Today’s global economy is enabled by a global energy trade and countries around the world are dependent on the flows of oil, coal and natural gas to keep their economies growing.
As countries move to decarbonise and adopt renewable energy, many are finding it difficult to do so cost-effectively because of fundamental limitations in solar and wind resources. For these countries to fully decarbonise without breaking the bank, they must develop innovative renewable energy carriers and build new zero-carbon energy supply chains.
This is according to a new report, 'Evolution of Energy Networks: Decarbonizing the Global Energy Trade', published by tech-enabled research and advisory solutions provider Lux Research, in which the company examines these renewable energy carriers and the countries and companies developing them.
“Places like Singapore, Japan and the Netherlands are great examples of countries that cannot meet their energy demands solely through domestic renewable sources like wind and solar energy.
"In fact, countries representing $9-trillion of global gross domestic profit cannot meet their energy demands solely through domestic renewable energy production and will require the import of renewable energy from more resource-rich countries,” says Lux Research analyst and the lead author of the report Tim Grejtak.
“Our analysis shows the expanded build-out of alternating current and direct current power lines will be the most cost-effective way of importing low-cost solar energy from distant regions, though only up to roughly 1 000 km.
"At farther distances, other renewable energy carriers like synthetic fuels are less expensive. It’s important to note that imported energy costs can be competitive against other zero-carbon technologies, but no current energy carrier can offer costs low enough to completely replace liquid natural gas (LNG) or oil,” he adds.
In the new report, Lux evaluated the lifetime costs of 15 different renewable energy carriers ranging from conventional carriers like electricity, hydrogen, synthetic methane, and ammonia to more advanced energy carrier concepts like liquid organic hydrogen carriers (LOHCs), vanadium and aluminium.
Delivering energy via land-based infrastructure like power lines or pipelines becomes expensive at long distances owing to the inefficiencies of power lines and the high capital costs of pipelines.
Delivery via ship, on the other hand, is much more cost-effective at long distances, whether it be LOHC delivered by tanker or liquid hydrogen delivered by cryogenic carrier like LNG.
Notably, Lux’s analysis found that across all renewable energy carriers, low-cost solar energy can be delivered to resource-constrained regions at 50% to 80% lower cost than generating that solar energy locally under less favourable conditions.
This value proposition will motivate the build-out of billions of dollars of new infrastructure in countries committed to reducing their carbon intensity, the company says.
Lux predicts the first tipping point for deploying renewable energy import infrastructure will be in 2030, when imported electricity via new high voltage direct current power lines becomes cheaper than low-carbon natural gas turbines.
The next tipping point will occur in 2040, when imported liquid hydrogen becomes cheaper than low-carbon steam methane reformation.
This gives companies today just ten years to develop the partnerships and pilot projects necessary to demonstrate such a transformative energy paradigm.
Major companies like Kawasaki Heavy Industries, Mitsui & Co, Equinor and Shell are already developing their own decarbonized energy trade routes in Europe, Japan and South East Asia, meaning the fight for $500-billion worth of energy imports in those regions is just beginning, the company notes.