energy sources, it is considered a new energy source that can provide stable, reliable, and low-carbon electricity. However, nuclear power plants operating through nuclear fission generate high-level radioactive waste and pose safety risks. In this article, nuclear fusion energy is also considered a form of green energy.

Green energy represents the future trend in energy development, catering to the low-carbon and clean requirements of the third energy transition. Simultaneously, the third energy transition is driving the intelligence and interconnectivity of energy, particularly electricity, imposing additional technological innovation requirements on green energy. It is the continuous cumulative effect of technological innovation in green energy that is pushing the global energy structure towards a more low-carbon and clean direction.

Factors such as technological innovation and commercial scaling are driving improvements in green energy generation efficiency, cost reductions, and rapid increases in installed capacity, making the trend of the third global energy low-carbon and clean transition more pronounced. The levelized cost of electricity for various green energy sources is now lower than that of coal-fired power generation. According to a research report from China International Capital Corporation (CICC), the levelized costs of nuclear power, photovoltaics, wind power, and hydropower are 5%, 17%, 25%, and 34% lower than coal-fired power generation, respectively. Between 2010 and 2020, the cost of photovoltaic power generation decreased by 89%, benefiting from economies of scale, new material substitutions, and efficiency improvements. In the next decade, costs are expected to be halved again. By 2060, the cost of photovoltaic power generation is expected to decrease to 68% lower than that of thermal power generation, making it the cheapest green energy source.

The Key to Successful Energy Transition

Establishing a diverse complementary system of green energy with energy storage at its core is the direction of the third global energy transition. Breakthroughs in technologies related to energy storage, green energy, and energy smart grids will be crucial for the success of the energy transition. Innovations in advanced nuclear energy technology and CCUS (carbon capture, utilization, and storage) technology will lead to long-term benefits, while breakthroughs and commercialization of controlled nuclear fusion technology will trigger a new energy revolution.

As of the current level of technological innovation and commercialization, solar energy and wind energy are the most installed and promising green energy sources globally. However, these sources exhibit characteristics of significant capacity fluctuations and high randomness due to natural conditions, categorizing them as intermittent energy sources. The increasing share of intermittent energy sources in the energy structure can exert enormous pressure on the stability and balance of the power grid, causing volatility in the electricity prices of intermittent energy sources and potentially leading to significant curtailment of solar and wind energy.

Energy storage technology is the key to efficiently utilizing green energy and serves as a bridge connecting the power grid with heating systems, gas networks, electrified transportation networks, and more. It is crucial for improving the volatility of intermittent energy sources and achieving consistency in power supply and demand. In future low-carbon energy systems, the flexible combination of green energy and energy storage will become the most economical solution. Therefore, in the future development of energy, the primary goal of technological innovation is to achieve cost reduction, increased efficiency, and flexibility and reliability in both the supply and storage ends of green energy. The development of a diverse complementary system of green energy with energy storage at its core is emphasized.

Energy storage technologies include electrochemical energy storage technologies and physical energy storage technologies. Electrochemical energy storage technologies include flow batteries, lithium-ion batteries, lead-carbon batteries, sodium-based batteries, and others, providing flexible advantages without location constraints. They can be applied on a large scale in power generation, transmission and distribution, and consumption processes, favoring the integration of green energy. Physical energy storage technologies include electrical storage and thermal storage, with examples such as pumped hydro storage, compressed air energy storage, flywheel energy storage, and superconducting energy storage. Compared to electrochemical energy storage technologies, physical energy storage technologies have the characteristics of large scale, low cost, long lifespan, and environmental friendliness, but they are more susceptible to location and environmental restrictions. From the current technical characteristics and development trends, physical energy storage is more suitable for power generation and transmission and distribution processes, while electrochemical energy storage is more applicable in the transportation sector, especially in the battery demand of electric vehicles. The combination of green energy generation and energy storage technologies poses a growing competitive threat to traditional power generation technologies, with the outcome largely dependent on the development of battery technologies. Additionally, battery recycling and disposal technologies will also influence the future development of this combination.

Energy sector challenge

Hydrogen storage emerges as a novel energy storage solution, boasting advantages of long adjustment cycles and substantial storage capacity. It holds immense potential in applications such as facilitating the integration of renewable energy and grid peak-shaving. Hydrogen, being one of the most abundant elements in the universe, stands out as a green energy source with the highest energy density among common fuels. Green hydrogen, distinguished by its eco-friendly and efficient characteristics, is often hailed as the “ultimate energy source” of the 21st century. However, due to factors such as limited technological innovation and high costs, the market size of hydrogen energy in industrial applications has remained constrained.

The hydrogen energy industry encompasses upstream, midstream, and downstream segments. In the upstream segment, hydrogen production predominates, with most of the world’s hydrogen currently derived from processing fossil fuels, categorized as polluting “gray hydrogen.” Utilizing carbon capture and storage (CCS) technology during hydrogen production can decarbonize “gray hydrogen,” transforming it into “blue hydrogen.” The ideal state for hydrogen utilization is “green hydrogen,” achieved by using renewable energy to electrolyze water.

In the midstream of the hydrogen energy industry, hydrogen storage and transportation methods include gaseous hydrogen, liquid hydrogen, and solid-state hydrogen. High-pressure gaseous hydrogen storage technology has been commercialized, characterized by small volume, short distances, and high flexibility. Liquid and solid-state hydrogen exhibit extremely high energy density, offering convenient transportation and representing the future direction for large-scale hydrogen storage and transportation.

The downstream segment of the hydrogen energy industry involves various applications. Hydrogen fuel can replace natural gas in industrial and heating applications, provide energy for heavy-duty trucks and ships, and serve as a new means of energy storage through the conversion of “green electricity to hydrogen and then back to electricity.”

The technological innovation prospects for energy storage and hydrogen energy are evident in patent applications. International applications filed under the Patent Cooperation Treaty (PCT) hold high value, representing the latest achievements in technological innovation and serving as a compass for future industry development. From 2000 to 2020, patent applications for energy storage technology, hydrogen energy technology, fuel cells, and smart grids ranked prominently in PCT patent applications for green technologies. These fields have shown a trend of increasing applications in recent years, indicating that energy storage and hydrogen energy are poised to become focal points in the competition within the energy sector. In the field of renewable energy generation, PCT patent applications reached their peak in 2012 and have exhibited a declining trend in subsequent years.

Among all prospects for innovative energy utilization technologies, a breakthrough in nuclear fusion technology could potentially unleash dramatic impacts. Nuclear fusion utilizes deuterium and tritium, with the resulting helium gas being non-radioactive. Deuterium can be extracted from seawater, and one liter of seawater subjected to deuterium fusion releases an energy equivalent to burning 300 liters of gasoline. Since the detonation of the first hydrogen bomb in 1952, research on controlled nuclear fusion has been ongoing. Subsequent inventions, such as the tokamak device, led to the establishment of the International Thermonuclear Experimental Reactor (ITER) in 2007. In 2021, China’s Experimental Advanced Superconducting Tokamak (EAST) successfully achieved repeated plasma operations at temperatures of 120 million degrees Celsius for 101 seconds and 160 million degrees Celsius for 20 seconds. In 2022, China’s new generation “artificial sun” (HL-2M) device achieved a plasma current breakthrough of 1 million amperes (1 megaampere), while in the same year, U.S. researchers conducted the first controlled nuclear fusion experiment with net energy gain at the Lawrence Livermore National Laboratory’s National Ignition Facility. After decades of research, global innovation in controlled nuclear fusion technology has made significant progress, with substantial private capital entering the field. However, achieving commercialization may still require several decades of effort. It is foreseeable that once controlled nuclear fusion technology achieves a breakthrough and large-scale commercialization, a transformative change will occur in humanity’s existing energy consumption structure.

Energy Industry Development Trends: A Forward Look

Technology plays a crucial role in shaping the development of the energy sector, with considerations extending to factors such as resources, population, climate, environment, politics, and economics. Specifically, the availability of resources, economic viability, population demands and preferences for energy, environmental capacity for energy activities, political demands and policy frameworks, and the level and trends of economic development all exert various influences on the development of the energy industry. Technological innovation primarily revolves around addressing these needs and operates through the diffusion of technology.

  • From the perspective of resources and the environment, fossil fuels are non-renewable and will gradually diminish.

Concerns about the depletion of fossil fuels, reflected in the recurring concept of “peak oil,” persist throughout history. Despite the longest history, deepest roots, and most significant achievements in technological innovation related to fossil fuels, it cannot escape the fate of eventual depletion, albeit delayed by the shale gas (oil) revolution. The use of fossil fuels emits a large amount of carbon dioxide, considered a major contributor to contemporary climate change. Concerns about oil have shifted from peak supply to peak demand—when will the consumption of oil reach its peak? The trends of depletion and high carbon emissions prompt fossil fuels to step down from their dominant energy position, replaced by the rapidly emerging dominance of renewable energy. Renewable energy possesses various advantages aligned with the current global energy needs: it is inexhaustible, clean, and low in carbon content, making it the predominant force in the future energy structure.

According to the International Energy Agency (IEA) forecasts, under the “Current Policies Scenario,” the share of fossil fuels in the global energy mix will decrease from the current 80% to 60% by 2050. Coal demand is expected to peak in the coming years, oil demand will peak in the mid-2030s, and natural gas demand will increase by about 5% from 2021 to 2030 before stabilizing. In the “Stated Policies Scenario,” the share of electricity in energy consumption will rise from 20% in 2021 to 39% by 2050. The proportion of renewable energy in total electricity generation will increase from 28% in 2021 to 80% by 2050, while the share of fossil fuel electricity generation will decrease from 62% in 2021 to 26% by 2050. The IEA predicts that solar photovoltaic capacity will increase year by year over the next five years, surpassing natural gas in 2026 and coal in 2027, becoming the world’s largest source of electricity.

  • World energy demand growth is also influenced by population and economic growth.

With the increase in global population and economic progress, there is a continuous rise in energy consumption demand and an increase in energy quality preferences. United Nations statistics show that as of November 2022, the global population has reached 8 billion, increasing by 1 billion since 2010 and 2 billion since 1998. It is expected that the global population will increase to 9.7 billion by 2050 and may peak at nearly 10.4 billion in the mid-2080s. Population growth, accelerated urbanization, and economic growth provide sustained impetus for energy production. According to data released by BP’s energy database, global primary energy consumption has increased from 396.88 exajoules in 2000 to 595.15 exajoules in 2021, nearly doubling. In addition, countries with different levels of economic development have different attitudes and meanings regarding energy use and energy transition. Developing countries often underestimate the challenges and difficulties they face in discussing energy transition plans, and some essential clean energy sources are considered polluting by developed countries. The inconsistency in economic development affects the effectiveness of climate international cooperation between developing and developed countries, turning energy transition into a dispute over development rights.

  • As extreme weather events increase, climate change has become one of the core issues for governments worldwide.

Currently, the United Nations’ policy framework for addressing climate change mainly involves implementing carbon neutrality action plans. As of now, over 130 countries and regions globally have set net-zero emissions or carbon neutrality goals. Under the structural pressure of global climate change and carbon neutrality, governments must strive to achieve zero-carbon goals while considering their national energy security and economic development resilience. Therefore, the core of designing and formulating national energy policies is to accelerate energy transition, achieve carbon reduction goals, including increasing the share of renewable energy, improving energy efficiency, constructing new nuclear power units, and deploying CCUS technology. In addition to increasing public funding, governments need to formulate policies to encourage private capital to participate in the clean energy sector.

Energy and weather
  • For the development of the energy industry, although technology is not a decisive factor, it is the most important one.

Population and economic growth require technology to develop and produce more resources and energy. Environmental pressures on resource development also require technological innovation to achieve a transformation in energy utilization methods. Political demands and policy designs strongly promote technological diffusion and large-scale commercialization. Under the structural pressure of achieving global carbon neutrality goals, countries and enterprises bear the task of promoting the clean transformation of energy, enhancing energy security, and developing resilience. Leveraging existing advantageous factors, harnessing the catalytic and multiplier effects of technological innovation will impact the development prospects of a country’s energy industry and determine its position and influence in the future energy industry.

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