Nikunj Panchal considers how developed western economies can support global energy transition

Nikunj Panchal, Ricardo Vice President, Energy Transition, is discussing energy transition challenges faced by developing economies in Asia towards accelerating decarbonisation journeys at a British Expertise International event on 20 August. Here, he shares his insights on energy transition, and how developed western economies can support such efforts from the perspectives of: policy, strategy, technology, innovation and, most importantly, funding.  

“Around ten years ago, working in the energy sector in Norway, I was leading the commercial side of a crucial engineering, procurement and construction (EPC) project. At that time, a decade ago, energy transition was still in nascent stage for many organisations and not at the top of the agenda for many. However, I was working for a business that realised energy transition was an emerging area, and that in order to stay resilient and relevant in the future, we needed to act, putting a strategy in place that would work in the future.”   

"Across the global energy sector, the COVID-19 pandemic really helped accelerate the focus on energy transition and sustainability for many businesses. During this time, when there was less travel and limited emissions, people started to notice the potential of improved climate conditions. I also think a little downtime helped develop a different perspective around energy transition.  

“More recently energy security and evolving geo-political landscapes are seen to have a massive impact on the new energy ecosystem with energy transition at the core of evolving supply chains. An over-dependency on some countries for energy resources, and fragility and hostile markets, has meant that people are looking at different avenues of energy generation. This is timely as it comes when people are looking at what is also right for our environment. Industry faces a major upheaval as we’ve seen previously through transitions from coal to oil and then to gas as predominant sources of energy. Cleaner and sustainable forms of energy are now leading industry transformation. Such transitions happen after a few decades, so it’s a fascinating and exciting time to be involved. 

“Energy security and geopolitical forces are just some of the factors driving energy infrastructure transition. Governments globally have been developing incentive programmes and providing grants to support policy objectives but also accelerate and develop new energy infrastructures. In some ways, it has emerged as a ‘chicken-and-egg' situation.  

“New energy investments have greater dependency on common user infrastructures (CUI) and vice versa. For example, if we’re talking about green hydrogen, if I produce that using renewable electricity, how do I transmit the electricity to produce the hydrogen? There isn’t currently enough traction within energy transmission infrastructure due to uncertain or unconfirmed demands. Investment in hydrogen may get delayed due to lack of available infrastructure that is essential to secure project finance. So, let’s incentivise investment to overcome the hurdles, building a new supply chain and a connected energy infrastructure market. There will always be gaps, but we need to continue to find them and address them swiftly as the transition process matures.    

“Ricardo has done a great deal of work with governments, advising on policy and legislation, but we also need to understand the dilemma that faces the corporate world, and financiers, who are making strategic decisions with hundreds of billions in driving such transformations. I want to make sure that we continue to engage with those corporate clients and financial institutions, helping them to solve the challenges they are facing and providing advocacy through our contacts with governments to connect policy frameworks with business strategies for energy transition. "Incentivisation is driven through nationalisation of localised principles with new supply chains evolving in high-cost locations which outweigh the benefits otherwise offered through incentive programmes. Processes for accessing such funds through incentives are also complex and time consuming.”   

“There’s a long history of outsourcing from more developed countries, where there is higher manufacturing and labour costs. In the traditional fossil fuel world, the supply chain has gone to a different part of the world, which offers greater cost efficiency and scale – but that’s not currently the case for new energy vectors. The key issue for governments is to think about how policy reflects what is needed, and to develop incentives based on creating simple and streamlined processes. It’s also imperative to develop a faster response to market need. That’s a critical factor in how we accelerate energy transition to achieve net zero goals. If we can develop and deploy resources quickly, create more efficient market technologies and solutions, it will make it easier to develop a new energy economy. Everyone has a role to play in that process, including Ricardo, as advisors and technology innovators.”  

Nikunj is chairing the British International Expertise event Asian Development Bank: Dialogues for Innovation in Development in London on 20 August 2024. Find out more about the event here.