Developing a modern energy mix – opportunities and obstacles

We’ve known since at least Winston Churchill’s famous 1913 speech that energy security relies on diversity – of sources, suppliers and geographies. But it’s increasingly clear that a modern energy mix also brings advantages of lower costs, wider energy access, lower environmental impact and greater resilience. Global energy demand is set to increase by 47% over the next three decades, in one estimate, and that will not be met by a single energy source, however cheap and clean it may appear.

This energy demand growth will be driven by rising populations – but, much more than that, by increasing incomes, and new technological needs and opportunities. The sudden interest in artificial intelligence, hungry for electricity, is one example. Others will undoubtedly emerge by 2050.

This concept of a modern energy mix has emerged recently. From wood to hydropower and coal in the nineteenth century, we added oil in the first half of the twentieth, then natural gas and nuclear in the second half. Most recently, the twenty-first century has seen two new renewable sources - wind, then solar power - become significant contributors. Yet each energy source has been mostly an addition to, not a replacement for, its forerunners.

These energy sources are linked by complex, expensive and interdependent infrastructure – electricity grids, storage systems, fuel refining and export and import terminals and pipelines. And they are enmeshed in an intricate structure of markets, contracts, regulations and institutions pieced together over decades.

Renewable sources and batteries have achieved impressive gains in performance and reductions in cost. They have minimal greenhouse gas emissions at the point of use. Yet even their breakneck growth will not be sufficient for them to deliver most global energy by 2050. 

They do emit some greenhouse gases when they are manufactured, and they require significant quantities of input materials, some of them relatively scarce or whose mining and processing is highly concentrated in a few countries. These problems should not be overstated.

More importantly, they cannot meet all needs. High-temperature industrial heat, feedstocks for chemical and fertilisers, the reduction of metal ores, all depend today on oil, gas and coal. Although methods based on electricity or hydrogen are being developed, they add another enormous challenge of technology scale-up and capital investment over a very short period. Electrifying all end-uses, from industry to home heating and electric vehicles, is an attractive goal, and undoubtedly electricity needs will increase significantly to 2050 and beyond. But grids are already straining to keep up with demand in numerous countries, while many parts of Africa in particular lack reliable access to electricity altogether.

And renewables, of course, are dependent on weather, time of day and seasons. Improving methods of energy storage, long-distance integration of electric grids, certainly help. But an electricity mix that retains some share of fossil fuels, ideally in a low-emission mode such as carbon capture and storage, will in most places be much cheaper and more reliable than an all-renewable grid.

This line of argument is not in favour of slowing the move to net-zero carbon – quite the opposite. It is about accelerating that transition by making it cheaper, avoiding junking assets prematurely, building on proved technologies as far as possible, and avoiding unnecessary political fights.

The modern energy mix methodology has the potential radically to enhance the efficiency and reliability of energy systems. Once its implementation into energy grids is complete, the variable energy sources from oil, gas and renewables will complement each other to advance the ability to respond to energy crises. These crises can come from sudden surges of demand, from technical breakdowns, weather or other natural disasters, or political insecurity.

The Russia-Ukraine war, and its impact on countries such as Germany, drastically illustrated the dangers of over-reliance on a single supplier. Climate deterioration increasingly poses problems of heatwaves that push up air-conditioning demand, droughts, high-pressure zones and hurricanes that variously affect the output of hydropower, biofuels and wind.

Consider the case of American Electric Power (AEP) and its ‘all of the above’ strategy, which embodies the modern energy mix approach. AEP has diversified its energy portfolio, with coal sources comprising 27%, natural gas 27%, nuclear 8% and hydro, wind, solar and pumped storage collectively making up 21%. Their goal is to invest in this strategy to provide customers with reliable and affordable electricity. The benefits of this commitment are evident: AEP has achieved a 66% reduction in its direct (“Scope 1”) greenhouse gas emissions since 2005 and has sold or retired nearly 13,500 megawatts of coal fuelled generation over the last 10 years. To maintain affordability and security for its 5.6 million customers, AEP intends to keep five coal-fuelled plants in its portfolio.

This balanced approach illustrates how a modern energy mix can support both environmental goals and energy reliability. With the addition of low-carbon technologies such as renewable and synthetic natural gas, green and blue hydrogen, and carbon capture, supported by government policy in the US, Canada, Europe and elsewhere, there is a clear path to near-zero emissions while enjoying the benefits of diverse and competitive energy supply.

Such balance is crucial for ensuring present and future energy security. The International Energy Agency’s forecast of the significant increase in global energy demand makes it imperative to develop a robust and diverse portfolio. To safeguard and improve our energy systems, industry leaders and government officials need to cooperate in planning and implementing a modern. global energy mix. International Summits such as Gastech 2024, scheduled for September, provide vital platforms for sharing strategies and ensuring our future energy security.