The coming low carbon energy system disruptors

Momentum towards the 1.5˚C goal of the Paris Agreement may be faltering but while the pursuit of net zero is slowing, it won’t stop. Multiple low carbon technologies will be needed at scale to achieve a 2˚C or lower pathway to complement those such as renewables already on the front line of decarbonisation.

Our fourth New Technologies Outlook reveals there is no shortage of contenders to be the next big thing in low carbon. The analysis ranks 243 technologies across 10 transition themes that are currently at various stages of development. All could, in time, make an impact by accelerating the transition. We’ve scored each technology on six metrics: maturity, pace of change, cost of carbon abatement, carbon offset potential, policy support and dependency (the potential for other nascent technologies to piggy-back).

Prakash Sharma, Head of our Energy Transition Service, helped me focus on the top quartile - the 60 that we reckon will be the earliest to break through to mass adoption, as well as one or two that may be longer-dated.

Technologies fast closing in on global deployment

Three themes top the rankings with technologies that are already disrupting the market. In transport these include passenger and light commercial EVs, electric buses and fast charging infrastructure; in power generation fixed offshore wind, and the crystalline silicon p-type cells (as well as the newer n-type) set to underpin solar’s future dominance; while lithium-ion batteries are streets ahead of rivals for short duration energy storage.

Bubbling under

Grid Edge and End Use is a big focus of innovation and investment with ten technologies in the Top 60. Highest ranked, but still in the development stage, is dynamic line rating (DLR). It’s a technology designed to boost grid capacity, which is increasingly important as variable renewables begin to dominate power systems. DLR uses sensors to determine in real time the carrying capacity of the transmission line instead of relying on static assumptions that typically assume worst case conditions.

High-profile technologies progressing at different speeds

Carbon capture continues to make steady progress up the ladder supported by strong policy support and keen interest from Big Oil. Planned CCUS project capacity reached 1.6 Bt at the end of Q1 2024 and we estimate nearly 50% of the pipeline is in early stage of development.

Hydrogen in contrast has slipped down the rankings from last year. The reality of project execution against a backdrop of rising costs, midstream transportation challenges, and the slow development of consumption have led to project cancellations. We have tempered our expectations of a hydrogen economy in the near-term but believe this is a blip. Hydrogen is destined to play an important part in decarbonising multiple industries.

Proven in demonstration but held back by dependencies

Multiple designs of small modular nuclear reactors (SMRs) are emerging, each with maximum capacity of 300 MW per unit. High capital intensity, tight supply of fuel (high-assay, low-enriched uranium) and the social licence to operate (including the tough permitting process) are among SMRs’ challenges.

Sodium-ion and solid-state batteries are emerging as a promising alternative to lithium-ion batteries but will take years before widespread adoption. The challenge is managing the trade-off between the technical performance and costs. While lithium-ion batteries score high in energy density compared to sodium-ion and solid-state, the latter two are considered safe and can achieve lower costs longer-term.

Big efficiency gains have put heat pumps at the forefront of decarbonising space heating in buildings. The main barrier is consumer appetite given the cost and disruption caused by reconfiguring heating layouts required for most existing homes.

Sustainable fuels for aviation (SAF) and maritime are gaining momentum – sixty companies have committed to reach 10% SAF in aviation by 2030. Feedstock supply for biofuels is the major constraint, potentially opening the door for synthetic or e-fuels.

Policy support to incentivise investment is critical

Low carbon technologies present a sustained investment opportunity - we estimate between US$34 trillion (Wood Mackenzie base case) and US$63 trillion (our net zero scenario) through to 2050. Many of the technologies in the analysis will be needed at industrial scale and all are capital intensive. Higher prevailing interest rates are compounding the specific challenges each faces to become competitive. If the world is to get close to net zero, policy makers mustn’t stint on support for the development of new technologies from the concept phase in R&D through to commercialisation and global deployment.

AI could be a gamechanger

The application of AI could unlock innovation by analysing vast amounts of data, running complex simulations to develop new designs and configurations. The result? New technologies with lower costs that are more scalable – and no doubt a shake-up of WoodMac’s rankings.