Powering Change: Innovation Opportunities in the Energy Transition

Blog #1   –   At Catalyze we admire entrepreneurs that want to change the world; as an impact-driven innovation consultancy, we pursue the same goal. With this article, our Green & Sustainable Innovation experts discuss the key steps forward in the “energy transition” from a fossil-fuel production and consumption system towards a sustainably produced energy supply. Subsequent articles in our Energy Transition series will focus on some important subtopics in the energy transition: Waste Heat Recovery, Sustainable Hydrogen, Smart Grids, Critical Materials.

In this article:

• Current energy sector and challenges towards a sustainable future
  • Challenge: Minimizing global warming
  • Challenge: increasing energy security
  • Challenge: stimulating welfare and GDP equality
• Sustainable energy as an alternative
  • What is required to make an energy transition and what are the barriers?
    • Key contributors for the energy transition: Renewables and Energy efficiency
• Complimentary approaches: Electrification, sustainable H2, BECCS, and FF-CCS
• Catalyze can support your energy transition innovation
  • EU Funding Opportunities in the Energy Transition

Current energy sector and the challenges towards a sustainable future

The current energy sector uses mainly fossil fuel-based energy, which is unsustainable both environmentally and socially. Its unsustainability can be attributed to: 1) its high associated CO2 emissions, critically driving global warming, 2) potential disturbances due to geopolitical issues; and 3) its role in unequal GDP growth and associated welfare. Together, they represent three key challenges that need to be overcome in order to achieve a sustainable energy future.

Challenge: Minimizing global warming

The world is warming up rapidly with devastating consequences. The current and foreseen effects are numerous and detrimental for flora, fauna, and people,  including:

• Loss of land and habitats due to rising sea levels
• Loss of biodiversity due to habitat disruptions on land and in water
• Increased weather instability. This includes changes in precipitation, causing droughts in some regions and flooding in others, leading to more frequent natural disasters.
• Impacts on human health, caused by natural disasters, low agricultural yields and increased illnesses and premature deaths by heart attacks, asthma exacerbations, and other cardiovascular and respiratory diseases caused by extreme weather¹.

Global warming is caused by the increase of greenhouse gases (GHG) in the atmosphere. The primary greenhouse gases are carbon dioxide (CO2) and methane (CH4), both of which have doubled in comparison to pre-industrial levels². In 2021, we reached an all-time high annual level of CO2 emissions with a record level of 36.3 gigatonnes (Gt). The energy sector accounts for two-thirds to three-quarters of global GHG emissions. Undoubtedly, the current energy system is the primary culprit for climate change, and a transition towards sustainable energy would have robust effects on global warming.

The Paris Agreement aims to limit the global temperature increase to within 1.5°C of pre-industrial levels by 2050. If we continue with business as usual (BAU scenario) the global temperature increase is expected to be ~3°C of pre-industrial levels, with the abovementioned detrimental effects (Figure 1).

Figure 1. Future climate scenarios and their socio-economic impacts. Currently the temperature increase (T increase) is ~1°C. In the business as usual (BAU) scenario T increase is expected to be ~3°C by 2050. The Net-Zero scenario would keep the temperature increase within 1.5°C and see further significant and positive impact, driving up global GDP by 2.5%, creating 139 million job opportunities by 2030, and a +20% growth (above the BAU scenario) in the welfare index ³.

Challenge: Increasing energy security

The current energy sector depends primarily on fossil fuels that are unevenly distributed over the planet, causing geopolitical power fields. The war in Ukraine exemplifies how vulnerable our energy security is, and how geopolitical issues can lead to disruptions in accessibility of natural gas.

In contrast, renewable energy sources are more plentiful due to their diverse and decentralized nature. By transitioning to a renewable energy system, we can facilitate equal access to electricity and maximize energy security.

Challenge: Stimulating welfare and GDP equality

The uneven distribution of fossil fuels is also causing wealth inequality. The energy transition holds promise for a more equal distribution of resources, which will lead to more equal GDP growth. The implementation of the Net-Zero scenario (Figure 1) will not only affect the CO2 emissions and energy security, but also drive-up global GDP by 2.3% and create 139 million job opportunities by 2030⁴. Yet the most notable growth (20%) will be experienced in the welfare index, a holistic socio-economic measurement encompassing economic, social, environmental, distributional, and energy access. Importantly, the African continent would profit most prominently, seeing a boost of +6.4% in GDP and +25.4% in welfare index by 2050².

Clearly, the planet would greatly profit from a transition of the Energy Sector. In the next sections we will explore what is required for a full energy transition and where we currently stand.

Sustainable Energy as an alternative

To re-invent our energy system towards a sustainable system we need to understand the value chain of sustainable energy. Figure 2 provides a visual depiction of the sustainable energy value chain, offering a comprehensive overview of the stages involved in transitioning to a sustainable energy system. It highlights the production, conversion, distribution, and utilization of renewable energy sources, shedding light on its critical components.

Figure 2. Main pillars of a sustainable energy value chain.

What is required to make an energy transition and what are the barriers?

The International Energy Agency (IEA), the intergovernmental organization with 31 member countries and 11 associated member countries that represent 80% of the global energy demand, has set the aim to achieve net-zero CO2 emissions by 2050. To achieve this we need to cut 36.9 Gt of annual CO2 emissions by 2050 in the energy sector⁴.

This number is equivalent to completely offsetting global CO2 emissions in 2021⁵.  Clearly, this task is challenging and daunting at the same time, and we may reasonably wonder if and how this is achievable.

The International Renewable Energy Agency (IRENA) which closely collaborates with IEA has developed a roadmap towards realizing net zero CO2 emissions by 2050. This roadmap consists of six approaches (Figure 3). We will take a look at the identified approaches and discuss the technological barriers that we need to overcome to realize the required annual 36.9 Gt CO2 reduction. The two most crucial contributors to this goal are renewables and energy efficiency.

Key approaches for the energy transition: Renewables and Energy efficiency

Key approach: Renewables

This approach involves significantly scaling up the deployment of renewable energy (incl. solar, wind, hydro, geothermal) technologies and infrastructure. If we succeed it can contribute to 9.2 GtCO2 reduction annually⁴. Current innovations that would help reach this ambition include technologies that optimize the utilization of renewables such as solar and wind. Ongoing areas of development include enhancing the performance of photovoltaic cells, developing advanced wind turbine designs, and floating solar and offshore wind technologies. To enable an efficient, decentralized, and diversified energy system, it is pivotal to manage the fluctuating supply and demand of energy, which continually changes according to seasonality and availability of natural resources.

To optimally use renewable energy sources, we have to improve in several fields: smart grids, energy storage, and critical materials.

• Advancements in Smart grids, in which the electricity supply network uses digital communications technology to detect and react to local changes in usage, is key to the EU energy strategy. Smart grids go hand-in-hand with the development of physical and regulatory links with gas and other energy infrastructure to allow optimal use of storage and backup generation. A central concept to the next-generation electricity grid is interoperability, i.e. the ability of smart grid actors, components and applications to work together by exchanging data and information⁶. The interoperability of the grid will leverage other technology such as Artificial Intelligence, blockchains, storage devices, and distributed energy generators to strengthen its resilience and efficiency.
• Effective Energy storage plays a pivotal role in capturing excess energy during peak supply from renewable sources. Advancements in this field should prioritize enhancing battery technology, exploring pumped hydroelectric storage, and optimizing compressed air energy storage to ensure reliable and efficient energy storage solutions.
• Critical materials are required for many zero- or low-carbon technologies, including those used in batteries, electrolyzers, solar panels, and wind turbines. Critical materials encompass substances used in technology that are susceptible to supply risks and lack easy substitutes. To reduce reliance on continued extraction of such resources from the earth, we must prioritize strategies that promote circular practices, enhance materials efficiency, and redesign products. Rare-earth materials form a crucial part of this category, requiring significant amounts of raw materials and energy to achieve usable purities. Moreover, the concentration of critical materials in limited regions like China, Australia, Chile, Russia, and the Republic of Congo, coupled with surging demand, creates an ideal environment for price volatility, exacerbated by geopolitical factors. China notably holds a near-monopoly on neodymium, a precious rare earth element used in electric vehicle batteries, accounting for 60% of required rare materials production and an overwhelming 85% of global refined rare earth supply in 2021⁷.

Key approach: Energy efficiency

Just by being more energy efficient we can realize another 9.2 Gt CO2 reduction. Energy efficiency can be achieved by reducing demand, but structural changes and circular economy practices must also be included to meet the 9.2Gt CO2 reduction. Smart grid and energy management systems need to be developed. These may include advanced metering, real time monitoring and control, and intelligent management systems that integrate renewable energy sources, energy storage systems, and electric vehicle charging infrastructure into the grid.

Complimentary approaches: Electrification, sustainable H2, BECCS, and FF-CCS

Renewable energy and energy efficiency are the most crucial factors to realizing the goal of achieving net-zero emissions in 2050. However, while these strategies are vital, the following additional complementary approaches will be necessary to fully realize the 36.9Gt CO2 emission reductions:

Electrification. This approach aims to electrify end-uses of energy, notably transportation and heating. One of the major challenges in electrifying transportation is the development of robust, fast, and accessible charging infrastructure for electric cars, buses, (heavy duty) trucks, ships, and industrial equipment. Also the development of electric planes requires substantial technological advancements. Additionally, advanced battery and energy storage technologies are essential. One of the major opportunities in electrifying heating and cooling is heat pumps.

Sustainable hydrogen and derivatives. Hydrogen is a versatile energy carrier and can help decarbonize sectors that are challenging to electrify directly. Sustainable hydrogen production does not have CO2 as a byproduct of its production process. It is most often produced by electrolysis (electron splitting), where renewable energy is used to split water into hydrogen (which is then called green hydrogen) and oxygen in an electrolyzer. Current hydrogen demand is about 94GT, and this demand cannot yet be met by green hydrogen. In 2021, only 1% of the total hydrogen produced was green hydrogen. Thus, scaling-up electrolyzer capacity is imperative for hydrogen to meet demand in the future. The rapid advancement of electrolyzer technology requires a shift from demonstrator-scale principles to global full-scale implementation. This can be achieved by focusing on technology engineering of hydrogen fuel cell stacks, efficient management of scarce manufacturing materials, and establishing a well-defined policy framework to support the transition. By combining these elements, we can accelerate the deployment of electrolyzers and unlock their full potential in the sustainable energy landscape. Furthermore, wide uptake of sustainable hydrogen would require substantial investments – both public and private – in hydrogen infrastructure, production facilities, pipelines, storage tanks, refueling stations, and into integrating hydrogen into industrial processes.

Bioenergy coupled with carbon capture and storage (BECCS). Bioenergy is energy derived from organic material. When used it releases CO2 into the atmosphere. BECCS is a process where CO2 emissions from bioenergy plants are captured and stored, preventing their release into the atmosphere. By cultivating dedicated energy crops, CO2 is captured from the atmosphere by the plants, and the captured CO2 is sequestered during the burning process. This carbon-negative approach has the potential to offset emissions from other sectors too. However, widespread adoption requires technological advancements for improved efficiency and cost-effectiveness. Storage technologies and monitoring systems need to be developed to manage potential leaks of sequestered CO2. Additionally, the large-scale production of energy crops raises concerns about its impact on ecosystems, biodiversity, water use, and competition with food crops, although sustainability criteria are in place to mitigate these risks.

Fossil Fuel-based carbon capture and storage (FF-CCS). As long as fossil fuels are still used to produce energy, we should aim to minimize their contribution to CO2 emissions. FF-CCS has the potential to significantly reduce CO2 emissions from existing fossil fuel infrastructure, helping to mitigate climate change. However, it does not provide a net reduction in CO2 levels since it only prevents the release of CO2 that would have otherwise been emitted.

Figure 3. Energy mix to abate CO2 emissions as per the “Net-Zero scenario” according to IRENA World Energy Transitions Outlook 2022⁸.

Catalyze can support your energy transition innovation

At Catalyze we commit ourselves to accelerate innovations that have a positive impact on the world. With the highest quality – and success rate – in the industry, we aim to be the consulting partner of choice to drive the success of meaningful innovation projects. Our services cover three pillars: Fund, Strategy, and Manage. We are dedicated to supporting innovators throughout their entire Innovation Journey, from grant writing, to business consulting and strategic support. Contact us to discuss how we can support you.

EU Funding Opportunities in the Energy Transition

We have identified the principal EU funding opportunities to support different stage innovations in the energy sector, and categorized them according to the technology readiness level (TRL).

(TRL 1-4) EIC Pathfinder⁹ (Challenges: solar power harvesting space, responsible electronic, cooling, etc.) Funding rate: 100%.  Deadline: October 18, 2023. Expected deadlines in 2024: Open Call, March 2024; Challenges, October 2024.  (Learn more)

(TRL4-6) Eurostars¹⁰. Funding rate varies per country, in general 40%-60%. Deadlines: 14 September 2023, 13 March 2024 (Learn more)

(TRL 5-9) EIC Accelerator¹¹ (Challenges: Energy storage, Digitalization for decarbonization) Funding rate: 70%+equity investment. Deadline: 19 October 2023. Expected deadlines in 2024: January (Open only), March, June, October. (Learn more)

(All stages) Horizon Europe¹² calls:  Research and Innovation Actions (RIA), Horizon Europe Innovation actions (IA) Funding rate: 70%-100%. (Learn more)

Meanwhile, European Commission has funding programmes for the demonstration of innovative low-carbon technologies, and environment and climate action.

Innovation Fund¹³. Funding rate: 60%. Small-scale call opened 30 March 2023 – deadline: 19 September 2023 (Learn more)

LIFE Programme¹⁴(subprogram: clean energy transition) has a budget of nearly EUR 1 billion over the period of 2021-2027 and aims at facilitating the transition towards an energy-efficient, renewable energy-based, climate-neutral and -resilient economy. (Learn more)

Powering Change: Energy Transition series

Blog #1: Innovation Opportunities in the Energy Transition

Blog #2: Low-grade waste heat recovery is a key priority for EU energy transition

Blog #3: Sustainable Hydrogen

Blog #4: Critical Materials

Blog #5: Smart Grids

References

(1)          Climate Change. A Global Threat to Cardiopulmonary Health. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3977715/

(2)         Emissions – Global Energy & CO2 Status Report 2019 – Analysis. IEA. https://www.iea.org/reports/global-energy-co2-status-report-2019/emissions 

(3)         Ritchie, H.; Roser, M.; Rosado, P. Energy. Our World in Data 2022.

(4)        Renewable Energy Market Analysis. https://www.irena.org/publications/2022/Jan/Renewable-Energy-Market-Analysis-Africa 

(5)          CO2 emissions – Global Energy Review 2021 – Analysis. IEA. https://www.iea.org/reports/global-energy-review-2021/co2-emissions 

(6)          Power Grid Digitalisation and Interoperability.

(7)          Mitchell, J. China’s stranglehold of the rare earths supply chain will last another decade. Mining Technology. https://www.investmentmonitor.ai/sectors/extractive-industries/china-rare-earths-dominance-mining 

(8)          World Energy Transitions Outlook 2022. https://www.irena.org/Digital-Report/World-Energy-Transitions-Outlook-2022 

(9)         EIC Pathfinder 2023 Overview – Download our EIC Guide. https://www.catalyze-group.com/fund/eic-pathfinder/ 

(10)         Eureka Eurostars – Get funding – Funding Database. https://www.catalyze-group.com/fund/eureka-eurostars/ 

(11)       EIC Accelerator – Writing the best proposal https://www.catalyze-group.com/eic-accelerator-guide/

(12)        Horizon Europe – Prepare for the upcoming programme https://www.catalyze-group.com/horizon-europe/guide/

(13)       Innovation Fund – EU Grants – Funding Helpdesk. https://www.catalyze-group.com/fund/innovation-fund/ 

(14)       LIFE Programme – All available grants https://www.catalyze-group.com/life-programme-guide/