11/09/2023
Cost, carbon footprint, origin: energy is a major issue that is on everyone’s lips. How can we explain the rise in energy prices? Where does the energy that we currently use come from? Can we imagine an entirely carbon-free world? To answer these questions, two experts in the field were invited to take part in the second episode of our #EnergyTalks: Patrice Geoffron, Professor of Economics at the Paris-Dauphine University and Director of the Center for Geopolitics of Energy and Raw Materials, and Jean-Pascal Clémençon, Senior Vice President Strategy & Markets at TotalEnergies. Here are the key takeaways from the discussion hosted by journalist Virginie Guilhaume.
Which energies are the most widely used today?
Patrice Geoffron:
Approximately 80% of the world’s primary energy mix is based on fossil fuels. This gives us an indication of the kind of effort that is required to reach the objective of Net Zero by 2050, which means emitting no more carbon dioxide than could be removed in different ways. In other words, we have just under three decades to dismantle a system that has been developed over two full centuries and which has generated enormous wealth. [...] We are seeing real progress, such as the penetration of electric vehicles, although not in a consistent manner worldwide. This is a huge opportunity to curb demand for oil, since the transport sector is still 90% dependent on this energy. [...] We need to develop customer-focused policies, so that even the lowest income households can access electric vehicles. It is a massive challenge for developed countries, and it will be even more difficult for emerging countries.
How will energy demand evolve? Can we expect it to fall?
Patrice Geoffron:
There is no reason for demand to fall worldwide, especially due to demographic trends and the rise of the middle classes in numerous emerging countries. Increased access to electricity is also desirable. Right now, 600 million people in Africa have no access to electricity whatsoever. All these factors play a part in driving up energy needs.
Why is there so much pressure on energy prices in Europe?
Patrice Geoffron:
We have severed our energy ties with Europe’s leading supplier of coal, oil and gas. [...] Simultaneously, France began to experience fairly extensive problems in the nuclear power sector, leading to reduced production in early winter. [...] France imports 99% of its oil and 98% of its gas. It is a precarious situation that should make us all the more determined to drive the energy transition forward.
Jean-Pascal Clémençon:
On the subject of fuel prices, OPEC countries and Russia have imposed quotas which, by limiting the supply of oil, inflates Brent crude barrel prices, resulting in high prices at the pump. [...] Our role is to supply oil in line with consumer demand. That is why TotalEnergies has set a price cap of €1.99 per liter in France in an attempt to help protect consumer spending power.
How is TotalEnergies responding to all these challenges?
Jean-Pascal Clémençon:
The challenge that we face is that we have to provide people with the low-carbon energy system that is needed to drive the energy transition, while maintaining a supply that is sufficiently available and affordable for those who currently have no option but to use fossil fuels.
In 2021, Total became TotalEnergies in response to the Company’s increasing awareness of the need to develop a diversified energy portfolio in order to drive the energy transition forward more swiftly. TotalEnergies was the first of the major longstanding companies in the oil market to take that step. [...] Ever since the Industrial Revolution, fossil fuels have helped improve the standard of living across the Western world. Today, we need to reduce the greenhouse gas emissions generated by the energy system that we live in, which I will refer to as System A.
At TotalEnergies, we are doing a great deal of work in this area and we are trying to get as many national companies as possible on board with these efforts, especially to reduce methane emissions. [...] The second phase involves building a new decarbonized energy system, called System B. We are reinvesting the money from our legacy business in renewable energies. [...] Our annual investments currently stand at $5 billion for low-carbon energy, mainly in electricity, and we intend to pursue our efforts. We have our hearts set on trailblazing the creation of this decarbonized energy system, which is the only way of addressing the climate emergency.
What about the cost of renewables and the problem of intermittence?
Patrice Geoffron:
The cost issue has to be examined on a case-by-case basis, but it is nowhere near as compelling as it was 10 or 15 years ago. If you look at the downward curve in photovoltaic costs, they have plummeted far faster than the most optimistic scenarios that we could have imagined back in 2010. [...] In France, for society as a whole, the energy transition will generate savings, because it will enable us to reduce our imports of oil, gas and electricity in particular.
Jean-Pascal Clémençon:
At TotalEnergies, we are well aware of the problem surrounding renewable energy’s intermittent nature and the need to ensure the most constant energy production level possible. Through our Integrated Power organization, we combine renewably generated power and top-ups from gas-fired power stations with battery storage. The idea is to provide customers with the most constant integrated energy supply possible.
Can we realistically expect a 100% carbon-free energy system?
Jean-Pascal Clémençon:
Carbon-free energy is not going to become a reality at the same time right across the globe. The world’s population is set to rise to approximately 10 billion people by 2050, and those extra 2 billion people will primarily live in countries that do not have sufficient access to energy. [...] It is highly likely that access to energy will initially be developed in these countries based on the current fossil fuel system. The biggest challenge of the whole energy transition – and this is where Western countries will have a role to play – is helping these emerging countries gain access to energy while progressively implementing energy efficiency and decarbonization measures in the rest of the world.
In India, for example, TotalEnergies is developing renewable energy and natural gas projects to help the country build its economy without relying exclusively on coal, unlike China in the early 2000s. [...] Energy sobriety and efficiency are at the heart of the energy transition in Western countries. For example, TotalEnergies is investing in sustainable aviation fuels, which are currently the only solution for decarbonizing aviation. We are also investing in green hydrogen to reduce the carbon footprint of our refineries in Europe. The aim is not solely to decarbonize our own industrial facilities, but to try and give the green hydrogen industry a boost by providing it with guaranteed business prospects.
There is a lot of talk about natural gas as a solution. Is it a good energy for the future?
Jean-Pascal Clémençon:
Today, the world’s electricity is primarily generated by coal. Although natural gas is a fossil fuel, it emits half as much greenhouse gas as coal in electricity generation.
Patrice Geoffron:
The problem with gas is not the molecule itself, but where it comes from. The challenge is decarbonizing gas, such as by producing biomethane from agricultural waste, sewage sludge and industrial waste. [...] There is also the issue of hydrogen which, at the moment, is largely produced from gas and is absolutely vital in the chemical and petrochemical industries. Hydrogen can be decarbonized using renewables or nuclear power, for example. This is a major challenge for the decarbonization and competitiveness of our industry, particularly in Europe.
Finally, how can we best move forward in making the energy transition a reality?
Jean-Pascal Clémençon:
A company like TotalEnergies has only one answer to this question, and that is action. We need to invest in low-carbon energies faster and on an even broader scale, in both developed and emerging countries. We also need to promote the sharing of technology.
Patrice Geoffron:
If we look at the list of countries around the world that have committed to being net zero between 2040 and 2050, that list covers 90% of the world’s greenhouse gas emissions, which is good news. But if we take a closer look at what current public policies are and at what has actually been done, we are not there at all. We must remain focused on the long-term vision and the present day.
We must act quickly and paint a coherent collective picture. As far as Europe is concerned, we need to realize that we have everything to gain from fast-tracking our exit from the current system, especially to reduce our energy dependency. We also need to be aware of the local benefits, such as improved air quality.
