Energy transformation starts with us (with consumption?)
On the 9th of September 2020, PKN Orlen announced its goal of climate neutrality by 2050, becoming the first fuel company in Central Europe to set such an ambitious target. On the 30th of November 2020, we announced in the #ORLEN2030 strategy how we plan to become the leader in energy transformation for this part of Europe.
The strategy is a company document intended for existing and potential shareholders and devotes relatively little space to explaining the topic of energy transformation as it’s being talked about today. That is why, along with the strategy, we have issued a special report titled “'Energy Transformation”, intended for anyone interested in a 'green economy'. The report clearly explains the changes that energy transformation will bring to our lives and how both our company and the economy will change because of it.
Let’s start by saying that energy transformation is not the goal. It is rather an ongoing pursuit to restore the balance between our current lifestyle and the laws of nature. Industrial production driven by energy obtained through burning mined fuels has upset this balance. The beginnings of the coal era go back to a time when the total world population was less than two billion. The current world population is over seven billion, yet we still obtain electricity through combustion. As a result, carbon dioxide accumulates in our atmosphere, constantly increasing its average temperature and disturbing the natural balance. With the world population estimated to grow by nearly three billion over the next three hundred years, it will be physically impossible for humans to meet their living needs as we have done so far. Therefore, it becomes necessary to abandon combustion and obtain usable energy directly from natural forces. We already know how to do it and we are using it successfully in different parts of the world. Now it is about applying it everywhere, in all countries. Global warming cannot be stopped locally.
With the current state of science and technological development, it is not possible to completely switch from molecules to electrons. Without having sufficiently energy-dense electricity carriers (stores), we cannot completely abandon obtaining usable energy through combustion, which involves carbon dioxide emissions. For this reason, in the energy transition we aim to reduce emissions to zero, but we are talking about net emissions, linked to the absorption of carbon dioxide from the atmosphere. Agriculture and forestry play an important role in this aspect. Not only by reducing emissions of carbon dioxide and other greenhouse gases in agriculture and livestock farming, but also by increasing carbon absorption through the expansion of green areas. This requires us as consumers to change our eating habits and to be more respectful of nature.
Energy transformation involves both supply and demand. Energy is not consumed directly. We use it to meet our consumer needs, thus generating demand for certain energy carriers. By having coal stoves, we create demand for coal. We will not switch to gas heating without replacing the stove. An alternative may be district heating, which is easier to switch to low-emission energy carriers. The same applies to transport. It is much easier to switch public transport to electricity or hydrogen than individual transport.
Energy transformation cannot be done independently. The challenge of the Energy Transformation today is to synchronize the supply of green energy carriers with the possibility of their reception in devices used by the final consumers, i.e. households and the institutions providing services to them. Many of these devices still need to be invented (e.g. efficient batteries, which are the basis for the electrification of transport), others still need to be designed and manufactured on a mass scale and end-users subsequently persuaded to buy them. From this perspective, electricity looks more attractive both from the consumer’s and the supplier’s perspective, because the carrier properties are known, electric motors are efficient, and electric solutions are easier to digitalize.
Wherever combustion is necessary, e.g. heavy transport or as a back-up for RES, its scope must be limited. This is facilitated by the currently developed technologies for closing material cycles in the economy, i.e. recovering raw materials from used products, but also by new business models which maximize the use of durable goods. A promising way forward is the "product-as-a-service" business model already in use. Does it make sense to own a car, even an electric one, if you drive it 2 hours a day? Wouldn't it be more beneficial to lease a refrigerator, whose quality, modernity and energy efficiency are the manufacturer’s responsibility? The manufacturer could then design it to be durable, repairable, ready for technological upgrades and recyclable. The spread of this model would accelerate the transition to a closed loop economy, because more durable and better used durable goods mean less raw materials and energy consumption per head. If we want to provide decent living conditions for the next generation, we must prepare now to share resources, thus reducing their consumption per unit. Let us not be afraid to do this, because it is the best investment in our children's future.
We have been actively involved in this process, preparing a long-term strategy to lead ORLEN to achieve carbon neutrality by 2050. We have chosen this direction because it is both in our company's long-term interest (generates profits and employment) and leads to the improvement of the country's security in terms of energy, economy and society.
We realize that the effectiveness of the energy transition in halting global warming depends on the extent to which global emissions can be reduced. This is dependent on international cooperation not only in agreeing on ambitious goals for the next decades, but above all on the willingness to show climate solidarity. It is about the effectiveness of compensation mechanisms. In planning these mechanisms, it is worth adopting the principle of equal efforts for decarbonization in different countries. If the energy transition is to become a climate protection program, it should be designed as a great passage that everyone can undertake, and not as a race in which the weakest will fall off. That, however, is a task for politicians.
Author: Adam B. Czyżewski, chief economist of PKN Orlen