Energy transition focuses on security, affordability amid high energy prices: execs

The recent increase in oil, natural gas and electricity prices in many markets globally has helped rebalance the energy transition conversation to focus on affordability, reliability and decarbonization which can be done with hybridization of power generation and industrial technologies, executives said June 14.

"The debate around energy has rebalanced from being largely about climate change which remains imperative but with the Russian war there is more focus on energy security, reliability and affordability of price," Patrick Pouyanné, CEO of French major oil company TotalEnergies, said during the Reuters Global Energy Transition 2022 conference in New York City.

Cash natural gas prices at the US benchmark Henry Hub were trading at $8.90/MMBtu on June 13, wholesale US electricity prices are well over 100% higher than last year at this time in most markets and average US gasoline prices are around $5/gallon in many cities due to a mixture of inflation and supply disruptions rippling out from the Russia Ukraine war.

Many leaders in Europe are asking questions about energy, Pouyanné said, adding that "we have to build a new decarbonized energy system while still delivering the energy of today."

"You don't pump more oil because governments say so ... oil development is not a manufacturing plant, but we listen," he said.

Affordability is a fundamental aspect of any energy source and one can observe that in countries where gas has gotten too expensive, they switch back to coal, and even in Europe there is a ceiling on power prices in France today, Pouyanné said.

A just energy transition means building new decarbonized systems while properly managing existing supply and demand to avoid price spikes, he said. "And we need planning from governments, we all want net zero emissions but without planning will have high energy prices," Pouyanné said.

Energy transition technology

"We are living through a massive disruption that sometimes feels like it's happening in slow motion," said Miguel Stilwell d'Andrade, CEO of EDP. "Wind and solar 15 years ago were expensive technologies that typically relied on subsidies and are now the cheapest sources of energy in most markets," he said.

Things like hydrogen, storage and distributed generation are growing quickly along with the expansion of networks needed to connect renewables and distributed generation, d'Andrade said.

Matthew Akman, senior vice president of strategy, power and new energy technologies at Enbridge, said the energy transition is critical but will take time and gas will be part of it. He told the audience that China has more coal-fired power generation capacity than the entire US installed generation capacity from all fuels.

Affordability and reliability are coming back into focus, and he suggested that it would make sense to invest in gas infrastructure now so it can bridge to hydrogen and renewable natural gas in the future.

Akman also gave an example of how Enbridge is reducing emissions from existing fossil fuel infrastructure. "We have an oil export terminal in Corpus Christie, Texas where we're working on a solution that takes gas from our pipeline system, feeds it into that terminal where we will produce blue hydrogen with onsite carbon capture and storage, then use the hydrogen for power generation while also exporting ammonia," he said.

Julian Nebreda, president of US and global business lines at AES, said his company is building a portfolio of assets that will do better in extreme weather by making them smaller, distributed and farther from water.

AES has also responded to requests from customers who want to match their power consumption with 100% renewable energy production, Nebreda said.

He cited an example from the mining industry in Chile where there were two separate power grids in the north and south of the country.

"We had to bring power from south but the transmission line got congested, so we overbuilt solar with batteries to cover the peak demand period, then brought power from the south in the evening when the congestion had decreased," Nebreda said.

Asked about opportunities for technology development amid the energy transition, Akman said carbon capture and hydrogen will be critical. Nebreda said there is a need for greater electrolyzer capacity to produce hydrogen which can help decarbonize the maritime and transport sectors.