The Next Generation of Decarbonization Technologies
The path to a net-zero future runs through decarbonization. Increasingly, companies and governments are setting ambitious targets for net-zero emissions to meet consumers', investors' and citizens' demands for progress on climate change---creating an explosion of opportunity in a variety of technologies.
Here are three areas that Mitsubishi Heavy Industries (MHI) Group, a leader in decarbonization technology, has identified as especially ripe for innovation and investment.
1. New Sources of Energy
A broader range of renewable energy sources -- more than just wind and solar power -- will be critical for the world to accelerate the journey to net zero. The need for post-carbon solutions has grown particularly acute in areas that have had few viable alternatives, such as commercial vehicle fleets, maritime shipping and energy-intensive industry applications like steel and cement production.
Every new energy source, from synthetic fuels to green hydrogen, adds to the potential to reduce emissions more broadly, in traditionally carbon-dependent industries.
Transporting freight by road was responsible for more than 40% of global oil demand in 2019, making commercial vehicle fleets a prime target for decarbonization. Electrification has been a challenge, however, because the batteries produced for electric vehicles haven't been light enough or powerful enough to move large vehicles over long distances.
In the near term, synthetic fuels, such as electrofuels, have the potential to make an immediate, positive impact. Infinium, a leading e-fuel provider in Sacramento, can power the production process with renewables and utilize captured carbon dioxide as a raw material for fuel -- a net-zero carbon alternative. Electrofuels work with existing engine technology, meaning transportation and freight companies could reduce emissions without immediately upgrading their fleets. Electrofuels could play a key role in reducing emissions in aviation as well.
Over the longer term, many investors clearly believe that hydrogen fuel cells could replace combustion engines in many vehicles. The value of the hydrogen fuel cell vehicle market is projected to grow nearly 67% annually between 2019 and 2026.
As alternative renewable energy sources come online, they will have applications across other sectors as well. In steel production, hydrogen is applicable for the direct reduction process, which enables decarbonization of the blast furness. In maritime shipping, green ammonia produced by companies such as Starfire Energy is seen as a remedy for an industry responsible for 2.5% of greenhouse gas emissions worldwide.
Every new energy source, from synthetic fuels to green hydrogen, adds to the potential to reduce emissions more broadly, not just in transportation but also in other traditionally carbon-dependent industries.
2. Carbon Management
Across the globe, the carbon value chain is taking shape. Carbon capture has been around since the late 1970s, when oil and gas companies wanted to capture carbon dioxide from the natural gas production process so they could inject it into oil wells to improve recovery. As these technologies continue to become more robust and sophisticated, investors have begun focusing on methods to use that stored carbon productively and profitably.
Investments in vegetation and soil storage could make these carbon management options a major part of decarbonization in the near future. The United Nations estimates that these solutions could generate $800 billion in annual revenues by 2050, giving them a net present value greater than the total market capitalization of today's oil and gas majors.
With the commoditization of captured carbon, analyst projections for products that use carbon dioxide range from $800 billion to $1 trillion by 2030. Possibilities range from incorporating the gas into building materials such as concrete to using it as a feedstock for chemicals like solvents or plastics to new, as-yet unimagined applications.
3. Advanced Renewable and Energy Storage
Existing renewable technologies continue to offer innovation and investing opportunities given the need to decarbonize the grid globally. Consider batteries, which have been around for more than two centuries. Recent advances in battery technology have made storing electricity from vast solar arrays economically viable.
A new report from IHS Markit projects that global utility-scale energy storage installations will surpass 10 gigawatts for the first time this year -- more than double the 4.5 gigawatts installed in 2020. And venture capital, public market and debt financing of battery companies jumped 136% last year, to $6.6 billion, suggesting more growth to come. Meanwhile, interest and investment in green hydrogen as a long-term storage solution is also rising rapidly.
Storing renewable power helps utilities bridge the gap between the time green electricity is generated and the moment it's used, so they can supply clean power when it's dark or the wind isn't blowing. As storage technology improves and becomes more widely adopted, these developments will enable utilities to retire redundant emissions-generating equipment, and will allow solar and wind power producers to take advantage of higher prices when electrons are scarce.
Improvements to other existing technologies can play key roles as well. More efficient gas-powered turbines can reduce consumption by electricity generators. Gains in the efficiency of solar panel technology are driving cost efficiencies. Wave and tidal power are poised to come online at scale. Because there is no single storage solution that's effective in all applications, increasing the use of current technologies will certainly be a part of the world's energy future.
On the Cusp of Major Changes
The biggest near-term growth areas in decarbonization aren't ends unto themselves as much as catalysts for future innovation and emissions reduction.
Developing drop-in electrofuels can provide commercial transportation and logistics fleets with an attainable first step in reducing their climate impact. Finding new uses and greater value for captured carbon can incentivize new companies and industries to capture it. And while we advance toward broader availability and utilization of green hydrogen and ammonia, we can seize opportunities to make current renewable technology even more efficient.
As these technologies evolve further, they will lay the groundwork for further innovations and investment opportunities as the world advances toward net zero.