Tackling the energy trilemma

Even though LNG certainly will play a major role in the energy transition, it is reassuring to see investments in renewable energy, batteries, electric vehicles, and so on are continuing to move. This is especially vital because just as Europe mounted a search for alternative sources of gas in the aftermath of the war, Asian economies too need LNG as well as cleaner fuels to support rapid economic growth in the coming decades.

Against that backdrop, the prevailing sentiment in the financial sector today is that perhaps we need a longer timeframe for the transition, because energy security is a topmost factor around the world.

The discussion on the trilemma is obvious, and the clock is ticking.

To cite the example of regional power grid connectivity – this is a very interesting subject because Europe is already busy creating grid connectivity for energy security, but this also serves well to boost sustainability by making the market bigger and reducing the intermittency factor of solar and wind. A larger market will certainly fill in the gap and provide more affordable energy to Europe – a model that Asia can learn from. Of course, there is a challenge of overcoming the difference of interest of individual countries. But the experiences of Europe in affordability, security and sustainability are great lessons for the Asian energy market.

We also need to bear in the mind the broader context of the transition and understand that energy transformation needs longer time. As distinguished scholar and professor Vaclav Smil has put it, every iteration of the energy transition is expected to take longer and longer time.

First, for coal to replace wood, and then for oil to replace coal, and then natural gas to replace oil and other sources. This transition will take longer and longer as the speed of transformation gets slower and slower.

So now what we are trying to see happen is making the share of renewables in the energy mix increase at a much faster speed than any of the traditional fuels. And if we look at the nuclear sector – which Prof Smil calls a successful failure – it is expected to play a complementary role. But can we really achieve this? And can the planet wait?

Adding another decade to the energy transition and reaching net zero would certainly help with a better transformation of the energy sector as well as preparing for the adaptation, but do we have that time? While being pragmatic, we have to be aware that the risk is lurking, and we cannot be complacent. We have to do our best to innovate and to put our investment into the necessary areas as quickly as possible.

Maintaining that delicate balance between technology, the supply side as well as lowering emissions needs a long list of actions, but at this moment, the most important thing is that governments must work and prepare the environment – with two main pillars being regulation and carbon pricing.

Japan is a good case study for both. With the country aiming to be net zero by 2050, Japan moved into carbon pricing last year, and announced that carbon surcharge for utilities and importers are coming. Similarly in terms of regulations, when Japan started importing LNG from Alaska 50 years ago, the cost was high, and nobody believed that liquefied gas could really be an alternative to pipeline gas. But after 50 years, LNG is now a prized commodity and Japan’s success was possible because of the regulated market.

The way forward in the energy transition must therefore focus on scaling up and provide the finance for it. If we talk about a decade, probably all the technologies which could be commercialised during that time are already here. It is the hydrogen, transportation, storage, batteries, small modular reactors and so on – everything is here.

But how can we deploy these technologies at scale?

I think governments are very happy to provide research and development funds for new technologies and innovation. But now the challenge for governments is to provide enough money for deployment, because that needs much more than R&D.

If we think about further ahead, I’m also excited by the prospect of direct air capture (DAC). If the cost of DAC becomes low enough, we don’t have to be bothered by difficult technologies to decarbonise in heavy industries like steel or cement.

Another technology to keep an eye on is nuclear fusion. With so many small commercial fusion ventures starting in the US, Europe, Japan, and elsewhere, I hope one of them will be successful. And if even one of them succeeds in the coming decades, it would be revolutionary and redefine the paradigm of power generation.