7 ways energy and utility companies can act on the 2022 IPCC climate and energy system findings

“It is the defining issue of our age. It is the central challenge of our century. It is unacceptable, outrageous and self-defeating to put it on the back burner.” These were the words of UN Secretary-General António Guterres in his opening remarks ahead of the two-day Climate Implementation Summit at COP27 in Sharm el-Sheikh, Egypt.

The UN Secretary-General’s urgent call to mitigate climate change echoes the findings of the Intergovernmental Panel on Climate Change (IPCC) Working Group III’s report, Climate Change 2022: Impacts, Adaptation and Vulnerability. In this blog, we focus on key findings of the “Energy Systems” report and share recommendations on what energy and utility companies can do to accelerate the advancement of their climate goals.

Solutions are becoming more accessible and affordable

According to the IPCC report, global greenhouse gas (GHG) emissions continue to grow at an alarming rate. Between 2010 and 2019, emissions increased by 12%. Limiting global warming to 1.5 degrees C (2.7 degrees F)—the worldwide target of the Paris Climate Agreement—requires lowering net CO2 emissions from 35% to 51% and net GHG emissions from 38% to 52%. This is no easy task.

But there’s good news. The cost of low-carbon energy and solutions is becoming more affordable. The IPCC report finds that renewable energy unit costs have steadily declined between 2010 and 2019, with solar energy and lithium-ion battery costs both falling by as much as 85% and wind power by 55%.

In addition, climate tech funding is at an all-time high. According to estimates, environment-focused tech companies have raised over $2.4 billion in funding so far this year. The IPCC report reveals that solar power solutions have grown by 10 times, while electric vehicle solutions have grown by a 100 times. However, there is still a lot of room for growth, especially at a regional level, where significant variations exist.

Regulations are helping to finance the energy transition

Despite growing efforts to fund climate action, current capital spending levels are still far from adequate to address the climate and energy crises and achieve net-zero emissions by 2050. Investments in clean energies still pale compared to investments in fossil fuel industries—a disparity that does not align with the objectives of the Paris Agreement.

The required funds exist; yet they’re not being channeled into low-carbon initiatives for several reasons, including:

• Clean energy initiatives typically are long-term projects with longer ROIs.
• Energy and utility companies—mainly traditional fossil fuel-focused enterprises—worry about the financial risks of investing in renewable energy as they are accustomed to larger ROIs.
• Fossil fuels create significantly more energy per unit than cleaner fuels, such as biomass or electrolysis-derived hydrogen, where intensive processing reduces ROI.

To help tackle these challenges, governmental bodies are increasing regulations to help advance the necessary shift to clean energy infrastructure.  

Targeted investment allocation—if focused on renewable and nuclear energy, carbon capture storage (CCS), power grids, energy storage and energy efficiency—could fully finance the ecological transition worldwide.

How can energy and utility organizations advance decarbonization targets and come out on top?

Industry leaders are adopting a mindset that the energy transition is an opportunity to: 1) evolve their business and operating models to benefit from the upcoming changes; and 2) adapt their energy consumption to achieve the objectives of the Paris Agreement.

Below, we offer seven recommendations that can help these leaders support a secure and sustainable future energy system:

1. Identify and track GHG emissions (including Scope 3) and other sustainability-related data across the value chain to measure, manage and report on stated goals.
2. Focus on the long-term benefits of adopting low-carbon energies and diversify investments in renewables, nuclear power and CCS to offset risk.
3. Invest in research and development to advance hybrid solutions, such as combining gas with bioenergy or batteries with turbine units.
4. Invest in green data centers that use energy-efficient design, policies and technologies.
5. Build stronger relationships with consumers, helping them monitor their energy usage and support behavioral changes to reduce consumption through incentives.
6. Understand consumer energy use patterns to support energy efficiency and energy sobriety value propositions (read insights from CGI experts on decarbonization and energy sobriety).
7. Invest in CCS technologies to compensate for GHG emissions that cannot be reduced or avoided.

As important, organizations should digitalize their operations from end-to-end to become data-driven. Data is a key enabler in measuring sustainability-related factors, achieving continuous improvement, reducing emissions and increasing profitability by reducing waste.

Learn how we help clients achieve their sustainability goals at https://www.cgi.com/en/sustainability