Energy transition to get delayed amid Trump’s push for oil, gas: Kearney’s Sevin

He said that although the goal of energy transition remains intact globally, the path and pace of transition is different for every region and country in the world.

“I think the way the energy transition is operating is different from one region to another region. And with the new Trump administration the way they want to operate the transition is a bit different, than what Europe is doing. For instance, in Europe, people are very pushed by the government, by the European Union with different laws.” 

“They try to impose different targets. In the US, it is a bit different because there, we’re gonna re-energize oil and gas sector. They will still do the energy transition, less than in Europe,” he told Mint in an interview.

Impact of US withdrawal

Citing examples of differing transition journey both in the US and Europe, he said that while the US may want to go in for combined cycle gas turbine and more and more sequestration of carbon to reduce emissions, Europe would go in for more and more of renewable energy to achieve transition.

“So, it’s a different way of doing the thing. You can see in many countries and region you can see many skepticisms about the energy transition. I think the ultimate goal is still there, I think, its the path to go there which is more difficult.” He also said the pace of transition depends on return on investments, whether renewable energy would bring in better returns or oil and gas.

“You got a lot of questions and a lot of questions also for the shareholders. Because we have a big push from the shareholders, because the return is different from what it was in renewable space rather than the pure oil and gas. So, I think it’s going to happen, I think the timeline is going to change a bit,” he said.

Concerns of a delay in energy transition and an impact on plans to curb climate change have gained momentum after Trump pulled out of the Paris climate agreement which aims to cap global warming at 1.5 degree celsius. Several countries like the US and countries in Europe have set a target to achieve net zero carbon emission by 2050. India plans to achieve net zero by 2070.

India’s unique energy mix

Speaking on the outlook for India, Sevin said that it is a major player in the energy space. He added that apart from renewable energy generation, India would also play a key role in terms of production of components for green power such as solar modules and cells and green molecules such as green hydrogen and biofuels.

“India is one of the major contributors now. Of course in the fossil fuels, but also the renewable energies. What I’ve seen so far…globally last year, we installed 500 GW capacity renewable energy, and when you look at the share of India, it is almost 30 GW, which is pretty massive. So, in India is one of the key country in the world who’s going to play a role in the energy space. And I think specifically in renewable energies. And you can see that from many fronts. Of course, production, there is also manufacturing, like, for instance, solar panel, or on different molecules like hydrogen or biofuels or all the cells, say all the molecules for the energy transition,” he said.

⁠Saurabh Singh, partner and Asia Pacific lead for energy and process industry at Kearney, noted that in India it is more about achieving the right energy mix rather than completely replacing conventional with renewable energy

“The energy transition here (in India) is different from a lot of other places in the world because it is not an ‘or’ question. It’s an ‘and’ question in India. Fossil fuels will exist. They will need to grow. India’s peak coal will happen in the 2030s, gasoline may be in the 2030s, but diesel or peak oil, the entire peak oil will not happen before 2040. That’s our sense, and which basically means you cannot ignore one at the cost of the other,” he said.

Noting that all the sources of energy need to grow, Singh said that policymakers or energy companies need to decide on the allocation of capital to varying sources of energy and also look at ways to raise the required finances.

“We need to grow everything. But what that also means is for policymakers, for CEOs or CXOs of energy companies, it’s a capital allocation problem. Because you need to grow everything simultaneously, and that is a tough act to do. Because at the end of the day, capital is limited,” he added.