Pål Eitrheim, Executive Vice President for New Energy Solutions at Equinor, talks about Equinor's role in the energy transition in our latest #RUKGOW19 Event Partner blog. Pål will be talking at the Opening Session of GOW19 alongside other senior leaders. Register here.
Leading up to this year’s GOW19 conference, I was asked if I could share some of my reflections on the ongoing energy transition, and the journey Equinor has embarked upon in response to this.
In May last year, Statoil became Equinor. In many ways we had become a company which had outlived our name. Our strategy remained firm, and we are as proud as ever of our industrial legacy and our hydrocarbon history. But we needed a name that better reflected our strategy: safe, high value and low carbon, signalling that we are going from being a pure oil and gas company to becoming a broad energy major. We will develop oil, gas, wind and solar power, building a substantial position within renewables.
What are my beliefs about the transition we now find ourselves in? Firstly, the energy transition is irreversible and will accelerate, and secondly, renewable sources will be the most cost competitive source of power.
Global energy systems are in transition
The scope, speed and endgame are still uncertain. The “glass half-empty” perspective is that renewables today are a limited part of the total energy mix. The “glass half-full” view is that the annual growth rates are impressive: On average, solar PV and offshore wind is expected to grow by 17 percent per year to 2030, according to the IEA and BNEF.
The transition is affecting political, economic, social and investor preferences and priorities. EU member states will this year conclude plans to integrate their climate and energy objectives, targets, policies and actions. 46 countries, and three U.S. states, have so far introduced or announced some form of carbon pricing. According to the Oxford Institute of Energy Studies, coal is facing a 40 percent discount rate among some investors.
Many want the energy transition to happen faster, but energy systems are slow-moving. I have a market-based view on this. Yes, policies and regulations matter. They are in fact key to change the future energy mix, the scope and speed of the transition. Still, forces of commercial gravity tend to prevail. Ultimately renewables will have to outcompete and outperform hydrocarbons.
The energy transition will be a marathon, not a sprint.
It will be gradual and move at different speeds in different markets. I believe renewables – over time – will have to replace hydrocarbons on the merits of being clean, affordable, and reliable alternatives.
In the electricity generation sector, renewable energy is at the centre, becoming competitive without subsidies in many markets. This growth is partly a result of political will and decision-making and partly market-driven by renewables being the cheapest solution. Continued improvements in technology and digitalisation will lead to further cost improvements.
The offshore wind industry is at the forefront of this development. The offshore wind market is projected to grow significantly over the next decade from today’s 18GW towards 130GW in 2030.
Some markets, like the UK, have come a long way. In fact, the offshore wind industry ensures that the UK can significantly increase its share of affordable renewable generation while continuing to cut carbon emissions.
Through the Sector Deal, the UK has consolidated its position as a global leader and innovator in offshore wind. As a result, offshore wind will become the backbone of the UK’s low-carbon electricity system.
To follow, more countries with long coasts and wind resources have stated that offshore wind is a growth market and an important part of the future energy mix. No one knows how the mix will look in 2050. But what we know for sure is that the world will look very different in 2030, 2040 and 2050.
We all acknowledge the large shifts taking place in the world’s energy systems. The ongoing transition is irreversible and enjoys widespread public support. By taking an active part, we - the industry, can demonstrate that we are committed to accelerate the renewal of the world’s energy mix.
There is every reason to believe that the offshore wind technology will play an increasingly central role in the way we generate clean electricity in the decades ahead and become a central part of the path towards a zero-carbon economy.
Equinor’s ambition is to be at the forefront of the ongoing energy transition to a less carbon-intensive and more sustainable energy system. For us, this is a powerful demonstration of what we aspire to be - a broad energy major continuing to grow within oil, gas, and renewable energy.
The UK has a unique opportunity to continue to develop a technology which has a truly global potential, and I am excited about attending GOW19 to explore these possibilities further.