Exploring Clean Energy Pathways: |
3. The implications if CO2 storage were limited |
The role of CO2 storage |
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Figure 25. Changes in global installed power generation capacity by fuel in the LCS relative to the CTS
IEA 2019. All rights reserved.
Note: Analysis above uses the Energy Technology Perspectives modelling framework.
The LCS would need additional power capacity of 3 300 GW in 2060 over the CTS, equivalent to today’s capacity of China, India and United States combined.
Changes in investment needs
Meeting the emissions reductions of the CTS with very limited access to CO2 storage, as in the LCS, would increase the investment needs of the global energy sector. The additional capacity needs of the power sector would have the largest impact on investment requirements, driven by higher final electricity demand (largely from industry) and electricity used for synthetic hydrocarbon fuels from electrolytic hydrogen in the fuel transformation sector. Although cumulative industrial investment in the LCS compared to the CTS (including for synfuel production) would be higher by a rather moderate USD 0.9 trillion, these activities would be the main driver for the investment needs in power generation. Investment in power generation would be USD 3.1 trillion higher in the LCS compared to the CTS. The additional investment that would be needed in power generation, industry and synthetic fuels may appear moderate, representing a combined 9% increase on the CTS total. Relative to the RTS, however, the additional investment needs of the LCS for these three sectors would be USD 13.7 trillion, 40% higher than in the CTS at USD 9.7 trillion (Figure 26). This means that achieving the same CO2 reductions, and thus climate targets, as in the CTS would increase the investment requirement by 40% if the availability of CO2 storage were limited.
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IEA. All rights reserved.
Exploring Clean Energy Pathways: |
3. The implications if CO2 storage were limited |
The role of CO2 storage |
|
Figure 26. Investment needs in power generation and industry, cumulative 2017–60, by scenario
IEA 2019. All rights reserved.
Notes: Dashed line represents investment level in the RTS. Analysis above uses the Energy Technology Perspectives modelling framework.
Limiting CO2 storage would increase the investment needs in power generation and industry by 40% to achieve the same mitigation targets as in the CTS (relative to the RTS).
Box 4. Managing risks associated with innovation
Risk is inherent to innovation projects as they aim to develop and deploy completely new processes or products. Thus risk management becomes critical to making research, development and demonstration (RD&D) projects viable. Final decisions on investment depend on many factors, but two stand out: uncertainty intensity and capital intensity. Investors have different levels of risk tolerance and perception throughout the different phases of the RD&D process.
Financing early phases of research tends to be more uncertain, or with less chance that the estimated return on investment is met, because technology performance is yet to be proven. The design and development phase builds on successful results from previous research activities, lowering the level of uncertainty when performing investment risk assessments.
Finally, the commercial demonstration stage, although characterised by greater capital intensity, has a more manageable risk because prior pilot-scale trials have provided a basis for considerable confidence in the new technology. While uncertainty intensity decreases as the innovation cycle advances, capital intensity tends to increase, mostly because of the gradual process of scaling up. A decision to invest in innovation hinges on what balance between uncertainty intensity and capital intensity the investor can accept.
In the LCS, limiting CO2 storage would increase the risk, at a systemic level, of failing to meet emissions reduction targets. This would be due to a reliance on some technologies currently at lower levels of maturity, and the lack of availability of CO2 storage to assist in generating negative emissions in the latter half of the century. In the LCS, there would be a general trend to deploy innovative technologies that are currently at earlier stages of development or deployment. For
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