What is the clean energy transition and what can we expect from it?

By: Lawrence D’Mello and Ling Ji

Posted: July 10th 2022

Many of us are familiar with the issues and problems associated with the heavy use of coal, oil, natural gas and other forms of non-renewable energy. To list a few problems, this includes their limited supply; fossil fuels take millions of years to form and cannot be quickly replaced when used. At the rate that we are using oil and coal, we are expected to run out by 2050, raising a big issue for the global economy. High carbon dioxide emissions when burnt. Research shows that burning fossil fuels is a major contributor towards the greenhouse effect. This contributes to global warming and is harming our environment.

While there may be many advantages to using fossil fuels, there is a push for us as individuals, and the economy to run off clean energy.

First Of All, What Is Clean Energy?

“Clean energy is the energy that comes from renewable, zero emission sources that do not pollute the atmosphere when used, as well as energy saved by energy efficiency measures.”

Clean energy sources include:

  1. Solar energy

  2. Wind energy

  3. Bioenergy

  4. Hydropower

  5. Geothermal energy

Now, governments around the world are pushing towards a cleaner and greener future. While there are many agreements and aims by governments to go through this transition, one example to put under the spotlight is the 2021 United Nations Climate Change Conference or COP26. Promises made by governments around the world at this event aim for global warming to be under 2 degrees this century, implementing different goals such as phasing out the use of coal, to rapidly scale up the deployment of clean power generation and goals of increased electric vehicle (EV) sales. For reference, the Chinese government is aiming for roughly 30% of the Chinese car market sales in 2030 to be EV sales.

The Net-Zero Goal - What Is It and Will We Ever Achieve It?

The net-zero emissions targets have recently grown in popularity as firms and national have begun to implement the goal in their operations. Achieving net-zero emissions refers to balancing the external emission of greenhouse gases with the total greenhouse gases being pulled out of the atmosphere. Achieving the perfect harmony here is a key factor in ensuring that targets such as the aforementioned sub 2 degree goal is reached as the point of net-zero emissions represents the official mark wherein the detriments of climate change are no longer worsened. To enable the feasibility of these targets, many states and nations have implemented net-zero policies targets by law.

Although the idea may seem impractical given the plethora of emission-forming activities that most firms/nations engage in and lack of affordable, effective measures to pull greenhouse gas emissions from the atmosphere. However, in 2014 and 2018, Tasmania had in-fact dropped its net emissions below the net-zero target. The two key factors that allowed for this to occur were attributed primarily to the increased hydroelectric energy production that allowed 94% of the state’s energy needs to be powered purely by renewable clean-energy sources, alongside the state’s large carbon-dense forestry that effectively sucked greenhouse emissions in their process of photosynthesis. More recently, new drawdown technologies such as direct air capture enable users to swiftly trap emissions and subsequently place the CO2 in safer, sustainable storages. Above all, the move to clean energy as a substitute for non-renewables had left the most impactful mark on reducing Tasmania’s net emissions and will need to be incorporated much more in the coming years to achieve the ambitious goals established in COP26.

While these are all factors that make up “clean energy,” what can we actually expect from it?

A couple of issues surrounding this space is the heavy investment and resources required to drive this transition. For each wind turbine, one tone of rare earth material is used (such as neodymium, praseodymium, dysprosium and terbium). For EV’s, lithium, cobalt, nickel and graphite are major components required for batteries to power the car. Rare earth materials are also used for electric vehicle batteries, highlighting the need for materials to fuel this transition.

Now What’s the Problem?

We all have heard of the term “supply chain bottlenecks,” and this is leading to inflationary pressures. The price of nickel, cobalt, lithium and rare earths have all skyrocketed, hampering this transition. To top it off, mining these materials from the earth’s crust takes a lot of investment, with the cost of equipment to mine these materials in the hundreds of millions of dollars. Without significant investment, the clean energy transition will be hampered by the supply deficit in the raw materials required.

What Can We Expect In This Transition To Clean Energy?

Naturally, clean-energy production remains far less efficient than its non-renewable counterparts due to the time-intensive production process and expansive needs for solar and wind-powered structures. The transition to clean energy will necessitate extremely high initial capital expenditure to build the respective structures with limited maintenance throughout their lifespan. The financial benefits of these renewables can be observed in the longer term as running costs are extremely low, especially in comparison to fossil fuels. However, more recently, electricity generation from renewable sources has hit all-time lows as ongoing research and development have optimised power production. Large solar farms have undergone the most striking change since their 2009 equivalent prices as denoted in the below figure. With this stark declining trend in price for renewable energy, we can expect to see many more solar and wind farms popping up shortly, specifically in rural/deserted regions where land prices are extremely low.