Towards a New Energy Mix

EXCHANGE OF VIEWS AMONG STUDENTS AND PROFESSIONALS IN THE INTERNATIONAL SCENARIO ABOUT THE TRANSITION TO A NEW ENERGY MIX IN THE XXI CENTURY   Claudia Porretta Serapiglia Eni …

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EXCHANGE OF VIEWS AMONG STUDENTS AND PROFESSIONALS IN THE INTERNATIONAL SCENARIO ABOUT THE TRANSITION TO A NEW ENERGY MIX IN THE XXI CENTURY

claudia

 

Claudia Porretta Serapiglia

Eni S.p.A.,

SPE Italian Section External Relations, Universities Director

 

 

At exactly 1 year of distance from the conference “FALLING OIL? Oil price drivers: market vs. technology”, once again SPE Italy and Eni Corporate University, SCUOLA MATTEI,  are collaborating to discuss a nowadays hot topic in the O&G industry.

It is almost clear to everybody that the O&G business is called to face a new challenge: modifying the energy supply mix in order to answer the requests coming from all the stakeholders, first of all the final consumers.

The aim of the event held in ECU on May, 23rd 2016, was to share views and ideas about the transition from one form of energy to another one: alternative green energies are a matter of fact. The real point is how and how quickly the energy switch will be feasible.

The event started with the welcome by Marco Coccagna (ECU CEO, Eni Corporate University) and with a brief introduction of SPE Italy by the Chairman Alessandro Tiani.

Enzo Di Giulio, manager of Scuola Enrico Mattei, moderated the panelists through their interventions:

  • “The turning point of the COP 21 and opportunities of the green economy” by Giuseppe Ricci, EVP Health, Safety, Environment and Quality, Eni SpA;
  • “Renewable energies: the challenge of a necessary transition” by Patrick Manino (alternate to Luca Cosentino), Energy Solution, Eni SpA;
  • “Cop 21 and the Paris Agreement: What does it mean for business?“ by Linden Edgell, Global Sustainability Program Director, ERM srl.

 

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The panel of experts stimulated the audience with a mix of alarms and hopes.

 

Giuseppe Ricci in his speech provided a detailed analysis of values regarding the climate and energy challenge: of the total 13,6 Gtoe of global energy supply, more than 80% currently derives from fossil fuels, so generating a global emission of 32 GtCO2 (on a total global emission of GHGs equals to 50 GtCO2e). Surprisingly, coal accounts for 29% of energy supply but is responsible of almost half of the global energy-related GHGs, especially due to its usage in the power sector in countries such as China (98% of power fuel), USA (76%), EU (75%) and India (94%)!

If one of the objectives of the Paris Agreement is “Holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels”, what does it mean in terms of energy mix and consumption? In order to explain it, Giuseppe Ricci introduced the concept of “Carbon Budget”: the temperature target equals to a max quantity in the atmosphere of 2,900 GtCO2e. Since unfortunately 1,900 GtCO2e have been already emitted before 2011, it means that our remaining budget is less than 1,000 GtCO2e and then the aim becomes 40÷70% GHGs reduction in 2050 and the carbon neutrality within 2100, in order to achieve the 2°C target.

It is clear, according to Ricci, that the approach has to be more scientific than ideological: targets have been identified and the road-map can be designed by governments according to the selected targets.

The Paris Agreement is considered by Ricci an outstanding result in this scenario, since it achieved a strong global political consensus among the 195 Countries that cover 95% of global GHG emissions. It represents a major difference with respect to the previous agreements, i.e. 2005 Kyoto protocol, since the approach moved from top-down to bottom-up: all the countries are committed to contribute to the goals with common but diverse responsibilities.

On a slightly different position was the smiling introduction by Linden Edgell: according to her point of view the new amazing word is “HOPE”. A new energy mix transition is becoming more and more feasible since the discussion is no more a matter for governments only; during COP 21 meetings in Paris, all the parties were actively attending: countries, O&G business representatives investors, and especially mass movements.

This will be translated into an increased pressure on the energy business stakeholders: on one side GHG accounting, reporting and risk disclosure will become mandatory for many consumers, whereas on the other side producers of energy will be pushed to reduce carbon-intensity.

Based on Ricci’s speech it is now evident that past EU climate policies generated competitive distortions for the industry, the so-called “paradox of the coal-renewables mix in the power sector”, while coal use increased.

For this reason it can be foreseen that global carbon pricing is the key to reach a worldwide low carbon transition; the introduction of an Emissions Performance Standard (EPS) can induce a progressive phase out of coal power plants and help the transition of the power sector.

According to Linden Edgell, impacts will be felt across the economy in many different ways: price on carbon emissions will impact most of the economy; the market for innovative, energy-efficient and low carbon products will be stimulated; the transport sector will be facing the prospect of major technological shifts and finally the financial sector will increasingly focus on managing carbon risk in investment and lending.

In such a scenario of risks and opportunities, Edgell underlines the chance of a competitive advantage to be captured by all the stakeholders.

And what about Eni in this scenario? Ricci pointed out as in the last two years Eni has improved its climate strategy thanks to a stronger involvement of the board and the top management. A GHG Action Plan at 2025 with challenging GHG objectives has been launched and a long term GHG reduction will be pursued along with the green integration of traditional business and specific low carbon R&D programs.

Patrick Manino with his speech “Renewable energies: the challenge of a necessary transition”, after illustrating the most recent breaking news about renewables focused on Eni major green projects managed by the new business line “ENERGY SOLUTIONS (DES)”, created in 2015.

According to Manino, an O&G company as Eni can succeed thanks to its main key strength points: it has a global presence and can work on a portfolio of assets to be converted (brownfield), or integrated in a new cooperation model (greenfield); it has the capability to mobilize financial levers and to manage complex and hybrid projects, while taking advantage of excellence in R&D.

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Breaking news: the world of energy is changing

 

Which is the most challenging task of an R&D department, according to Manino? For sure “storage capability” is the greatest question mark about the future in the energy market; who will solve this topic will be the winner!

At the end of this very interesting panel section, we were pleased to attend to a session called “The energy perspectives for the XXI Century” during which three detailed project cases were presented by Medea students:

  • “U.S. Shale Revolution”, by Serena Salvio;
  • “Solar Investment Assessment in Egypt”, by Riccardo Rebosio;
  • “Can Chinese carbon emissions peak before 2030?”, by Leonardo Bartolini.

The three projects deeply investigated 1) the economic and technical aspects of Shale Oil in the US market, 2) a potential solar investment in Egypt and 3) the impact of different Chinese business plan scenarios in the trend of CO2 emission.

The main outlines from Serena Salvio presentation is that the survival of the shale companies will strongly depend on the US government financial support. The resilience of these companies, the so-called “Shale Zombies”, has been underestimated until now and it is still uncertain. The probability that there will be a real agreement on the production level between OPEC and NON OPEC countries will surely play a significant role in the shale oil future.

Solar power currently covers the highest share of the new global investments in renewable energy. “What would you do with 100M US$ of investment in solar energy in Egypt?” asked himself Riccardo Rebosio; the answer came from the results of a feasibility study and comparison between a Photovoltaic system (PV) and a Concentrating Solar Power System (CSP) plant.

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Medea Students’ presentation

 

The presentation illustrated the technical modeling and the economic evaluation of both systems. Based on the economic results concerning the studied case, the CSP proved to be a less mature technology; nevertheless it could become a viable option in the future, since costs are going to be cut on the short and medium term.

Since China is the country with the largest emissions in the world, the impact of different industrial scenarios will be of great importance for the level of the emissions in the future. Leonardo Bartolini illustrated the ”Business As Usual“, the “Green” and the “New Policies” scenarios, highlighting that just in the last two of them, a peak in the CO2 emission can be reached (in 2035 and in 2025 respectively), whereas in the Business As Usual scenario there are no chances of stabilizing the CO2 emission trend.

After attending the student session, I felt myself convinced that the youngest generations are approaching the new challenges of the market with a very high level of competence and professionalism. This will be the real hope for our future, since, as Linden Edgell well said in her speech, the future can be efficiently built by inspired individuals as well as by a government or a CEO of a major company.

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Former student of the year 2013-2014