The energy sector getting greener
THE ENERGY SECTOR GETTING GREENER
Who are you?
I am Ivan Pavlovic, a thematic analyst within Natixis CIB Research teams.
Let’s talk about the energy sector
Recent trends in the industry suggest greater sustainability concerns as well as increased climate actions from a set of players, not only power utilities but also major European oil & gas groups. These actions take place amid intensified initiatives in Western Europe to reach carbon neutrality by 2050, to align with the targets set by the Paris agreement on climate change.
When looking at the various options currently available to speed up the World economy’s decarbonization, one sees growing interest and relevance in the “electrify everything” approach. The idea is to displace fossil fuels whenever possible by using low-carbon electricity, that is electricity produced out of renewable sources as well as from nuclear reactors.
Such is the case in the electricity sector where these low carbon sources can displace carbon intensive coal-fired plants. But that is also the case in the mobility sector where the gradual development of electric vehicles can displace traditional internal combustion engines. The International Energy Agency scenario set for 2040 - the Sustainable Scenario which is the most Paris-aligned energy scenario, predicts that by 2040 renewable sources will have displaced oil as the world’s primary energy source.
Who are the key players?
European power utilities, in particular Iberdrola, Enel and EDP, have set the stage. They have massively invested in renewable sources as well as expanded and modernized their power grids.
What’s new is that these players have been joined by some major European Oil & Gas groups such as BP, Repsol, Total, Shell and Eni. These groups have lifted their sustainability targets and most of them now ambition to reach climate neutrality by 2050. In parallel, they have heavily invested and are likely to continue to invest in low carbon generation sources as well as in low carbon mobility infrastructure.
These trends are likely to continue and even intensify in the coming months amid continuing uncertaincy on the future developments in the oil and gas industry.