By Stephen Kishewitsch
As Canada, along with the rest of the world, seeks a plan to bring the economy back up to speed from the Covid-19 shutdown, there is also substantial discussion around using a “once in a generation” opportunity created by the slowdown to restructure the economy at the same time towards decarbonization. Some adaptations forced on everyone by the pandemic, like the replacement of business travel with online meetings, seem likely to remain at least in part for the long term, driving travel-related emissions down. Electrification of legacy fuel-burning sectors like transportation is ongoing. But as risk management firm DNV GL warns, below, that will still not be enough. These trends need to be deliberately accelerated. Before things pick up again, the organizations cited below argue for policy directions to make that happen. Canada, along with most of the world, has expressed a commitment under the Paris agreement to keep global warming below 2 degrees Celsius by the end of this century, and preferably below 1.5o. Canada can already boast a generally low-emitting electric power sector, and business leaders in the sector have expressed acceptance of the need.
The suggestions below consider how to get there.
The discussions and recommendations below cover a range of strategies:
» Investment strategies, such as how much and where to invest – interprovincial transmission, storage, electric vehicles
» New but unproven technologies with large promise but risk turning into dead ends
versus an accelerated commitment to existing policies like super-insulating buildings
» General principles for driving innovations that will be needed in areas that currently have few options
» And what trends the world’s economies are likely to follow in the wake of the Covid-19 economic slowdown. How long will it take before it returns to its pre-Covid trend, will there be long-term structural changes as a direct result of the pandemic, how much difference will policy change make?
Target sectors and investment policies
For example, Corporate Knights Inc. released a report June 30 challenging the government and business to support a $109 billion investment by the federal government over the next 10 years to trigger total investments of $790 billion, mostly from the private sector, to set Canada on a path to a “resilient, net-zero economic recovery.” The Building Back Better Canada Plan proposes targeting investments in high-growth areas where Canada has strong competitive advantages, for example in sectors like deep retrofits of homes and workplaces, accelerated electric vehicle (EV) uptake, greening of the electricity grid, and decarbonizing of heavy industry.
The authors say the capital expenditures projected for their proposals are well within the bounds of routine levels of investment in Canada, which exceed $400 billion per year. For example, the Greening the Grid element of their proposal for investments in solar, wind and storage capacity “averages $12.9 billion per year in a sector that routinely absorbs $22 to $23 billion per year in capital expenditures.”
Greening the grid, in their proposal, would involve
• improved transmission infrastructure to allow increased interprovincial electricity trade, including a 500-kilovolt connection between B.C. and Alberta, a new high-voltage connection between Manitoba and Saskatchewan (the federal government announced $18.7 million funding for this on March 2), and a new 2,000-megawatt high-voltage, direct-current (HVDC) connection between Ontario and Quebec.
• a 10-year, $25-billion program of strategic investment in the storage capacity needed to support renewable electricity grids, particularly in Alberta and Saskatchewan, where access to hydro reservoir storage is limited.
Investment, they say, could be structured on a fee-for-service basis, with provinces paying only when they make use of the interties and with the Canada Infrastructure Bank assuming the long-term risk, which would be low.
In addition to direct federal investment, the report also calls it essential that the federal government use its spending power to encourage provinces and municipalities to follow suit by attaching green strings as a condition for accessing federal stimulus funds: policies like zero-emissions vehicles mandates, and fast and fair power-grid access for storage and renewables.
"As policy-makers design economic recovery plans, they are making decisions that will cast the die of our economy for decades to come," said the report authors. "For this once-in-a-generation investment, it's vital that we look ahead and invest in building an economy that's ready for tomorrow."
In related economic sectors, Corporate Knights and the International Institute for Sustainable Development (IISD) both recommend policies to accelerate adoption of zero emission vehicles like electric cars, trucks and buses, and policies advancing greater investment in battery technology and manufacturing. For example, the IISD calls for all new light-duty passenger vehicles sold to be zero-emission by 2040, 50% of new medium-duty trucks and buses to be zero emission by 2030, and 15% of new heavy-duty trucks and buses zero-emission by 2030 (75-80% for trucks by 2030 in Corporate Knights’ recommendation).
“Globally, most electric vehicles (80%) are made in the region they are sold. However, Canada’s auto industry lags behind other auto-manufacturing countries in its preparation for an electrified transportation future: Only 0.4% of the light duty vehicles produced in Canada are electric, which is 80% lower than the global average of 2.3%, according to the Power Play electric vehicle transition report. Major investments are needed to build out Canada’s zero emission vehicle (ZEV) value chain, which includes raw material production and refinement, electric vehicle manufacturing and battery manufacturing. Failing this, we are at risk of losing a major pillar of our economy.” (IISD, Green Strings: Principles and conditions for a green recovery.)
To kickstart installation jobs in the short-term, Corporate Knights suggests government could launch new fast-track requests for proposals to provide advance investment for any proponents able to complete projects over the next 12 months, and ensure the program is sufficiently funded to support eligible projects. A loan guarantee should be provided for the additional cost for proponents that need it. Charging infrastructure, at least in urban areas and along major highways, could be supported similarly, with federal support for the cost of installation and electricity upgrades could be provided to building owners, homeowners, municipalities and other businesses, in the form of 50% grant and 50% loan guarantee for projects that can be completed over the next 12 months.
The day before its report, Corporate Knights Inc. released a letter signed by 47 business leaders, with more coming, calling for a bold green recovery coming out of the COVID 19 crisis. The leaders challenge the notion of austerity and the idea of a mild recovery plan and instead call for action that is even bolder than has been the case for the COVID crisis response. "It will require a significant burst of investment in the first couple of years buttressed with complimentary policies over the next five. Some will raise concerns about the costs, but if we learned anything from the last economic crisis, it's that austerity is not a growth strategy, rather it leads to lost opportunities for people and businesses alike."
Which technologies should we concentrate on?
A natural question would be how much can be done quickly by accelerating deployment of existing policies and technologies, versus how much reliance should be on newer ones. In a June webinar International Energy Agency Executive Director Fatih Birol noted that, unsurprisingly, GHG emissions declined in 2009 after the market crash, but as the economy recovered the year 2010 showed the largest single-year growth in emissions. The same pattern may well be followed when the economy recovers after the Covid-19 driven economic downturn of 2020. Avoiding that effect should now be the world energy sector’s number one job, he said. To do so quickly does not need new policies or technological developments, merely aggressively pursuing existing policies. Improving building envelope efficiencies with triple-glazed, low-e windows, improved insulation in new buildings, and heat pumps are examples. Tom Rivett-Carnac, founding partner of Global Optimism, agrees: “There are a whole variety of [known, reliable technologies] that we can rely on that have been proven at scale: building retrofits, transportation solutions, that we can just get on with and do now.”
The International Energy Agency analyzed nearly 400 technologies relevant to decarbonization, according to NASA’s technology readiness level (TRL) scale. Readiness for wide-scale deployment increases to the right. Courtesy IEA (2020) Special Report on Clean Energy Innovation. All rights reserved. Reproduced under Creative Commons licence.
At the same time, however, a recent Special Report on Clean Energy Innovation report by the IEA says, “Without strong and targeted R&D efforts in critical technologies, net-zero emissions are not achievable.” The report finds that around three-quarters of the cumulative reductions in carbon emissions that would be needed to move the world onto a sustainable path would come from technologies that have not yet reached full maturity. That’s around 35% of the technologies needed are currently at the prototype or demonstration phase, the report says, while a further 40% of the reductions rely on technologies not yet commercially deployed on a mass-market scale. This means urgent efforts will be needed to accelerate innovation. For example, it would require rapid progress in new battery designs that are still at the prototype stage now to shift long-distance transport from fossil fuels to electricity.
The risk of course is any technology at the prototype stage can fail of its promise, and time and resources devoted to ramping it up quickly can be unproductive. On the other hand, failure to accelerate progress now risks pushing the transition to net-zero emissions further into the future, the IEA notes, adding that, for some energy sectors, 2050 is just one investment cycle away, making the timing of investments and the availability of new technologies critical.
In the same webinar, Nicholas Beatty, founding director of battery maker Zenobe in the UK suggested allocating perhaps 10% of effort to the exciting early-promise technologies and 90% to incremental improvements in the technologies that are delivering results today.
There are of course also major sectors with currently few technologies available for reducing emissions to zero, such as shipping, trucking, aviation and heavy industries like steel, cement and chemicals. Decarbonising these sectors will largely require the development of new technologies that are not currently in commercial use. However, the innovation process that takes a product from the research lab to the mass market can be long, and success is not guaranteed. It took decades for solar panels and batteries to reach the stage they are at now. Time is in even shorter supply now.
The IEA sets our five key innovation principles:
• Prioritize track and adjust. Review the processes for selecting technology portfolios for public support to ensure that they are rigorous, collective, flexible and aligned with local advantages.
• Raise public R&D and market-led private innovation. Use a range of tools – from public research and development to market incentives – to expand funding according to the different technologies.
• Address all links in the value chain. Look at the bigger picture to ensure that all components of key value chains are advancing evenly towards the next market application and exploiting spillovers.
• Build enabling infrastructure. Mobilize private investment to help bridge the “valley of death” by sharing the investment risks of network enhancements and commercial-scale demonstrators.
• Work globally for regional success. Co-operate to share best practices, experiences and resources.
How are we doing so far?
One forecast by Independent risk management consulting firm DNV GL is something of a good news / bad news story. The company anticipates the lingering effects of the pandemic will “take the wind out of the sails” of the world economy for many years – reducing World GDP in 2050 by 9%, relative to pre-pandemic forecasts. Even with slower growth, however, by mid-century the world economy will still be twice its size today. In contrast, energy demand will not grow. In 2050, it will be about the same as it is today, in spite of a larger population and world economy. This is largely due to significant improvements in energy intensity, but also due to the effects of COVID-19.
The firm sees improvements in energy intensity that have been ongoing for years will remain the most important factor in reducing energy demand in the coming decades, and the contraction due to COVID-19 comes on top of this. For one thing, reduced office work and changed commuting habits will result in transport energy use never again reaching 2019 levels. Demand for manufactured goods globally will need almost four years to recover to 2019 levels, and the energy-intensive iron & steel industry, impacted inter alia by lower demand for new office space, may never reach its pre-pandemic heights.
As the company notes, that looks like good news from a climate goals perspective – but the longer-term decline in emissions is not significantly accelerated by the pandemic. Even with peak emissions behind us, and flat energy demand through to 2050, the energy transition the company forecasts is “still nowhere near fast enough” to deliver the Paris ambition of keeping global warming well below 2°C above pre-industrial levels. “To reach 1.5-degree target, the world would need to repeat the decline we’re experiencing in 2020 every year from now on.”
DNV’s forecast is predicated on IMF’s longer outbreak scenario, where World GDP will shrink 6% in 2020. The IEA’s Special Report has somewhat different numbers, with perhaps a shorter duration and a larger rebound from the reduction in world economic output and emissions, but still needing swift action to bring about structural change. The speed at which energy-producing and energy-consuming equipment would have to be replaced and new technologies introduced in the IEA’s Sustainable Development Scenario “is as fast as has ever been seen in the history of energy,” the organization says.
The IEA report is here: https://www.iea.org/reports/clean-energy-innovation
Popular support for decarbonization makes a difference:
“If you look back at civil movements through history, there has never been a movement that achieved 3.5% of the population, consistently engaged, that failed to achieve its objectives.”
– Tom Rivett-Carnac, founding partner of Global Optimism
Consultant / analyst firm DNV GL offers the following ten point list for decarbonizing the world’s energy generation and use:
• Ten-fold growth in solar power increasing to 5 terawatts and a five-fold increase in wind power to 3 TW by 2030, which would meet 50% of the global electricity use per year.
• Fifty-fold increase in production of batteries for the 50 million electric vehicles needed per year by 2030, alongside investments in new technology to store excess electric energy and solutions that allow our electricity grids to cope with the growing influx of solar and wind power.
• New infrastructure for charging electric vehicles on a large scale.
• More than $1.5 trillion of annual investment needed for the expansion and reinforcement of power grids by 2030, including ultra-high-voltage transmission networks and extensive demand-response solutions to balance variable wind and solar power.
• Improvements in global energy intensity (the energy used per unit of output) need to increase by 3.5% per year within the next decade.
• Green hydrogen to heat buildings and industry, fuel transport and make use of excess renewable energy in the power grid.
• For the heavy industry sector: increased electrification of manufacturing processes, including electrical heating. Onsite renewable sources combined with storage solutions.
• Heat-pump technologies and improved insulation.
• Massive rail expansion both for city commuting and long-distance passenger and cargo transport.
• Rapid and wide deployment of carbon capture, utilization and storage installations.