Total Cost Management & Energy Transition

Total Cost Management & Energy Transition

By: dr. ing.  Gianluca di Castri, DIF, EIE/ICEC.A – 07/09/2023

Our starting point is that majority of the world countries have agreed to have a carbon neutral energy system within 2050; besides the international agreement the European Union has set a law provision for that goal, the United Kingdom, Japan, the Republic of Korea and about 110 countries have done the same.  So has the United States administration, while China has pledged to get there before 2060. The United Nations have declared that carbon neutrality is the world’s most urgent mission.

It is not our business, as Total Cost & Value Managers, to discuss about the causes of climate change and the effectiveness of the carbon neutrality in fighting it, we leave this to scientists and politicians. On the other side, the implementation of the international programme for carbon neutrality as well as the related national programmes and single projects or multi-projects are our business.

In reality, this is an extremely ambitious plan that will not be easy to fulfil: while the so-called developed countries can work on it and reach a quite satisfactory result within the date, maybe also the full result, situation could be completely different for other countries. Goodwill is not enough, and sometime goodwill can be only a declaration without a real commitment.

Declarations and acceptance of programmes is not enough, the problem is to implement them in a sustainable way, where with the word “sustainable” we must include for:

• environmental sustainability, that in plain words means that the remedy has not be worst than the problem itself, in detail that the carbon neutrality does not cause an increase of pollution due to other causes (do not forget that carbon dioxide is not a polluting gas);
• economic sustainability, either nationally and internationally, with the minimum goal to keep the living standard of developed countries and to allow the development of other countries, since the decline of developed countries, besides social unrest, would severely hinder the huge investments needed for obtaining the carbon neutrality and, on the other side, any delay in the development of other countries would cause poverty and uncontrollable migratory movements; the “happy decline” is only an oxymoron;   
• social sustainability, aiming first at eliminating poverty, that has been substantially reduced during the last fifty years and could be substantially eliminated within 2050 and, in a further stage, to allow as much human beings to live with an “objective welfare income”, a parameter we can define and measure.    

The full electrification of the energy system will be the final result, but this will be an impossible result if we really want to get it within 27 years from now, therefore we must identify some intermediate ways to work through combustion of hydrogen, ammonia, or something else. On the other side, we must not forget that to produce hydrogen or ammonia we need energy, since we cannot mine them. Furthermore, we should take into consideration that a hugely increasing amount of energy will be required in the next decennia for water desalination.

The energy used as electricity, as things are now, in only about 20 to 25% of the total energy used and is not yet carbon free. The electricity production should be dramatically increased from now to 2050 to cope with all energetic needs such as heating, industrial, transportation, and so on.  

It is objectively difficult or maybe dreamish to be optimistic about it.

As Total Cost & Value Managers, we must work on economic aspects of the problem, albeit we can give also some technical advises since majority of us have an engineering background. The positive point is that investments in energy are quite rentable, therefore equity from private investors or investment funds is and will be available, albeit not in all countries, while further support could be obtained through the banks or other financial institution. Let’s assume then that the complete funding will be available, we should be able to demonstrate the rentability of every program or project to get it really:  that is not easy task, the earth of the matter is that forecast of energy prices is not a fully reliable matter and sometimes is also erratic, however it something we must cope with.

In the longer run, it’s difficult to define what really can be defined as energy price, since different sources of energy will be used for different purposes, then it would be best to define the price of energy services. The difference among energy price and price of energy services, at least in a first approximation, will have a negligible impact in the time span from now to 2050, unless completely new technologies and services be introduced.

The European Union has set forward a taxonomy of accepted energy sources that includes for renewables properly so said (solar, wind, hydroelectric), nuclear and geothermic. The limit of renewables is that they are subject to a primary energy that is not continuous and not under our control, either sun or wind cannot work on our command. It means that, if they are deemed to be the only main source or at least the dominant source of electricity, there will be a need of an immense capacity of storage, that has to be a seasonal storage if we still want to have some kind of heating and industrial production during winter: as things are now, the only highly efficient seasonal storage system we have in our hand is gravity, through pumping of water from down to top in order to re-use it through hydroelectric power, this is commonly used in the counties where hydroelectric facilities do exist but is quite difficult to be used elsewhere. The electrochemical storage through batteries that is the best storage we have today, but its energy density is limited: other storage systems are being studied such as electrostatic (super-condenser, that start to be used), superconductive electromagnetic, heat storage and, in addition, a lot of technologic research is running and will give substantial improvements, but will not make miracles.

We shall go nowhere if we do not accept that we need also a continuous source of electricity that can produce   about 8000 MWh/MW (in other words, that can work about 90% of the time) instead of the 1500 to 2000 MWh/MW that is the maximum we can obtain through solar or wind. As far as we know, the only continuous and carbon free electric sources of energy are nuclear and geothermal. We can like it or not, but insisting on relying only on renewables is unrealistic: furthermore, we must consider that, in reality, also geothermal is a renewable energy and nuclear is a long-term source of energy (centuries or maybe millennia should we rely only on fission, geological eras if we succeed in use nuclear fusion).

As far as 2050 goals are concerned, what can we realistically obtain from now to then? As we have told above, we cannot rely on nuclear fusion, it will be a good result if by that date we can have one or two experimental fusion reactors somewhere in the world, but we shall not have a substantial production by that date. In order to have a carbon free economy we must use all the existing production systems, namely renewables such as photovoltaic, thermal solar, wind farms and others that are being studied, geothermal, thermonuclear either third or fourth generation.

The last consideration is that all the international agreements do not include for militaries: some pacifists   will learnedly explain that by 2050 there will be no more war in the world, however based on our human experience of the last fifty thousand years or maybe more, it is difficult to believe it.