Energy transition challenges and roles of technology

By Kim Sung-woo

The summer of 2022 was by far the worst season in recent climate history. Record-level droughts, heavy rains and heat waves showed how devastating climate aberrations can be across the globe. The United States saw multiple once-in-a-thousand-years rainfalls, with Illinois alone being blasted for 12 hours with average rainfall of about 200 millimeters per hour noting that the record rainfall in Seoul that paralyzed the city in early August recorded 141 mm per hour.

In Europe, the worst drought the continent has seen in 500 years hit almost two-thirds of Europe and is expected to last until November this year. China also recorded the highest temperatures in more than 200 locations nationwide, including 43 degrees Celsius in Chengdu. Korea, which experienced its worst August due to the heaviest rainfall in 115 years, was not an exception to the unprecedented climate aberrations.

Carbon neutrality is an effort to mitigate this climate crisis by drastically reducing carbon emissions. The key to achieving carbon neutrality is to supply at least 70 percent of the energy as renewable energy. However, it is practically challenging to bring abrupt changes to our dependence on fossil fuel, which currently covers more than 80 percent of the global economy.

Even if it is possible, it will bring about a significant level of transition costs. The war in Ukraine taught us how difficult it is to wean the EU off Russian energy in a short period of time. Korea, which is also vulnerable to these record-level climate crises as well as energy security issues, is confronting the pressing challenge of converting its current energy structure into a more sustainable one. The country's high energy-consuming economic structure makes this challenge even more burdensome.

Nevertheless, Korea pledged to the U.N. to reduce greenhouse gas emissions by 40 percent compared to the 2018 level by 2030. Further, the Framework Act on Carbon Neutrality, effective since last March, requires the government to monitor steps taken to achieve the carbon neutrality target on an annual basis, which will also be incorporated into statutorily required plans such as the Masterplan for National Energy. As a country that grew into a high energy-consuming economy despite its lack of endowed energy, Korea needs to do some heavy lifting going forward.

The more challenging the energy transition is, the more prudent it is to tackle it from multiple angles. Executing a mix of energy solutions, rather than attempting fragmented efforts on individual tasks, is essential to achieve the transition. It will be sustainable only if various solutions such as nuclear power and renewable energy expansion, demand management, grid stabilization, power market restructuring and new energy (hydrogen) supplies are combined.

The U.K., one of the countries at the forefront of energy transition efforts, announced that the grid connection of a solar power plant ― which had already been licensed to connect to the grid ― will be possible in 2028 at the earliest, with the reasons being the lack of prior investment in the grid network and consensus on cost allocation. The story of a car that was made but has no road to drive on shows the importance of ensuring a mix of solutions.

One of the key elements of a solution mix is technology. The technology to implement the energy transition refers to low-carbon energy technology including hydrogen, carbon capture and storage, bioenergy, recycling, smart grids, nuclear power plants, virtual power plants, and demand management, to name a few. In October of last year, the CEO of BlackRock, the world's largest asset management company, said, "It is my belief that the next 1,000 unicorns won't be a search engine or a media company, they'll be businesses developing green technologies like hydrogen."

Around the same time, Bill Gates also noted, "[Technology] innovation is the only way the world can cut greenhouse gas emissions from roughly 51 billion tons per year to zero by 2050." All echo the idea that technology is one important key to achieving the energy transition we need.

Technologies can be found through patent data. According to the European Union, 80 percent of the technological information existing in the world can only be identified from patent data. There are about 1.7 million patent documents for climate change mitigation technology alone. Conducting technical review without analyzing this data is as if we are driving a car with 80 percent of our view obscured.

With academic papers on patent data and expert interviews added, we can even identify not only promising technology fields and core technologies, but also target companies to acquire and benchmark competitors' technologies. So patent data can be a useful tool to find a mix of technical solutions for the energy transition.

According to a recent study from the Federation of Korean Industries and the Korea Automobile Association, Korean patents on the energy transition are centered on traditional areas such as production, transmission and distribution, rather than new areas such as hydrogen-produced steel and carbon capture, utilization and storage (CCUS).

In particular, the study pointed out that hydrogen-related patents were weak in terms of identifying core technologies such as production, storage and transfer, while patents for application technologies such as fuel cells were actively pursued. If Korea can utilize patent data to improve its proprietary technologies, the challenges of energy transition can be turned into opportunities.

Just as the invention of steam engines played an innovative role in energy transition to coal, and the invention of internal combustion engines contributed to the widespread distribution of petroleum-based energy structure, the energy transition to a low-carbon economy will largely depend on technological innovation.

Kim Sung-woo is the head of the Environment & Energy Research Institute at Kim & Chang.