Why Fossil Fuels Can Share Space With Renewable Energy Sources
Posted: May 16, 2024
The energy sector is at a crossroads, navigating the delicate balance between fossil
fuels and renewable energy. This dynamic landscape is characterized by technological
leaps in renewable energy yet tempered by a continuing reliance on traditional oil and
gas. Grasping these trends is essential for anticipating market shifts and
environmental impacts.
Here, we’ll delve into the current state of renewable energy, the enduring role of fossil
fuels, and the intricate interplay that will shape the future of global energy
consumption.
The State of Renewable Energy Use
Renewable energy sources such as solar, wind, hydropower, and biofuels are pivotal
for transitioning towards cleaner, more sustainable energy systems. In recent years,
their generation capacities have surged, fueled by supportive policies and significant
cost reductions—especially when it comes to solar photovoltaics and wind power.
In 2022, American renewable energy production exceeded coal for the first time ever.
By 2025, domestic solar energy output is projected to rise by 75%, with wind power
generation growing by 11%. Renewable energy plays a key role in limiting global
temperature increases to below 1.5°C, especially within power generation, heating,
and transportation. In a scenario aiming for net-zero emissions by 2050, renewables
would nearly fully decarbonize electricity production.
But while the renewable energy sector is thriving in electricity generation, this sector
makes up only 20% of the world’s energy use. To adequately increase the shift
towards cleaner energy, greater adoption of renewables in transport and heating is
also essential.
Overcoming Renewable Energy Capacity
Challenges
Before the COP28 climate conference in Dubai, the International Energy Agency (IEA)
called on governments to back certain key actions by 2030. This includes a target to
triple the world’s renewable energy capacity. The COP28 Global Stock take, agreed
upon by the 198 participating governments, aligns with the IEA’s main objectives; it
also includes commitments to doubling the rate of energy efficiency advancements
annually to 2030.
Achieving a threefold increase in renewable power (from 2022 levels) would exceed
11,000 GW by 2030, consistent with the IEA’s Net Zero Emissions by 2050 Scenario.
Existing policies and market conditions predict that global renewable energy capacity
will grow to 7,300 GW by 2028—2.5 times the current level. However, this falls short of
the goal to triple renewable capacity by 2030.
Governments can achieve the target of more than 11,000 GW by 2030 by rapidly
addressing existing obstacles and expediting policy enforcement. The four main
challenges vary by country, and include:
Inconsistent policies and slow reaction to the new macroeconomic environment
Underinvestment in grid infrastructure hindering the growth of renewables
Complex administrative processes and permitting procedures that cause delays
and issues with public acceptance
Lack of funding in emerging and developing countries
According to the IEA, addressing these challenges could boost renewable energy
growth by nearly 21%, helping the world progress towards its goal of tripling
renewable energy use.
Why Oil and Gas Is NOT Leaving The Stage Soon
While the 1.5ºC global temperature increase limit is only possible with a fossil fuel
phase-out, this will not happen overnight. Oil and gas will continue to play a significant
role in the energy mix for several reasons even with the growing emphasis on
renewable energy sources.
Current Infrastructure
Existing energy infrastructure is heavily dependent on oil and gas. Changing this
infrastructure to accommodate renewables widely and at scale requires significant
investment and time. Oil and gas serve as a bridge in the energy transition, providing
the necessary energy supply until renewables can fully take over.
Energy Density
Oil and gas have a high energy density; therefore, they can deliver more energy per
unit volume than most renewable sources. This makes them particularly valuable in
applications such as transportation, where weight and space are constraints.
Reliability and Consistency
Unlike solar and wind power, which are intermittent and dependent on weather
conditions, oil and gas provide a consistent and reliable energy supply. Oil and gas are
extensively used for heating in industrial processes and homes in many parts of the
world, especially where electric heating is less economical or practical.
Geopolitical Dynamics
The geopolitics of oil and gas also play an important role. Certain nations wield
significant power and influence due to their oil and gas reserves, thus potentially
slowing the transition to alternative energies. Government policies may not always
favor a rapid transition to renewables, especially in regions dependent on fossil fuel
revenues. Thus, while investment in the renewable energy industry is increasing, oil
and gas will continue attracting substantial investment.
Transportation Sector
Although electric vehicles are on the rise, the global vehicle fleet is predominantly
powered by oil, and full electrification will take time. Aviation and shipping are also
sectors where oil is likely to continue to be a dominant energy source for the
foreseeable future.
Plastics and Chemicals Industry
Oil and gas are used for energy and as feedstock for a wide range of chemicals and
materials, including plastics, for which there are no large-scale renewable substitutes
yet. Consumer preferences for products and services that rely on oil and gas—as well
as resistance to change—can prolong the transition.
Energy Storage Technology
The current limitations in energy storage technology can act as a barrier to the
adoption of renewable energy. Energy produced from sources like wind and solar
cannot always be stored effectively for use during periods when generation is low.
The Future of Energy Use: Renewable, Hybrid, and
More
Incumbent energy companies have vast expertise and resources that could be
rechanneled toward transitioning to renewable energy. They are well-positioned to be
leaders in the transition due to:
- Their global scale
- The risk appetite of their investors
- Large balance sheet and cash positions
- Their long-term relationships with energy stakeholders and customers
- Their specialist capabilities in offshore projects, as well as the production and
transport of hydrogen and sustainable fuel
Oil and gas companies can provide unique value in four key areas of the energy
transition:
Offshore Project Development
Experienced oil and gas companies can create and construct comprehensive projects
that incorporate renewable energy, as well as hydrogen and heat production.
Additionally, certain project bidders propose investments that cover both heat and
hydrogen.
Hydrogen Production and Transportation
Oil and gas companies have extensive experience with hydrogen production through
their refining and chemical operations. Their expertise in gas storage and
transportation also applies to hydrogen, as both are flammable gases requiring
pressurized containment and meticulous handling.
EV Charging
Retailers, refiners, ads, customer networks, properties, and strategically-located fuel
stations near highways and roads to provide quick charging services for electric
vehicles.
Decarbonization Solutions
Oil and gas companies face increasing demands to reduce carbon emissions, leading
them to create technologies and build valuable expertise across various sectors. They
can capitalize on this by providing services in renewable energy, energy sales, battery
technology, and carbon capture and storage. Given current dependence on fossil fuels
and established supplier networks, these companies can play a role in designing the
transition pathway.
As innovations in storage, efficiency, and infrastructure accelerate, renewables will
become more dominant. However, the transition will be gradual—reflecting economic
realities, policy choices, and technological advancements.
Hybrid systems that blend renewable and non-renewable sources will likely prove
pivotal in meeting the diverse energy needs of a growing global population. Ultimately,
a multifaceted approach will ensure energy security, sustainability, and the resilience
required to address the world’s burgeoning energy challenges.
Energizing the Future
In confronting global energy trends, the industry faces both challenges and
opportunities. To thrive, it must prioritize innovation and adaptability. Gilmore leads in
providing energy-efficient flow control solutions for oil and gas production. Our
engineering experts focus on safety, efficiency, quality, and reliability, aiming to
deliver competitive pricing.
Reach out to learn how our global distribution network can help reduce operational
expenses and boost productivity in your energy operation.
