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Energy transition is our greatest opportunity

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Authored by Ben Sawford, KBR's Vice President of Sustainable Energy

The supply and demand of energy, energy security, and environmental sustainability are increasingly big issues capturing the attention of governments and companies around the world. There is a significant shift in thinking around the energy transition and the need for a less carbon intensive mix where people, planet and profit come together. The race is on to achieve this, while demand for energy continues to rise, particularly in emerging economies.

The UN Climate Change Conference (COP26) and the race to Net Zero by 2050 have already realigned and energised humanity’s priorities. It's opened up peoples’ eyes to the ‘art of the possible.’ At the same time, COVID-19, a catalyst for digital transformation, has accelerated many businesses up the S curves of technology adoption in a growing number of economic sectors. The energy sector is no different.

Tackling the global energy challenge and the need to transition offers economies, financiers, and businesses a once in a lifetime opportunity. If they don’t grab it in the short-to medium term, others will. This challenge is not confined to energy production itself, but all the supply chains, infrastructure, and the provision of so-called green electrons across every industry and economic sector.

There are thousands of examples of how disrupted markets can shift rapidly — like Spotify or Apple. The revolution for audio consumption was sudden, while growth was exponential, and existing heritage providers missed out, as laggards in the transition. There are lessons here for the global energy transition. Disruption is imminent, it will be bold and speedy.    

Power to X

We are already seeing challenges with energy price spikes across Europe and the UK, particularly for gas. This has social, economic, and geopolitical consequences. People are questioning the status quo. To-date power in the energy sector has been concentrated and centralised on traditional fossil fuel companies and hydrocarbon infrastructure, but this is evolving. Power is increasingly shifting to those that are agnostic about where their energy comes from, as long as its green and sustainable. They are driving change today.

Think Amazon or Google, commodity traders such as Trafigura or investors from sovereign wealth funds across the globe from Norway to Singapore. They have a laser focus on sustainability. They are also market collaborative. Some are technology agnostics as well when it comes to energy provision. They’re efforts are also decentralised around the world.

Interestingly and at the same time, it is governments that are more centralised in their approach, working hand in glove with industry, that are taking the lead when it comes to the energy transition. Japan, South Korea, Singapore, Saudi Arabia and Oman are leading the way in this approach.

They are combining foresighted policy making with the free market, where business, government and financial institutions are working together effectively with a long-term vision and well thought out plan. This provides a fertile, consistent, and predictable environment for investment. These players are then able to thrive off one another to manage both the energy supply chain and the evolving energy transition effectively. 

Since the global population and energy demand is only going up, this makes the energy transition more attractive to investors, as well as those who crack this global energy challenge. One concept, Power to X, is looking increasingly attractive to investors. This involves taking renewable electricity from wind, geothermal or solar and converting it into other energy carriers — the “X” — so the fuel can be stored for later use and absorb energy fluctuations. The X can also be used in some hydrocarbon intensive sectors, replacing traditional fossil fuels in established industrial ecosystems. For instance, using renewables for plastic polymers or even in the base production of antibiotics.

Green hydrogen or ammonia is the likely candidate. It can also be transported from renewable energy producing hubs to where it is needed. This offers incredible opportunities for new players and energy centres around the world. If the sun shines and the wind blows extensively, these spots could be ripe for investment. In fact, this shift rewrites the energy map for tomorrow. This is why geopolitics has a huge part to play in this process, as well as an intrinsic understanding of policy, combined with technology, infrastructure and finance.

The new global landscape for energy was just a concept 12 months ago, a pipedream — but not anymore. Now we are seeing serious investment into significant projects. There’s the Asian Renewable Energy Hub in western Australia with significant investments from Temasek, Singapore’s sovereign wealth fund. In Saudi Arabia, vast sums are moving into NEOM, the Kingdom’s brand-new planned city and green energy hub. In the UK, Fortescue Future Industries plans to sell green hydrogen to JCB. 

These are not small concepts, indeed, some are multiple double-digit Gigawatt energy infrastructure projects. We've not seen this level of investment into this sector in years — this is a gamechanger. Developing renewables-based, green fuels export projects in places that have consistent solar, wind or geothermal will recalibrate the power base of energy across the globe.

The UK has a great deal of potential in this regard. It is the windiest country in Europe with about 40% of the total wind that blows across the whole continent. In fact, the country is one of the best locations for wind power in the world. The potential to export green, sustainable and renewable energy is vast and currently untapped. Australia and Saudi Arabia are moving ahead fast in realising this.

A Transition in Technology Needed

Such developments will also require a transition in green energy technology as well. There are new capabilities being developed in Canada, Norway, South Korea and Japan. The energy transition will require a vast amount of new resources from rare-earth metals to lithium and cobalt. Securing supply chains need to be part of the strategy.  Whether it is mining, sustainably, new sources of lithium in Cornwall or Greenland, as well as recycling batteries for reuse.

The global energy challenge isn't just about creating cheap, green energy — it has to be about understanding the sovereign ownership of the entire global supply chain. What decentralised energy production will need and also the sharing of resources worldwide, where they are located and at the same time not wasting valuable materials.

At KBR we think the future is bright and we are very optimistic. The energy transition represents a huge economic and social benefit to many globally. Those who are the first-movers will have an advantage and a significant opportunity to reshape the energy mix for years to come. These are exciting times.

Click here to listen to Ben Sawford in the latest episode of In Orbit: A KBR Podcast

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