The world is going through an unprecedented energy transition and a shift towards renewable and alternative feedstocks for downstream processing and power generation. Hundreds of new projects are being announced from different parts of the world - from the largest electrolyzer ever manufactured, and the biggest production capacity of Sustainable Aviation Fuel (SAF), to the most advanced bio-ethanol production technology implementation.
It’s fair to say that the energy transition, together with the strategies for achieving net-zero carbon emissions, has been front-and-center for the past few years. Even during the pandemic, the announcement of new projects and pledged developments didn’t lose momentum - but with all this positive spin, has significant progress really been made - the answer, according to a recent announcement from Goldman Sachs, is an emphatic NO. A massive $3.8 trillion has been invested in renewables to date and yet, in the last 10 years, it has only moved fossil fuel from 82 to 81 percent of overall energy consumption! The accuracy of this statistic may be questionable, but what is not is the fact that real progress has been minimal and much remains to be done.
Such insight raises the question, how can we further measure and define milestones during the energy transition journey? The need for standardisation, to define what is right, what is wrong, what is required and what is not has emerged over the last few years, forcing the industry to create new terminology.
The IEA medium to long-term outlooks - the World Energy Outlook (WEO) and the Energy Technology Perspective (ETP) - use a scenario approach to examine future energy trends relying on the Global Energy and Climate (GEC) Model. The GEC Model is used to explore various scenarios, each of which is built on a different set of underlying assumptions about how the energy system might respond to the current global energy crisis and evolve thereafter. By comparing them, the reader is able to assess what drives the various outcomes, and the opportunities and pitfalls that lie along the way. These scenarios are not predictions – GEC Model scenarios do not contain a single view about what the long-term future might hold. Instead, what the scenarios seek to do is to enable readers to compare different possible versions of the future and the levers and actions that produce them, with the aim of stimulating insights about the future of global energy.
Understanding GEC Model Scenarios Overview and Table: Definitions & Objectives
Source: IEA
Currently, socially responsible companies have an Environmental, Social, and Governance (ESG) department whose primary function is to maintain transparent governance regarding the company’s plans for reducing their environmental impact on the planet and therefore, their contribution to the overall 1.5 °C climate goal.
However, its slightly more complex for the downstream industry as it strives to fulfill its ESG responsibilities while also ensuring energy security? Finding the right balance - maintaining the ESF momentum while also continuing to meet consumer demand for energy products - is key.
For EU refiners in particular, maintaining this balance, in the current climate, is not easy. Russian crude supply is gradually being phased out of European markets (relocated to India and China), with a total ban coming into effect on 5th February. So now, European refiners are looking to substitute their Russian crude feedstock with a number of other grades from different locations. Added to the crude supply issue, is the problem of reduced, or limited refining capacity. Since 2019, the refining capacity in Europe has been reduced by approx. 4,000,000 barrels per day, comparable to 10-15 refinery closures.
This shortage of middle distillates presents Middle East refiners, the leading and most secure producers and processors of liquid hydrocarbons, with a great, medium-term export opportunity and an ability to achieve higher margins. This will provide much-needed energy security for Europe allowing it to continue to function and develop its infrastructure. This need for energy security will ensure that fossil-based fuels are here to stay, at least in the short-term, and will continue to stimulate energy transition-based R&D to upscale facilities and commercialise environmental solutions for the refining industry.
The technology required to make refinery facilities more environmentally friendly is available today however, one common approach is to finetune processes to achieve better unit performance, starting from the energy efficiency of the heat furnaces to treating the exhaust gasses for fine particles and SNOX emissions. Maintaining existing production facilities in good operational condition and equipping them with environmental protection systems will allow for a smoother energy transition and will give renewables and ESG more time for accurate planning and project execution.
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