How have energy transition expectations changed since the pandemic?
Dan: There is a major change in the economic outlook, and we don’t expect the world to get back on track in terms of economic performance and energy demand. In some ways, that opens the door for the energy transition to happen a bit quicker if renewables can take a greater share of that somewhat smaller pie going forward.
Jonty: It’s forced everyone to ask how the state of the world impacts forward views, and energy transition has become part of that. It’s accelerated a process that was already there.
We’ve recently seen increased interest in hydrogen in the region. What is the outlook for it?
Jonty: It’s certainly the case that we have seen an enormous amount of much more than interest, but voiced intent from the market around hydrogen over the last several months. We’re not seeing trade now in hydrogen, or the spot market hubs. What we are seeing is everyone behaving as if those are just around the corner. The market doesn’t exist yet, but people are already trying to split it up into grey, green, and blue… We think the next step in the hydrogen market is to look at some unified approach ahead of the market actively trading.
What are the next steps in the energy transition after the pandemic?
Dan: That’s the main question here. And I think there isn’t a clear pathway right now. There are potential ones where you’re seeing the the big countries, the big markets of the energy world starting to lead the way. You’re getting to a large chunk of overall world energy demand, world energy emissions that are under some kind of policy target, and it then becomes about getting public support, and getting the money to do those types of things. Because it is great to have a policy and it is great to have goals, but if ultimately the people are not willing to pay for it, there are going to be policies that are not going to be followed through. One of the reasons why we do not see COVID-19 as being that catalyst to the energy transition is because things like price matters, things like supply and demand, ultimately will still drive what is happening for the markets. Transitioning markets is always a slow process.
How should the actual approach to energy transition change?
Jonty: We know very well how markets over the years have driven efficient outcomes. I think that’s what the environmental markets are lacking. The more time you spend looking at the various ways of accounting for greenhouse gases, the more it’s evident that the lack of transparency, the lack of efficiency has held a lot of things back, and I would argue more than the lack of policy in a way. That’s a very different way of looking at the world if you’ve actually got it led by by prices and market forces. I think that the next step really is market evolution and the markets coming into operation.
We frequently talk about the importance of gas as a bridge fuel to the energy transition, but how has the pandemic impacted its outlook?
Dan: There might actually be some bullish short term phenomenons where people are heating their homes and their offices at the same time, and that way you have a little bit more demand. But when we’re talking about the size of the market and the growth areas in particular, it’s not growing as fast as before. Still, it is going to be the fastest growing fossil fuel over the long term, no matter what happens because of COVID-19 for a lot of different reasons, from the upstream pushing more gas into the market, things like developments in LNG and in shipping.
