【花旗银行_Citi_GPS_】2024年难以减排的行业以及脱碳路径研究报告_76页_5mb

Summary of "Hard to Abate Sectors & Emissions II"

Core Content

This report focuses on the decarbonization of hard-to-abate sectors, which are responsible for over one-third of energy-related greenhouse gas emissions. These sectors include steel, cement, aluminum, shipping, and aviation. Despite the significant growth in clean energy investment, these sectors still require substantial attention and funding to meet net-zero targets.

The report outlines the current state of progress, the solutions being deployed, and the financial structures that are necessary to support the transition. It emphasizes that while some sectors have started to decarbonize, the scale-up of new fuels and technologies is still in its early stages and varies by region.

Main Viewpoints

• Emissions Growth: Without intervention, emissions from hard-to-abate sectors could increase by more than 50% by mid-century.
• Decarbonization Momentum: There is growing momentum in decarbonizing these sectors due to government support, legislation, and client demand.
• Supply Side Solutions: The key solutions for decarbonization include the use of renewables and nuclear, clean hydrogen, CCUS, and biomass.
• Financing Needs: Trillions of dollars are required annually to scale up these solutions. While corporate balance sheets are currently the main source of funding, project finance will become increasingly important, especially in emerging and developing economies.

Key Information

Progress in Solutions

• Renewables & Nuclear:

  • Over 130 countries have continuous policy support for renewables, leading to significant capacity growth and cost reductions.
  • Nuclear energy, particularly through Small Modular Reactors (SMRs), is gaining traction. Over 80 commercial SMR designs are being developed globally.
  • Floating nuclear power plants (FNPPs) are being explored for remote and industrial applications.

• Clean Hydrogen:

  • There are over 1,600 hydrogen projects planned, but only 477 are expected to come online by 2030.
  • Cumulative production of hydrogen is projected at 44.6 million tonnes by 2030, with cumulative investment reaching just under $204 billion.
  • The US is expected to lead in hydrogen project deployment, followed by Europe, China, and the Middle East and Africa (MEA) region.

• CCUS:

  • Over 350 projects are in development, with over 420 million tonnes of CO2 expected to be captured by 2035.

• Biomass:

  • Renewable fuel capacity is projected to increase from 6.9 billion gallons to nearly 21 billion gallons by 2030.

Sector-Specific Progress

• Shipping:

  • 44 Green Corridors have been initiated, with 229 methanol ships, 346 battery/hybrid ships, 11 ammonia ships, and others in development.

• Aviation:

  • A cumulative total of 6.7 billion gallons of Sustainable Aviation Fuel (SAF) has been announced for 2030, representing 5.4% of current global jet fuel demand.

• Steel:

  • 66 green steel projects could be operational in 2024, increasing to 202 by 2030.

• Aluminum:

  • 50 innovative projects are contributing or planned to reduce emissions.

• Cement:

  • 53 CCUS plants are being invested in, with emissions captured expected to increase from 2.2 MtCO2 to 80 MtCO2 by 2030.

Financing the Transition

• Corporate Balance Sheet Financing:

  • Most projects are currently funded by corporate balance sheets. $80 billion in green bonds have been issued for hard-to-abate sectors over the last five years.

• Project Finance:

  • Long-term infrastructure and industrial projects are increasingly being funded through project finance structures, which are non-recourse or limited recourse.

• Other Financing Structures:

  • Companies are also using equity, carbon credits, and government grants/tax credits to support their transition.

Challenges and Bottlenecks

• Cost Increases:

  • Rising costs of building renewables and nuclear projects are affecting their economic viability and auction attractiveness.

• Permitting Delays:

  • The time to obtain permits for renewables is a major delay factor. For example, offshore wind projects can take up to 9 years to get permits.

• Grid Infrastructure:

  • Insufficient investment in grid infrastructure is hindering the expansion of renewables.

• Energy Storage:

  • Additional investment is needed in both short and long-term energy storage due to the intermittency of renewables.

• Hydrogen Challenges:

  • Hydrogen has low volumetric energy density, is difficult to store and transport, and is expensive compared to fossil fuels.
  • There is a mismatch between supply and demand, with most offtakers still being grey hydrogen users.

• Data and Experience:

  • There is a lack of real-world data and experience with SMRs and concerns about safety, cost, and nuclear waste.

Hydrogen Policies and Funding

• Hydrogen Policies:

  • Various countries have introduced policies to support hydrogen development, including tax credits, grants, and funding mechanisms.
  • The US has the most generous policies through the Inflation Reduction Act, including Tax Credit 45V and the Advanced Energy Tax Credit (48C).
  • The EU has introduced mechanisms like the Clean Hydrogen Partnership and the Hydrogen Bank, while Japan has a Carbon Contracts for Difference (CCFD) scheme.

• Hydrogen Funding:

  • As of November 2023, only 10% of clean hydrogen production capacity planned by 2030 has identified a third-party offtaker.
  • Most offtakers are current grey hydrogen users, with limited demand from sectors like steel, aviation, and shipping.

Conclusion

The decarbonization of hard-to-abate sectors is underway, but it is still in the early stages. While there is progress in solutions and policies, significant challenges remain. The report underscores the need for more investment, particularly in project finance, and for addressing the bottlenecks in permitting, grid infrastructure, and hydrogen scalability. The transition to net-zero will require coordinated efforts from governments, corporations, and the financial sector.