Extractive Industries (Oil & Gas) &

Sustainable Development

Day 3 - Low and Zero Carbon Technologies &

Deployment Constraints

City University
30th January – 2nd February 2023

Hooman Farnejad
 Key Pillars to Decarbonisation
l Broad range of policy approaches and technologies required to
deliver rapid GHG emissions and achieve the Net Zero target by 2050

Source:- : IEA A global pathway to net-zero CO₂ emissions in 2050

l “Solar, wind and energy efficiency deliver around half of emissions

reductions to 2030 in the NZE, while electrification, CCUS and hydrogen
ramp up thereafter”
2
 Agenda
l Renewables (Wind & Solar PV)
 Policy intervention for scale-up & challenges to growth

l Hydrogen
 It’s role in decarbonised economy and developmental challenges

l Carbon Capture and Storage (CCS)

l Market and Regulatory mechanisms

 Environmental regulations / Carbon pricing

l Sectorial Electrification

l Mineral use in clean technology

 Mineral security and sustainable development of resources

3
 Wind Energy Scale up to 2030
l Total global wind power
capacity of 837 GW

l ~94 GW of capacity added

globally in 2021
 Comprising of ~73 GW of
onshore and ~21 GW of offshore
wind installation
 China contributed to more than
50% of the new capacity added

l Wind energy is not growing

nearly fast enough to realise a
secure and resilient global
energy transition
 At current rates of installation, GWEC forecasts that “by
2030 we will have less than two-thirds of the wind energy
capacity required for a 1.5°C and net zero pathway”
Source:- : Global Wind Energy Council (GWEC)
https://gwec.net/global-wind-report-2022/ 4
 Solar PV Energy Scale up to 2030
l Total global Solar PV capacity of 885 GW in 2021

l Distributed systems play an

increasingly important role in
global solar PV deployment
 Utility-scale plants were responsible
for 52% of global solar PV capacity
additions in 2021, followed by the
residential (28%) and commercial and
industrial (19%) segments
Source:- : IEA https://www.iea.org/reports/solar-pv

l Generous policy incentives drove record distributed PV capacity additions in

China, the United States and the European Union in 2020-2021
 Share of utility-scale plants was the lowest since 2012

l Recent increases in fuel and electricity prices has made distributed PV

increasingly attractive alternative and has driven investments despite increase in
cost of “crystalline polysilicon” the dominant technology…

5
 Strong Global Policy Support for REs
l Worldwide policy support is the driver behind accelerated RE deployment
 Include auctions, feed-in tariffs, net-metering and contracts for difference

l November 2021, (COP 26) India announced new 2030 targets of 50% renewable electricity
generation share (more than double the 22% share in 2020), and 500 GW of total non-
fossil capacity

l May 2022:- The European Commission proposed to increase the bloc’s renewable energy
target for 2030 to 45% through “REPowerEU Plan”
 A more aggressive plan than the one announced in July 2021 (i.e. 40% target) due to
recent energy crisis
 Require 1, 236 GW of total installed renewable capacity – includes 600 GW of solar PV

l June 2022:- China announced an ambitious target of 33% of electricity generation from
renewables by 2025 (up from about 29% in 2021), including an 18% target for wind and
solar technologies

l August 2022:- The US Inflation Reduction Act (IRA) will significantly expands support for
renewable energy in the next 10 years through tax credits and other measures

6
 Challenges to REs Growth
l Policy factors: The pace of coal phase-out and natural gas penetration; boosting
demand for REs from cost reduction; and commercialisation of “green” hydrogen
technologies and storage

l Permitting factors: The ease of obtaining the necessary permits, licenses and
approvals for RE project deployment, including legal challenges
 Public and community awareness / acceptance required (NIMBY versus YIMBY)

l Land / seabed availability

l Supply chain costs: Rising market prices for materials, minerals and metals and
the need for “Circularity” - reuse, recyclability and waste reduction of components

l Grid and transmission: The pace and scale of grid reinforcement, buildout and
modernisation, ensuring sufficient grid availability to increase deployment

l Energy access: The expansion of infrastructure to enable universal clean energy

access and electrification of power and other sectors

l Availability of skilled workforce

Source:- : Global Wind Energy Council (GWEC)

https://gwec.net/global-wind-report-2022/7
 Hydrogen – It’s Role in Decarbonizing Economy
l Three fold increase in hydrogen
production since 1975 to ~75 Mt/a
 Almost entirely supplied from fossil
fuels i.e. 6% of global natural gas and
2% of global coal production
 However, associated CO2 emissions of
830 MM tons, equivalent to emissions Source:- : IEA The Future of Hydrogen
of UK & Indonesia combined https://www.iea.org/reports/the-future-of-hydrogen

l Hydrogen use today is dominated by industry i.e. predominantly oil

refining & ammonia production (but also for methanol and steel production)

l Potential future uses:

 Transport sector, i.e. fuel cell in cars. However depends on the competitiveness of
fuel cell costs, transportation / storage network and refuelling stations
 Buildings Sector, where hydrogen can be blended into existing natural gas networks
or directly used in hydrogen boilers or fuel cells
 Power generation, hydrogen (and ammonia) can be used in gas turbines to increase
power system flexibility

8
 Hydrogen Production Technologies
l Frontrunner for a sustainable alternative to oil and natural gas

l Black / Grey Hydrogen:-

 Most hydrogen is currently produced from steam reforming coal or natural gas
(methane) which are carbon intensive

l Blue Hydrogen:-
 Alternative to above, is to use carbon capture and storage (CCS) to capture the
CO2 from steam reforming process

l Green hydrogen
 Electrolysis of water with electricity produced from inexhaustible renewable
sources

l Pink / Yellow hydrogen

 Alternatives to green hydrogen but with the all the electricity for electrolysis coming
from nuclear and solar respectively

l Turquoise hydrogen;- Derived from pyrolysis of methane

9
Basic Components of Water Electrolysis

Source:- : IRENA Green Hydrogen Cost Reduction

https://www.irena.org/-
/media/Files/IRENA/Agency/Publication/2020/Dec/IRENA
_Green_hydrogen_cost_2020.pdf 10
 Challenges to Green Hydrogen Development (1)
l Government support in regulations and market design to support
innovation and scale-up of green hydrogen production
l Cost of Production i.e. Actual
Green hydrogen production comparison as a function of
input cost of electricity from RE a. Electricity Price ($65/MWh versus 20/MWh)
sources used for electrolysers b. Electrolyser Cost ($1,000/Kw versus $650/Kw)
has the largest effect
 However despite general decline
trends in renewable power costs,
green hydrogen is 2-3 times more
expensive than blue hydrogen
(produced from fossil fuels with CCS)

l But low electricity cost on itself

does not make green hydrogen
production competitive … R&D in
to other cost reduction strategies Source:- : IRENA Green Hydrogen Cost Reduction

needs to be incorporated …. https://www.irena.org/-

/media/Files/IRENA/Agency/Publication/2020/Dec/IRENA_Green_hydrogen_cost_2020.pdf

11
 Challenges to Green Hydrogen Development (2)

l 40 - 80% reduction in the cost of electrolysers (both the stack and

balance of plant) required for competitiveness of green hydrogen

l Achieved through;
 Electrolyser design and construction. Increased modular size of stack manufacturing
and plant size from 1 MW (typical today) to 20 MW will reduce costs by ~30%
 Economies of scale. Step-change in cost reduction (~50%) through automation and
mass-manufacturing of stacks. E.g. the tipping point for Polymer Electrolyte
Membrane (PEM) electrolysers is approx. 1,000 units (of 1 MW) per year, where the
scale-up can reduce the in stack manufacturing costs by 50%

l Scarcity of key materials used for production of PEM electrolysers

(Iridium and Platinum) can increase supply costs

l Large efficiency and power supply losses at low load limiting system
flexibility and economic viability

12
 Carbon Capture and Storage (CCS)
l CCS technology is designed to capture carbon emissions from sources
of emission (or directly from the atmosphere) so they can be stored and
prevented from contributing to climate change

l CCS involves three stages:

 Separating CO2 from other gases produced by industrial processes
 Compressing the CO2 and transporting it, via pipeline, to a carbon storage site
 Storing CO2 where it will not escape into the atmosphere e.g. deep underground

l According to Global CCS Institute, in 2020 ~40 Mt/a of CO2 of CCS

capacity was in operation
 Approx one-thosanth of the 38 Gt of CO2 produced every year

l O&G industry has the necessary resources and skills to play a critical
role and tackle emissions from “hardest-to-abate” sectors - subject to
viable business models for the capital-intensive investment

13
 Overview of CO2 capture processes
l Three main approaches in capturing CO2 generated from fossil
fuel, biomass or a mixture of these;

l Post Combustion
 Use of liquid solvent to capture and
concentrate CO2 from flue gas stream
e.g. MEA, DEA

l Pre Combustion 2

 Feed gas in a reactor combined with

steam and air to produce CO and H2
“synthesis gas”. CO is reacted with
steam in a second reactor to produce
additional H2 and CO2 “Shift Reactor” Source:- : IPPC Carbon Dioxide Capture and Storage
https://www.ipcc.ch/report/carbon-dioxide-capture-and-storage/ his

l Oxy Fuel
 Use of pure oxygen for combustion to produce high concentration of CO2 after
removing the water. Upstream air separation required to produce 95+% oxygen

14
 Overview of CO2 Storage
l Use of deep onshore or offshore geological formations – although
ocean storage concepts reviewed by IPCC

l The former option has the benefit

of using the same technologies
currently used in O&G industry.

l CO2 is injected to suitable saline

formation or depleted oil or gas 2

fields where the presence of

trapping mechanism (caprock)
prevent migration to surface
 Sleipner project (offshore saline
formation), In Salah project (depleted
Source:- : IPPC Carbon Dioxide Capture and Storage
onshore gas field) https://www.ipcc.ch/report/carbon-dioxide-capture-and-storage/ his

l EOR Opportunities e.g. Alberta Carbon Trunk Line Project (ACTL)

 Use of CO2 to enhance oil recovery and generate additional revenues while capturing
~ 15 Mt/a of CO2

15
 Market and Regulatory Mechanisms

l Policy frameworks are key in promoting innovation and

investments to help realize a decarbonized energy system

l A few key levers include;

 Environmental regulations
 Carbon pricing
 Funding and financing programs
 Power market design i.e. supply balancing, dispatchable electricity
as well as grid stability to counter the fluctuating features of REs

l =====================================================

l EU “RePowerEU” - help boost renewables and reduce its reliance on Russian-

backed fossil fuels,

l US Inflation Reduction Act – Countering Europe’s leadership in clean energy ?

16
 Environmental Regulations
l Targeted and sustained policy interventions to achieve sectorial and
behavioural change to reduce emissions
 Road transportation sector.
– Phasing-out the ICE cars in large cities, increase use of ridesharing, reduce speed limits on
motorways, provide for low car cities, EV and fuel-efficient driving

 Aviation sector.
– Business air travel versus teleconferencing, long‐haul flights for holidays

 Building design, construction, reuse /recycle, and lifetime extension

 Space heating, space cooling and eco-household
 Incentivize closure of coal power plants and accelerate scale-up of REs
 Supports investment in “green” hydrogen production, its use in mobility and
power generation, and associated infrastructure

l Reduce bureaucracy to expedite approvals of energy transition projects

(NIMBY effect)

18
 Carbon Pricing
l An instrument that captures external costs of GHG emissions (damage to
public health, belongings or crops from droughts, floods etc.) and ties them to sources
through CO2 emitted.

l Recent launch of carbon pricing mechanism (P 103, IEA, World Energy Outlook 2021)
 China’s launch of Emission Trading System (ETS) - The largest carbon market (by
volume) covering 4 Gt of CO2 emissions
 Launch of UK carbon market;
 Reforms to EU ETS e.g. gradual inclusion of maritime sector, surrender of allowances
 Extension of scope of ETS in Korea and Germany
 Introduction of carbon tax in Netherland and Luxemburg

l Application to non-CO2 emissions, such as methane

l Increase production costs of fossil fuels

 Incentivise reduction in emission intensity of production
 Application of energy efficient technologies and operational performance improvements
 Reduce the demand for fossil fuels

19
 Electrification
l Commercially available to end-users and cost effective

l Transport
 Policies implemented to end sale of new ICE vehicles
 Higher costs of EV cars could dissuade many customers however cost reductions and
improvements in battery performance are game changers
 Weak, unreliable grids. Widespread deployment of public charging infrastructure

l Industry
 Extensive use for heat below 200 °C e.g. Food, textile, chemical industries
 Inroads in to high-temperature heat demand e.g. electric furnaces for glass production

l Buildings
 Electric heat pumps technology displacing fossil fuel boilers for heating
 Split incentives in rental properties i.e. owner pay high upfront costs but savings on
utility bills accrued by renter
 Upfront costs could be offset against government financing programs

20
 Availability of Electrification Technology
l Industry consumes more energy than any other sector
 However only about 20 % consisted of electricity

l Despite electronically driven

equipment being slightly more
energy efficient they have lower
maintenance costs

l According to McKinsey & Co;

 “It is technologically possible to electrify
up to half of the industrial fuel
consumption today”
 “Electrification of industrial processes
that require heat up to 1,000 °C does
not require a fundamental change in the
industrial process setup, but rather a
replacement of a piece of equipment,
such as a boiler or furnace, running on Source:- : McKinsey & Co
conventional fuel with a piece of electric https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-
insights/plugging-in-what-electrification-can-do-for-industry
equipment”
21
 Maintaining Power Grid Stability
l The intermittent supply of electricity from renewable sources adds no
inertia to the grid and increase the risk of power outage

l Rotating grid stabilizers (RGSs)

 Spinning machinery which operates synchronously with the grid frequency,
dampening fluctuations and bringing stability. RGSs support voltage stability by
providing reactive power and enhance grid strength at connection points by
providing short-circuit power

l Static VAR Compensator (SVCs)

 Instead of spinning, they use electronics to help operators avoid blackouts caused
by excessive load and surges, insufficient voltage, or natural catastrophes taking
out part of the grid

l Smart / intelligent systems

 Able to react quickly to changing conditions e.g. variation to energy supply and
demand, weather while supporting reliable power distribution and ensuring cost-
effective / low carbon emission operation

22
 Minerals Used in EVs vs Conventional Cars
(Excludes Steel & Aluminium)
l Lithium, Nickel, Cobalt, Manganese
and Graphite are crucial for battery
performance, longevity and energy
density

l Typical EV requires more than 6 times

of mineral inputs of conventional car
 Graphite (66 Kg), Copper (53 Kg), Nickel
(40 Kg), Manganese (25 Kg), Cobalt (13
Kg), Lithium (9 Kg), Rare Earth (0.5 Kg)

l Rare earth elements are essential for

permanent magnets in EV motors
 Also vital for wind turbines magnets

l Copper is cornerstone of electricity

related technologies (electricity
networks)
Source:- IEA The Role of Critical Minerals in Clean Energy Transitions

23
 Minerals Used In Clean Energy Technologies
(Compared to Alternative Power Generation sources)

l Typical offshore wind will use

 8 tones / Mw of Copper
 5.5 tones / Mw of Zinc
 790 Kg / Mw of Manganese
 530 Kg / Mw of Chromium
 240 Kg/ Mw of Nickel
 240 Kg/ Mw of Rare Earth
 110 Kg / Mw of Molybdenum

l According to IEA “to hit net-

zero globally by 2050, would
require six times more mineral
inputs in 2040 than today”

Source:- IEA The Role of Critical Minerals in Clean Energy Transitions

24
 Unprecedented Growth in Demand for Minerals

Source:- IEA The Role of Critical Minerals in Clean Energy Technologies

l Stringency of climate policies and technology uncertainties will impact on demand

trajectories and investment by mining companies / suppliers
 Critical role by policy makers to ensure availability and reliability of supplies by making clear their
ambitions, and turn targets to action
 Market will pick winners in support of specific clean technology , evolution of battery chemistry etc.

25
 Minerals and metals for Energy Transition
Exploring the conflict implication for mineral-rich, fragile states

l Significant strategic
mineral reserves in Latin
America, sub-Saharan
Africa, SE Asia and
Australia

l Excluding Australia, there

is a mid-high measure of
fragility, corruption and
vulnerability to conflicts
through proliferation of
clean energy technologies

Source:- Church & Crawford - Minerals and the Metals for the Energy Transition:
Exploring the Conflict Implications for Mineral-Rich, Fragile States

26
 Pathway to Mineral Security
l Policy intervention for investment of diversified sources of new supply

l Promote technology innovation along the entire value chain

l Scale up recycling

l Enhance supply chain resilience and market transparency

l Mainstream higher environmental, social and governance standards

l Strengthen international collaboration between producers and consumers

to ensure mineral security

l However, with supplies and refining processes of minerals being

geographically concentrated - some in fragile, conflict states with poor
human-right records and prone to violence – extraction of minerals in a
sustainable manner with safeguard for social, environmental and
climate risks will be challenging

27
 Supply Chain Governance
l A number of legislations by states and guiding principles by international agencies
to curb “3TG conflict minerals” and promote responsible and transparent mineral
supply chains

l Provide a framework for companies operating in fragile conflict states to conduct

due diligence on their supply chains by assessing potential risks, preventing and
mitigating the identified risks, and adopting a risk management plan. A few
examples;
 UN Guiding Principles of Business and Human Rights
 OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected
and High-Risk Areas
 U.S. Dodd-Frank Act (2010)
 The Chinese Chamber of Commerce for Metals, Minerals & Chemicals Importers & Exporters (2015)
 European Union (EU) Conflict Minerals Regulation (2021)

l Civil society / private sector initiatives

 Extractive Industries Transparency Initiative (EITI)
 London Metals Exchange (LME) initiatives to monitor / investigate mineral sourcing companies
 Responsible Minerals Initiative (RMI)
 IPIECA - Guide to operating in areas of conflict for the oil and gas industry

28
Review Progress with the
Group Work Cases

29