A New Era of Energy Part 1: Understanding the Intricacies of the Energy Transition

The world is no stranger to transition, especially when it comes to how we source and use energy. Since the rise of the Industrial Revolution, radical innovations in technology and science have paved the way for widespread development and a much higher standard of living. But at what cost? The long-term effects of industrialization continue to shape the world we live in. While many societal and technological gains have been made in the past two centuries, we are now experiencing critical environmental threats as a result of human activity. For example, four key climate change indicators — greenhouse gas concentrations, sea level rise, ocean heat, and ocean acidification — saw new record highs in 2021, underlining the need for sustainable change.

To mitigate these threats, a new energy transition is underway. While it’s true that energy transitions are not a new historical phenomenon, the urgent and complex nature of the current energy transition is unlike anything society has previously experienced, and therefore requires a multi-faceted plan of action. But what is renewable energy’s role in this shift? Knut Einar Rosendahl, a researcher and Professor of Economics at the School of Economics and Business at the Norwegian University of Life Sciences, argues that it will be the most crucial element in the transition to a lower-carbon society. Hanwha Newsroom recently interviewed Professor Rosendahl to take a closer look at the economic and technical intricacies surrounding this green energy transition, and gain a deeper understanding of what is needed to keep us on the path towards a decarbonized world for all.

An energy transition of global proportions is no easy task, and there are several pressing challenges to overcome before we can see a complete shift. To start, many renewable energy sources are intermittent in nature, meaning certain conditions must be met before they can provide power. For example, a fuel-powered car requires gasoline, which is readily available. However, solar-powered batteries can only be charged if the sun is shining. Furthermore, supporting green energy infrastructure requires massive investments in power grids, in terms of both time and money. Building a new power grid is expensive and typically takes anywhere from 10-20 years to complete. This lengthy timeline further underscores the need to implement solutions now in order to account for the ample time required for a complete energy transition.

Numerous industries that rely on traditional energy sources may experience substantial effects on demand, production costs, and employment by making a sudden energy switch, adding another layer of complexity to the transition. “Some emissions are really hard to abate, such as some industrial processes and some transport segments (long distance ships, aviation, and possibly trucks),” Professor Rosendahl explained. As well as being energy-intensive, these sectors are often large-scale, multifaceted, and frequently reflect a direct link to infrastructure like harbors and railways. They operate in competitive international markets, making them a difficult target for climate policies. However, public and private sector climate action is growing throughout the world. An increasing number of political commitments to net-zero emissions goals aim to instigate voluntary initiatives that address sustainability while the private sector seeks to create innovative solutions to reduce its carbon footprint.

Policymakers and community buy-in will both play a major part in driving the energy transition forward. Furthermore, Professor Rosendahl notes that a country’s cultural and political environment can greatly impact the success of policy supporting green energy. “It is clear that the policymakers (in democracies, at least) need some public support in their policy interventions,” he stated. “It is thus important to not only consider what is regarded as the most effective policies, but also policies that are regarded as politically feasible.”

Another challenge lies in the widening divide between developed and developing countries around how the transition should proceed. This chasm reflects disagreements concerning policies, how they impact a country’s development, who is responsible for emissions, and who should finance the transition. When asked about these challenges, Professor Rosendahl replied, “I think both financing and grid capacity may involve obstacles. For low-income countries, I think it’s important that high-income countries help with financing of this transition.”

For developing countries though, the emphasis on reducing emissions must be balanced against other urgent priorities such as health, poverty, and economic growth. Many countries are simply unwilling to sacrifice near-term economic gains for the long-term benefits of implementing greener energy sources. However, Professor Rosendahl argues that green energy buy-in doesn’t necessitate sacrificing a large degree of growth potential. While he agrees it may involve higher initial costs, a gradual approach to lower-carbon fuel sources shouldn’t be very costly, especially with the falling costs of solar and wind energy. A green transition would also provide other advantages for these countries including good job creation, a cleaner environment, and improved health outcomes.

The current energy crisis, driven by recent geopolitical challenges, has posed another obstacle for the energy transition. After COVID-19 lockdowns were ended in 2021, the economic rebound that followed ignited global energy consumption. But energy markets have remained tight due to a plethora of supply and demand factors. The price of natural gas reached record highs in 2022 with electricity following suit in certain markets.

With the mounting market pressures, leaders have found themselves needing to prioritize between security, affordability, and sustainability, a problem known as the Energy Trilemma. Faced with the dual challenges of an ongoing global energy crisis and spiking inflation, many leaders have identified energy security as the main priority. But others argue that the choice between energy security and sustainability is a false one, and that a balance can be struck between all three dimensions. What is certain is that to truly achieve a decarbonized scenario, there must be a concerted, coordinated effort between policymakers and the private sector to push the energy transition forward.

The energy transition is complex. We are still learning how to stop climate change, and there is no “one size fits all” solution or quick fix that will remove all barriers to a decarbonized society. The reality is every country is different. For instance, communities in Alaska, where they experience darkness for two months of the year, wouldn’t reap the same benefits from solar energy as those in sunny Egypt. Remote areas lacking transportation and energy infrastructure might struggle to access renewable energy solutions compared to places with a well-established grid. Therefore, progress requires a nuanced approach that accounts for each region’s unique culture, resources, strengths, and challenges.

For the energy transition to really work, we should aim to establish an optimal energy mix based on complementary sources and objectives instead of competing priorities. This unprecedented period of transition may be rife with obstacles, but the prosperity and peace-of-mind to be discovered on the other side will be well worth the journey.