3. Finding innovative solutions
Reaching net zero by 2050 requires the wider adoption of available technologies as well as the rapid development of new technologies that are not quite ready in the market yet. In this context, we see many ways ahead to accelerate the global energy transition and drive innovation forward, by investing in new climate technology, especially for hard-to-abate sectors, which are parts of the economy that cannot easily be decarbonised. Looking ahead, we see the biggest opportunities for innovation potentially coming from advanced batteries, charging technologies, hydrogen electrolysers and carbon capture and storage.
Advanced batteries: Battery technology is improving quickly as companies compete to deliver longer-lasting, faster-charging products, especially for electric vehicles. Better battery performance remains a key factor – alongside charging networks – impacting the take-up of electric cars and even electric aeroplanes. In the future, we see most cars running on electricity or fuel cells and planes relying on advanced biofuels and synthetic fuels.
Charging ahead: The accelerated rollout of charging networks is removing the last major impediment to widespread adoption of electric cars, ahead of the proposed phase-outs of internal combustion engines across more countries in the 2030s. Meanwhile, the electrification of commercial trucks is rapidly gaining momentum, requiring refits in transport hubs and logistics centres.
Hydrogen electrolysers: Hydrogen will likely be a critical part of the equation to decarbonise hard-to-abate sectors. While global hydrogen production for energy purposes is currently small, the outlook is changing rapidly with new policy support and incentives. A key pillar of Europe’s REPower EU strategy is targeting 10Mt of domestic clean hydrogen production and 10Mt of imported clean hydrogen by 2030. With added policy support and rapid adoption, we anticipate a significant reduction in the production costs of clean hydrogen, similar to what we saw initially for wind and solar, and more recently for batteries. In our view, green hydrogen may reach cost parity with grey hydrogen by mid-decade, and parity with diesel fuel for long-haul transport by the decade’s end.
Carbon capture and storage: Facilities that can extract and store carbon at an industrial scale are leaving the realms of science fiction and landing in the real world. Already, ethanol pipelines are set to be tapped for liquefied carbon for extraction and underground storage. Carbon Capture and Sequestration is potentially an efficient, cost-effective solution to reduce emissions in heavy industries. Newer technologies like Direct Air Carbon Capture and Storage, the pilot technology that recoups carbon from the air, could unlock an immensely scalable method to remove atmospheric carbon, irrespective of the initial source. With 7.2GT of sequestration needed annually by 2050, carbon capture capacity will likely need to increase 100 times by 2050.
Source: BlackRock, September 2022. IEA, Carbonomics. There is no guarantee that any forecasts and forward-looking expectations made will come to pass.