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Predictions 2021: Part four, continued dependence on gas and coal

As corporations attempt to recover from the effects of COVID-19 pandemic and finding ways to navigate through the new normal, both renewable energy, gas and coal projects will possibly to go online.

These predictions were shared by Boitumelo Sehlake, Founder, Sehlake Energy Solutions, South Africa, contributing to the five-part series of articles where ESI Africa invited industry experts to give their judgment on the past year and their predictions for 2021.

Judgement: What developments surprised you during 2020?

January of the year 2020 couldn’t have prepared us for the surprises that the year had in store for us. No one anticipated the decline in energy demand due to restrictions on international travel, import and exports, trade and factories closing down for almost half of the year. Carbon (CO2) emission fell by ca. 7% according to the IEA World Energy Outlook 2020, this was owed by low economic activities and less cars on the road. There have been some interesting developments within the energy sector that one didn’t see coming.

  • Investment in oil, gas and coal

The number of financial institutions that indicated they will no longer invest in fossil fuel related projects or rather impose restrictions on financing such projects were more than anticipated.  The growing pressure from climate change concerns has pushed many financial institutions to re-evaluate their involvement with fossil fuels albeit the COVID-19 pandemic bringing greater uncertainties for the energy sector.

It was good to see South African banks such as ABSA bank, Standard Bank and Investec Bank publishing fossil fuel investment policies elaborating on how they will continue to invest in new fossil fuel projects, however, with restrictions imposed to reduce CO2 emissions. ABSA bank published its policy on funding new coal projects in line with the Equator Principles (EP) guidelines; this forces coal companies to think strategically on how to make their project more sustainable (economically, socially and environmentally). While Investec Bank’s fossil-fuel policy is the first to finance both new coal, oil and gas projects they also follow the EP guidelines and work with the Task Force on Climate-related Financial Disclosures (TCFD).

These policies can be seen as promoting new fossil fuel projects that are more sustainable than previously. With the amount of job losses seen in 2020, to build back our economies many countries (developed and developing) will continue to depend on fossil fuels.

banner coal in energy transition
  • Total South Africa Brulpradda and Luiperd

One other surprising development was the arrival of the Stavanger drilling rig during a pandemic and drilling the Brulpadda to find commercially viable gas which is a positive for South Africa as the country needs gas now more than ever. This will further assist the stranded PetroSA refinery that is running out of gas feedstock.

Have you read?
Predictions 2021: Part three, new push for renewables in green recovery

Predictions: What trends do you anticipate for 2021?

As corporations attempt to recover from the effects of COVID-19 pandemic and finding ways to navigate through the new normal, both renewable energy, gas and coal projects that are new and existing (but held back by the pandemic) are expected to go online. There will be an increase in energy demand not only for these projects but for companies returning to operate to full capacity, especially the aviation industry.

  • Investment in oil, gas (LNG and LPG) and coal

To address climate change, more investment is directed toward LNG projects as gas is seen as the “better” fossil fuel emitting far less CO2 than oil. LNG is regarded as a fuel for energy transition in the O&G industry. One can expect LNG projects to see final investment decisions (FID) closure in 2021 in particular those that were delayed due to the COVID-19 pandemic such as the Mozambique Rovuma LNG project where ExxonMobil delayed the FID in 2020 due to capex cuts and COVDI-19 pandemic. Others include: Venture Global Plaquemines LNG export project in Louisiana and the Sempra Energy’s Port Arthur LNG project in San Diego which is expected to have a capacity of ca. 13.5 million tonnes per annum (mtpa) of LNG.

The fossil fuel policies released by most financial institutions could be seen benefiting and promoting more coal and gas project development than discouraging them.

Missed previous articles – read them below:
Predictions 2021: Part two, water sector will merge digitalisation processes
Predictions 2021: Part one, ‘Hydrogen can unlock untapped renewables’

  • The new energy customer

The energy customer continues to change as more and more consumers are being educated and making well informed decisions when it comes to energy consumption. There is no doubt that 2020 has exposed the inefficiencies in the energy sector and also made consumers more aware of their “energy consumption behaviour”.

The new energy customers in both developed and developing countries are looking for energy options, ways to reduce their carbon footprint and most importantly they are looking for energy that is affordable and reliable. In Africa, particularly Nigeria and South Africa, loadshedding is threatening economic development. A peak in self generation through renewable energy can be anticipated in the year 2021 in attempt to take ownership of access to reliable energy.

With the changing energy consumer, affordability of solar power systems for residential homes remain a challenge. A colleague of mine once stressed that installing solar power systems for residential homes, especially amongst the middle class, is not an issue of affordability but rather that of consumers prioritising differently. This had one thinking of the number of middle class households that own the latest smartphones and smart TV in addition to all other electrical gadgets for their family, surely all these require electricity to charge and be able to use them. Then why is it that we priorities differently when it comes to the reliability of the energy source to power our homes and these electronic? Is this perhaps a matter of needing to change the financing models for solar power system to encourage home owners to add solar power to their list of priorities? Absolutely, one can anticipate a rise in different solar power system financing models such as crowd-funding for residential solar power systems.

Look out for the fifth and last installment of ‘Judgements & Predictions’