Accelerating Global Energy Transition　PwC Propose Six Key Insights

　　In the context of international ESG (Environmental, Social, and Governance) and decarbonization trends, renewable energy represents a crucial pathway for companies to achieve sustainability and reach Net Zero emissions goals. Global investments in renewable energy have been steadily increasing, with solar and wind power experiencing the fastest growth. According to the International Energy Agency's (IEA) 2022 Energy Investment Report, the growth in energy investments is primarily driven by the electricity sector, including expenditures on renewable energy, smart grids, and efforts to enhance end-use energy efficiency. Furthermore, according to Allied Market Research, the industry market value for global energy transition is expected to exceed 5.6 trillion US dollars by 2030.

Energy Transition: Over 90% of Companies Require External Support

　　As the demand for energy transition increases, companies are placing a growing emphasis on investing in renewable energy. According to PwC's "2023 US Large Energy Users Survey," effective practices that companies have adopted in advancing energy-related improvements include monitoring the costs of heating and cooling (74%), implementing basic energy-saving technologies (70%), adjusting processes to reduce electricity consumption (68%), deploying on-site energy storage systems (65%), setting up on-site power generation systems (64%), establishing renewable energy systems (62%), and implementing complex, high-efficiency energy-saving technologies (59%).

　　However, in the process of energy transition, companies cannot rely solely on their own efforts. More than 90% of surveyed companies require external support to provide suitable energy solutions, such as on-site generation and battery storage. 46% of the surveyed companies anticipate that on-site generation and battery storage solutions, among others, will become available quickly.

Six Key Factors to Narrow the Global Energy Transition Gap

　　PwC propose six key factors to narrow the global energy transition gap:

　　1. Generation Gap: Between 2016 and 2021, a total of 1,282 GW of renewable energy capacity was added to the energy system to assist in power generation globally. Additionally, the International Energy Agency (IEA) anticipates the addition of another 2,400 GW of renewable energy capacity between 2022 and 2027. However, to achieve the goal of net-zero emissions by 2050, the generation capacity of renewable energy must increase by over 27,000 GW.

　　2. Grid Gap: All electricity generated from sources like offshore wind and solar panels must be delivered to end users worldwide through the infrastructure of the electrical grid. To achieve this, substantial investments are required in the foundational infrastructure for power transmission and distribution globally. Over the past decade, the average annual investment in grid infrastructure has been approximately $300 billion worldwide. IEA estimates that by 2030, annual investments in the grid infrastructure must reach a level between $560 billion to $780 billion to meet the net-zero emissions goal by 2050. Furthermore, the challenges of complex technologies, labour shortages, and material scarcity must also be overcome in grid development.

　　3. Storage Gap: Electricity generated from renewable sources like solar and wind is intermittent, making energy storage particularly crucial. According to the IEA's statistics, in 2022, a total of 16 GW of grid-scale battery storage capacity was installed globally. To achieve the net-zero emissions goal by 2050, the average annual addition of new grid-scale battery storage capacity must exceed 80 GW between 2022 and 2030.

　　4. Conversion Gap: The process of producing hydrogen through electrolysis also requires significant investments. As of 2022, the global capacity for low-carbon hydrogen electrolyzers stands at only 1 million metric tonnes. IEA estimates that if planned hydrogen electrolyzer projects are completed, the capacity could reach 134 to 240 million metric tonnes by 2030. However, to achieve the net-zero emissions goal by 2050, the global production of low-carbon hydrogen through electrolysis must increase to 452 million metric tonnes by that time.

　　5. Critical Mineral Gap: Critical minerals such as lithium, cobalt, nickel, graphite, aluminium, copper, and other scarce metals are indispensable elements for the foundational infrastructure of renewable energy, including solar panels, wind turbines, batteries, and compressors. The availability of these minerals is crucial for the pace of energy transition. To achieve the net-zero emissions goal by 2050, IEA estimates that by 2030, the world will need four times the production of critical minerals compared to the 2021 levels.

　　6. Funding Gap: According to Bloomberg New Energy Finance (BNEF) statistics, global investments in energy transition have reached $1.1 trillion, on par with investments in hydrocarbon industries. However, both the IEA and the United Nations Intergovernmental Panel on Climate Change (IPCC) recommend that annual investments in global energy transition need to increase to $4-6 trillion to achieve the net-zero emissions goal by 2050.

　　Yi-Tai Tsai, the Managing Partner for Renewable Energy Industry Services at PwC, has stated that to achieve the goals of energy transition, in addition to addressing the six key gaps mentioned above, the corporates should establish detailed and concrete implementation steps tailored to the net-zero objectives. One of the initial steps is energy conservation, followed by the development of energy storage solutions to manage off-peak power usage. When planning their energy transition strategies, companies should maintain global perspective and strike a well-balanced approach between cost, safety, and sustainability. n formulating solutions, considering the dynamics within the supply chain is crucial, and prioritizing various solutions should be based on the benefits of reducing greenhouse gas emissions and the associated costs.

Yi-Tai Tsai, the Managing Partner for Renewable Energy Industry Services at PwC

Current Status of Green Energy Trading in Taiwan

　　In response to global trends, Taiwan has been gradually advancing its regulations related to renewable energy, and this impetus for energy transition has been driving the annual development of the renewable energy market in Taiwan. According to the "2022 Taiwan Green Energy Trading Progress Report" published by PwC, Taiwan's total installed electricity capacity reached 62 GW in 2022, with renewable energy capacity accounting for 14 GW, representing 23% of the total installed capacity. In terms of electricity generation, renewable energy sources collectively generated 23.8 billion kilowatt-hours in 2022, a 36% increase compared to 2021, indicating that Taiwan's renewable energy sector is experiencing rapid growth.

　　Among all types of renewable energy, photovoltaic power leads in both installed capacity and electricity generation. By the end of 2022, Taiwan's photovoltaic capacity reached 9.7 GW, and it generated 10.7 billion kilowatt-hours of electricity. The growth of renewable energy in Taiwan can also be gleaned from the green energy distribution figures. Taiwan's green energy distribution volume increased from 700 million kilowatt-hours in 2021 to 1.1 billion kilowatt-hours in 2022, representing a 60% annual growth rate. While this is still a minority compared to the total renewable energy generation of 23.8 billion kilowatt-hours, it indicates that self-consumption remains the predominant use of renewable energy in Taiwan. However, from the distribution data, it can be observed that wind power distribution volume continues to grow rapidly, constituting 60% of the overall renewable energy distributing volume.

Moving Towards a New Era in Energy: The Issue of Liberalization in Green Energy Trading

　　The amendment to the Electricity Act in 2017 laid the foundation for the liberalization of renewable energy in Taiwan. With the gradual establishment of related power supply and surplus electricity mechanisms, Taiwan's green energy liberalized trading officially commenced in 2020. The impetus for the green energy trading market stems from the increasing demand from businesses for green energy. Currently, this demand can be met through Corporate Power Purchase Agreements (CPPAs), allowing businesses to fulfill their green energy procurement needs.

　　When renewable energy generators enter into Corporate Power Purchase Agreements (CPPAs) with businesses, green energy is sold to corporate users either through intermediary suppliers or directly. If the focus is on the metering system, the green energy is supplied through Taiwan Power Company's (Taipower) grid to the end-users. Since 2020, a total of 1,885 GWh of renewable energy has been supplied to corporate users through Taipower's grid, with the top ten corporate consumers accounting for approximately 98% of the total green energy procurement volume. TSMC (Taiwan Semiconductor Manufacturing Company) is the largest purchaser of green energy among these corporate consumers.

　　Examining the types of renewable energy in detail, wind power accounts for 78% of the total green energy procurement by businesses. This is primarily due to the fact that the feed-in-tariff (FiT) for onshore wind power is lower than the electricity prices in the public utility sector, making the power prices in the open market more competitive. Therefore, CPPA electricity transactions are mutually beneficial for large electricity consumers and renewable energy developers.

Assists Businesses in Energy Transition

　　However, green energy trading involves many details that businesses need to be taking care of. Companies embarking on green energy procurement may initially face challenges related to unfamiliarity with the power system and electricity trading, as well as the complexity of power purchase agreements. One significant challenge in green energy trading arises from the diverse generation patterns of renewable energy sources. Buyers must understand whether their electricity consumption patterns align with the generation patterns of renewable energy facilities to increase their green energy proportion effectively.

　　Another major challenge is surplus electricity. Before engaging in green energy procurement, it's necessary to assess the electricity consumption and generation levels of both parties involved in the transaction. Failure to match these quantities can result in surplus electricity costs, where the buyer may need to subsidize the renewable energy provider for the additional costs incurred due to surplus electricity issues. Therefore, evaluating and managing surplus electricity levels is also a significant consideration.

　　To assist businesses in implementing green energy trading and green energy supply, PwC has introduced the "Green Energy Procurement Dashboard." This tool can help businesses match their electricity consumption patterns with the generation patterns of renewable energy facilities based on their metering data, allowing them to calculate procurement ratios and surplus electricity ratios. Additionally, it references the Buyer's Roadmap proposed by the Clean Energy Buyers Alliance (CEBA) in the United States.

　　Tsai suggests that enterprises with a need for green energy procurement can follow these six steps in their green energy procurement strategy:

1. Take stock of their own electricity consumption data.
2. Define the procurement goals and the timeframe for achieving them.
3. Understand the pricing and generation patterns of different types of green energy and assess their compatibility with the enterprise's electricity consumption profile.
4. Establish a dedicated green energy procurement team and consider seeking external independent professional advice when necessary. 5. Negotiate the commercial terms for green energy procurement.
6. Implement green energy transactions and green energy supply, while regularly monitoring and tracking with the electricity supplier to ensure a stable power supply.