Energy
Technology
Perspectives
2020

EnergyTechnology
Perspectives
2020

INTERNATIONAL ENERGYAGENCYThe IEA examines
the full spectrum ofenergy issues
including oil, gas
and coal supply anddemand, renewableenergytechnologies,
electricity markets,energy efficiency,
access to energy,
demand side
management andmuch more. Throughits work, the IEA
advocates policies
that will enhance
the reliability,
affordability andsustainability ofenergy in its
30 membercountries,
8 association
countries andbeyond.

Revised version,
February 2021.
Information noticefound at:www.iea.org/
corrections
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its use and distribution. The
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reserved.
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Energy Technology Perspectives 2020

Foreword

Foreword
Technology will largely determine our energy future. The International Energy
Agency (IEA) has long been cognizant of this, which is why for more than a decade
we have produced the Energy Technologies Perspectives (ETP) series to help inform
policy makers as they plan for the sustainable and resilient energy systems thatpeople and businesses will need in the years to come.
When I became Executive Director of the IEA in late 2015, it was clear to me that the
ETP was in need of a revamp to increase its relevance for decision makers ingovernment and industry. My objective was to prepare “a global guidebook on clean
energy technologies” for policy makers and others seeking to navigate the fastevolving technological developments across a wide range of energy-related sectors.
With the publication of this report, Energy Technologies Perspectives 2020, I believe
we have come close to reaching that objective.
This report is an essential contribution to the global conversation on energy. As thereport’s rigorous analysis makes clear, achieving international climate goals hinges
on dramatically scaling up clean energy technologies to reduce greenhouse gas
emissions. And having those technologies ready in time hinges on a rapid
acceleration in innovation. In the ETP Special Report on Clean Energy Innovation thatwas published in July, we examined the innovation element of that challenge. This
report, ETP-2020, gives the full picture, analysing the major energy technology
challenge the world faces and identifying the needs and opportunities that result
from it.
Today, I am increasingly optimistic about the world’s clean energy future, despite thegrave challenges we face. ETP-2020 shows that we know what needs to be done todevelop and deploy the technologies that can put emissions on a sustainable path.
The spectacular success of solar PV in becoming the cheapest source of power inmany economies and the impressive rise of offshore wind demonstrate the ability ofclean energy technologies to break through if governments put in place the rightpolicies to support their expansion.
At the same time, more and more governments around the world are backing clean
energy technologies as part of their economic recovery plans in response to the
Covid-19 crisis – as was made clear by many of the 40 Ministers who attended the
IEA Clean Energy Transitions Summit on 9 July 2020. The private sector is also upping
its game, with some oil and gas majors betting their futures on becoming lowerincreasing resources into renewables and energy storage. Moreover, investments in

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IEA. All rights reserved.

carbon energy companies and top information technology companies puttingEnergy Technology Perspectives 2020

Forewordclean energy projects can benefit from the extended period of extremely low interest
rates in some regions that appears likely following the massive easing of monetary
policy by central banks in response to the Covid-19 crisis.
As the ETP analysis underscores, energy innovation will be crucial. Despite thedisruption and uncertainty caused by the pandemic, I see reason for optimism there,
too. Investment in clean energy start-ups by venture capital funds and companies
rose to a new record in 2019. And governments and businesses are finally putting
serious resources into the clean energy potential of hydrogen, which this reportmakes clear will be critical for reaching net-zero emissions.
However, my optimism should not be mistaken for naivety. Even if these encouraging
trends continue, there are significant challenges to overcome. For instance, morework needs to go into mapping out pathways for fair and inclusive clean energy
transitions for all parts of the world. Moreover, huge portions of the global energy
sector are yet to make reducing their emissions a top priority.
The major challenge studied in depth in this report is how to tackle emissions fromthe vast amount of existing energy-related infrastructure around the world. The
enormous fleets of inefficient coal plants, steel foundries, chemical facilities andcement factories – many of them recently built – are set to produce enough emissions
in the coming decades to put international climate goals out of reach. But, as
ETP-2020 shows, we can develop the technologies to address this through smart
policies and investments today.
The transformation of ETP has been three years in the making and has involved atremendous amount of hard work from the team behind it. I would particularly like tothank Timur Gül for leading the overhaul of the series and his team for the research,modelling and writing that has produced these important reports. I look forward to
many more ETP publications full of valuable insights and guidance in the years to
come.

Dr. Fatih Birol
Executive Director

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International Energy Agency

Energy Technology Perspectives 2020

Acknowledgements

Acknowledgements
This report was prepared by the Energy Technology Policy Division within the
Directorate on Sustainability, Technology and Outlooks (STO) of theInternational Energy Agency. The study was designed and directed by TimurGül (Head of the Energy Technology Policy Division).
The analysis was co-ordinated by Araceli Fernandez Pales (lead on end-use
modelling and innovation), Peter Levi (lead on industry), Uwe Remme (leadon supply modelling and hydrogen) and Jacob Teter (lead on transport). The
main contributors were Thibaut Abergel (co-lead on buildings,
decomposition), Praveen Bains (bioenergy), Jose Miguel Bermudez
Menendez (hydrogen), Chiara Delmastro (co-lead on buildings, cooling),
Marine Gorner (transport), Alexandre Gouy (batteries, recycling), Raimund
Malischek (fossil fuels), Hana Mandova (industry), Trevor Morgan (Menecon
consulting), Leonardo Paoli (batteries, spillovers, patents), Jacopo Tattini(transport, shipping), Tiffany Vass (industry and material efficiency). Other
contributors were Ekta Bibra, Till Bunsen, Elizabeth Connelly, Hiroyoki Fukui,
Taku Hasegawa, Pierre Leduc, Francesco Pavan, Sadanand Wachche and
Per-Anders Widell. Caroline Abettan, Claire Hilton, Reka Koczka and Diana
Louis provided essential support.
Edmund Hosker carried editorial responsibility. Jennifer Allain and Debra
Justus copy-edited the report.
The main contributors from across the agency were: Adam Baylin-Stern(carbon capture, utilisation and storage [CCUS]), Simon Bennett (innovation),
Niels Berghout (CCUS), Sara Budinis (direct air capture), Pharoah Le Feuvre(bioenergy) Jean-Baptiste Le Marois (innovation policy and metrics),
Samantha McCulloch (CCUS), Luis Munuera (technology readiness,
spillovers) and Dong Xu (CCUS).

We are also grateful to Jad Mouawad, Head of the IEA Communications andDigital Office (CDO) and the following CDO colleagues for producing and

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IEA. All rights reserved.

Mechthild Wörsdörfer, Director of STO, provided encouragement andsupport throught the project. Valuable comments and feedback were
provided by other senior management and colleagues within the IEA. Thanks
in particular go to Keisuke Sadamori, Laura Cozzi, Nick Johnstone,
Laszlo Varro, Joel Couse, Paolo Frankl, Peter Fraser, Tim Gould, Brian
Motherway, Sara Moarif, Apostolos Petropolous and Luca Lo Re.

Energy Technology Perspectives 2020

Acknowledgements

disseminating this report: Jon Custer, Astrid Dumond, Tanya Dyhin,
Merve Erdem, Grace Gordon, Christopher Gully, Katie Lazaro, Jethro Mullen,
Isabelle Nonain-Semelin, Julie Puech, Rob Stone, Therese Walsh and Wonjik
Yang.
The work could not have been achieved without the support provided by theJapanese Ministry of Economy, Trade and Industry, and the Netherlands
Ministry of Economic Affairs and Climate Policy.
The analysis and findings in this report draw on strategic guidance, insights
and data received during several invaluable IEA events: an ETP-2020
consultation meeting held in July 2019, a high-level workshop on acceleratingenergy innovation in December 2019, and a workshop on potential for CCUS
technologies held in February 2020. These events formed the foundationfrom which the revamped ETP publication was developed, as well as its twocomplementary reports, the ETP Special Report of Clean Energy Innovation
published in July 2020, and the soon to be released Special Report on Carbon
Capture and Storage. The work also benefited from information and views
provided by participants within the Technology Collaboration Programme(TCP) by the IEA, which brings together thousands of experts acrossgovernment, academia and industry from 55 countries in order to accelerateenergy technology innovation.

Nate Aden
Patrik Akerman
Nour Amrani
Florian Ausfelder
Monica Axell
Russell Balzer
Chris Bataille
Chris Bayliss
Vincent Benezech
Nuno Bento
Thomas Berly
Michel Berthelemy
Christoph Beuttler
Sama Bilbao y Leon
Simon Bittleston
Herib Blanco

World Resources Institute
Siemens
FLSmidth
DECHEMA
Technology Collaboration Programme on Heat
Pump Technologies
WorldAutoSteelInstitut du Développement Durable et desRelations Internationales
International Aluminium InstituteVeitch Lister Consulting
Instituto Universitário de Lisboa
ABT Consulting Pty Ltd
Nuclear Energy Agency
Climeworks
Nuclear Energy Agency
Schlumberger
University of Groningen

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IEA. All rights reserved.

Many experts from outside the IEA provided input, commented on theunderlying analytical work and reviewed the report. Their comments andsuggestions were of great value. They include:Markus Blesl
Nigel Brandon
Teun Bokhoven
Javier Bonaplata
Jean-Paul Bouttes
Keith Burnard
Erin Burns
Carlos Calvo Ambel
Iain Campbell
Isotta Cerri
Christos Chryssakis
Roberto Cimino
Christopher Cleaver
James Craig
Colin Cunliff
Yan DaSujit Das
Jonathan Davies
Carl de MaréSanjiva de Silva
Guillaume De Smedt
Agustin Delgado
Danielle Densley Tingley
Mieke Desmet
Bo Diczfalusy
Tim Dixon
Francesco Dolci
Un Dray
Michal Drewniok
John Dulac
Jean-Michel Durand
Emrah Durusut
Gabriele Eder
Alessandro Faldi
Alexander Farsan
Rodica Faucon
Maria Ferrara
Alan Finkel
Sarah Forbes

Acknowledgements

University of Stuttgart
Imperial College
Technology Collaboration Programme on Energy
Storage
ArcelorMittal
EDF
Technology Collaboration Programme on
Greenhouse Gas R&D
Carbon180
Transport & Environment
Rocky Mountain InstituteToyotaDNV GL
Eni
Cambridge University
Technology Collaboration Programme on
Greenhouse Gas R&D
Information Technology & Innovation Foundation
Tsinghua University
Oak Ridge National Laboratory
Joint Research Centre, European Commission
ArcelorMittal Group
Australian Department of Industry, Science,
Energy and Resources
Air Liquide
Iberdrola
University of Sheffield
Sasol
Nordic Energy ResearchTechnology Collaboration Programme on
Greenhouse Gas R&D
European Commission
University College London
University of Cambridge
European Commission
The European Association for Storage of Energy
Element Energy
Technology Collaboration Programme on
Photovoltaic Solar Power Systems
ExxonMobil
WWF International
Groupe Renault
Politecnico di Torino
Chief Scientist of the Australian Federal
Government
U.S. Department of Energy

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IEA. All rights reserved.

Energy Technology Perspectives 2020

Fridtjof Fossum Unander
Naohide Fuwa
Kelly Sims Gallagher
Marta Gandiglio
Mónica García
Bertrand Gatellier
Oliver Geden
James Glynn
Kirsty Gogan
Thomas Gourdon
Brandon Graver
Lukas Gutzwiller
Caroline Haglund Stignor
Jacob Handelsman
Stuart Haszeldine
Andreas Hauer
Stéphane Henriot
Jonas Helseth
Cameron Hepburn
Antoine Herzog
Howard Herzog
Nakamura Hidemi
Neil Hirst
Takashi Hongo
Kaoru Horie
Andreas Horn
Edmund Hosker
Yoshito Izumi
Kevin Jayne
Henry Jeffrey
Nigel Jenvey
Nicolas Jeuland
Nils Johnson
Hiroyuki Kaneko
Goksin Kavlak
Yoichi Kaya
Jasmin Kemper
Noah Kittner
Christian Kjaer
Tom KoberMoon-Hyun Koh

Acknowledgements

The Research Council of Norway
ToyotaTufts University
Politecnico di Torino
Technology Collaboration Programme on
Greenhouse Gas R&D
Institut Français du Petrole Energies Nouvelles
Stiftung Wissenschaft und Politik
University College Cork
Energy for Humanity
ADEME
International Council on Clean Transportation
Swiss Federal Office of Energy
Technology Collaboration Programme on Heat
Pump Technologies
American Forest & Paper Association
University of Edinburgh
ZAE Bayern
Institut Français du Petrole Energies Nouvelles
Bellona Europa
University of Oxford
EDF
Massachusetts Institute of Technology
Taiheiyo Cement Corporation
Imperial College
Mitsui & Co. Global Strategic Studies Institute
Honda
BASF SE
Hosko Ltd
Japan Cement Association
U.S. Department of Energy
Technology Collaboration Programme on Ocean
Energy Systems
Gaffney, Cline & Associates
SafranElectric Power Research InstituteNissan Motor Co.
Massachusetts Institute of Technology
Research Institute of Innovative Technology for
the EarthTechnology Collaboration Programme on
Greenhouse Gas R&D
University of North Carolina
Nordic Energy ResearchPaul Scherrer Institute
Soongsil University

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IEA. All rights reserved.

Energy Technology Perspectives 2020

Christian Königstein
Kazuma Koyama
Sunil Krishnakumar
Amit Kumar
Martti Larmi
Marie-Hélène Laurent
Arthur Lee
Caroline Lee
Magnus Lindgren
Tore Longva
Claude Loréa
Volkmar Lottner
Rui LuoJohn McCann
Claude Mandil
Claudia Masselli
Eric Masanet
Yuko Masuda
Egil Meisingset
Ryan Melsert
Yann Ménière
Olaf Merk
Paul C. Miles
Josh Miller
Roberto Millini
Vincent Minier
Philippe Montarnal
Simone MoriPeter Morris
Daniel Mugnier
Steve Murphy
Colin Murphy
Kazuhiko Muto
Manabu Nabeshima
Sumie Nakayama
Mara Neef
Lena NeijDavid Nevicato
Tidjani Niass
Motohiko Nishimura

Acknowledgements

European Patent Office
Daikin Industries
International Chamber of Shipping
The Energy and Resources InstituteTechnology Collaboration Programme on Clean
and Efficient Combustion
EDF
Chevron Corporation
Canadian Institute for Climate Choices
Technology Collaboration Programme on
Advanced Motor Fuels
DNV-GL
Global Cement and Concrete Association
Independent Consultant
CEM Secretariat
SEAI
Former IEA Executive Director
Universita' degli studi di Salerno
Northwestern University
Daikin Industries, LTD.
Norwegian Ministry of Petroleum and Energy
American Battery Metals
European Patent OfficeInternational Transport Forum
Technology Collaboration Programme on Clean
and Efficient Combustion
International Council on Clean Transportation
Eni
Schneider Electric
CEA
Enel Group
Applied Energy Solutions LLC
Technology Collaboration Programme on Solar
Heating & Cooling
Pale Blue Dot
University of California
New Energy and Industrial Technology
Development Organization
Japanese Ministry of Economy, Trade and Industry
J-POWER
Volkswagen AG
International Institute for Industrial Environmental
Economics
Total
Saudi Aramco
Kawasaki Heavy Industries

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Energy Technology Perspectives 2020

Emmanuel Normant
Thomas Nowak
Makoto Nunokawa
Brian O'Gallachoir
Manuela Ojan
Rafael Ortiz-Cebolla
Henri Paillère
Dimitrios Papaioannou
Luc Pelkmans
Thomas Pellerin-Carlin
Magnus Pelz
Julien Perez
Klaus Petersen
Vincent Petit
Stefan Petrovic
Antonio Pflüger
Cédric Philibert
Antonio Pires da Cruz
Francesco Pomponi
Rich Powell
Lynn Price
Joris Proost
Andrew Purvis
Carlo Raucci
Nicola Rega
Stephan Renz
Khangele Revombo
Felipe Rodriguez
Ian Rowe
Urs Ruth
Dan Rutherford
Assaad Saab
Ambuj Sagar
Ichiro Sakai
Toshiyuki Sakamoto
Gerhard Salge
Björn Sandén
Mani Sarathy
Midori Sasaki
Sunita Satyapal
Sacha Scheffer

Acknowledgements

Saint-Gobain
European Heat Pump Association
New Energy and Industrial Technology
Development Organization
Technology Collaboration Programme on Energy
Technology Systems Analysis Programme
Italcementi Group
Joint Research Centre, European Commission
International Atomic Energy Agency
International Transport Forum
Technology Collaboration Programme on
Bioenergy
Institut Jacques Delors
Scania CV AB
OGCI Climate Investments LLPMAN Diesel
Schneider ElectricTechnical University of Denmark
Independent Consultant
Climate and Energy Senior Advisor
Institut Français du Petrole Energies Nouvelles
Edinburgh Napier University
ClearPath
Lawrence Berkeley National Laboratory
Université Catholique de Louvain
World Steel
University College London
CEPI
Technology Collaboration Programme on Heat
Pump Technologies
South African Department of Energy
International Council on Clean Transportation
U.S. Department of Energy
BoschInternational Council on Clean Transportation
EDF
Indian Institute of Technology
Honda Motor Europe Ltd
Japanese Ministry of Economy, Trade and Industry
ABB
Chalmers University of Technology
King Abdullah University of Science andTechnology
The Federation of Electric Power Companies
U.S. Department of Energy
Rijkswaterstaat

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IEA. All rights reserved.

Energy Technology Perspectives 2020

Fu ShaDavid Shipworth
Toshiyuki Shirai
Maria Sicilia
Noel Simento
Ralph Sims
Ottar Skagen
Jim Skea
Simon Skilling
Stephen Smith
Tristan Smith
Matthijs Soede
Robert Spicer
Matthias Spoettle
Wil Srubar
Maarten StaatsMarkus Steinhäusler
Bert Stuij
Tongbo Sui
Stig Svenningsen
Yuichiro Tanabe
Ryozo Tanaka
Hideaki Tanaka
Nobuo Tanaka
Peter Taylor
Wim Thomas
Jessika E. Trancik
Norio Ueda
Noé van Hulst
Mark van Stiphout
Antonio Vaya Soler
Pierre Verlinden
Hans Jorgen Vinje
Julia Walschebauer
Luke Warren
Jim Watson
Hans-Jörn Weddige
Ning Wei
Eveline Weidner
German Weisser

Acknowledgements

EF China
Technology Collaboration Programme on UserCentred Energy Systems
Japanese Ministry for Economy, Trade andIndustry
EnagásAustralian National Low Emissions Coal Research& Development
Massey University
StatoilImperial College
Third Generation Environmentalism Ltd
University of Oxford
University College of London
European CommissionBP
NOW GmbH
University of Colorado
Over Morgan
Voestalpine AG
The Netherlands Enterprise Agency
Sinoma International & Simona Research Institute
Norwegian Ministry of Petroleum and Engineering
Honda
Research Institute of Innovative Technology for
the Earth
New Energy and Industrial Technology
Development Organization
The Sasakawa Peace Foundation
University of Leeds
Shell
Massachusetts Institute of Technology
Kawasaki Heavy Industries
The Netherlands Ministry of Economic Affairs &Climate Policy
European Commission
Nuclear Energy Agency
Amrock Pty Ltd
Gassnova SF
European Commission
CCS Association
University College London
Thyssenkrupp AG
Chinese Academy of Sciences
Joint Research Centre, European Commission
Winterthur Gas & Diesel Ltd

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Energy Technology Perspectives 2020

Energy Technology Perspectives 2020

Kim Winther
Michal Wojcieszyk
Markus Wråke
Felix Wu
Masato Yamada
Kyota Yamamoto
Ping Zhong
Thalis ZIs

Natural Resources Canada
University of East Anglia
Technology Collaboration Programme on District
Heating and CoolingTechnology Collaboration Programme on
Advanced Motor Fuels
Technology Collaboration Programme on Clean
and Efficient Combustion
Swedish Energy Research Centre
U.S. Department of Energy
MHI Vestas Offshore Wind
Japanese Ministry of Economy, Trade and Industry
ACCA21
Technical University of Denmark

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Amanda Wilson
Charlie Wilson
Robin Wiltshire

Acknowledgements

Energy Technology Perspectives 2020

Table of contents

Table of contents
Executive summary ....................................................................................................................... 23
Introduction.................................................................................................................................... 27
Objective ..................................................................................................................................... 27
What we mean by clean energy technology ............................................................................ 27
Scope and analytical approach ................................................................................................. 28
Structure of the ETP-2020 ......................................................................................................... 30
Chapter 1. Clean energy technologies – the state of play ............................................................31
Introduction ................................................................................................................................ 32
Clean energy technology is a necessity ................................................................................... 32
Tackling the climate crisis ...................................................................................................... 33
Clearing the air ....................................................................................................................... 34
Enhancing energy security .................................................................................................... 35
Energy and emission trends and drivers .................................................................................. 35
Global energy trends .............................................................................................................. 36
Implications for energy-related CO2 emissions.................................................................... 49
What will happen to today’s CO2 emissions tomorrow? ......................................................... 54
Emissions from existing infrastructure ................................................................................. 54
Age and distribution of the current asset stock ................................................................... 57
References .................................................................................................................................. 64
Chapter 2. Technology needs for net-zero emissions ................................................................. 66
Plotting a path to net-zero emissions ....................................................................................... 67
Energy transition scenarios.................................................................................................... 68
The path to net-zero emissions in the Sustainable Development Scenario ........................... 71
CO2 emission trajectories........................................................................................................ 71
Energy implications ................................................................................................................ 78
Prospects and readiness of critical low-carbon technology value chains............................90
Electrification .......................................................................................................................... 94
Carbon capture, utilisation and storage ............................................................................. 103
Hydrogen and hydrogen-based fuels ................................................................................. 109
Bioenergy ............................................................................................................................... 115
References ................................................................................................................................. 123
Introduction ............................................................................................................................... 127

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Chapter 3. Energy transformations for net-zero emissions ...................................................... 126

Energy Technology Perspectives 2020

Table of contents

Power generation ...................................................................................................................... 128
Alternative clean fuels.............................................................................................................. 135
Biofuels .................................................................................................................................. 136
Hydrogen and hydrogen-based fuels ................................................................................. 139
Industry ..................................................................................................................................... 148
Transport ................................................................................................................................... 153
Buildings ................................................................................................................................... 159
Investment implications............................................................................................................ 167
References ................................................................................................................................. 171
Chapter 4. Technology needs for heavy industries....................................................................173
Introduction ............................................................................................................................... 174
The outlook for heavy industry in the wake of Covid-19 .................................................... 174
Why are emissions from heavy industry “hard to abate”? .................................................. 177
Industry in a net-zero emissions energy system ................................................................ 180
Chemical production ................................................................................................................ 182
Sector overview and demand outlook .................................................................................182
Technology pathways towards net-zero emissions ............................................................ 187
Readiness and competitiveness of emerging technologies ............................................. 193
Steel production ....................................................................................................................... 198
Sector overview and demand outlook ................................................................................ 198
Technology pathways towards net-zero emissions ...........................................................203
Readiness and competitiveness of emerging technologies .............................................209
Cement production ................................................................................................................... 215
Sector overview and demand outlook ................................................................................. 215
Technology pathways towards net-zero emissions ............................................................218
Readiness and competitiveness of emerging technologies ............................................. 223
Bulk materials for construction ............................................................................................... 229
Overview ............................................................................................................................... 229
Material efficiency pathways towards net-zero embodied emissions ............................. 232
References ................................................................................................................................ 239
Chapter 5. Technology needs in long-distance transport ........................................................250
Introduction ............................................................................................................................... 251
Heavy-duty trucking ................................................................................................................. 253
Overview and outlook in the wake of Covid-19 .................................................................. 253
Technology pathways towards net-zero emissions ........................................................... 259
Maritime shipping...................................................................................................................... 271

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Readiness and competitiveness of emerging technologies ............................................. 264

Energy Technology Perspectives 2020

Table of contents

Overview and outlook in the wake of Covid-19 ................................................................... 271
Technology pathways towards net-zero emissions ........................................................... 277
Readiness and competitiveness of emerging technologies .............................................280
Aviation ..................................................................................................................................... 286
Overview and outlook in the wake of Covid-19 .................................................................. 286
Technology pathways towards net-zero emissions ........................................................... 293
Readiness and competitiveness of emerging technologies ............................................. 298
References ............................................................................................................................... 305
Chapter 6. Clean energy innovation........................................................................................... 310
Introduction ............................................................................................................................... 311
Clean energy innovation and the vital role of governments .................................................312
Successful new ideas pass through four stages… eventually ........................................... 313
The role of governments and other actors in innovation systems ................................... 315
Covid-19: A threat or an opportunity for clean energy technology innovation? ............. 316
Global status of clean energy innovation in 2020 .................................................................. 317
Government R&D funding .................................................................................................... 318
Private sector R&D funding .................................................................................................. 319
Venture capital ....................................................................................................................... 321
Patenting ............................................................................................................................... 322
Potential impact of Covid-19 on clean energy innovation ................................................ 324
Innovation needs in the Sustainable Development Scenario ............................................... 327
Timescales in taking technologies from the laboratory to market ................................... 332
Moving down the learning curve ......................................................................................... 334
Technology attributes for faster innovation ....................................................................... 335
Clean energy innovation needs faster progress .................................................................... 339
The Faster Innovation Case – just how far could innovation take us? .............................. 339
Innovation needs in the Faster Innovation Case ................................................................ 342
Technology needs in the Faster Innovation Case .............................................................. 343
References ................................................................................................................................ 355
Chapter 7. Making the transition to clean energy .....................................................................359
Introduction ............................................................................................................................. 360
Government targets for net-zero emissions .......................................................................... 361
Implementing strategies towards net-zero emissions .......................................................... 367
Tackle emissions from existing assets ................................................................................ 374
Strengthen markets for technologies at an early stage of adoption ................................ 378
Boost support for research, development and demonstration ........................................ 384

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Develop and upgrade infrastructure that enables technology deployment ................... 382

Energy Technology Perspectives 2020

Table of contents

Expand international technology collaboration .................................................................386
References ................................................................................................................................ 389
Annexes ....................................................................................................................................... 390
Regional and country groupings ............................................................................................ 390
Country notes ....................................................................................................................... 391
Acronyms and abbreviations................................................................................................... 393
Units of measure.......................................................................................................................396

Global total primary energy demand, population and GDP, 1950-2019 ............ 36
Annual change in GDP, total primary energy demand and energy
intensity in selected countries/regions, 2000-19 ................................................ 37
Global primary energy demand by fuel, 1925-2019 ............................................. 39
Primary demand for low-carbon energy sources, 2000-19 ................................40
Reduction in capital cost since 2010 for PV and wind power generation
technologies.............................................................................................................41
Global average energy intensity in selected end-use sectors, 2000-19 ............ 45
Light-duty vehicle market share by size segment, 2005-17 ................................ 46
Global primary energy demand and energy-related CO2 emissions,1971-2020 ................................................................................................................ 49
Global energy-related CO2 emissions by fuel (left) and sector (right),
2000-19 .................................................................................................................... 51
Global energy-related CO2 emissions by region .................................................. 52
Global CO2 emissions from existing energy infrastructure by sub-sector,
2019-70 .................................................................................................................... 55
Typical lifetimes for key energy sector assets...................................................... 56
Age structure of existing fossil power capacity by region and technology ...... 58
Age profile of global production capacity for key industrial sub-sectors ..........60
Building stock by year of construction and share of stock that remains
in 2050 .....................................................................................................................61
Age profile and geographic distribution of road transport vehicles .................. 62
Age profile and geographic distribution of aircraft ............................................. 63
Global energy sector CO2 emissions by fuel and technology in the
Sustainable Development Scenario, 2019-70 ...................................................... 72
Global energy sector CO2 emissions reductions by measure in the
Sustainable Development Scenario relative to the Stated Policies Scenario,
2019-70 .................................................................................................................... 73
Global energy sector CO2 emissions by sector and sub-sector/fuel in the
Sustainable Development Scenario, 2040 and 2070 .......................................... 75
Cumulative energy sector CO2 emissions by region and scenario, 2019-70 ..... 78
Global primary energy demand by fuel share and scenario, 2019 and 2070 ....80
Change in global final energy demand by fuel and sector in the
Sustainable Development Scenario, 2019-70 ...................................................... 83
Reduction in global steel and cement demand through material efficiency
gains by stage in the supply chain in the Sustainable Development
Scenario relative to the Stated Policies Scenario in 2070 .................................. 87

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List of figures

Table of contents

Growth in global electricity consumption by sector and scenario
and electricity share in total final consumption in the Sustainable
Development Scenario ........................................................................................... 95
Global CO2 emissions reductions from electrification by sector in the
Sustainable Development Scenario relative to the Stated Policies
Scenario, 2030-70 .................................................................................................. 96
Global copper and lithium demand by sector and scenario ............................... 99
Technology readiness level of technologies along the low-carbon
electricity value chain........................................................................................... 102
Growth in global CO₂ capture by sector and fuel in the Sustainable
Development Scenario, 2019-70 ......................................................................... 103
Global CO₂ use for fuel and feedstock production in the Sustainable
Development Scenario, 2019-70 ......................................................................... 105
Technology readiness level of technologies along the CO2 value chain ......... 109
Global hydrogen production by fuel and hydrogen demand by sector
in the Sustainable Development Scenario, 2019-70 ........................................... 110
Global final energy demand for hydrogen by sector and share ofhydrogen in selected sectors in the Sustainable Development Scenario ......... 111
Global CO2 emissions reductions from hydrogen by sector in the
Sustainable Development Scenario relative to the Stated Policies
Scenario, 2030-70 ................................................................................................. 112
Technology readiness level of technologies along the low-carbonhydrogen value chain ............................................................................................ 114
Global bioenergy demand by sector and share of bioenergy use in
key sectors in the Sustainable Development Scenario, 2019-70 ....................... 116
Global CO2 reductions from bioenergy use in the Sustainable
Development Scenario relative to the Stated Policies Scenario, 2030-70 ....... 118
Competitiveness of bioenergy for power generation and biofuels, 2050 ........ 119
Technology readiness level of technologies along the bioenergy
value chain ............................................................................................................. 121
Global energy sector CO2 emissions by sector in the Sustainable
Development Scenario, 2019-70 ..........................................................................128
Global power generation by fuel/technology in the Sustainable
Development Scenario, 2019-70 ..........................................................................129
Global CO2 emissions in the power sector by scenario anddecomposition of the difference by technology type ....................................... 130
Electricity generation mix by region, fuel/technology and scenario,
2019 and 2070 ....................................................................................................... 131
Coal-fired electricity generation from existing plants in the Stated
Policies and Sustainable Development scenarios, 2019-70 .............................. 133
Role of hydrogen and liquid and gaseous biofuels in the Sustainable
Development Scenario ......................................................................................... 136
Global biofuels production by technology in the Sustainable
Development Scenario, 2019-70 ......................................................................... 138
Global hydrogen production and demand in the Sustainable
Development Scenario, 2070 .............................................................................. 140
Global hydrogen production by technology in the Sustainable
Development Scenario, 2019-70 .......................................................................... 141
Global development of electrolyser capacity and CO2 capture
from hydrogen by region in the Sustainable Development Scenario,
2019-70 .................................................................................................................. 143

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Energy Technology Perspectives 2020

Table of contents

Hydrogen production costs by technology in the Sustainable
Development Scenario, 2019 and 2050 ............................................................. 144
Production of hydrogen-based fuels in the Sustainable Development
Scenario, 2019-70 ................................................................................................. 146
Projected synthetic kerosene production costs from different
sources and impact of electricity costs and full-load hours, 2050 .................. 148
Global direct CO2 emissions in industry by sub-sector andregion in the Sustainable Development Scenario, 2019-70 .............................. 149
Final energy demand by fuel shares for total industry and selected
sub-sectors in the Sustainable Development Scenario, 2019-70 ..................... 150
Global CO2 emissions in transport by mode in the Sustainable
Development Scenario, 2000-70 ........................................................................ 154
Global transport sector energy consumption by fuel in the Sustainable
Development Scenario, 2019-70 .......................................................................... 157
CO2 emissions from the use phase of buildings by sub-sector
and region in the Sustainable Development Scenario, 2019-70 ....................... 160
Heating equipment sales share and share of near-zero energy
buildings by region in the Sustainable Development Scenario .........................162
Global cumulative CO2 emissions reductions in the buildings sector by
mitigation lever and technology readiness level in the Sustainable
Development Scenario relative to the Stated Policies Scenario,
2020-70 ................................................................................................................. 164
Change in average annual energy-related investment by sector
and decade in the Sustainable Development Scenario relative to
the Stated Policies Scenario ................................................................................ 169
Average annual investment in technologies by technology readinesslevel in the Sustainable Development Scenario ................................................. 170
Production growth in key heavy industries, 2000-30 ........................................ 175
Global industrial energy consumption and CO2 emissions in the
Sustainable Development Scenario, 2019-70 .................................................... 180
The technology portfolio for reducing direct industrial CO2 emissions,2040 and 2070 ...................................................................................................... 181
Global primary chemical production by scenario and plastic demandby market segment, 2019-70 ............................................................................... 185
Global chemical sector direct CO2 emissions and energy consumption
in the Sustainable Development Scenario 2019-70 ........................................... 188
Global CO2 emissions reductions in the chemical sector by mitigation
strategy and current technology maturity category, 2019-70 .......................... 189
Global primary chemicals production routes by energy feedstock in the
Sustainable Development Scenario, 2000-70 .................................................... 191
Levelised cost of ammonia and methanol production under varying
techno-economic assumptions ............................................................................ 197
Global steel production by region and end use, 2019-70 ................................. 202
Global iron and steel sector direct CO2 emissions and energy
consumption in the Sustainable Development Scenario, 2019-70...................204
Global CO2 emissions reductions in the iron and steel sector by
mitigation strategy and current technology maturity category, 2019-70 ........ 205
Global steel production by route and iron production by technology
in the Sustainable Development Scenario, 1990-2070 ..................................... 207
Levelised cost of steel production for selected production routes
when they reach commercialisation ....................................................................213

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Table of contents

Levelised cost of steel production for selected production pathways
at varying gas, electricity and CO2 prices ............................................................214
Global cement production by region and end use, 2019-70 .............................218
Global cement sector direct CO2 emissions and energy consumption
in the Sustainable Development Scenario, 2019-70 ...........................................219
Global CO2 emissions reductions in the cement sector by mitigation
strategy and current technology maturity category, 2019-70 .......................... 220
Global cement production by technology and material compositionin the Sustainable Development Scenario, 2000-70 ......................................... 222
Levelised cost of cement production under varying techno-economic
assumptions .......................................................................................................... 228
Decomposition of embodied cement and steel sector CO2 emissions inbuildings construction, 2000-20 .........................................................................231
Projected year-to-year growth of residential construction activity
in 2020 relative to 2019........................................................................................ 232
CO2 emissions in the buildings and construction value chain in the
Sustainable Development Scenario, 2010-70 .................................................... 233
World cement- and steel-related CO2 emissions in the buildings
construction sector by scenario and driver, 2019-70 ........................................ 234
Contribution of material efficiency to reducing cumulative cement
and steel demand for buildings construction in the Sustainable
Development Scenario, 2019-70 ......................................................................... 235
Global energy consumption and CO2 emissions in long-distancetransport by sub-sector in the Sustainable Development and Stated
Policies scenarios.................................................................................................. 252
Heavy-duty truck fleet and share of road fuel demand, 2019 ........................... 254
Share of vehicle sales covered by fuel economy and/or CO2 emissions
standards by vehicle type and country/region .................................................. 257
Global CO2 emissions from trucks by abatement measure (left)
and technology readiness level (right) in the Sustainable Development
Scenario relative to the Stated Policies Scenario ..............................................260
Global heavy-duty trucking energy demand by fuel and average vehicle
efficiency in the Sustainable Development Scenario, 2019-70 ........................ 262
Heavy-duty truck fleet by powertrain in the Sustainable Development
Scenario ................................................................................................................. 263
The effect of battery and fuel cell prices on total cost of ownershipof heavy-duty trucks in long-haul operations ..................................................... 268
Total cost of ownership of heavy-duty trucks by low-carbon fuel in the
Sustainable Development Scenario, 2040 and 2070 ........................................ 269
Global freight activity, energy consumption and CO2 emissions
in international maritime shipping by vessel type and fuel, 2019..................... 274
Global CO2 emissions reductions in shipping by mitigation category (left)
and technology readiness level (right) in the Sustainable Development
Scenario relative to the Stated Policies Scenario .............................................. 277
Global energy consumption and CO2 emissions in international shippingin the Sustainable Development Scenario, 2019-70 .......................................... 278
Total cost of ownership of hydrogen, ammonia and electric vessels
by ship type, 2030 ................................................................................................ 282
Growth of revenue passenger-kilometres by region, 2013-19 .......................... 289
Passenger aviation activity by region in the Sustainable Development
Scenario, 2019-70 ................................................................................................. 292

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Energy Technology Perspectives 2020

Energy Technology Perspectives 2020

Figure 6.2
Figure 6.3
Figure 6.4
Figure 6.5
Figure 6.6
Figure 6.7
Figure 6.8

Figure 6.9

Figure 6.10
Figure 6.11
Figure 6.12
Figure 6.13
Figure 6.14
Figure 6.15
Figure 6.16
Figure 6.17

Figure 6.18
Figure 7.1
Figure 7.2

Figure 7.3
Figure 7.4

Global aviation fuel consumption in the Sustainable Development
Scenario and total fuel use in the Stated Policies Scenario, 2019-70 .............. 294
Global CO2 emissions in aviation by abatement measure (left) andtechnology readiness level (right) in the Sustainable Development
Scenario relative to the Stated Policies Scenario .............................................. 295
Share of flights and fuel use in overall commercial passenger
aviation, 2017 ....................................................................................................... 300
Levelised production costs of sustainable aviation fuels in 2050 ................... 303
Four stages of technology innovation, feedbacks and spillovers
that improve successive generations of designs ............................................... 314
Public energy technology R&D and demonstration spending by
IEA member governments by technology, 1977-2019 ....................................... 319
Global corporate R&D spending as a share of revenue in selected
sectors, 2007-19 ................................................................................................... 320
Global early-stage venture capital deals for energy technology start-ups .......321
Issuance of patents for low-carbon energy technologies in selected
countries/regions ................................................................................................. 323
Growth rates for revenue and R&D for selected sectors, 2007-12 ................... 326
Value and number of global energy-related venture capital deals(early and late stage) by semester and year ....................................................... 327
Global energy sector CO2 emissions reductions by current technology
maturity category in the Sustainable Development Scenario relative
to the Stated Policies Scenario, 2019-70 ............................................................ 328
Global CO2 emissions reductions by current technology maturity
category and sector in the Sustainable Development Scenario
relative to the Stated Policies Scenario, 2040 and 2070 .................................. 329
Time to materiality for selected technologies in the Sustainable
Development Scenario ......................................................................................... 333
Unit cost reductions for selected technologies in the Sustainable
Development Scenario, 2020-70 ........................................................................ 335
Global energy sector CO2 emissions by sector, 2019 and 2050 ...................... 341
Period from first prototype to market introduction for selected
technologies, including the quickest examples in recent developments........ 342
Contribution to global energy sector annual CO2 emissions
reductions in 2050 by current technology maturity category ......................... 343
Selected decarbonisation indicators by scenario in 2050 ................................ 345
Global energy sector annual CO2 emissions reductions by type ofabatement measure and total primary energy demand, 2050 .........................346
Global share of hydrogen and electricity in final energy demandby end-use sector (left) and selected adoption metrics of hydrogentechnologies (right), 2019 and 2050 ................................................................... 352
Global captured CO2 emissions by source, 2050 .............................................. 354
Share of energy-related CO2 emissions covered by national andsupra-national public net-zero emissions targets .............................................. 362
Global CO2 emissions savings by current technology readinesscategory in the Faster Innovation Case relative to the Sustainable
Development Scenario in 2050 ...........................................................................369
Governing process for a strategy towards net-zero emissions ......................... 371
Core target areas for policy instruments to advance a net-zero emissions
strategy by technology maturity level ................................................................ 373

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Figure 6.1

Table of contents

Energy Technology Perspectives 2020

Figure 7.5

Figure 7.6

Figure 7.7

Table of contents

Global CO2 emissions locked in by existing energy-related assets
by sector measured against the CO2 emissions trajectory of the
Sustainable Development Scenario, 2019-70 .................................................... 374
Capital cost reductions of selected clean energy technologies
at early stages of adoption in the Sustainable Development
Scenario, 2019-30 ................................................................................................. 381
Global cumulative investment in selected energy infrastructure in the
Sustainable Development Scenario .................................................................... 384

List of tables

Table 7.1
Table 7.2

Primary energy demand by fuel and scenario (Mtoe) .......................................... 79
Primary energy demand by region and scenario (Mtoe) ......................................81
Final energy consumption by sector, fuel and scenario (Mtoe) .......................... 82
Status of the main emerging technologies in the chemical sector .................. 194
Status of main emerging technologies in the iron and steel sector ................. 210
Status of main emerging technologies in the cement sector ........................... 224
Logistic companies and electric trucks .............................................................. 259
Status of the main emerging technologies in heavy-duty road freight ........... 265
Main international regulatory policies covering air pollution and
GHG emissions in maritime shipping .................................................................. 275
Status of main emerging technologies in shipping ............................................281
Status of the main emerging technologies in the aviation sector .................... 299
Energy technology attributes that can favour more rapid innovation
cycles or faster learning ...................................................................................... 336
Government carbon or climate neutral targets by legal status ........................ 363
Examples of market-pull policy instruments by targeted group ...................... 379

List of Boxes

Box 2.1
Box 2.2
Box 2.3
Box 2.4
Box 2.5
Box 2.6
Box 2.7
Box 2.8
Box 3.1
Box 3.2

What does the most recent climate change science tell us? .............................. 33
The shale revolution? .............................................................................................. 43
What is the expected impact of Covid-19 on CO2 emissions? ............................ 50
How technology has cut air pollutant emissions from power
plants: the US example........................................................................................... 53
Non-energy sector and non-CO2 emissions ......................................................... 68
Energy efficiency benefits in the Sustainable Development Scenario............... 73
Reduced air pollution in the Sustainable Development Scenario ...................... 76
The role of consumer behaviour in the clean energy transition ......................... 84
3D printing as an enabler of lightweighting and reduced material use ............. 88
Assessing technology readiness: The ETP Clean Energy Technology Guide ......91
The opportunity of cooling storage and electric vehicles in China .................... 97
Impact of the Covid-19 crisis on electricity-based technologies ...................... 100
Reducing process emissions and electricity needs in aluminium
smelting .................................................................................................................. 152
Technologies to reduce electricity and refrigerant needs forcooling in the buildings sector ............................................................................ 166

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Box 1.1
Box 1.2
Box 1.3
Box 1.4

Energy Technology Perspectives 2020

Box 4.2
Box 4.3
Box 5.1
Box 5.2
Box 5.3
Box 5.4
Box 5.5
Box 5.6
Box 6.1
Box 6.2
Box 6.3
Box 7.1
Box 7.2
Box 7.3
Box 7.4

Accelerating progress in the wake of the Covid-19 crisis: The role ofgovernments in supporting the transition in heavy industry ............................. 178
Iron and Steel Technology Roadmap ................................................................. 200
How digital technologies can support material efficiency ................................ 237
Types of trucks and their energy and emission implications ............................ 256
Types of ships and their energy and emissions implications ............................ 272
Is the Covid-19 crisis impacting marine regulations? ........................................ 276
Making CORSIA work for the climate challenge ................................................ 288
Who flies and how much? .....................................................................................291
Trade-offs in making aircraft more fuel efficient................................................ 297
Potential negative impacts of Covid-19 on clean energy innovation –Reduced Innovation Case .................................................................................. 330
Spillovers as an important attribute for faster innovation ................................. 338
Key opportunities among technologies at laboratory or small
prototype stage..................................................................................................... 347
Covid-19 government recovery packages in support of net-zero emissions
targets .................................................................................................................... 364
Corporate net-zero emission targets .................................................................. 365
Tracking progress: A key element of net-zero emissions strategies ................. 371
Opportunities to unlock emissions from existing infrastructure ...................... 377

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Box 4.1

Table of contents

Energy Technology Perspectives 2020

Executive summary

Executive summary
Achieving our energy and climate goals demands a
dramatic scaling up of clean energy technologies
To avoid the worst consequences of climate change, the global energy system must
rapidly reduce its emissions. Calls to reduce global greenhouse gas emissions are
growing louder every year, but emissions remain at unsustainably high levels.
International climate goals call for emissions to peak as soon as possible and thendecline rapidly to reach net-zero in the second half of this century. The vast majorityof global CO2 emissions come from the energy sector, making clear the need for acleaner energy system. Global CO2 emissions are set to fall in 2020 because of theCovid-19 crisis, but without structural changes to the energy system, this decline will
be only temporary.
Achieving net-zero emissions requires a radical transformation in the way wesupply, transform and use energy. The rapid growth of wind, solar and electric cars
has shown the potential of new clean energy technologies to bring down emissions.
Net-zero emissions will require these technologies to be deployed on a far greater
scale, in tandem with the development and massive rollout of many other clean
energy solutions that are currently at an earlier stage of development, such as
numerous applications of hydrogen and carbon capture. The IEA’s Sustainable
Development Scenario – a roadmap for meeting international climate and energy
goals – brings the global energy system to net-zero emissions by 2070, incorporating
aspects of behavioural change alongside a profound transformation in energy
system technology and infrastructure.
This report analyses over 800 technology options to examine what would need tohappen for the world to reach net-zero emissions by 2050. The report focuses
primarily on the Sustainable Development Scenario, but it also includes acomplementary Faster Innovation Case that explores the technology implications ofreaching net-zero emissions globally by 2050. The analysis seeks to assess thechallenges and opportunities associated with a rapid, clean energy transition. The
report covers all areas of the energy system, from fuel transformation and power

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generation to aviation and steel production.

Energy Technology Perspectives 2020

Executive summary

Transforming the power sector alone would only get theworld one-third of the way to net-zero emissions
Many governments have ambitious plans for reducing emissions from the energy
sector. Some governments have even put net-zero ambitions into law or proposed
legislation, while others are discussing their own net-zero strategies. Manycompanies have also announced carbon-neutral targets. The success of renewable
power technologies gives governments and businesses some cause for optimism.
But reaching these targets will require devoting far more attention to the transport,
industry and buildings sectors, which today account for more than 55% of CO2
emissions from the energy system.
Spreading the use of electricity into more parts of the economy is the single largest
contributor to reaching net-zero emissions. In the Sustainable Development
Scenario, final electricity demand more than doubles. This growth is driven by using
electricity to power cars, buses and trucks; to produce recycled metals and provide
heat for industry; and to supply the energy needed for heating, cooking and otherappliances in buildings.
Reaching net-zero emissions in 2050 would require a much more rapid deploymentof low-carbon power generation. In the Faster Innovation Case, electricity
generation would be about 2.5 times higher in 2050 than it is today, requiring a rateof growth equivalent to adding the entire US power sector every three years. Annual
additions of renewable electricity capacity, meanwhile, would need to averagearound four times the current record, which was reached in 2019.

Electricity cannot decarbonise entire economies alone
Hydrogen extends electricity’s reach. On top of the surging demand for electricity
from across different parts of the economy, a large amount of additional generationis needed for low-carbon hydrogen. The global capacity of electrolysers, which
produce hydrogen from water and electricity, expands to 3 300 GW in the
Sustainable Development Scenario, from 0.2 GW today. In order to produce the lowcarbon hydrogen required to reach net-zero emissions, these electrolysers would
consume twice the amount of electricity the People’s Republic of China generates
today. This hydrogen forms a bridge between the power sector and industries where
the direct use of electricity would be challenging, such as in the production of steel
from iron ore or fuelling large ships.
Carbon capture and bioenergy play multifaceted roles. Capturing CO2 emissions in

1
Our forthcoming ETP Special Report on CCUS provides our most in-depth look yet at this critical technology family
and its role in reaching net-zero emissions.

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order to use them sustainably or store them (known as CCUS) 1 is a crucial technology

Energy Technology Perspectives 2020

Executive summary

for reaching net-zero emissions. In the Sustainable Development Scenario, CCUS is
employed in the production of synthetic low-carbon fuels and to remove CO2 fromthe atmosphere. It is also vital for producing some of the low-carbon hydrogen thatis needed to reach net-zero emissions, mostly in regions with low-cost natural gas
resources and available CO2 storage. At the same time, the use of modern bioenergy
triples from today’s levels. It is used to directly replace fossil fuels (e.g. biofuels fortransport) or to offset emissions indirectly through its combined use with CCUS.
A secure and sustainable energy system with net-zero emissions results in a newgeneration of major fuels. The security of today’s global energy system isunderpinned in large part by mature global markets in three key fuels – coal, oil andnatural gas – which together account for about 70% of global final energy demand.
Electricity, hydrogen, synthetic fuels and bioenergy end up accounting for a similar
share of demand in the Sustainable Development Scenario as fossil fuels do today.

The clean energy technologies we will need tomorrow
hinge on innovation today
Quicker progress towards net-zero emissions will depend on faster innovation inelectrification, hydrogen, bioenergy and CCUS. Just over one-third of the
cumulative emissions reductions in the Sustainable Development Scenario stemfrom technologies that are not commercially available today. In the Faster Innovation
Case, this share rises to half. Thirty-five percent of the additional decarbonisation
efforts in the Faster Innovation Case come from increased electrification, with around
25% coming from CCUS, around 20% from bioenergy, and around 5% from hydrogen.
Long-distance transport and heavy industry are home to the hardest emissions to
reduce. Energy efficiency, material efficiency and avoided transportation demand(e.g. substituting personal car travel with walking or cycling) all play an importantrole in reducing emissions in long-distance transport and heavy industries. But nearly
60% of cumulative emissions reductions for these sectors in the Sustainable
Development Scenario come from technologies that are only at demonstration andprototype stages today. Hydrogen and CCUS account for around half of cumulativeemissions reductions in the steel, cement and chemicals sectors. In the trucking,shipping and aviation sectors, the use of alternative fuels – hydrogen, synthetic fuelsand biofuels – ranges between 55% and 80%. Highly competitive global markets, thelong lifetime of existing assets, and rapidly increasing demand in certain areas further
complicate efforts to reduce emissions in these challenging sectors. Fortunately, theengineering skills and knowledge these sectors possess today are an excellent
starting point for commercialising the technologies required for tackling these

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challenges.

Energy Technology Perspectives 2020

Executive summary

Emissions from existing assets are a pivotal challenge
Power and heavy industry together account for about 60% of emissions today fromexisting energy infrastructure, climbing to nearly 100% in 2050 if no action is taken.
Reaching net-zero will depend on how we manage the emissions challenge
presented by these sectors’ long-lasting assets, many of which were recently built in
Asian economies and could operate for decades to come. The situation underscores
the need for hydrogen and CCUS technologies. Ensuring that new clean energy
technologies are available in time for key investment decisions will be critical. In
heavy industries, for example, strategically timed investments could help avoid
around 40% of cumulative emissions from existing infrastructure in these sectors.

Governments will need to play the decisive role
While markets are vital for mobilising capital and catalysing innovation, they will notdeliver net-zero emissions on their own. Governments have an outsized role to playin supporting transitions towards net-zero emissions. Long-term visions need to bebacked up by detailed clean energy strategies involving measures that are tailoredto local infrastructure and technology needs. Effective policy toolkits must address
five core areas:Tackle emissions from existing assets

Strengthen markets for technologies at an early stage of adoption

Develop and upgrade infrastructure that enables technology deployment

Boost support for research, development and demonstration



Expand international technology collaboration.

Economic stimulus measures in response to the Covid-19 crisis offer a key
opportunity to take urgent action that could boost the economy while supporting

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clean energy and climate goals, including in the five areas above.

Energy Technology Perspectives 2020

Introduction

Introduction
Objective
The Energy Technology Perspectives (ETP) series has been informing the global
energy and environment debate since 2006. Meeting the policy goals of energy
security, economic development and environmental sustainability can only beachieved through energy technology development and innovation. Understanding
the opportunities and challenges associated with existing, new and emerging energy
technologies is critical to improving policy making to meet those goals.
A cleaner and more secure energy sector requires the rapid uptake and use of a wide
range of technologies, some of which are still at an early stage of commercial
development or deployment, or still at the prototype stage. But technological changetakes time: for example, solar photovoltaics (PV) and batteries took decades to becommercialised and become economically competitive. Moreover the evolution ofexisting and emerging technologies in terms of technical performance and cost isinherently uncertain – the success of PV and batteries was far from assured when
they were developed and launched – and that uncertainty increases as we peerfurther into the future.
The primary purpose of this edition of the ETP is to help decision makers ingovernment and industry to meet the challenges of a cost-effective transition to aclean energy system with net-zero emissions, while enhancing energy security andensuring access to modern energy services for all. ETP has evolved to improve its
usefulness and relevance; it focuses throughout on exploring the opportunities andrisks that surround the scaling up of clean energy technologies in the years ahead. It
sets out where the key technologies stand today, their potential for wider deployment
to meet energy policy goals, and the opportunities for and barriers to developing
selected new technologies in the coming decades. It also looks at how pastexperiences can help governments design more effective policies to encourage
innovation from research and development to market deployment. In addition, usinga systems approach it looks at what governments and stakeholders need to do toaccelerate the development and deployment of clean energy technologies with aparticular focus on those that address multiple policy objectives.

What we mean by clean energy technology
Energy technology refers to the combination of hardware, techniques, skills,
methods and processes used in the production of energy and the provision of energy
using energy. It follows that technological change in the energy sector refers to

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services, i.e. the way we go about producing, transforming, storing, transporting andEnergy Technology Perspectives 2020

Introductionchanges over time in the types of technology that are used at various stages of theenergy supply chain. Technological progress results from investment in basic andapplied research, and from the development, demonstration and commercialisationof new technologies (see Chapter 6 for a detailed discussion of this innovation
process and how to accelerate it).
Clean energy technology comprises those technologies that result in minimal or zero
emissions of carbon dioxide (CO2) and pollutants. For the purposes of this report,
clean energy technology refers to low-carbon technologies which do not involve theproduction or transformation of fossil fuels – coal, oil and natural gas – unless they
are accompanied by carbon capture, utilisation and storage and other anti-pollution
measures.
The International Energy Agency (IEA) defines low-carbon energy technologies as:
renewable energy sources (renewables 1), nuclear power; carbon capture, utilisationand storage (CCUS); hydrogen derived from low-carbon energy sources;
technologies that improve the efficiency of energy transformation (e.g. switchingfrom incandescent to light-emitting diode [LED] lighting); other non-fossil power andstorage options; and cross-cutting technologies that result in minimal emissions of
CO2 and pollution. Clean energy sources are growing in importance, but they stillaccount for only around one-fifth of energy supply worldwide. In other words, theenergy system in its present state is unsustainable.

Scope and analytical approach
The analysis in this report is underpinned by global projections of clean energy
technologies derived from the IEA’s in-house ETP model, a quantitative framework
composed of four interlinked modules covering energy supply (production andtransformation), and energy use in the buildings, industry and transport sectors (seeonline documentation of the ETP Model). 2 Depending on the sector, the modelling
framework includes 28 to 40 world regions or countries. The projection period in thisreport is 2019 to 2070 – ten years beyond the end-point of the previous ETP in 2017.
The most recent year of complete historical data is 2019, though preliminary data are
available for some countries and sectors for the first-quarter of 2020 whichaccordingly have been used to adjust the projections.
We employ two scenarios to describe possible energy technology pathways over the
next half century. The Sustainable Development Scenario – the focus in this report –sets out the major changes that would be required to reach the key energy-related

Renewables include bioenergy, though this energy source is sometimes used unsustainably (e.g. if not entirely
replaced with replanted biomass) and in an unhealthy manner (e.g. the indoor use of wood for cooking on an open
stove).
2www.iea.org/reports/energy-technology-perspectives-2020/etp-model.

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1

Energy Technology Perspectives 2020

Introduction

goals of the United Nations Sustainable Development Agenda, including an earlypeak and rapid subsequent reductions in emissions in line with the Paris Agreement,
universal access to modern energy by 2030 and a dramatic reduction in energyrelated air pollution. The trajectory for emissions in the Sustainable Development
Scenario is consistent with reaching global net-zero CO2 emissions by around 2070. 3
The Stated Policies Scenario takes into account energy- and climate-related policy
commitments already made or announced by countries, including the Nationally
Determined Contributions under the Paris Agreement. The Stated Policies Scenario
provides a baseline from which we assess the additional policy actions and measuresneeded to achieve the key energy and environmental objectives incorporated in the
Sustainable Development Scenario.
Neither scenario should be considered a prediction or forecast. Rather the scenarios
offer valuable insights of the impacts and trade-offs of different technology choices
and policy targets and provides a quantitative approach to support decision making
in the energy sector and strategic guidance on technology choices for governments
and stakeholders. The ETP scenarios are broadly consistent with those presented in
the 2019 edition of the IEA’s flagship publication, World Energy Outlook (WEO) 4,
however the time horizon is extended to 2070 to underpin a more technology
focussed view of the energy system. As well, the ETP scenarios incorporate updated
assumptions for gross domestic product (GDP) and energy prices which have been
affected with the outbreak of the global Covid-19 pandemic.
This report draws on strategic discussions during an ETP-2020 consultation meetingwith high-level energy officials and experts from government, industry, financial
institutions, academia and international organisations on 3 July 2019. In addition
from insights, feedback and data obtained at two high-level workshops that the IEA
organised in Paris on accelerating energy innovation (18 December 2019) and carbon
capture, utilisation and storage (5 February 2020). 5 It also draws on information andviews provided by those who work on the IEA’s broad portfolio of Technology
Collaboration Programmes, which bring together more than 6 000 experts from key
companies and research institutions in 53 countries in order to accelerate energy
technology innovation.

An additional Faster Innovation Case in Chapter 6 explores the technology innovation needs for reaching net-zeroemissions already in 2050.
4
WEO-2019 (IEA, 2019) was released in November 2019. For more details, see:www.iea.org/topics/world-energy-outlook.
5
Information about these events can be found at www.iea.org/weo/events.

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3

Energy Technology Perspectives 2020

Introduction

Structure of the ETP-2020
Chapter 1 reviews the current status of clean energy technologies worldwide andputs the challenges ahead in context, setting out the urgent need to reduce
emissions and improve air quality, assessing historic trends in energy technology anddiscussing the possible implications of the Covid-19 crisis for clean energy
technology. It also assesses projected CO2 emissions from existing energy assets,
and their implications for long-term global emissions reductions.
Chapter 2 sets out the key projections for energy and CO2 emissions in the
Sustainable Development Scenario and describes how the energy sector will need tochange relative to current trends in order to meet the energy-related United Nations
Sustainable Development Goals. It details the technology pathways required to meetthose goals, the central role that technologies such as electrification, hydrogen,
CCUS and bioenergy could play in the energy transition to net-zero emissions andthe current state of readiness of those technologies.
Chapter 3 provides a detailed overview of the technology opportunities in eachenergy sector stem for the transition to net-zero emissions. It sets out the structuralchanges required in the industry, transport and buildings sectors together with thedevelopments needed to provide these end-use sectors with low-carbon fuels.
Chapters 4 and 5 delve more deeply into the technological needs in selected energy
end-use sectors, sometimes referred to as “hard-to-abate”, where cutting emissions
substantially is likely to prove particularly difficult because technological solutions
do not yet exist or are relatively costly. Many of these are in heavy industry(chemicals, steel and cement) and long-distance transport (maritime shipping,aviation and long-haul trucking). Both chapters identify the technologicalopportunities, costs and trade-offs involved in the selected areas to achieve net-zeroemissions for the energy sector as a whole.
Chapter 6 takes a broad look at energy innovation, pinning down innovation needsin the Sustainable Development Scenario and assessing them relative to progress todate on clean energy innovation. It explores past experiences in bringing new energy
technologies to market, identifies potential additional opportunities and looks at
strategies for accelerating innovation in clean energy technology. We consider the
potential of innovation to support a clean energy transition to net-zero emissions by
2050 in the Faster Innovation Case, which amongst others includes consideration oftechnologies that are today in the very early stages of development.
Chapter 7 sets out key recommendations for the development of long-term clean
energy transition plans, including recommendations dealing with the managementof existing CO2-intensive energy assets, the creation of markets for clean energy
technologies at an early stage of adoption, the development of priorities for newenergy technologies.

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clean energy infrastructure and for the development and demonstration of clean

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of playThe need for clean energy technology has never been more important. The way wecurrently produce and consume energy is unsustainable, and while technology is
not the only ingredient to a cleaner energy future, there is no credible path to netzero emissions without a significant and speedy ramping up of clean energy
technologies across the entire energy sector.



The carbon footprint of the global energy system has been reduced in waves driven
by government policies. For instance, construction of nuclear reactors surged in the
1960s and 1970s, but slowed down thereafter. More recently wind and solar PV haveseen rapid expansion, led by policy support in Europe, United States, the People’s
Republic of China (“China” hereafter) and India. The expansion of wind power isevidenced since the late 1990s and today accounts for over 5% of global power
supply. Solar PV expansion was not too far behind and now accounts for about 2.5%of global power supply. Biofuels for transport has expanded steadily to reach 3% of
global transport energy requirements today, mainly due to blending mandates andproduction targets in Brazil, United States and European Union.



Clean energy technology progress, however, has been slow in end-use sectors.
Energy efficiency has been the main means of moderating growth in CO2 emissions
in end-use sectors. Some progress has been made, notably in the development ofelectric cars, which accounted for 2.6% of global sales in 2019. The momentum for
critical technologies such as hydrogen and CCUS is also increasing. If the world isto reach net-zero emissions this century, faster progress will be needed in end-use
sectors, which accounted for 55% of energy and industry-related CO2 emissions in
2019.



Progress in deployment of clean energy technologies has been outpaced by overall
energy demand growth. In 2019, CO2 emissions from fossil fuel combustion reachedmore than 33 gigatonnes (Gt), a record high. Many existing energy assets are still
young, particularly in Asia. Around 45% of installed fossil-fuelled power generation
capacity in Southeast Asia was built within the last ten years, and 70% within the last
20 years. Much of the infrastructure for the production of steel, cement andchemicals is also relatively young, particularly in China. The global average age is
10-15 years, compared with a typical lifetime of 30 years for chemical plants and40 years for steel and cement plants. Existing energy infrastructure could lead tonearly 750 GtCO2 of additional emissions by 2070 if unchanged. This would exhaust
the majority of the remaining CO2 budget compatible with limiting the global
temperature rise to ”well below 2°C”, let alone 1.5°C as set out in the Paris
Agreement.

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Chapter 1. Clean energy
technologies – the state of playEnergy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Introduction
Tackling climate change, securing energy supplies and ensuring clean air and water
for all require a transformation of the way we produce and consume energy.
Accelerating the transition to clean energy technologies is central to thattransformation in the face of persistent increases in energy demand. Fossil fuelscontinue to dominate world energy supply, despite the growing contributions ofrenewables and steady progress in making energy use more efficient. But there is stilltime to get back on track and meet key the energy-related UN Sustainable
Development Goals by adopting the cleanest and most efficient technologies thatare currently available without delay, and by developing new technologies.

Clean energy technology is a necessity
The need for clean energy technology has never been more important. The way wecurrently produce and consume energy is unsustainable and considered in thecontext of continuing economic growth and an increasing global population
underlines the need for a sounder approach. Climate change caused byanthropogenic emissions of greenhouse gases is among the toughest challenges
faced by humanity. The combustion of fossil fuels contributes around two-thirds ofglobal greenhouse gas (GHG) emissions 1 and the bulk of CO2 emissions, so theenergy sector must be at the front line of efforts to tackle climate change. Risingfossil energy use in emerging economies is deteriorating air quality with serious
consequences for public health.
It is unrealistic to expect humanity to slash its consumption of energy by simply
going without energy services on a large scale. What is needed is a sustained andcomplete shift to clean energy technologies that provide the energy services weneed but that do not emit GHG or pollute the air (or land and water). This shift alsoenhances energy security by reducing dependence on imported sources of energy
over often vulnerable supply chains. This transition has been underway for1
The remaining one-third of GHG emissions are linked to CO2 emissions from industrial processes and agriculture,
forestry and other land use, as well as non-CO2 emissions in the energy sector (mainly methane) and other sectors,
such as agriculture.

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decades, but has much further to go.

Energy Technology Perspectives 2020

Box 1.1

Chapter 1. Clean energy technologies – the state of play

What does the most recent climate change science tell us?

In late 2018, the Intergovernmental Panel on Climate Change (IPCC) published a
special report on the impacts of global warming of 1.5 degrees Celsius (°C) above preindustrial levels compared with an increase of 2°C, based on the assessment of thelatest available scientific, technical and socio-economic literature (IPCC, 2018). The
report finds, with a high degree of confidence, that human activity has already caused
0.8 to 1.2°C of warming, and that global warming is likely to reach 1.5°C between
2030 and 2052 if it continues to increase at the current rate. It warns that many of thephysical impacts of climate change may escalate in a non-linear fashion as the global
temperature rises: in other words, the effects of 2°C of warming are likely to be far
worse than those of 1.5°C. It also underlines the urgency of the need for action:
combined national efforts to reduce emissions so far fall far short of what is needed
to be on track to limit global warming to 2°C, let alone 1.5°C.
Source: IPCC (2018).

Tackling the climate crisis
Climate scientists agree that there is a strong and incontrovertible link between
global GHG emissions caused by human activity, their concentration in theatmosphere and average global air and sea temperatures. The global average annual
concentration in the atmosphere of CO2 – the most important anthropogenic
greenhouse gas – reached 410 parts per million (ppm) in 2019, up 3 ppm (0.6%) on
the previous year. This is a major increase from pre-industrial levels, which ranged
between 180 and 280 ppm. These higher concentrations are responsible forincreasing the global average temperature of the planet by about 1 degree Celsius,
leading to an increase in global sea levels of about 20 centimetres, the melting ofglaciers and reduced sea ice, along with broader changes in weather patterns.
Increased CO2 levels in the atmosphere dissolve into the upper ocean waters and arealso causing the world’s oceans to become more acidic.
Since the first United Nations conference on climate change in Rio de Janeiro in 1992,
the global community has attempted to forge agreements on tackling climatechange. The main forum for negotiation is a series of annual international
governmental gatherings known as Conferences of the Parties (COP). The Paris
Agreement reached at COP-21 in December 2015, which entered into force inNovember 2016, sets a target of limiting future increases in global temperature to“well below 2°C” above pre-industrial levels and calls for efforts to limit theAgreement includes the aim of reaching a global peak in emissions of greenhouse

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temperature increase to 1.5°C above pre-industrial levels. Article 4 of the ParisEnergy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of playgases “as soon as possible”, recognising that this will take longer for emerging
economies than for others, and making rapid reductions thereafter to achieve abalance between anthropogenic emissions by sources and removals by sinks of GHG,
i.e. net-zero emissions of GHG in the second half of this century.
Nationally Determined Contributions (NDCs) are at the heart of the Paris Agreement
and will be critical to its success. NDCs embody efforts by each signatory country to
reduce national emissions and adapt to the impacts of climate change. Article 4
requires each Party to prepare, communicate and maintain successive NDCs,
including measures to mitigate domestic emissions, taking into account its domestic
circumstances and capabilities. Together, these climate actions will determine
whether the world achieves the long-term goals of the Paris Agreement, namely anearly peak in emissions and net-zero GHG emissions in the second half of thiscentury. At the time of writing, at least 122 national and regional jurisdictions,
including the European Union, had set or were actively considering long-term netzero emissions targets, in some cases for dates before 2050. These economies
together accounted for 30% of global GDP and 20% of energy-related CO2 emissions
in 2019.
The four COPs since the Paris Agreement have focussed on specific climate-related
problems, such as water scarcity and sustainability, and on the technical aspects ofimplementing various aspects of the Agreement. The remaining issue to be resolved
relates to Article 6, which describes rules for a carbon market and other forms ofinternational co-operation. COP-25 in Madrid in December 2019 failed to reachagreement on this matter. The 2020 COP was postponed due to the Covid pandemic
and rescheduled for 2021 in Glasgow. COP-26 will also review progress in reaching
the goals of the Paris Agreement, seek to ratchet up near-term efforts to curb GHG
emissions and look to establish long-term plans for achieving net-zero emissions.

Clearing the air
The need for clean energy technology is not just about dealing with the climate crisis.
Energy production and use is the leading source of air pollution caused by humanactivity. Air pollution has an enormous impact on public health: nine-out-of-ten
people around the world breathe polluted air every day. This causes more than
5 million premature deaths each year, largely as a result of increased mortality fromstroke, heart disease, chronic obstructive pulmonary disease, lung cancer and acuterespiratory infections. The total death toll is significantly higher than deaths from
HIV/AIDS, tuberculosis and road injuries combined (3.7 million deaths). Outdoor(ambient) pollution is the biggest killer, accounting for 3 million premature deaths,

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but around 2.5 million also die prematurely from indoor air pollution from

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

combustion of fuel for cooking and heating. The biggest impact is in emerging
economies, where more than 2.6 billion people still do not have access to clean
cooking (IEA, 2019a).
Most types of clean energy technology help to reduce air pollution as well as to cut
GHG emissions. For example, power generation from nuclear or renewable energy
sources (with the exception of bioenergy) do not emit GHG directly, and energyefficient technologies can reduce pollution by decreasing the amount of fossil fuelinputs. In the case of CCUS, emissions of the main air pollutants – nitrogen oxides(NOx), sulphur dioxide (SO2) and particulate matter (PM) – depend on the type oftechnology adopted and whether pollution control equipment is installed.

Enhancing energy security
Decarbonisation of the supply mix could also enhance energy security by reducing
dependence on imported oil and gas that can be prone to disruption and pricevolatility. Reduced demand for fossil fuels resulting from increased reliance on local
clean energy sources such as wind and solar power, as well as from more efficientuse of energy, could also relieve pressure on energy prices, making energy more
affordable for households and businesses. The long-term trend of electrification andthe rising share of variable renewable technologies in electricity generation are
shifting the focus of energy security to the reliability and resilience of electricity
systems, which will become increasingly important to economic development andprosperity. This highlights the importance of technological advances in providing
electricity system flexibility, as well as of adequate investment in all aspects ofelectricity generation and transmission and distribution infrastructure.

Energy and emission trends and drivers
The global energy system is akin to a tanker: it has enormous momentum and takes
a lot of time to change direction. Analysis of historical trends in energy supply anduse and associated GHG emissions shows that they follow very steady long-term
paths. Most changes have occurred very gradually. Technology development andmarket introduction have taken time even when there has been a spike of interest in
the use of particular energy technologies, such as the boom in the construction of
nuclear power reactors in the 1970s and 1980s, the upsurge in combined-cycle gas
turbines (CCGTs) in the 1990s, wind turbines in the 2000s and solar photovoltaic (PV)panels in the 2010s. This is reflected in the long-term trends in energy-related CO2
emissions: the steady growth in renewables has not been enough to offset continued

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increases in emissions from the use of fossil fuels.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Global energy trends
The link between prosperity and energy use is a two-way
streetEnergy has been central to economic development, and global energy use, GDP and
population have all risen sharply since the beginning of the 19th century. Total
primary energy use worldwide reached 14 400 million tonnes of oil equivalent (Mtoe)
in 2019, 45% higher than in 2000 and an estimated 16-fold higher than in 1900
(Figure 1.1). GDP has increased by 160% and by 80% on a per capita basis since 1990.
The number of people in the world swelled from around 1 billion in 1800 to roughly
7.7 billion today. Population growth accelerated in the first half of the 20th century
to peak at around 2% per year in the late 1960s but since has slowed to an estimated1.1% in 2019 (UNPD, 2019).
The inexorable increase in global energy use since the end of the 18th century has
been at once the driver and the effect of economic development. Energy use
however has generally increased more slowly than GDP (which is linked, in turn, topopulation) as a result of structural economic shifts, saturation effects and efficiency
gains. Over the period 2000-19, for every one percentage point rise in global GDP(expressed in real purchasing power parity [PPP] terms), energy demand increased
by around 0.6% (Figure 1.1). In other words, energy intensity – energy consumption
per unit of GDP – has been declining steadily. Today, the world needs 20% less energy
to produce one dollar of economic output than it did only 19 years ago.

Index (1950=100)

Global total primary energy demand, population and GDP, 1950-2019
1 500

GDP

1 250

TPED

1 000
GDP per
capita750

Population

500
TPED percapita

250
0
1950

1960

1970

1980

1990

2000

2010

2019

TPED perGDP (energy
intensity)

IEA 2020. All rights reserved.
Note: TPED = total primary energy demand.

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Energy demand has historically been driven by GDP and population, reaching a sevenfold
increase from 1950.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

The precise relationship between GDP and energy demand differs between andwithin countries and regions, as well as over time (Figure 1.2). For advanced
economies, energy intensity has fallen by 1.8% per year since 2000, with modest
growth in GDP being accompanied by nearly unchanged primary energy demand. In
some advanced economies, energy demand has declined. For example, in Europe
energy use peaked in 2006 and was 10% lower in 2019; in the United States, demand
peaked in 2007 and was practically the same value in 2019 while GDP increased. In
emerging economies as a group, annual energy demand increased by about 3.6% in
the 2000-19 period while GDP rose about 6%, with energy intensity falling 1.9% per
year, slightly more rapidly than in advanced countries. Nonetheless, on averageenergy intensity levels remain considerably higher in the emerging economies thanin the advanced ones. For example, 0.12 tonnes of oil equivalent (toe) of energy isneeded to produce USD 1 000 of output on a PPP basis in China, compared with just
0.10 toe in the United States and 0.07 toe in Europe.
Shifts in the economic centre of gravity of the world economy are mirrored by the
global energy market. Most of the 20th century increase in economic activity andenergy needs up to the 1970s occurred in Europe and North America. Since then, theeconomic rise of China and the rest of Asia has been the main driver of energy
demand growth, particularly in recent years. Advanced economies accounted for
38% of global primary energy demand in 2019 compared with 63% in 1971. Emerging
economies in Asia today account for 36% of global energy demand compared withless than 15% at the beginning of the 1970s.
Annual change in GDP, total primary energy demand and energy intensity inselected countries/regions, 2000-19
World
Emerging economies
Advanced economies
China
Middle East
India
Southeast Asia
AfricaLatin America
RussiaUnited States
Europe-2%

GDP

EnergydemandEnergyIntensity
improvement
0%

2%

4%

6%

8%

10%

IEA 2020. All rights reserved.
Note: Energy intensity is measured as total primary energy demand per unit of GDP. GDP is measured in PPP terms.

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Energy intensity of the global economy improved on average by 1.6% per year due tostructural changes, saturation effects and efficiency gains.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

The global energy system has become cleaner in waves
The fuels and technologies used to meet the growth in energy demand over the lastcentury have undergone considerable change as successive waves of technologicalinnovation have affected the energy sector. An early wave of innovation in the 20th
century expanded the use of oil and subsequent waves increased the use of naturalgas, the development of nuclear power and, more recently, non-hydro renewableenergy power generation technologies (Figure 1.3). For the most part, each wave hasbrought forward energy technologies with lower carbon footprints than those thatwent before, i.e. the share of coal in energy supply declining in overall terms for mostof the 20th century after its rapid growth to fuel industrialisation in the 18th and 19th
centuries. However, since the inception of the 21st century, the share of coal in the
global energy supply mix has increased with the economic boom in China. The shareof traditional biomass, which was almost the only source of energy in many parts of
the world a century ago, has steadily declined as the availability of other fuels has
expanded.
Oil is in relative decline: its share of the global energy mix peaked in the mid-1970s
at just under 50%. Broader energy diversification was in evidence in the last quarterof the 20th century with increased use of natural gas and the development of nuclear
power led by the United States, the Russian Federation (“Russia” hereafter), Japanand some European countries. It also saw the link between energy use and GDP start
to weaken with higher energy prices stimulating investment in more efficient energy
technologies. Since 2000, there have been two major energy stories: the rise of
China as an economic power and energy consumer, and the surge in investment inmodern renewables for power generation, especially in Europe, United States, China
and India: it is however worth noting that the increased share of renewables in the
global energy mix has barely offset the declining share of nuclear power over the

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period.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Global primary energy demand by fuel, 1925-2019
1 420 Mtoe

2 100 Mtoe

6 150 Mtoe

10 050 Mtoe

14 410 Mtoe

100%

Modernrenewables
Nuclear80%
Natural gas

60%

Oil

40%

Coal

20%
0%

1925

1950

1975

2000

Traditional
biomass

2019

IEA 2020. All rights reserved.
Note: Modern renewables includes all uses of renewable energy with the exception of traditional use of solid
biomass.

Coal and traditional biomass have declined over the last century while first oil and then gas,
nuclear power and renewables emerged in successive waves. Since 2000 the share of oil
and nuclear has declined while that of coal has increased.

A persistent trend has been the rising share of electricity in final energy use, initiallyin industry and buildings and more recently in the transport sector. This reflects thefact that some energy services, such as lighting and refrigeration, in practice can only
be provided by electrical devices, as well as the environmental, technical andeconomic advantages of electricity. Electricity now accounts for about one-fifth of
total final energy consumption worldwide compared with an estimated one-tenth in1970 and one-sixth in 2000. Consequently, the share of primary energy to produce
electricity has risen from about 22% in 1970 to 37% in 2000 and 38% in 2019.

Technological change has accelerated since 2000
The last two decades have seen a marked acceleration in the pace of technologicalchange, but the share of clean energy sources in the global energy mix remains
relatively small at just under one-fifth in 2019 – a similar share to that at the beginningof the 1970s. The share of modern non-hydro renewables has increased significantly,
especially since 2000, but this has been more than offset by a decline in the share of
nuclear (Figure 1.4). Bioenergy remains the single largest category of low-carbon
energy sources, accounting for 9% of total primary energy demand in 2019 (with aroughly equal split between traditional biomass and modern bioenergy), followed by
nuclear power (5%), hydropower (3%) and solar and wind (1%). Not all bioenergy is

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clean energy, however, since some of it is used in unsustainable and polluting ways.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Mtoe

Primary demand for low-carbon energy sources, 2000-19
3 000

30%

Other

2 500

25%

Wind

2 000

20%

Solar

1 500

15%

1 000

10%

500

5%

0
2000

2005

2010

2015

Hydro
Nuclear
Bioenergy
Low-carbon share in
total demand (right
axis)

2019

IEA 2020. All rights reserved.
Notes: Mtoe = million tonnes of oil equivalent. Other includes geothermal and marine energy.

Bioenergy remains the single largest category of renewables, though solar PV and wind
power have increased the fastest in recent years.

Technological change in the power sector
The overall share of clean fuels in total power generation rose steadily through the1970s and 1980s, fell back in the 2000s as coal-fired generation in Asia surged, thenstarted to rise again in 2013. Coal accounted for 38% of global electricity generationin 2019 – just one percentage point lower than in 2000 – but in 2019 more of it was
generated in new plants employing supercritical, ultra-supercritical and othertechnologies that achieve a higher thermal efficiency than traditional subcritical
combustion technology and thus emit less CO2 per kilowatt-hour (kWh) generated.
The share of subcritical plants in total coal-fired power generation worldwide fell
from 75% in 2000 to around 40% in 2019, and a number of the most inefficient plants
have been shut in recent years, notably in China.
The expansion of renewables-based power generation technologies has been a majorclean energy technology success story. Investment in wind power took off in the late
1990s, and wind power now accounts for over 5% of all the power generated on theplanet. The boom in solar PV started later but has increased at a rapid pace in recent
years. Solar PV now meets over 2.5% of global electricity needs, with generation
having increased by around 25% in 2019 to over 710 terawatt-hours (TWh). Dramatic
declines in the cost of wind turbines and solar PV panels in recent years have boosted
investment: solar PV costs have fallen by close to 80% since 2010 (Figure 1.5). In
many cases, both technologies are now cost-competitive with conventional thermal
generating options, including gas-fired CCGTs (IEA, 2019b). Their success has its

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origins in R&D efforts that date back decades, supported by significant amounts ofEnergy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

public funding, and their commercialisation around the world has been underpinned
by a mix of various regulatory and economic instruments, including feed-in tariffs
and minimum targets for generation from renewables in electricity systems (seeChapter 6).
Reduction in capital cost since 2010 for PV and wind power generation
technologies
100%

80%

60%

40%

20%

0%

Solar PV

Wind onshore

Wind offshore

IEA 2020. All rights reserved.
Source: Based on IEA (2019b).

Significant cost reductions in solar PV and wind technologies have led to a major shift ininvestment and a rapid transformation of the generating mix.

The other main change in the power sector since 2000 has been the stagnation of
nuclear power, with a sharp slowdown in the rate of commissioning new reactors,
especially in advanced economies. The world's first nuclear power plant to generate
electricity for the grid started operation in the Soviet Union in 1954. The constructionof nuclear reactors worldwide surged in the 1960s and 1970s, driven by governmentson the back of technological progress and rising oil prices that led many countries todiversify their power mix. The number of construction starts for new nuclear power
plants slumped in the late 1980s and 1990s in the wake of lower fossil fuel prices andaccidents at Three Mile Island and Chernobyl, but started to pick up again in the late
2000s, mainly in emerging economies. Interest in building new nuclear plants thenfell again after the Fukushima-Daiichi nuclear accident (IEA, 2019c). Today there are
54 nuclear power reactors under construction, 39 of which are in emerging
economies (IAEA, 2020).

The global supply of biofuels – liquid transport fuels produced from renewablebioenergy feedstock – has expanded steadily since the 2000s, mainly in response to

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Technological change in alternative fuels

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of playpolicy incentives such as blending mandates and production targets aimed atdiversifying transport fuel use and reducing its environmental impact. Except inBrazil, however, they remain more expensive to produce than conventional oil-based
fuels. They met around 3% of global road transport fuel needs in 2019, up from lessthan 1% in 2000, driven to a large extent by Brazil, United States and European Union:
they also accounted for around 0.01% of total aviation fuel consumption throughblending.
The use of biofuels for transport is by no means new. The first diesel engines were
designed to run on peanut oil, and the Ford Model T produced over the first three
decades of the 20th century was designed to use hemp-derived biofuels. Today,
most biofuel supply comes from conventional ethanol and biodiesel production
processes that were developed decades ago, though recent advances have
improved the performance of plants and lowered costs. A growing share of biofuels
now comes from advanced technologies, notably hydrotreated vegetable oil
produced from waste feedstock, which accounted for 8% of biofuels production in
2018. By contrast, investment in lignocellulosic ethanol production, which makes useof farm and forestry waste, has not taken off as originally expected. The process of
converting lignocellulosic materials to ethanol is more complex than that used toconvert starch and sugars into ethanol, and the future of this type of biofuel hinges
on the success of research and development (R&D) aimed at lowering costs at every
stage of the lignocellulosic ethanol production and supply chain, as well as on its
integration with conventional ethanol plants and other biorefineries (see Chapter 5
for the use of biofuels in the transport sector).
Hydrogen technologies have received considerable attention in recent years. Like
biofuels, hydrogen is not “new” – it was used to fuel early internal combustion
engines over 200 years ago, to contribute to the composition of city gas from the18th century till the first half of the 20th century, and to provide lift to balloons andairships in the 18th and 19th centuries, while its use for non-energy purposes as input
to ammonia fertiliser production (derived from fossil fuels and, earlier, fromelectricity and water) has helped feed a growing global population. Since the mid20th century, it has also been used in oil refining for hydrogenation purposes.
Hydrogen today is mainly used for oil refining and as feedstock in the chemicalindustry. Almost all of it still comes from fossil fuels, emitting today more than
800 million tonnes of carbon dioxide (MtCO2).
At the point of use, hydrogen can be burned or converted in such a way as to produce
no harmful emissions 2 and, if produced without emitting any GHG, it has the potential
to make a huge contribution to a sustainable energy system. The principal barrier tothe uptake of low-carbon hydrogen is its high cost, which is partly the result of thelack of economy of scale in production, supply and use (IEA, 2019d). Another main
challenge is the long-standing problem of how to develop supply infrastructure intandem with end-use equipment: why develop hydrogen cars if there is noNOx emission however may increase in hydrogen rich fuel combustion. (See, for example, www.hy4heat.info/ formore on the challenges to reduce NOx emissions of hydrogen appliances)

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2

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

distribution network, and why develop a distribution network if there are no hydrogencars? Technical and trade regulations also have hindered the development of thehydrogen industry in some cases. Today, however, low-carbon hydrogen is enjoying
unprecedented political and business momentum, with the number of policies andprojects around the world expanding rapidly, and the costs of key technologies suchas electrolysers falling as production increases. The case for hydrogen to play a majorrole in a future cleaner energy system is becoming increasingly clear, especially insectors where CO2 emissions are hard to reduce (see Chapters 2-5).

Box 1.2

The shale revolution?

Technology change in the energy sector has not been limited to clean energy
technologies. One major supply-side development over the past two decades has
been the remarkable boom in production of shale gas and oil in the United States,
which has transformed the country from a major importer to a net exporter of both
fuels. Shale gas output reached a record high of 680 billion cubic metres (bcm) in
2019, contributing more than two-thirds of total US natural gas supply – up from
3 bcm, or less than 1%, in 2000. This boom spurred a similar surge in tight oil
production, which took off in the early 2010s and surpassed 7 million barrels per day(mb/d) in 2019 – more than 40% of US crude oil output and 8% of world production.
One effect of the surge in shale gas output has been to lower natural gas prices acrossNorth America, boosting demand for gas in power generation, pushing out coal andlowering CO2 and pollutant emissions.

1 200

mb/d

bcm

US production of shale oil* and gas, 2000-19

1 000

20
16

800

12

600
8
400
4

200
0
2000

2005

2010

2015

Shale Gas2019
Tight Oil

0
2000

2005

2010

2015

2019

Other production

IEA 2020. All rights reserved.

PAGE | 43

IEA. All rights reserved.

* Light crude oil contained in low permeability shale or tight sandstone formations.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

The shale boom resulted from a number of factors, including technological innovation(e.g. horizontal drilling, hydraulic fracturing) that stemmed in large part fromgovernment R&D programmes initiated in the late 1970s. Other government
incentives, including tax credits for unconventional production, also helped to makeinvestment in shale gas profitable, together with private land and mineral rights
ownership, high natural gas prices in the 2000s, favourable geology, the availabilityof abundant water resources and well-developed gas pipeline infrastructure. The
techniques that were first developed for gas and the subsequent cost reductions thatcame with learning and the scaling up of production were transferred to the oil sector,
yielding equally spectacular results. Shale production outside the United States has
not yet developed to anywhere near the same extent because geological, operational,
regulatory and economic factors (as well as social acceptance in some regions) havenot been as favourable.

Technological change in energy end use
On the demand side, technical gains in the efficiency of energy end use – measured
as the amount of energy needed to provide a given energy service, such as a lumenof lighting or a joule of mechanical energy – have been the primary way to temper
the growth in global energy use to fuel rising economic activity over the past two
decades. We estimate that, if these gains had not occurred since 2000, energy
demand in the major economies that account for some 70% of global demand would
have been a thumping 1 200 Mtoe, or 19%, higher. Structural economic changes,
involving a shift to less energy-intensive services and lighter industry, also helped toslow overall demand growth, even though these structural changes actuallycontributed to demand increases in transport and buildings over the period. The
improvement in efficiency gains is reflected in the downward historical trend inenergy intensity across most sectors, though there are signs of a slowdown in some,notably the services and residential sectors (Figure 1.6). This slowdown, in part, isbecause of an easing of policy action, particularly with respect to the scope and

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IEA. All rights reserved.

strength of efficiency standards (IEA, 2019e).

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of playIndex (2000=100)

Global average energy intensity in selected end-use sectors, 2000-19
120

Iron and steel

100

Chemicals

80

Cement60

Residential

40

Services

20

Light-duty
vehicles

0
2000

2005

2010

2015

2019

Air travel

IEA 2020. All rights reserved.
Notes: Intensity is measured as energy use per dollar of value added in the industry and services sectors; per tonneof steel in the iron and steel sub-sectors; per tonne of primary chemicals in the chemical and petrochemical subsectors; per tonne of clinker in the cement sub-sector; per square metre of floor space in the residential sector; andper passenger kilometre in the transport sector. Cement here refers to the energy intensity of clinker, which is themost energy-intensive portion of cement production and where energy-efficient equipment changes can have thelargest effect.

Improvements in energy intensity over two decades are diminishing in some sectors
reflecting structural shifts in economies and weakening efficiency policy efforts,
particularly for performance standards.

Policy has been a major driver of energy efficiency improvements. In the buildings
sector, for example, appliances and equipment subject to minimum energy
performance standards accounted for one-third of the energy used in 2019 (IEA,
2020a) and the stringency of the mandatory policies has risen in most countries since
2000. In the case of LEDs, which use far less electricity energy than incandescent,fluorescent or halogen lightbulbs, demand increased in the late 2000s in response
to lower prices made possible by technical advances and economies of scale, as well
as by policies to limit the sale of the most inefficient incandescent bulbs (seeChapter 7). Market-based solutions, such as using bulk procurement and energy
service providers, have also helped drive LED costs down, boosting uptake. India has
demonstrated that it is possible to deploy LEDs rapidly on a large scale when the rightfinancing and market mechanisms are in place. India has one of the largest LED
markets in the world thanks to the national Unnat Jyoti by Affordable LEDs for All
programme, which uses bulk procurement to offer LED bulbs at low prices. LEDs now
make up nearly half of total residential lightbulb sales worldwide, and more than
350 million LED lamps have been sold since 2015.
In transport, vehicle fuel economy has improved enormously in recent years, thanks
in large part to fuel efficiency and emissions standards. The global average fuel

PAGE | 45

IEA. All rights reserved.

consumption of newly registered light-duty vehicles (LDV) dropped from 8.8 litres

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

per 100 kilometres (L/100 km) in 2005 to 7.2 L/100 km in 2017, driven by standards
that today cover around 85% of global car sales (IEA, 2019f). Policy played a big rolein stimulating the development and commercialisation of technologies that madethis possible. In recent years, however, improvements in fuel economy thanks tomore efficient powertrains, lighter materials and other technical improvements havebeen partly offset by a shift to larger vehicles, including sport utility vehicles (SUVs),
which motorists increasingly prefer (Figure 1.7). SUVs, which now account for around
15% of LDV sales worldwide compared with just 20% in 2010, consume a quarter moreenergy on average than medium-size cars. 3
Light-duty vehicle market share by size segment, 2005-17
100%

Van/LCV
Large
SUV/pickup
Small
SUV/pickup
Large car

80%
60%
40%

Medium car
City car

20%

Emerging

2017

2015

2013

2011

2009

2007

2005

2017

2015

2013

2011

2009

2007

2005

2015

2017

2013

2011

Advanced < USD 1/L

2009

2005

Advanced ≥ USD 1/L

2007

2005
2007
2009
2011
2013
2015
2017

Unspecified
0%

World

IEA 2020. All rights reserved.
Notes: LDV = light-duty vehicle; LCV = light commercial vehicle; pickup = pickup truck. Advanced < USD 1/L=
advanced economies with gasoline prices below USD 1 per litre; Advanced > USD 1/L = advanced economies withgasoline prices above USD 1 per litre. Unspecified is the share of vehicles where there are no data on the size
segment; the values are not included in the denominator to calculate market shares.
Source: IEA analysis based on IHS Markit (2018).

Small SUVs and pickup trucks have been gaining LDV market share over the last decade inadvanced and emerging economies.

Electric cars have experienced a decade of rapid growth. Global sales increased bymore than 60% every year since 2014 except for 2019, when growth slowed to 6% as
the regulatory environment changed in China and passenger car sales contracted in
major markets. Even so, electric vehicle sales reached 2.1 million in 2019, accountingfor 2.6% of the global car market. Policy support has played a major role, withgenerous purchase subsidies in many countries helping to overcome cost barriers.

www.iea.org/commentaries/growing-preference-for-suvs-challenges-emissions-reductionsin-passenger-car-market.

PAGE | 46

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3

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Performance and cost improvements in lithium-ion batteries – the key technology
today to enable road vehicle electrification – also have made an important
contribution.

History teaches that energy transition takes a long time
What does this brief sweep through energy history reveal? It shows that large- scaleenergy transitions are possible and have been realised over the last century.
Nevertheless it demonstrates that transformation may take decades to have a major
impact on relative fuel shares. Energy demand – driven by rapidly growing
populations and economies – was constantly rising, so that new fuels andtechnologies at the early stages of their deployment largely helped to meet additional
demand rather than replacing existing technologies The sheer size of the global
energy system means that, today more than ever, any new technology needs to be
deployed rapidly and on a huge scale to make any dent in the shares of the existing
ones. It took two to three decades to move from the first commercialisation of energy
technologies to just 2.5-3% market share, and decades more to reach widespread
deployment (Bento, Wilson and Anadon, 2018; Gross et al., 2015). The time needed
to build large-scale infrastructure, and to see benefits for innovative technologies
from learning and scale economies, have also constrained the pace of energy
transitions, as has the reluctance to abandon sunk investments before the end of theuseful life of the assets (Grubler, 2012; Smil, 2010).
Another important lesson is that clean energy technology progress has been mostvisible in energy supply, as well as electricity and other fuel transformation. In energy
end use, progress has been made but there are few breakthroughs at the scale ofsolar PV and wind in power generation. Given the relative size of emissions stemmingfrom the use of coal, oil and gas in the industry, transport and buildings sectors,
technology progress will need to dramatically accelerate to meet environmental
goals.

Covid-19: A threat or an opportunity to boost clean energy
technologies?
For technologies that are currently at an early stage of adoption such as renewables
and electric cars, indications suggest a degree of resilience in the face of the Covid
pandemic and scope for progress to accelerate in the months ahead.
The current IEA forecast is that additions of renewable electricity capacity will decline
by 13% in 2020 compared with 2019 due to delays in construction activity fromsupply chain disruptions, lockdown measures and social‑distancing guidelines, aswell as financing challenges. However, the majority of the delayed projects are

PAGE | 47

IEA. All rights reserved.

expected to come online in 2021 and lead to a rebound in capacity additions to 2019

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of playlevels. At the same time, renewable electricity generation is expected to increase bynearly 7% and reach almost 30% of electricity supply globally, largely because of the
low operating costs of renewables and preferential access in many power systems.
In some countries, the share of variable renewables in overall electricity supply
during the months of lockdown was particularly high, providing important
operational insights for the future.
Electric car sales are likely to be resilient to the impacts from the Covid-19 crisis,
particularly in Europe, where tougher CO2 emissions performance standards for new
passenger cars and vans came into effect at the start of 2020. Economic stimulus
measures in many countries could speed up the transition to clean energy
technologies in power generation and passenger transport compared to what would
have been expected before the pandemic. IEA forecasts expect global sales of
conventional car to drop by 15% in 2020 relative to the previous year, with electriccars sales coming in at about the same level as 2019, and perhaps even higher,
depending on the pace of economic recovery, and the nature and extent of
economic stimulus measures.
The impacts of the pandemic may vary for technologies that currently are at an earlier
stage of deployment, in particular those at a demonstration or prototype stage or stillin the laboratory. Key risks include pressures on public and private budgets, a riskier
environment for clean energy venture capital and disrupted global supply chains.
Public R&D is likely to hold up better than private R&D, and there is a reasonablechance that the governments of major economies will seek to boost innovation
funding as a response to the crisis. Many companies face lower revenue and a lackof cash flow for capital investments to meet near-term growth targets, but there iscurrently little sign of backsliding on the part of those that have made commitments
to reduce their emissions intensity and test new energy technologies. When the IEA
surveyed industrial contacts in May 2020 for gauging the likely impacts of Covid-19
on their ability to support innovation to achieve longer term goals, responses
indicated no change in long-term commitments and an expectation that their R&D
budgets would be resilient, even though overall sentiment about the impact of thepandemic on the full range of innovation activities was gloomy (IEA, 2020b).
The months ahead present a unique opportunity to double down on progress on all
clean energy technologies. While near-term responses to the Covid crisis haveunderstandably focussed on mitigating health, employment and liquidity risks,
attention is now turning to the speed of the recovery, creation of new jobs and thefuture shape of the economy. Economic stimulus plans being proposed in countries
around the world offer a once-in-a-generation opportunity to boost clean energy
technology progress. These plans may offer a supportive environment to new players

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IEA. All rights reserved.

with new ideas aiming to displace high-carbon producers and to scale-up quickly.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Implications for energy-related CO2 emissions
The inexorable growth in energy demand and the continued heavy reliance on fossil
fuels have led to large increases in global CO2 emissions, despite major technologydriven improvements in energy efficiency and the rapid growth of renewables for
power generation. Between the middle of the 20th century and the first decade of
the 21st century, global energy-related CO2 emissions – i.e. emissions from the
combustion of fossil energy in transformation processes such as power generationand direct end uses – increased steadily, except during periods of major economic
disruption, such as the oil crisis in 1973 and the global financial crisis in 2008-09(Figure 1.8).

Index (1971=100)

Global primary energy demand and energy-related CO2 emissions, 1971-2020
300
Total primaryenergy demand

250
200

Energy-related
CO₂ emissions

150
100

CO₂ intensity ofprimary energy

50
0
1971

1980

1990

2000

2010

2020
IEA 2020. All rights reserved.

Energy-related CO2 emissions generally have risen with energy demand since the 1970s;
the Covid-19 is set to cause the largest decline in annual emissions over that period.

CO2 emissions from fossil fuel combustion levelled off between 2014 and 2016 evenin a period of robust economic growth as a result of a sudden slowdown in coal use
in Asia (largely due to energy efficiency gains) and a surge in non-hydro renewables
generation worldwide. But CO2 emissions edged up in 2017 and held steady at around
33 Gt in 2018 and 2019. However, the Covid-19 pandemic has rocked this trend
downward: it is expected to lead to the largest ever annual decline in energy-related

PAGE | 49

IEA. All rights reserved.

CO2 emissions in 2020 (Box 1.3).

Energy Technology Perspectives 2020

Box 1.3

Chapter 1. Clean energy technologies – the state of play

What is the expected impact of Covid-19 on CO2 emissions?

The outbreak of the Covid-19 pandemic led to a drastic curtailment worldwide of
economic activity and mobility during the first half of 2020, pushing down global
energy demand. IEA analysis suggests that if lockdowns last for many more months
and economic recoveries are slow, global annual energy demand could drop by 6%
in 2020, wiping out energy demand growth registered in the last five years. If efforts
to curb the spread of the virus and restart economies are more successful, the decline
in energy demand could be limited to under 4%. However a bumpier restart,
disruption to global supply chains, and ongoing spread of Covid-19 second half of2020 could suppress energy demand even further.
The expected impact on energy demand is generally largest for fossil fuels, and global
CO2 emissions are expected to fall to 30.6 Gt in 2020, almost 8% lower than in 2019.
This would be the lowest level since 2010. Such a reduction would be six-times larger
than the previous record reduction of 0.4 Gt in 2009 due to the financial crisis, andtwice as large as the combined total of all previous reductions since the end of WorldWar II.
Source: IEA (2020c).

Switching to gas and renewables has slowed the growth inCO2 emissions
Coal remains by far the biggest contributor to global energy-related CO2 emissions
as it is the most carbon-intensive fossil fuel 4 and the second-largest energy source
worldwide (Figure 1.9). Coal accounted for 45% of total CO2 emissions in 2019,
followed by oil (34%) and natural gas (22%). Apart from a brief hiatus in the 2000s,
the share of coal in the global energy mix has been declining in recent decades, whilethat of oil has been broadly flat and that of gas has been rising steadily. The IEA
calculates that coal has been the single leading cause of global warming: CO2
emitted from coal combustion is responsible for more than 0.3°C of the 1°C increasein global average annual surface temperatures above pre-industrial levels. 5

The carbon intensity (or emission factor) measures the carbon content and, therefore, the amount of CO2 emitted
per energy content of fossil fuels. On average, the carbon intensity of coal is roughly three-quarters higher than thatof natural gas and around one-third higher than oil. The precise factors vary according to the quality and category ofeach type of fuel.
5
www.iea.org/reports/global-energy-and-co2-status-report-2019/emissions#abstract.

PAGE | 50

IEA. All rights reserved.

4

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

GtCO2

Global energy-related CO2 emissions by fuel (left) and sector (right), 2000-19
Emissions by fuel (2000-19)

35

Emissions by sector (2019)
Other 6%30

Buildings
9%

25

Power
coal 28%

20
15

Industry
23%

10
5
0
2000
Power coal

2005

2010

Other coal use

2015

2019

Transport
24%

Power
gas 9%
Power oil2%

Other fossil fuels
IEA 2020. All rights reserved.

Power generation, where coal use is increasingly concentrated, is the biggest emitter of
CO2 worldwide, accounting for about 40% of total emissions.

The consumption of natural gas, which emits less CO2 than coal and oil per unit ofenergy, has been rising more rapidly than coal consumption in recent years, which
has lowered the average carbon intensity of global energy use. The increased use ofrenewables, mainly in power generation in China, Europe and United States, has
further reduced the carbon intensity of energy as have the continuing use of nuclear
power and gains in energy efficiency. In the power sector, the global average carbon
intensity of electricity generated in 2019 was 470 grammes of CO2/kWh – 12% lower
than in 2000. Cumulative emissions savings related to increased contribution ofrenewables in power generation since 2000 are estimated at 16 Gt. The equivalent
cumulative emissions savings figure related to nuclear power generation is 30 Gt.
Emissions savings from the use of other prominent clean energy technologies suchas electric vehicles (53 million tonnes [Mt] in 2019) or LEDs (100 Mt in 2019) have so
far been limited in comparison. Energy efficiency gains in the power sector and invarious end uses have also made a significant difference. For instance, efficiency
improvements to coal-fired power plants in China since 2005 have resulted incumulative CO2 emissions savings of over 6 Gt.

Emission trends diverge across regions
There is considerable variation in CO2 emission trends across countries and regions.
Since 2000, increases in CO2 emissions generally have slowed and, in some cases,
started to decline in the advanced economies due to dampening of primary energy
demand, a shift to clean energy sources and gains in energy efficiency. Between

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IEA. All rights reserved.

2000 and 2019, CO2 emissions from energy dropped by 18% in Europe, 17% in theEnergy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

United States and 13% in Japan. By contrast, CO2 emissions in the emerging
economies have risen briskly, albeit at a slower pace in the last few years. Emissions
between 2000 and 2019 tripled in China and more than doubled in other emerging
economies in Asia. Per capita emissions in emerging economies however remain
substantially lower than levels in advanced economies.
Emerging economies in Asia have been the principal driver of global CO2 emissions
growth for the past two decades (Figure 1.10). China alone contributed just under
two-thirds of the increase in global emissions between 2000 and 2019: otheremerging economies in Asia accounted for another 25%. China’s emissions
skyrocketed in the decade up to 2013 – the result of an unprecedented surge inpower generation capacity and industrial output, largely powered by coal. With
9.8 Gt of emissions in 2019, China accounted for 30% of global CO2 emissions – upfrom just 14% in 2000. However, there are signs of a slowdown in emissions growth
as the Chinese economy matures, mirroring what happened in most advanced
economies in the 2000s. China’s CO2 emissions fell between 2013 and 2016 due tolower emissions from industry and the power sector, though they rebounded
thereafter.
Global energy-related CO2 emissions by region
0

5

10

15

20

25

30

35

World
Emerging economies
Advanced economies
2000

China
Middle East
India

2019

Southeast Asia
AfricaLatin America

Per capita(sec. axis)

RussiaUnited States
Europe
0

5

10

15

20

25

30

35
GtCO2 (tCO2/cap)

IEA 2020. All rights reserved.
Note: tCO2/cap = tonnes of carbon dioxide per capita.

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IEA. All rights reserved.

Emissions have started to fall in most advanced economies as a result of a slowdown inprimary energy demand, a switch to clean energy and gains in efficiency, but they are stillrising almost everywhere else.

Energy Technology Perspectives 2020

Box 1.4

Chapter 1. Clean energy technologies – the state of play

How technology has cut air pollutant emissions from power plants: the US
exampleWhile the carbon intensity of US coal-fired power plants has barely changed over the past
three decades, enormous progress has been made in reducing emissions of the main air
pollutants from those plants, in large part thanks to the installation of pollution control
equipment in response to stringent air quality regulations. Between 1990 and 2018, emissionsof sulphur dioxide (SO2) and nitrogen oxides (NOx) from coal-fired power plants plummetedby around 90% A reduction in the share of coal plants in total power generation over the last
decade in favour of less-polluting gas plants as well as wind and solar power also helped toreduce overall air pollutant emissions.

Index (1990=100)

Emissions from US coal-fired power plants, 1990-2018
140
Coal power

120
100

CO₂

80
60

SO₂

40
NOₓ

20
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

IEA 2020. All rights reserved.
Source: US EIA (2020).

The implementation of environmental regulations under the Clean Air Act Amendments(CAAA) of 1990 gave the initial impetus to efforts to cut pollution from coal plants. The CAAA
gave rise to several regulations to reduce pollution, notably the Mercury and Air Toxics
Standards; the Acid Rain Program, which introduced a cap and trade programme foremissions of SO2 and NOx from coal and fuel oil-fired power plants in phases between 19952010; and the Clean Air Interstate Rule (replaced by the Cross-State Air Pollution Rule in 2015),
which required 27 states in the east to file implementation plans to reduce emissions further.
The main approach adopted by generators to meet the requirements was to install pollution
control equipment at existing plants, including flue-gas desulphurisation (scrubber) and dry
sorbent injection equipment, low-NOx burners and selective catalytic reduction equipment.
In some cases, generators switched to using lower sulphur coals or closed capacity where it

PAGE | 53

IEA. All rights reserved.

was uneconomic to invest in pollution control facilities.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Similar progress has been made in other advanced countries, notably in Europe and Japan. In
China, where the surge in coal-fired generation in recent decades has led to severe air
pollution, the government introduced Ultra-low Emissions Standards in 2014, requiring coalplants progressively to limit air pollutant emissions. As a result, emissions of SO2, NOx and PM
in China dropped by 65%, 60% and 72% respectively between 2014 and 2017, greatly
improving air quality and its consequences for public health. 6

What will happen to today’s CO2 emissions
tomorrow?
So far, progress in deploying clean energy technologies has not been sufficient tobring about a peak in energy-related CO2 emissions, even with the strong growth inrenewables for power generation and the millions of electric vehicles on the road in
the last decade. This is, in part, because of strong growth in energy demand, but also
because of existing infrastructure and its emissions. Understanding the dynamics ofthe various sectors and technologies that comprise the existing infrastructure isimportant in the context of efforts to accelerate the use of clean energy technology.

Emissions from existing infrastructure
The amount and type of energy that is used worldwide reflects investments alreadymade in the vast range of physical assets that produce, transport and consume
energy. It is not possible to accurately predict the future energy consumption andsubsequent emissions of these assets, as there is considerable scope for adjusting
the quantities and types of energy carriers that they will consume and the span of
their operational lives. Decisions about whether to cease, continue or extend
operation of a given asset will be based predominantly on its operational cost relative
to existing or emerging alternatives, and/or the ability to obtain a return in a given
economic and regulatory context. However, examining the likely emissions
trajectories of various sectors and equipment is a useful starting point in an attempt
to understand the outlook for emissions in the coming decades, and to estimate theroom for manoeuvre.
Absent investment in new fossil-fuelled assets, emissions from the global energy
system would decline, but the decline would take time (Figure 1.11). If operated under
the conditions typically observed in each sub-sector, existing energy infrastructure

6

www.ucl.ac.uk/news/2019/oct/china-track-meet-its-ultra-low-emissions-goals-2020.

PAGE | 54

IEA. All rights reserved.

could lead to nearly 750 GtCO2 in emissions between now and 2070, in line with otherEnergy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of playestimates (Tong et al., 2019). This would exhaust the bulk of the remaining CO2
budget that the IPCC estimates is compatible with limiting the global temperaturerise to “well below 2°C”. There are likely to be additional emissions as well from new
fossil fuel infrastructure during the next decade in the absence of sufficiently
developed alternative technologies in certain sub-sectors. Clearly, the details of how
we deal with existing infrastructure are critical to consider in any effort to meet global
climate commitments.

GtCO2 /yrGlobal CO2 emissions from existing energy infrastructure by sub-sector,
2019-70
40

Other

30

30

Buildings

Rail, 3Aviation, 11

35

Rail
Aviation

Shipping, 12

25

Shipping

2/3 wheelers, 1
Buses, 8

Two-three wheelers

25

21
29

Buses

20

42
28
60

Road freight

15
10
5
0
2019

Passenger vehicles
Other industry

67

Chemicals

82

CementSteel

328

Other power
Coal power
2030

2040

2050

2060

2070

IEA 2020. All rights reserved.
Notes: Includes assets under construction in 2019, the base year of this analysis. Numeric area labels on the graphdenote cumulative emissions quantities by sub-sector in GtCO2. Analysis includes industrial process emissions, andemissions are accounted for on a direct basis. Annual operating hours over the remaining lifetime are based on thelevel in 2019.

Assuming typical lifetimes and operating regimes, cumulative emissions from existingenergy infrastructure could reach nearly 750 GtCO2 by 2070.

The bulk of cumulative emissions from existing infrastructure is expected to comefrom the power (55%) and heavy industry (26%) sectors, reflecting their large sharesof emissions today and the long lifetimes their assets, e.g. power stations andmanufacturing facilities (Figure 1.12). Transport accounts for around a further 11%,
with two-thirds stemming from road transport, particularly road freight andpassenger vehicles. While many households in advanced economies may replace
their vehicles every 5-10 years, these cars can have lengthy “second lives”, whether
in the same market or after export to another country. Direct emissions from the

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IEA. All rights reserved.

buildings sector account for another 3%.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Typical lifetimes for key energy sector assets
Fuel transformation / distribution

Large hydropower plant
Nuclear power plant
Coal-fired power plant
Transmission and distribution networks
Pipelines
Combined-cycle gas-turbine plant
Oil refineries
Offshore wind turbines
Onshore wind turbines
Solar photovoltaics

End-use equipment

Urban infrastructure
Building stock
Cement plant
Steel plant
Petrochemical plant
Aircraft
Manufacturing equipment
Residential space heating and cooling
Commercial heating and coolingRefueling stations
Passenger cars
Household appliances
Residential water heating
Consumer electronics
Light bulbs (fluorescent)
Office equipment
Light bulbs (incandescent)0Lifetime range

25

50

Typical lifetime

75

100

125

150

175

200

225

250

Years
IEA 2020. All rights reserved.

Notes: The red markers show expectations of average lifetimes while the blue bars show typical ranges of actual
operation in years, irrespective of the need for interim retrofits, component replacement and refurbishments.
“Buildings” refers to building structures, not the energy consuming equipment housed within. Examples of “urban
infrastructure” assets include pavement, bridges and sewer systems.

The operating lifetime of some assets, especially those that produce materials or transform
energy, can span several decades: this means that it could be a long time until they are
replaced by cleaner and more efficient ones.

Around 80% of the expected cumulative emissions from the power sector are fromcoal plants. By 2050, annual emissions from existing coal plants would be 5.9 Gt –nearly 70% of current levels – absent early retirement or other emission reduction
measures. Around 75% of cumulative power sector emissions through to 2070 are
related to projects in Asia, with China alone accounting for almost 50% of all
cumulative CO2 emissions. More coal plants are still planned, although final
investment decisions for new coal plants have fallen by about 80% over the past three

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IEA. All rights reserved.

years, from about 88 gigawatts (GW) in 2015 to around 17 GW in 2019 (IEA, 2020a).

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Industry is the other major contributor to emissions from existing infrastructure, due
to the high energy intensity of the sector, the large share of fossil fuels in energy use
and the relatively long operational lifetimes of production facilities. Of the expected
196 GtCO2 of cumulative emissions from industry, absent early retirement or othermeasures, the steel and cement sub-sectors account for around 30% each, and thechemicals sub-sector for around 15%. A complex array of smaller sub-sectors andmanufacturing industries account for the remaining 25%. In the iron and steel
industry, emissions come primarily from the production of iron for primary
steelmaking, and particularly blast furnaces. In the cement sector, the key emitting
process unit is the kiln for producing clinker, which is the active ingredient in cement;in the chemicals sub-sector, ammonia accounts for close to 50% of the cumulativeemissions, methanol and high- value chemicals 7 account for about a quarter each.
Reducing emissions during the coming decades depends on finding ways to reduce
process emissions (i.e. those that result from chemical reactions occurring inindustrial processes rather than from the combustion of fuels); finding alternative
ways to provide the high-temperature heat that is most easily provided by fossil fuels;
and avoiding “carbon leakage” – the migration of energy-intensive industries tocountries with less stringent policies to curb emissions.
The rate of turnover of the energy system’s capital stock strongly influences theopportunities for adopting new energy technologies, including clean ones. That ratevaries considerably across the various sectors and types of equipment. Many
household appliances and office equipment such as computers may be replaced
after a few years, while cars and trucks, heating and cooling systems, and industrial
boilers generally last between one and two decades. But most existing buildings,
roads, railways and airports and many power stations, oil refineries and pipeline
systems are likely still to be in use several decades from now. Existing infrastructure
certainly presents challenges for reducing emissions, but there are also technology
opportunities to be seized (see Chapter 7 for strategies to deal with existing
infrastructure).

Age and distribution of the current asset stock
The scope for replacing the existing energy-related capital stock is determined by
the current age of the existing assets and their typical lifetimes. In key sectors,
particularly power generation, the average age of energy assets is substantially lower
in emerging economies than in advanced economies, reflecting the fact that muchof the investment in these assets has been more recent as their economies weregrowing and industrialising rapidly. For example, around 50% of the installed fossilfired power generation capacity in China was built within the last ten years, and 85%

7High-value chemicals include ethylene, propylene, benzene, toluene and mixed xylenes.

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within the last 20 years. From the point of view of emissions, it is worth noting that

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

500 GW of subcritical coal plants – the least efficient coal technology – have been
added in the last two decades, mainly in China and elsewhere in Asia. Such plants
now account for a quarter of global installed coal-fired capacity.
The average age of fossil fuel-based power plants varies considerably around theworld (Figure 1.13). The average age of coal plants is over 40 years in the UnitedStates and around 35 years in Europe, while it is below 20 years in most Asian
countries, and just 13 years in China. Gas-fired power plants are generally younger:
they are on average less than 20 years old in all major countries with the exceptionof Russia, Japan and United States, reflecting the fact that gas was only introduced
as a fuel for power generation in many countries from the 1990s. Gas plants however
have a shorter technical lifetime than coal plants. Of the 2 100 GW of coal-fired
capacity in operation worldwide today and the 167 GW under construction, around1 440 GW could still be operating in 2050 – 900 GW of it in China. Of the 1 800 GW
of gas power plants in operation today and 110 GW under construction, only 350 GW
are likely to still be opertional in 2050.

GW

Age structure of existing fossil power capacity by region and technology
1 400

1 400

1 200

1 200

1 000

1 000

800

800

600

600

400

400

200

200

0

0
Less
than 10years

United States
India
Middle East

10-20
years

20-30
years

30-40
years

European Union
Japan
Other

40-50
years

more
than 50
years

China
Southeast Asia

Less
than 10
years

10-20
years

20-30
years

Coal subcritical
Coal ultra-supercritical
Natural gas

30-40
years

40-50
years

more
than 50
years

Coal supercritical
Coal otherOil

IEA 2020. All rights reserved.
Notes: Based on fossil fuel power plants in operation in 2018.
Source: Informed by Platts (2020a).

Around a third of existing coal-fired power capacity worldwide was added during the last
decade, and almost a third of that new capacity uses inefficient subcritical technology.

In heavy industry sectors, China again takes centre stage (Figure 1.14). It accounts fornearly 60% of global capacity used to make iron from iron ore – the most energyintensive step in primary steel production. It also accounts for just over half theworld’s kiln capacity in cement production and for around 30% of total production
chemicals sub-sector. The majority of this capacity is at the younger end of the age

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capacity for ammonia, methanol and high-value chemicals (HVCs) combined in theEnergy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of playrange in each asset class, averaging between 10 and 15 years, compared with atypical lifetime of 30 years for chemical plants and 40 years for steel and cement
plants. The range of ages of individual plants within the country varies considerably,
but the output growth over the last 20 years in China’s steel (more than sevenfold)
and cement (nearly fourfold) sub-sectors shows the relatively short timeframe overwhich most of these installations have been added.
Our estimates for the steel industry’s key assets (blast furnaces and direct reducediron [DRI] furnaces) incorporate plant-level information on the years when plants
were most recently refurbished. Taking this information into account implies that
European blast furnaces are among the most recently renewed plants on average (atheme discussed in Chapter 7).
The chemical sub-sector has a more even distribution of capacity both regionally andin terms of age than cement and steel industries. Several chemical facilities havebeen built in recent years in advanced economies such as the United States as wellas in the Middle East. Most of the investment in methanol and HVC capacity has takenplace in regions with access to low cost petrochemical feedstocks, particularly North
America, Middle East and China. The shale revolution has made US ethane (acompound present in natural gas and a key petrochemical feedstock) comparable inprice to ethane in the Middle East, leading to a re-balancing in the geographicalspread of chemical production capacity. Methanol and HVC plants are on averagearound ten years old. Ammonia output growth has been slower than that of HVCs
and methanol, with emerging economies generally adding these facilities early intheir development, in step with agricultural development. Ammonia plants are on

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average 15 years old, and around 16 years old in China.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

Regional average age (yr)Age profile of global production capacity for key industrial sub-sectors
40

Steel (blast furnaces and DRI furnaces)
Russia blast furnaces

30
Recently refurbished
European blast furnaces

Japan blast furnaces

China blast furnaces

20
Middle East DRI furnace

10

Regional average age (yr)

0

0

25

200

400

600

800

1 000

1 200
1 400
Capacity (Mt hot metal)

Cement (kilns)

Japan kilns

20

India kilns
China kilns

Middle East kilns

15
10
5

Regional average age (yr)

0

25

0

500

1 000

1 500

2 000

2 500

Chemicals (ammonia, methanol and HVC production)

3 500
Capacity (Mt clinker)
China ammonia

India ammonia

20
Middle East ammonia

Middle East HVCs

15

10

3 000

Middle East methanol
China HVCs

China methanol

5

0

0

Asia Pacific100
Eurasia200
Middle East

Africa300
EuropeCSAM

400
North America

500

600

Capacity (Mt primary chemicals)

IEA 2020. All rights reserved.
Notes: CSAM = Central and South America. HVC = high-value chemicals. Average ages are calculated by region or
country, depending on data availability, for 2019. Steel data are calculated based on plant-level data, while cement,ammonia, methanol and HVC calculations are based on historic data on capacity additions at the national level.

China’s middling-to-young production capacity accounts for upwards of 50% of the global
total in key industrial sub-sectors. India and the Middle East are also key regions.

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Sources: Informed by capacity and production data from Steel Institute (2018), Wood Mackenzie (2018), IFA (2020),
Platts (2020b), and USGS (2020).

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

The energy conversion devices that lead to direct emissions in the buildings sector(e.g. natural gas combustion for space and water heating) have a short lifetime
compared with power plants and industrial assets: they tend to last for around15 years. However, the buildings in which they are housed will shape energy
consumption and subsequent emissions from the sector for decades. The averageage of the buildings stock is between 12 and 15 years for most emerging economies
and 30 to 40 years for advanced economies. About half of today’s buildings stock islikely to be in use in 2050 (Figure 1.15). The average lifetime of a building varies from30-50 years for commercial buildings to 70-100 years for modern residential
construction and 150 years or more for historic buildings, although low-quality
construction can reduce the lifetime of residential buildings to 30 years or less,
especially in rapidly emerging economies (IEA, 2019g).
Building stock by year of construction and share of stock that remains in 2050
80

80%

60

60%

2010-2019

40%

40

20%

20

Share of 2019 stock

million m2

2000-2009
1990-1999
1980-1989
1970-1979
1960-1969
1945-1959
<1945
0

North
America

European
Union

China

India

Other
advanced

Otheremerging

0%Remaining in 2050
(right axis)

IEA 2020. All rights reserved.
Note: Building floor area covers residential, commercial, services, education, health, hospitality, public and othernon-residential sectors but excludes industrial premises.
Sources: Informed by NRCan (2020), RECS (2020), CBECS (2020), and EU Commission (2020), NBS China (2020).

Around half of today’s buildings stock is likely still to be in use in 2050.

The age of a building tends to make a big difference to its heating and cooling needs.
Buildings constructed before 1960 for example, can require three-times (or more) as
much heat as those built in accordance with current building codes. Building energy
codes increase efficiency and reduce energy needs, with the energy requirements of
new buildings reducing by around 20% since 2000 globally and by more than 30%
in the United States and the European Union 8 (IEA, 2019h). However, the long life of

8

The European Union in the analysis incorporates EU-27 and the United Kingdom.

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buildings and a relatively small number of renovations means that overall progress isEnergy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of playslow: around 60% of the global building stock in use today was erected when there
were no code requirements regarding energy performance, and this rises to 85% ormore in most emerging economies.
The global vehicle fleet is generally young, with about 70% of cars, trucks and buses
being less than ten years old (Figure 1.16). The global passenger car fleet in 2019reached about 1 billion vehicles. As cars age, many get exported from advanced
economies to emerging economies where they may be driven for many more years.
The lifetime of cars, trucks and buses is roughly comparable, but trucks in particular
are used very intensively by their first owner over a period of three to five years, andas a result they are typically used infrequently for low-intensity operations by the timethey reach a decade or more of age.
Age profile and geographic distribution of road transport vehicles

Vehicle stock (millions)

800

Buses

Heavy-duty trucks

Cars

40

16

700

35

14

600

30

12

500

25

10

400

20

8

300

15

6

200

10

4

100

5

2

0

0
<10
years

Other advanced

>20
years

<10
years

Other developing

China

10-20
years

10-20
years
India

0

>20
years
Europe

<10
years
Japan

10-20
years

>20
years

North America

IEA 2020. All rights reserved.

The global car, bus and truck fleets are relatively young, with about 70% of the total being
less than ten years old.

The past decade has seen a dramatic shift the location of where new cars are sold,with China surpassing the European and North American market in the early 2010s.
Emerging economies have gone from accounting for less than one-quarter of new
car sales in 2005 to making up about half of global sales today (IEA, 2019f). The result
is that the car fleet in emerging economies is newer than in advanced ones. Around
85% of the cars on China’s roads are less than a decade old; in Europe, Japan andNorth America, cars manufactured within the past ten years make up only about 70%of the fleet. The same general pattern is seen with trucks and buses, but the shifts in

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new sales of each of these modes are even starker: the majority of trucks sold in theEnergy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

past decade are in emerging economies, as are two-thirds of the buses. With recent
declines in car sales in China and India, global car sales may peak in the coming few
years.
While about 70% of the global aircraft fleet operating in 2019 was built after 2000,
aircraft may continue to operate for 50 years or more (Figure 1.17). The median ageof the fleet is around 15 years. Newer aircraft predominantly are providing additional
capacity to service rapidly growing demand in Asian Pacific commercial passenger
aviation markets. Aircraft operating in Europe are roughly of median age on average,
while aircraft servicing the North American market tend toward the older end of the
distribution range.

Aircraft age (yr)Age profile and geographic distribution of aircraft
60
50
40
30
20
10
0

0

4 000

8 000

Middle East

12 000Asia PacificCSAM

16 000Europe20 000Africa24 00028 000Aircraft in operation

North America

IEA 2020. All rights reserved.
Notes: CSAM = Central and South America.

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Aircraft built in the past ten years are primarily being used to service rapidly growing
demand for commercial passenger aviation in the Asia Pacific region.

Energy Technology Perspectives 2020

Chapter 1. Clean energy technologies – the state of play

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Chapter 1. Clean energy technologies – the state of play

IEA (2019h), Material efficiency in clean energy transitions, IEA, Paris,
https://www.iea.org/reports/global-status-report-for-buildings-and-construction-2019.
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Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Chapter 2. Technology needs fornet-zero emissions
An energy sector transition to net-zero CO2 emissions by 2070 of the kind depictedin the Sustainable Development Scenario requires a radical technologicaltransformation of the energy sector. Energy efficiency and renewables are central
pillars, but additional technologies are needed to achieve net-zero emissions. Fourtechnology value chains contribute about half of the cumulative CO2 savings:
technologies to widely electrify end-use sectors (such as advanced batteries);
carbon capture, utilisation and storage (CCUS); hydrogen and hydrogen-related
fuels; and bioenergy.

Greater use of clean electricity is central for decarbonisation. The share of electricity
in final energy demand grows from one-fifth today to nearly 50% in 2070 in the
Sustainable Development Scenario, contributing almost a fifth of cumulative CO2
savings. Electricity demand expands by 30 000 TWh, which means that each year
to 2070 sees electricity demand equivalent to the current annual demand of Mexicoand the United Kingdom combined be added to the world power system, pushing
far more use of solar, wind and other renewables, as well as nuclear power.



CCUS technologies can reduce the emissions of fossil-fired plants in power
generation and industry, provide negative emissions, and in the longer term
produce carbon-neutral CO2 to produce fuels. In the Sustainable Development
Scenario, bioenergy with carbon capture and direct air capture create incombination with storage 3 Gt of negative emissions in 2070 or are used to produce
5 mb/d of clean aviation fuels.

Global hydrogen production grows by a factor of seven to 520 Mt in 2070. Hydrogenuse expands to all sectors and reaches a share of 13% in final energy demand in
2070. The development of technologies at the demonstration and prototype stage
today leads to hydrogen and hydrogen-based fuels becoming important for the
decarbonisation of heavy trucks, aviation and shipping as well as for the productionof chemicals and steel.
The share of sustainable biomass in primary energy demand doubles to 20% in 2070,
reflecting versatility and technology readiness of much of the related value chain. It
is used to make transport biofuels and generate power and heat; in both cases, it isfrequently coupled with CCUS. Bioenergy provides 12% of the cumulative emissions
reductions in the Sustainable Development Scenario.

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Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Plotting a path to net-zero emissions
If the goal of the Paris Agreement of 2015 is to be met, the clean energy transition
will need to bring about a rapid reduction in emissions of greenhouse gases to zeroon a net basis over the coming decades.
The Paris Agreement set a goal of “holding the increase in the global averagetemperature to well below 2°C above pre-industrial levels and pursuing efforts to limit
the temperature increase to 1.5°C above pre-industrial levels”. It also calls forgreenhouse gas emissions to peak as soon as possible and for a rapid reduction
thereafter in order to achieve net-zero emissions – in the second half of this century.
Achieving net-zero emissions requires any remaining anthropogenic emissions to be
entirely offset by anthropogenic carbon sinks such as changes in land-use systems
or the removal of carbon dioxide (CO2) through bioenergy with carbon capture andstorage (BECCS) or direct air capture with storage.
The Paris Agreement goal does not correspond to a single pathway for energy sector
CO2 emissions or a specific date for achieving net-zero emissions. This is becausethat goal spans a range of outcomes and because the required energy trajectory
depends on emissions from outside the energy sector, as well as emissions of othergreenhouse gases and air pollutants that also have climate effects (Box 2.1). The
precise timing of the need for overall net-zero greenhouse gas emissions worldwide
also depends on how soon the peak in emissions is achieved and the rate at whichemissions are subsequently reduced.
Net-zero CO2 emissions for the energy sector mean that any remaining emissions in
sectors where abatement is technically difficult or very costly would need to be fully
offset by negative emissions through BECCS or direct air capture with storage inother parts of the energy sector. Similarly, any emissions persisting in particularcountries or regions would need to be balanced by net-negative emissions in othercountries. Assuming that emissions peaked in 2019 and that they decline in a steady,near-linear fashion from now on, as in the Sustainable Development Scenario, thencurrent research suggests that achieving net-zero emissions from the energy sector
globally by around 2070 would limit the global temperature rise to below 1.8°C by
2100, with a 66% probability if CO2 emissions remain at net-zero after 2070 (IEA,
2019a). If CO2 emissions were to fall below net-zero after 2070, then this could
increase the possibility of reaching 1.5°C by the end of the century, depending on
the level of carbon removal eventually reached. Removing carbon through negative

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emissions is a very common feature of the scenarios assessed by theEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Intergovernmental Panel on Climate Change (IPCC) in its special report: 88 out of the
90 scenarios in the IPCC’s report assume some level of net-negative emissions. 1

Box 2.1

Non-energy sector and non-CO2 emissions

In Energy Technology Perspectives 2020, unless otherwise stated, historical andprojected CO2 emissions from the energy sector include those from fossil fuelcombustion as well as from industrial processes, which are often closely linked toenergy use. On this basis, CO2 emissions from the energy sector account for 92% of
all anthropogenic CO2 emissions and for 70% of all greenhouse gas emissions. The
combustion of bioenergy is considered to be carbon-neutral (following theIntergovernmental Panel on Climate Change’s [IPCC] 2006 Guidelines for National
Greenhouse Gas Inventories), with energy-related CO2 emissions in the production of
bioenergy feedstocks or the conversion of biofuels being accounted for within the
agriculture and other energy transformation sectors. CO2 emissions from non-energy
activities predominately arise through agriculture, forestry and other land use, andaccounted for 7% of all anthropogenic CO2 emissions in 2017. These emissions will
also need to be reduced in order to meet the goals of the Paris Agreement.
Emissions of greenhouse gases other than CO2, such as methane (CH4, which
accounted for 16% of all greenhouse gas emissions in 2017), nitrous oxide (N2O, 6%)
and various chemical compounds used in aerosols (2%), originate mainly from nonenergy sectors, notably agriculture and waste processing. Variations in the
projections from these sectors affect the necessary rates of transformation of theenergy sector. The IPCC Fifth Assessment Report Scenario Database contains
projections of non-CO2 emissions over the 21st century across a number of scenarios;
it is thus possible to determine the residual CO2-only budgets for particulartemperature targets by using these IPCC projections of non-CO2 emissions to 2100.

Energy transition scenarios
As with previous editions of Energy Technology Perspectives (ETP), this report adopts
a scenario approach to exploring the outlook for clean energy technologies and,specifically, the energy transition that would be required to achieve climate andA critical parameter in the analyses of the temperature impact is the climate sensitivity, describing the temperature
impact of doubling the CO2 in the atmosphere. A recent study indicates that the uncertainty range for this parameter
could be smaller than previously thought (Sherwood et al., 2020), which could imply that the Sustainable
Development Scenario would at a 66% probability result in a slightly lower temperature increase than 1.8°C.

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1

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

broader energy sustainability goals. Projections for two main scenarios, which arealso employed in the International Energy Agency’s (IEA) flagship publication, theWorld Energy Outlook, are presented here. These two scenarios map out different
energy technology pathways over the period to 2070, and are differentiated primarily
by the assumptions they make about government policies.
Sustainable Development Scenario: This is the scenario which lies at the heart ofETP-2020 and that is used to illustrate the technology needs for reaching net-zeroemissions from the energy sector. It describes the broad evolution of the energy
sector that would be required to reach the United Nations Sustainable Development
Goals (SDGs) most closely related to energy: achieving universal access to energy(SDG 7), reducing the impacts of air pollution (SDG 3.9) and tackling climate change(SDG 13). It is designed to assess what is needed to meet these goals, including theParis Agreement, in a realistic and cost-effective way. The trajectory for energy- andindustry-related CO2 emissions in the Sustainable Development Scenario is
consistent with reaching global net-zero CO2 emissions from the energy sector in
2070. 2
Stated Policies Scenario: This scenario serves as a benchmark for the projections of
the Sustainable Development Scenario. It assesses the evolution of the global energy
system on the assumption that government policies and commitments that havealready been adopted or announced with respect to energy and the environment are
implemented, including

commitments

made

in

the nationallydetermined

contributions under the Paris Agreement. Where commitments are aspirational, suchas the goal of reaching net-zero emissions, a judgement is made as to the likelihoodof those commitments being fully met based on an assessment of the impact ofmeasures that have been agreed to date. This scenario does not assume any futurechanges to existing and announced policies and measures, although it does consider
their impact on long-term technology evolution as a means to guide scenario
expectations beyond the time horizon of current policy plans.
The scope of the projections in terms of the regional, sectoral and technology
coverage is the same for each scenario, but the modelling approach differs. For theStated Policies Scenario, the approach involves defining a set of starting conditions
and then modelling where they lead the energy system, without aiming to achieve
any particular outcome. The opposite approach is used for the Sustainable2
An additional Faster Innovation Case, presented in Chapter 6, explores the technology needs for reaching net-zeroemissions by 2050.

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Development Scenario, which involves defining a set of future outcomes andEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

modelling how they can be achieved in a least-cost manner through policy
interventions, including targeted support for technology research, development,
demonstration and deployment.
The projections for both scenarios are generated by the IEA’s ETP Model, a large-scaleenergy systems model that comprises optimisation or simulation models (dependingon the sector) and embodies a rich representation of current and future technology
options across all sectors. The ETP Model has been developed over many years, using
the latest data for energy demand and supply, costs, and prices. 3 It comprises fourinterlinked technology-rich models that cover the energy supply and transformation,buildings, industry, and transport sectors. One of the features of the framework is its
technological richness, which is underpinned by a thorough assessment oftechnology readiness at all levels, from broad technology families and supply chainsto individual technologies, sub-types and components; overall, the ETP comprises
more than 800 technologies that are modelled individually, 230 of which are today
not yet commercially deployed (see Box 2.6). Depending on the sector, the modelling
framework includes 28-39 world regions or countries. ETP-2020 covers the period to2070, expanding the analysis beyond the 2060 timeframe of the last edition in 2017.
The projections for both scenarios build on those of the World Energy Outlook 2019
(IEA, 2019b), which run to 2040 and are based on the IEA World Energy Model. They
have, however, been updated with new GDP and energy price assumptions to take
into account the macroeconomic impacts of the Covid-19 pandemic. Key
assumptions and more detail on the modelling framework are presented in the online
documentation of the ETP Model. Emerging near- and medium-term energy andemissions trends will be discussed in the forthcoming World Energy Outlook 2020.
The scenarios should not be considered as predictions, but rather as assessments of
the impact of different policy approaches on energy and emissions trends as well as
technology choices: their aim is to provide a quantitative framework in order tosupport decision making and policy making in the energy sector and to improveunderstanding of the need for technological innovation in energy supply and use.
Any projection of energy supply or use 50 years ahead is bound to be speculative tosome degree as we cannot know with certainty how technology will evolve. The
further into the future we look, the greater the uncertainty about how technology willchange, the types of new technology that will emerge and how quickly they will be
deployed.
In recognition of these uncertainties, neither of the two scenarios assumes the
emergence of technologies that are not already known. In the period to 2040, mostof the technologies that are deployed are already commercially available or are on

Full descriptions of the model and key assumptions can be found online at:www.iea.org/reports/energy-technology-perspectives-2020/etp-model.

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Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

the brink of large-scale commercialisation; beyond 2040, some other technologies
that are already in the innovation pipeline (i.e. at a stage of development that makescommercial-scale deployment possible by 2070) are also deployed at greater scale.
Given the enormous uncertainties surrounding whether and when such technologies
will become commercial, only technologies for which there is sufficient technical andeconomic information for modelling purposes are considered, though others are
identified as potentially having an impact before 2070. The rate of deployment ofboth the best available existing technologies and new technologies that will become
available in the future is considerably faster in the Sustainable Development Scenario
on the assumption of much more rigorous policy action. More than 400 individual
technology designs and components across the whole energy system have beenassessed in the new ETP Clean Energy Technology Guide for their potential
contribution to achieving the goal of net-zero emissions. 4

The path to net-zero emissions in the
Sustainable Development Scenario
CO2 emission trajectories
The significant gap in energy sector CO2 emissions between the Stated Policies
Scenario and the Sustainable Development Scenario over the projection period
represents the size of the challenge the world faces in achieving sustainable
development through the accelerated deployment of clean energy technologies. In
the Stated Policies Scenario, global emissions return onto an upward trajectory after
a decline in 2020 due to the macroeconomic impacts of the Covid-19 outbreak(Figure 2.1). By contrast, in the Sustainable Development Scenario, the measurestaken for sustainable recovery in the wake of the pandemic and additional policy
action mean that emissions peak in 2019 and fall to zero on a net basis by 2070. 5

The interactive ETP Clean Energy Technology Guide is available at: www.iea.org/articles/etp-clean-energytechnology-guide.
5
Technology implications to reach net-zero emissions already by 2050 are discussed in a Faster Innovation Case in
Chapter 6.

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4

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

GtCO₂/yrGlobal energy sector CO2 emissions by fuel and technology in the Sustainable
Development Scenario, 2019-70
40
35

Process

30

Gas

25

Oil

20

Coal

15

Bioenergy with CCS

10

Direct air capture and storage

5

SDS Total

0
-5

2019

2030

2040

2050

2060

2070

IEA 2020. All rights reserved.
Notes: CCS = carbon capture and storage. SDS= Sustainable Development Scenario.

In the Sustainable Development Scenario, CO2 emissions from fossil fuel combustion andindustrial processes drop to 3 Gt in 2070; they are offset by negative emissions
technologies, resulting in net-zero emissions.

Achieving net-zero CO2 emissions requires a range of measures and a range oftechnological transitions (Figure 2.2). The immediate opportunities are in energy
efficiency, in particular in industrial processes, space heating and cooling, and thefuel economy of vehicles, (Box 2.2) and energy from renewable sources, in particular
wind and solar photovoltaic (PV). Over the next two decades, energy efficiency andrenewables contribute between them around 70% of cumulative CO2 emissions
savings relative to the Stated Policies Scenario. Material efficiency reduces demandfor energy services and is another immediate opportunity: it saves around 5% of
cumulative emissions through to 2040 by reducing the need to produce materials(through designing for long life, lightweighting, reducing material losses during
manufacturing and construction, amongst other actions: see also the section on

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“Focus on material efficiency: A blind spot?” below).

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

GtCO2/yrGlobal energy sector CO2 emissions reductions by measure in the Sustainable
Development Scenario relative to the Stated Policies Scenario, 2019-70
Cumulative, 2020-70

Annual0

Energyefficiency*

-10
-20

Electrification,
CCUS, bioenergy,hydrogen

-30
-40

2030

2019

Avoided demand
Bioenergy

2040

2050

Technology performance
Other renewables

2060

2070

Electrification
Other fuel shifts

Hydrogen
CCUS

IEA 2020. All rights reserved.
* Energy efficiency includes enhanced technology performance as well as shifts in end-use sectors from moreenergy-intensive to less energy-intensive products (including through fuel shifts).
Notes: CCUS = carbon capture, utilisation and storage. See ETP model documentation for the definition of eachabatement measure. Hydrogen includes low-carbon hydrogen and hydrogen-derived fuels such as ammonia.

Electrification, CCUS, bioenergy and hydrogen-derived fuels contribute to more than halfof cumulative emissions reductions from 2020 to 2070 in the Sustainable Development
Scenario relative to the Stated Policies Scenario.

Box 2.2

Energy efficiency benefits in the Sustainable Development Scenario

Energy-efficient technologies and services contribute to about 40% of cumulativeemissions reductions to 2070 in the Sustainable Development Scenario relative to theStated Policies Scenario (Figure 2.2). Those stem from efficiency improvements andrefurbishments to further enhance technology or process efficiency and from shifting
towards low-carbon electric, renewable, or hydrogen end-use equipment that are
more efficient than existing products. Avoided demand through material efficiency,
public transportation, and active controls also contributes.
Energy efficiency contributes to lower CO2 emissions in two ways:
Reducing total energy use: total final energy demand is more than 30% lower in
2070 in the Sustainable Development Scenario than in the Stated Policies
Scenario. Such savings are enabled by a strong decline of end-use energy
intensity*, particularly in buildings and road transport (-50% to -65% relative to2019). Short-term opportunities pair with electrification on the longer-run. In

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Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

2070, the share of electricity in total final energy use is 20% higher than in theStated Policies Scenario.
Placing downward pressure on upstream supply systems, the pace of
decarbonisation of which can be constrained by resource availability (e.g.
biomass, rare earth), land-use (e.g. solar PV) and technology cost. For example,
lower peak power capacity needs can reduce the cost of decarbonising
electricity: high-efficiency cooling alone could save USD 1.2 trillion globally
through to 2050 as avoided capital spending for power generation (IEA, 2018b).

Energy efficiency benefits however are much broader than reducing emissions andalso contribute to policy priorities such as energy security, clean energy access, job
creation, economic growth, productivity, public budgets, air quality or health andwell-being (IEA, 2019d). To take full advantage, policy packages should aim at steering
demand for high-efficiency products, integrating multiple components such as
regulation (i.e. mandatory standards for vehicles, motors, appliances, etc.), incentives(i.e. creating a push effect with subsidies, rebates, etc.) and information (i.e.
collecting data to monitor and disclose progress using labelling, certifications, digitalvisualisation tools, etc.). In parallel, R&D should aim at enhancing best available
product performance while broadening their applicability to foster efficiency via fuelshifting (e.g. extending heat pump use to a broader range of industrial or building
renovation applications).
* Energy intensity was assessed based on final energy use per square meter for buildings, final energy use pervehicle-kilometre for road transport, and final energy use per USD of industry value added at purchasing power
parity for industry.

In the long run, four additional technology opportunities emerge as critical for thepath to net-zero emissions:Electrification of end-use sectors. The contribution of electrification to emissions
reductions increases as the power sector becomes fully decarbonised:
electrification accounts for 20% of cumulative savings relative to the Stated
Policies Scenario in 2070, making it the largest single contributor to CO2
abatement.
CCUS. The role of CCUS changes over the projection period: at first the focus ison decarbonising existing assets in the power sector and heavy industries, but
over time it shifts towards the removal of carbon from the atmosphere, offsetting
emissions in sectors where they are hard to abate (see Chapters 4 and 5). CCUS
makes the fourth-largest contribution to cumulative emissions savings in 2070,
accounting for 15% of the total.

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Energy Technology Perspectives 2020



Chapter 2. Technology needs for net-zero emissions

Low-carbon hydrogen and synthetic fuels such as ammonia and synthetichydrocarbon fuels. The use of these fuels increases over time across different
sectors and contributes 6% of cumulative emissions savings by 2070, relative to
the Stated Policies Scenario.

Sustainable bioenergy. While sustainably grown bioenergy plays an importantrole in curbing emissions in the near term in the Sustainable Development
Scenario, for example in transport, it has additional potential across different
parts of the energy sector, such as in industrial applications. It contributes 12% of
cumulative savings in 2070 in the Sustainable Development Scenario relative to
the Stated Policies Scenario.

These four technology families are central to efforts to reduce emissions, especiallyin sectors where emissions are difficult to reduce, notably in industry and longdistance transport. Many parts of their value chains are, however, at an early stage of
deployment, and they are less developed overall than renewables, nuclear for power
generation and technologies to improve the efficiency of using fossil fuels (seebelow).

GtCO₂/yrGlobal energy sector CO2 emissions by sector and sub-sector/fuel in the
Sustainable Development Scenario, 2040 and 2070
7
6
5
4
3
2
1
0
-1
-2
-3

2040

2070

Power

2040

2070

Other energy
transformation

2040

2070

Industry

2040

2070

Transport

2040

2070

Buildings

2040

2070

Direct air
capture

DACS
BECCS
Gas
Oil
Coal
Other industry
Chemicals
CementIron and steel
Other transport
Road freight
Passenger cars
Shipping
Aviation
Services
Residential

IEA 2020. All rights reserved.
Notes: BECCS = bioenergy with carbon capture and storage. DACS = direct air capture and storage. Other energy
transformation includes coal mining, oil and gas extraction, oil refining, coal and gas transformation andliquefaction, production of hydrogen and hydrogen-based fuels, and biofuels production with and without CCS.

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IEA. All rights reserved.

The emissions that remain in 2070 in the Sustainable Development Scenario areconcentrated in sectors where emissions are hard to abate – essentially heavy industry andlong-distance transport.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Opportunities for reducing emissions in the next 20 years are greatest in those
sectors where the current capital stock has the shortest remaining operational
lifetimes (see Chapter 1), and where economically and technically viable clean energy
technologies are already available. In the transport sector, this includes passenger
cars (most of which are running on electricity by 2070), and in the buildings sector it
includes hot water supply from heat pumps. But in other sectors, and in particular inheavy industry and long-distance transport, the remaining lifetime of existing assets
is generally long and the availability of clean energy technology alternatives islimited. For this reason, global emissions are not projected to fall to zero in those
sectors until after 2070 (Figure 2.3). The bulk of industrial emissions remaining in
2070 are in the iron and steel and cement sectors, where carbon-neutral
technologies are today at demonstration or large prototype level; the bulk oftransport emissions remaining in 2070 come from aviation, shipping and road freight.

Box 2.3

Reduced air pollution in the Sustainable Development Scenario

Clean energy technology is not just needed to deal with the climate crisis. The energy
sector is also by far the largest source of air pollution from human activity: the threemajor air pollutants are NOx, SO2 and particulate emissions, and the energy sector
accounts for over 99% of the first two and over 85% of the third.
Air pollution comes primarily from the combustion of fossil fuels and traditional useof solid biomass, but also from fossil fuel extraction and other forms of mining andindustrial activities, the processing/washing of coal, the transportation of coal andnatural gas, and oil refining and charcoal production. Air pollution also comes from
non-exhaust emissions from the transport sector (mainly tyre and brake wear, androad abrasion, but also fine dust particles of quartz sand and steel abrasion in railtransport). Fortunately, technologies are in place already today that can drasticallyreduce pollution: post-combustion control technologies are generally cheap,
available and proven, so implementation is largely a matter of policy, monitoring andenforcement.
The decarbonisation of the energy system in the Sustainable Development Scenario
also helps bring down the level of pollutant emissions. Outdoor air pollution isminimised mainly through a drastic reduction in the use of fossil fuels in power
generation and industry and a shift towards low-carbon fuels in transport. The use ofclean fuels for cooking also all but eliminates household air pollution from the use of
traditional biomass for cooking. Global energy-related SO2 emissions fall from 55 Mt
in 2019 to 13 Mt in 2070, mainly through emissions reductions in the industry andpower sector that stem from reduced use of coal. Global NOx emissions fall by over

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80% to 16 Mt, mainly due to a reduction in emissions from transport and from

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

industrial and power facilities. Global PM2.5 emissions fall by 80% to 3 Mt largely
thanks to a reduction in the use of polluting fuels for cooking, in particular the near
total phase-out of the traditional use of biomass in the residential sector of emerging
economies.
Although the Sustainable Development Scenario tackles many of the root causes of
air pollution, reducing air pollutant emissions does not need to (and should not) wait
for the decarbonisation of the energy sector, given the severity of its impacts onhuman health: technologies for post-combustion treatment are already proven andavailable. In the Sustainable Development Scenario, the widespread adoption of suchtechnologies alongside measures for monitoring and enforcement mean that the
majority of the decline in pollutant emissions (99% for SO2, 87% for NOx and 95% forPM2.5) occurs prior to 2040.
Source: Based on IEA and International Institute for Applied Systems Analysis. For more information on
methodology and data see e.g. IEA (2016) and IEA (2019a).

The extent of the challenge faced in reducing CO2 emissions varies markedly acrossregions. The reductions in the Sustainable Development Scenario relative to theStated Policies Scenario are largest in absolute terms in regions where the energy
sector is emissions-intensive today and where emissions are projected to be large on
the basis of current policy plans (Figure 2.4). The proportion of cumulative emissions
in the Sustainable Development Scenario expected to come from current
infrastructure is highest in the People’s Republic of China (hereafter “China”) due toits young fleet of power stations, industrial and other capital stock, highlighting thecritical importance of efficiency and CCUS retrofits there.
While low-carbon technologies mitigate CO2 emissions, they can also help to reduce
air pollution and their negative health impacts. Actually, the need to tackle air
pollution has been in some cases a major driver for the deployment of clean
technologies, such as support measures for electric vehicles or public transport in

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some heavily polluted cities (Box 2.3).

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Cumulative energy sector CO2 emissions by region and scenario, 2019-70
EuropeUnited States
Sustainable
Development
Scenario

India
China
Advanced economies

Stated Policies
Scenario

Emerging economies
World
0

500

1 000

1 500

2 000
GtCO₂

IEA 2020. All rights reserved.

The emissions reductions required in the Sustainable Development Scenario are greatest in
countries with an emissions-intensive capital stock.

Energy implications
Trends in primary energy demand
World primary energy demand 6 increases only modestly between 2019 and 2070 in
the Sustainable Development Scenario, by which time the global population is 35%
more than it is today and the economy about 3.5 times larger (Table 2.1). This
compares with an increase of nearly 40% in global primary energy demand in theStated Policies Scenario, and the extent of the decoupling of economic growth andenergy demand represents a significant break with past trends.

Primary energy refers to energy in its initial form before being subjected to any human-engineered conversion
process. Some energy is converted in power stations, refineries, heat plants and other transformation processes. Finalconsumption refers to energy and feedstock use in final end-use sectors net of losses in transformation anddistribution.

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6

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Primary energy demand by fuel and scenario (Mtoe)
Sustainable Development
ScenarioStatedPolicies
Scenario

2019

2040

2070

2070

Coal

3 783

1 309

696

3 188

Oil

4 523

3 000

1 156

4 778

Natural gas

3 336

3 056

2 048

4 786

728

1 140

1 472

1 101

Renewables

2 220

5 325

9 905

6 013

Hydro

371

585

840

716

Modern bioenergy

935

2 365

2 948

2 252

Traditional use of biomass

588

0

0

287

Solar

118

1 156

3 414

1 283

Wind

123

759

1 564

845

Other renewables

86

461

1 140

630

Total

14 59013 83015 27819 865Net CO2 emissions (MtCO2)

36 06416 834035 737

Nuclear

Notes: Primary energy demand includes conversion losses from biofuel production. Modern bioenergy includes
biomass processed/pre-treated for electricity generation, industrial applications and biofuel production. Traditionaluse of biomass refers to burning locally sourced biomass for household cooking and heating, using basic
technology such as an open fire pit.

The much slower increase in energy demand in the Sustainable Development
Scenario is largely the result of big gains in energy and material efficiency: these help
keep demand at roughly current levels through to the early 2050s, when it slowly
begins to rise again because most of the potential for efficiency gains from currently
available technologies has been exploited. Energy intensity – the amount of energy
consumed per dollar of GDP – falls by two-thirds between 2019 and 2070,
corresponding to a decline of the energy intensity of 2.2% per year, more than a third
higher than the rate of 1.6% per year observed over the period 1990-2019.
The Sustainable Development Scenario sees a dramatic rise in the use of clean
energy sources through to 2070. They account for 20% of global energy demand
today: this doubles to around 40% in the Stated Policies Scenario, but it goes up

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much further to some 75% in the Sustainable Development Scenario (Figure 2.5).

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Global primary energy demand by fuel share and scenario, 2019 and 2070
100%

Solar
Bioenergy

80%

Wind
Hydro

60%

Other renewables
Nuclear

40%

Gas
Oil

20%

Coal
0%

Share of fossil fuels
2019

2070

2070

STEPS

SDS
IEA 2020. All rights reserved.

Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario. Bioenergy includes traditional
biomass use and modern bioenergy as well as the conversion losses from biofuel production. Other renewables
include geothermal and ocean energy.

With fossil fuel use falling rapidly, renewables rise from 15% in 2019 to more than 60%
in 2070 in the Sustainable Development Scenario, and solar energy becomes the largest
primary energy source.

The use of fossil fuels falls rapidly over the projection period, and most of those fuelsthat are still used in 2070 do not produce emissions thanks to the widespread
deployment of CCUS at both new and existing power stations and industrial plants.
Coal consumption all but disappears, with remaining coal use in 2070 being
dominated by iron and steel production. Oil demand falls by 75% below today’s levelto around 20 mb/d; nearly 65% of oil demand in 2070 is for non-emitting feedstocks
and most of the remainder is for transport (aviation and shipping). Gas demand peaks
during the 2020s and falls nearly 40% below today’s levels by 2070. It is primarily
used in 2070 as a feedstock in the chemicals industry, as a fuel in power generation
mostly equipped with carbon capture (to provide electricity-system flexibility), andas a fuel and feedstock in hydrogen production, again mostly equipped with carbon
capture.
As for non-fossil fuels, nuclear primary energy use more than doubles between 2019and 2070, with emerging economies in Asia accounting for around 75% of the growthin capacity. The share of renewables, including hydropower and solid biomass, jumps
from around 15% in 2019 to more than 60% in 2070. Solar energy, which is used for
power generation and for heating purposes in buildings and industry, becomes by
2070 the largest primary energy resource, accounting for more than 20% of global

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primary energy demand. Sustainable bioenergy reaches an almost similar level in theEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

global primary energy mix, in part because its versatile nature means that it can beused to provide power and heat for buildings and industry or converted into liquid
fuels for transport.
The growth in the global use of renewables – largely solar PV, wind power andbioenergy – in the Sustainable Development Scenario represents an acceleration ofcurrent trends, and is driven by stronger policies to tackle climate change, enhanceenergy security and improve air quality: these policies spur faster improvements intechnology and cost reductions and encourage faster deployment. The integrationof much higher shares of variable renewables into electricity systems requires far
greater use of flexibility mechanisms, such as energy storage, to ensure electricity
security. Greater electrification of end uses facilitates this integration by increasing
the potential of demand response (e.g. flexible electric vehicle charging).
Energy needs in the Sustainable Development Scenario fall fastest in the advanced
industrialised countries, where economic and demographic growth rates are lower.
Primary demand is around 25% lower in 2070 than in 2019 in Europe and North
America, where there is greater potential for efficiency gains (Table 2.2). In India andmost other emerging economies, notably in Africa and the Middle East, demand
increases through to 2070, though at a much lower rate than in the Stated Policies
Scenario. Demand in China falls by nearly one-fifth, as efficiency measurescompound a slowdown in the rate of economic growth. Developing regions accountfor most of the remaining consumption of fossil fuels in 2070, reflecting their large
and relatively young industrial sectors, where eliminating direct and process
emissions is hardest.
Primary energy demand by region and scenario (Mtoe)

2000
3 127
2 027
843
741
3 012
273

2019
3 500
1 934
1 691
898
6 158
408

2040
2 911
1 474
1 991
775
6 229
450

2070
2 950
1 423
3 327
735
6 330
510

StatedPolicies
Scenario
2070
3 646
1 632
3 857
1 156
8 653
921

10 023

14 59013 83015 27819 865

Sustainable Development
Scenario
Americas
EuropeAfrica and the Middle East
Eurasia
Asia PacificInternational bunkers
World

Notes: Primary energy demand conversion losses from biofuel production. International bunkers refers to fueldemand in international aviation and shipping.

Trends in final energy demand
Total global final energy consumption in the Sustainable Development Scenario
2070, it is at a level close to 10% below that in 2019, and more than 30% below thePAGE | 81

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levels off in the early 2020s and then falls steadily through the projection period. By

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

demand in the Stated Policies Scenario, thanks to major gains in energy and material
efficiency – especially in the period to 2040 (Table 2.3). Oil and gas demand see the
sharpest decline in relative terms in the Sustainable Development Scenario, eachfalling by more than 70% between 2019 and 2070, although the decline in oil demandis larger in absolute terms. Space heat demand in buildings and process heat demandin industry also fall as a result of more efficient use of technologies such as heatpumps. Electricity consumption increases the most in absolute terms, more thandoubling by 2070, followed by hydrogen, which emerges as a fuel in the 2020s andis primarily used in the transport and industry sectors. Liquid synthetic hydrocarbon
fuels, derived from hydrogen produced from electricity and CO2, begin to be used inroad freight trucks and aircraft in the second half of the 2020s: by 2070, the amountof synthetic fuel use is equivalent to 5 mb/d, and it meets around 40% of aviation fueldemand.
Final energy consumption by sector, fuel and scenario (Mtoe)

2000

2019

2040

2070

StatedPolicies
Scenario
2070

Industry

2 054

3 278

3 162

3 077

4 513

Transport

1 961

2 865

2 537

2 461

3 923

Buildings

Sustainable Development
Scenario

2 345

3 087

2 648

2 868

4 193

Other

950

1 153

1 310

1 081

1 639

Total

7 310

10 384

9 657

9 486

14 269

Coal

732

1 327

824

398

1 326

Oil

3 292

4 048

2 823

1 099

4 561

Natural gas

1 104

1 659

1 357

426

2 362

Electricity

1 076

1 943

2 909

4 507

4 004

Heat

240

312

272

187

356

0

0

98

539

91

HydrogenAmmonia

0

0

18

133

9

Bioenergy

859

1 035

1 035

1 315

1 285

Synfuels

0

0

32

254

0

Other renewables

7

60

290

629

275

7 310

10 384

9 657

9 486

14 269

94

290

1 199

229

Total
Hydrogen-related
demandPAGE | 82

IEA. All rights reserved.

Notes: Deviating from IEA Energy Balances, final energy demand for industry includes here and in the following
energy use for blast furnaces and coke ovens. Synfuels refer to synthetic hydrocarbon fuels produced fromhydrogen and CO2. Heat refers to heat from combined heat and power plants or heat plants being sold to third
parties, e.g. district heat use in buildings. Bioenergy refers to both traditional biomass use and modern bioenergy.
Other refers to the final energy consumption in agriculture and fuels used for chemical feedstocks and non-energy
products. Hydrogen-related final energy demand includes in addition to the final energy demand of hydrogen,ammonia and synfuels, the onsite hydrogen production in the industry sector and the final electricity produced fromhydrogen.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

The decline in fossil fuel use is largest in the transport sector (mostly oil), but usage
also falls in the industry and buildings sectors. In all three sectors, electricity emerges
as the leading source of energy (Figure 2.6). In the transport sector, all hydrogenbased fuels combined (hydrogen, ammonia, synthetic hydrocarbon fuels) cover onethird of all energy needs in 2070, almost on a par with electricity.
Change in global final energy demand by fuel and sector in the Sustainable
Development Scenario, 2019-70
Coal
Oil

Industry

Gas
Electricity
Heat

Transport

HydrogenAmmonia
Bioenergy

Buildings

Other renewables
Synfuels-2 500-2 000-1 500-1 000

- 500

0

500

1 000

1 500

2 000

2 500

Mtoe/yr
IEA 2020. All rights reserved.
Notes: In the industry sector, heat and hydrogen can be produced onsite at industrial plants, i.e. not being
purchased from third parties. In these cases, the final energy demand for the industry sector includes thecorresponding fuel input being consumed to produce heat or hydrogen. Synfuels refer to synthetic hydrocarbon
fuels produced from hydrogen and CO2. Other renewables include solar and geothermal energy.

Electricity, bioenergy, hydrogen and hydrogen-based fuels replace the vast majority offossil fuels in a net-zero emissions world.

The Sustainable Development Scenario brings energy intensity improvements in arange of end-use sectors. In industry, the global average thermal energy intensity of
producing clinker (the main ingredient of cement) falls by 15% between 2019 and
2070 as a result of energy efficiency improvements associated with the adoption ofstate-of-the-art technology when existing assets are replaced by new capacity. These
improvements are partly offset by additional energy requirements related to the useof other carbon mitigation measures, for instance the installation of carbon capture
equipment. In transport, improved efficiency yields large energy intensity
improvements in the coming decades in international shipping and in light-duty
vehicles; for both vehicle categories, energy intensity is cut nearly in half between

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2019 and 2040. The improvements in light-duty vehicles come from cars, lightEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissionscommercial vehicles and minibuses exploiting efficiency gains from improved
engines and powertrains (including hybridisation), improvements in design andmaterials, and a shift to electric drive.
Improving energy efficiency is crucial to global energy transitions. It has played an
important role in the slowing of global CO2 emissions growth in past years and has
the potential to play a leading role in the future, especially in the near term. The scaleof improvement in energy efficiency in the Sustainable Development Scenario
requires early policy action to accelerate the adoption of the most efficienttechnologies so as to avoid locking-in inefficient energy use in the long term: the bulkof the energy and emissions savings come in the first two decades of the projection
period.
While an accelerated deployment of clean and efficient energy technologies areneeded to reduce the emission impacts of transport, buildings and industry, these
efforts can be complemented by consumer behaviour and lifestyles changes andenable some of these technology efforts (Box 2.4).

Box 2.4

The role of consumer behaviour in the clean energy transition

Consumers will be directly involved in the Sustainable Development Scenario’s
change of technology landscape, including through:Greater end-user engagement. New electricity technologies allow consumers toplay a role in electricity generation and balancing. In 2070, around 3 600 GW of
distributed rooftop solar PV is integrated into the fabric of buildings – on the roof
and walls, or in windows. Greater electrification also enables households toparticipate directly in demand-side response, with electric vehicles and heatpumps potentially unlocking hundreds of gigawatts of flexibility, for example.

The emergence of energy communities. Interactions among end users play arole in the use of distributed energy resources through peer-to-peer energy
trading. Citizens also have a key role in promoting the deployment of
infrastructure supporting clean energy technologies, such as district energy
systems, mini-grids, publicly available vehicle chargers and virtual power plants.
Consumer acceptance of change. A number of changes rely on behaviouralshifts on the part of consumers. Urban planning, for example, encourages greateruse of less emissions-intensive modes of transport such as buses, trains andbicycles, while the success of the circular economy relies on people being willing
to renovate rather than replace old buildings, and to do more to reuse and recycle
goods (see Chapter 3).

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Energy Technology Perspectives 2020

Interaction with energy service providers. Energy service companies, whose
revenues approached USD 30 billion in 2018, currently mostly operate in China
and the United States and in the services and industrial sector (IEA, 2018). The
Sustainable Development Scenario broadens their market potential, and theyplay a part in the retrofitting of the existing buildings stock and in improving
access to clean energy in emerging economies.

Focus on material efficiency: A blind spot?
The potential for material efficiency improvements to reduce emissions is often
overlooked. Material efficiency covers a broad suite of measures that lower energy
needs through more efficient use and management of materials. Collectively thesemeasures account for about 5% of the cumulative CO2 emissions reductions in the
Sustainable Development Scenario compared to the Stated Policies Scenario in 2070
– an amount equal to 1.5 times the current total annual emissions. Different material
efficiency measures can be applied at each stage of the supply chain for each typeof good or service (Box 2.5). Some reduce material demand, while others may
increase demand for particular materials while enabling CO2 emissions benefits atother stages of the supply chain. Some involve a shift to using lower emission
materials or production routes. Material efficiency measures, such as lightweighting
or recycling, can interact with each other, leading to synergies in some cases andcounterbalancing effects in others (for additional details on material efficiency
strategies, see IEA [2019c]). Measures include:Design stage: Good design can factor in optimisation measures such as
lightweighting – the use of less or lighter material in the production orconstruction process so as to reduce the quantity or weight needed to produce
the same good or provide the same service. 3D printing has emerged as apromising technology for lightweighting. The full lifecycle should be consideredat the design stage. For example, in some cases, the optimal solution may be todesign a more durable product, which may increase the initial demand formaterials but yield offsetting emissions savings over their lifetime by reducing
the frequency of the need to replace them.

Production stage: There may be scope to reduce waste and overuse of material
inputs or replace materials with ones that involve lower lifecycle emissions in
manufacturing and construction.

Use stage: Using a product or building more intensively or extending its lifetime
through repair and refurbishment can reduce the need for materials to produce
new products.

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

Chapter 2. Technology needs for net-zero emissions

Energy Technology Perspectives 2020



Chapter 2. Technology needs for net-zero emissions

End of life: Reusing or recycling materials at the end of product lifetimes can
reduce the need to produce new materials or, in the case of recycling, can makepossible lower emission secondary production routes.

Measures to extend the lifetime of buildings account for some of the largest
reductions in demand for materials within the wide portfolio of material efficiency
strategies – they account for 40% of cumulative reductions for steel and nearly 70%
for cement over the period 2019-70 compared with the Stated Policies Scenario(Figure 2.7). Improved buildings design and construction contribute about one-fifthof cumulative reductions in demand for steel and one-third for cement (seeChapter 4 for further discussion of material efficiency in buildings). Reduced material
losses also play an important role.
For metals, potential exists to improve yields at two stages: semi-manufacturing (theprocess of converting crude metal into finished metal products like bars and sheets)and product manufacturing (the process of converting finished metal products into
final end-user products like cars and appliances). Reducing scrap generated during
car manufacturing when the chassis is cut from metal sheets is an example ofmaterials improvement at the product manufacturing stage, and digitalised
production may play a key role in reducing such scrap and other production losses.
Betweenthem,semi-manufacturing

andproduct

manufacturing

material

improvements contribute to a reduction in demand for steel in the Sustainable
Development Scenario of 25% by 2070, compared with demand in the Stated Policies
Scenario. Direct reuse of metals (without remelting) for various applications such as
steel beams or ship plates also helps to cut materials demand, and this contributes

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to a reduction in demand for steel on the same basis of 18% by 2070.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Gt steel

Reduction in global steel and cement demand through material efficiency gains
by stage in the supply chain in the Sustainable Development Scenario relative
to the Stated Policies Scenario in 2070
Steel

3.0

Improved semi-manufacturing
yields

2.8
2.6

Vehicles - lightweighting

2.4
2.2
2.0

Buildings - improved designand construction

1.8
1.6

Material
demandSteel
Product
manufacture design andfabrication

Use decrease

Use increase

End of life

Gt cement

STEPS

Resultingmaterial
demandSDS

Cement5.0

Improved productmanufacturing yields
Vehicles - reduced use
Buildings - extended lifetime

4.5
4.0

Power infrastructure
requirements

3.5

Transport infrastructure
requirements

3.0
2.5
2.0

Material
DemandCementProduct
manufacture design andfabrication

Use Decrease

Use Increase

STEPS

End of life

ResultingMaterial
DemandSDS

Reuse

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario.

The biggest potential for material efficiency gains that reduce the need for steel andcement lies in improved designs and a more intensive use of buildings and vehicles,
notably through extended lifetimes in tandem with energy efficiency retrofits.

Recycling is also an important aspect of material efficiency. It does not directly
impact total demand for materials, but rather enables increased secondary
production, which is considerably less energy- and CO2-intensive than primary
production. Steel recycling, which depends on available volumes and qualities ofscrap, is already widely used: scrap currently accounts for 32% of total output,
reaching 50% by 2070 in the Sustainable Development Scenario (see Chapter 4).
Various innovation efforts are underway to improve metal and plastic sorting andrecycling. Recycling of cement is more limited, given that a large portion of cement
reacts with water (hydrates) during concrete hardening, and that this process cannot
easily be reversed. However, innovation efforts are underway to recycle concretefines – which are small particles from the process of crushing concrete for recyclingthat contain calcium oxide and that could be used in cement production in place of
calcium carbonate, thus reducing process emissions – and to recover unreacted

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cement from end-of-life concrete.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

The potential for lightweighting to lower CO2 emissions in transport is particularly
large, not just through its impact on material efficiency, but also through its ability to
improve fuel economy. For passenger light-duty vehicles, lightweighting contributes
approximately 2 Gt of cumulative CO2 emissions reductions by 2070 relative to theStated Policies Scenario from use of the vehicle, on top of almost 1 Gt of net
reductions from materials production. The absolute amount of savings decreases
over the course of the scenario period as vehicles increasingly shift to electricity andother low-emission fuels, thus reducing the potential for lightweighting also to lower
emissions. Lightweighting can also bring benefits other than direct CO2 emission
savings. In the next few years, when battery costs are likely to remain high,lightweighting could boost driving range, thereby facilitating faster uptake ofbattery-electric vehicles. Later on, the pressure on increasingly scarce or expensive
materials needed to produce batteries may be reduced if lighter vehicles can achieve
the same performance, including range, with smaller batteries.

Box 2.5

3D printing as an enabler of lightweighting and reduced material use

As industries continue to digitalise, 3D printing has emerged as one of the most visibleof the process technologies that could transform certain industrial operations(Cotteller and Joyce, 2014). 3D printing can produce both plastic and metal parts inlayer-by-layer fashion, on demand and directly from digital 3D files, and has several
advantages compared with conventional manufacturing. It reduces lead times, scrap
material, inventory costs, manufacturing complexity and floor space, while providing
the ability to produce goods using fewer parts and so increasing the durability of the
final product (Huang, 2016). It can yield significant energy and material savings under
the right conditions. As an electricity-driven process, it also promotes theelectrification of thermal forming processes such as metal casting and forging, which
reduces CO2 emissions to the extent that power generation is decarbonised. It could,
in addition, lead to the production of new objects with different or novel shapes,
which improve the function of final products and lead to energy savings beyond theindustrial sector.
3D printing is already being used in the production of lightweight aircraft components
by some aircraft manufacturers to reduce fuel consumption (Airbus, 2016).
Quantifying the net energy and resource savings that can be achieved by 3D printing
in any given case requires a life-cycle assessment approach. One recent study
quantified the energy and resource impacts of selected lightweight metallic additive
manufacturing components in the US aircraft fleet under different adoption scenarios
to 2050 (Huang et al., 2016). A life-cycle assessment found that 9-17% of total typical

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aircraft mass in the US fleet could be replaced by lighter 3D printed components inEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

the near term. This could deliver two environmental benefits. First, the reduced
materials intensity of these alternative components could avoid nearly 20 kt/yr ofmetal demand in 2050. Second, reduced aircraft mass could reduce the overall fueluse of the US aircraft fleet by up to 6.4% in 2050 if those components were fully
adopted.
3D printing markets have grown rapidly in recent years. In 2016, the industry grew by
17.4% to USD 6.1 billion and its turnover has continued to rise rapidly (Wohlers
Associates, 2017). However, the technology faces barriers that may limit widespread
adoption, including high production costs, low throughput rates and difficulties inmeeting the technical requirements for certain products (Huang, 2016; Huang et al.,2016). For these reasons, its use so far has been limited mainly to high-value
applications in the aerospace, medical and transport industries.

The overall potential for material efficiency is exploited much more fully in the
Sustainable Development Scenario than in the Stated Policies Scenario thanks tostronger government policies and regulations. Some directly incentivise material
efficiency in order to increase emissions savings – for example, building codes thatcover embodied emissions from a life-cycle perspective and include incentives formaterials reuse. Others incentivise materials efficiency indirectly – for example,
requirements for industry to reduce emissions lead to somewhat higher prices forsteel, cement and other materials, which provide an incentive for construction
companies and other industries to use them more efficiently. Policy-driven changes
occurring in other sectors also contribute to lower material demand, for example byencouraging the renovation rather than the replacement of old buildings.
Exploiting the full potential of material efficiency will, however, not be easy or cheap.
Real and perceived risks, time constraints, the high cost of labour relative to materials
in many cases, fragmented supply chains, regulatory restrictions and lack ofawareness are among the many barriers to greater uptake of material efficiency
measures. Moreover, although estimates suggest that most material efficiency
strategies are no higher than EUR 100/tCO2 abated (Material Economics, 2018),
improving material efficiency will in many cases incur additional upfront costs. But
the message is clear: much stronger policies are needed to drive efforts from all

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stakeholders to realise the full benefits of material efficiency.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Prospects and readiness of critical
low-carbon technology value chains
Developing a new technology and successfully bringing it to market is typically a longdrawn-out process (see Chapter 6). Technologies go through a journey in which they
evolve from a concept to a prototype, are demonstrated at scale and, if successful,are adopted and commercialised more widely. One way to assess where atechnology is in its journey from bench to market is to use the technology readinesslevel (TRL) scale (Box 2.6). As technologies pass through each stage, the level of risk
associated with technology performance is successively reduced: however, capital
expenditure grows throughout the process as scale increases, and this creates new
risks.
Support schemes need to be tailored to the different stages of the innovation value
chain to help mitigate the different risks that arise so that, for example, they address
investment risks when a technology moves to large-scale demonstration plants.
However, innovation is rarely a linear progression. Not all technology designs makeit to market or get deployed at sizeable levels. Stages of development can accelerate
or slow down, depending on technical or economic factors, and might reach a deadend that results in a return to square one. Moreover, a given technology can be atdifferent stages of this process in different markets and applications, with each phasetaking different amounts of time. As the development of a technology generates new
ideas

for

improvements,

alternative

configurations

andpotentiallybettercomponents can appear at different stages of the innovation process, even once agiven technology configuration has become competitive. Stages overlap and run

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concurrently, feeding on one another.

Energy Technology Perspectives 2020

Box 2.6

Chapter 2. Technology needs for net-zero emissions

Assessing technology readiness: The ETP Clean Energy Technology

Guide
One way to assess where a technology is on its journey from initial idea to market is
to use the technology readiness level (TRL) scale. Originally developed by the National
Aeronautics and Space Administration (NASA) in the United States in the 1970s andused in many US government agencies since the 1990s, the TRL provides a snapshotin time of the level of maturity of a given technology within a defined scale (Mankins,
1995). The US Department of Defense has been using the TRL scale since the early
2000s for procurement, while the European Space Agency adopted it in 2008. In
2014, the TRL was applied for the first time outside the aerospace industry to assess
EU funded projects as part of the Horizon 2020 framework programme. It is now
widely used by research institutions and technology developers around the world to
set research priorities and design innovation support programmes.
The scale provides a common framework that can be applied consistently to any
technology to assess and compare the maturity of technologies across sectors. The
technology journey begins from the point at which its basic principles are defined(TRL 1). As the concept and area of application develop, the technology moves into
TRL 2, reaching TRL 3 when an experiment has been carried out that proves theconcept. The technology then enters the phase where the concept itself needs to bevalidated, starting from a prototype developed in a laboratory environment (TRL 4),
through to testing in the conditions it which it will be deployed (TRL 5-6). The
technology next moves to the demonstration phase, where it is tested in real-world
environments (TRL 7), eventually reaching a first-of-a-kind commercial demonstration(TRL 8) on its way towards full commercial operation in the relevant environment(TRL 9).
Arriving at a stage where a technology can be considered commercially available(TRL 9) is not sufficient to describe its readiness to meet energy policy objectives, forwhich scale is often crucial. Beyond the TRL 9 stage, technologies need to be further
developed to be integrated within existing systems or otherwise evolve to be able toreach scale; other supporting technologies may need to be developed, or supply
chains set up, which in turn may require further development of the technology itself.
For this reason, the IEA has extended the TRL scale used in this report to incorporate
two additional levels of readiness: one where the technology is commercial andcompetitive but needs further innovation efforts for the technology to be integrated
into energy systems and value chains when deployed at scale (TRL 10), and a final one

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where the technology has achieved predictable growth (TRL 11).

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Technology readiness level scale applied by the IEA

IEA 2020. All rights reserved.
Note: SDS = Sustainable Development Scenario.

To inform this analysis, we have analysed the technology readiness of almost
400 individual technology designs and components, and have structured themhierarchically alongside others delivering the same service in what we refer to as the
ETP Clean Energy Technology Guide.* This is an interactive framework that includes
information on the level of maturity of different technology designs and components,
as well as a compilation of cost and performance improvement targets and leading
players in the field. Sixty per cent of the technology designs and components
analysed are not commercially available today, and 35% are at the early adoption
phase, meaning that they are still significantly dependent on innovation to improve
performance and reduce costs. Of the mature technology designs assessed, 65%
relate to the buildings and power generation sectors: a higher proportion of thetechnologies in industry, transport and fuels transformation have lower TRLs.

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In this report we refer to four broader readiness categories, each of which comprises
different ranges of specific readiness levels from the full TRL scale: mature, early
adoption, demonstration and prototype. Each technology type is assigned to one ofthese higher level categories based on the granular levels of maturity of individual
technology designs or components today associated with that technology. In somecases, we distinguish between large and small prototypes; we also refer to sometechnologies as being at the concept stage, which means that they are not yet readyfor the readiness categories.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions“Mature” for commercial technology types that have reached sizeable deployment
and for which only incremental innovations are expected. Technology types in thiscategory have all designs and underlying components at TRL 11. Hydropower andelectric trains are examples.
“Early adoption” for technology types for which some designs have reached market
and require policy support for scale-up, but where there are competing designs being
validated at the demonstration and prototype stage. Technology types in thiscategory have at least an underlying design at TRL ≥ 9 and others at lower TRLs.
Offshore wind, electric batteries and heat pumps are examples.
“Demonstration” for technology types for which designs are at demonstration stage
or below, meaning no underlying design at TRL ≥ 9, but with at least one design at
TRL 7 or 8. Carbon capture in cement kilns, electrolytic hydrogen-based ammonia andmethanol, and large long-distance battery-electric ships are examples.
“Large prototype” for technology types for which designs are at prototype stage of acertain scale, meaning no underlying design at TRL 7 or 8, but with at least one design
at TRL 5. Ammonia powered vessels, electrolytic hydrogen-based steel production
and direct air capture are examples.
“Small prototype” for technology types for which designs are at early prototype
stage, meaning no underlying design at TRL 5, but with at least one design at TRL 4.
Battery-electric aircraft and direct electrification of primary steelmaking are
examples.
“Concept” for applications that have just been formulated but need to be validated.
Lithium-air batteries and electrifying a steam cracker for olefins production are
examples.
Number of clean energy technology designs and components analysed in the ETP

Clean Energy Technology Guide
60

Buildings

50
Transport
40
Industry30
20Power generation

10
0

Fuels
transformation
Concept

Small prototype

Largeprototype

Demonstration Early adoption

MatureIEA 2020. All rights reserved.

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* For more information, see: www.iea.org/articles/etp-clean-energy-technology-guide.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

The Sustainable Development Scenario identifies four key decarbonisation
strategies: 1) the electrification of the transport, industry and buildings sectors; 2) the
deployment of CCUS systems; 3) the shift towards hydrogen and hydrogen-derived
synthetic fuels (using low-carbon hydrogen and sustainable carbon sources); and4) the use of more sustainable alternative fuels and feedstock such as bioenergy. For
these decarbonisation strategies to be rolled out, innovation is needed to bring newtechnologies to market and to improve emerging ones along all the different stepsof the involved value chains.

Electrification
A central pillar of the clean energy transition in the Sustainable Development
Scenario is the acceleration of the electrification of the world economy. The share ofelectricity in final energy uses has been growing steadily for decades. In the period
1990-2019, global annual electricity demand grew on average by 3.0%, an averageannual increase roughly equivalent to the total amount of electricity generated
annually in Italy and Sweden combined. This trend continues in the Sustainable
Development Scenario, driven by growing demand for electrical appliances and also
by an expansion of electricity into new sectors, which reflects the environmental andpractical advantages of electricity over other forms of energy in final applications.
Final electricity demand expands by around 30 000 TWh through to 2070, which isaround 6 000 TWh (or 25%) more than in the Stated Policies Scenario, and equivalent
to around 135% of current consumption. The share of electricity in the global final
energy demand grows from 19% today to 47% in 2070, compared with just 28% in theStated Policies Scenario (Figure 2.8).
Electricity becomes the main energy carrier in all end-use sectors in the Sustainable
Development Scenario, but trends vary significantly. The buildings sector is thelargest user of electricity today, and demand in 2070 increases by 75%, or almost
9 000 TWh, driven mostly by conventional uses in electric appliances. But the scope
for the buildings sector to use more electricity is generally lower in the Sustainable
Development Scenario than for other sectors, as demand growth is held back bystringent efficiency measures (demand grows by 110% over the period 2019-2070 in
the Stated Policies Scenario, in which efficiency improves less).
Electricity demand in industry and transport grows by 11 500 TWh and 9 500 TWh
respectively. Electricity is already an important fuel for the industry sector today,
meeting around one-quarter of total demand. In the Sustainable Development
Scenario, demand growth between 2019 and 2070 is about 135% higher than in theStated Policies Scenario, driven in particular by the chemicals and the iron and steel
sectors. Transport relies predominantly on oil today: electricity is largely confined to
the rail sector, and meets just 1% of total transport energy demand. The change in

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the transport sector is the biggest of all in the Sustainable Development Scenario:

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

electricity overtakes oil by 2060 to become the main form of energy for transport,
and more than one-third of transport energy demand (and half of road transportdemand) is met by electricity by 2070, with electric vehicles dominating thepassenger car fleet. Many trucks also convert to electric powertrains, though theiradoption lags that of cars by more than a decade (see Chapter 5).

TWh/yrGrowth in global electricity consumption by sector and scenario and electricity
share in total final consumption in the Sustainable Development Scenario
15 000Growth in annual electricity demand 2019-70 andshares in final energy demand

Electricity share in total final energy demand
100%

100%

12 000

80%

80%

9 000

60%

60%

6 000

40%

40%

3 000

20%

20%

0%

0%
2019

0

STEPS

SDS

Industry
STEPS

STEPS

SDS

Transport
SDS

STEPS

SDS

2030

2040

2050

2060

2070

Buildings

Share of electricity in final energy demand 2019

Share of electricity in final energy demand 2070

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario.

Electricity accounts for almost half of all final energy demand by 2070 in the Sustainable
Development Scenario: its growth is driven by increased demand in industrial motors,
electric vehicles and appliances in buildings.

Increased electrification of end-use sectors accounts for almost 30% of the annual
CO2 reductions in 2070 in the Sustainable Development Scenario relative to theStated Policies Scenario (or about one-fifth on a cumulative basis over the period)
because it replaces fossil fuels with low-carbon electricity. A major part of these
reductions come from the transport sector, particularly through the uptake of electricvehicles, first in light-duty vehicles (cars and commercial vehicles) and urban buses,
and later in medium- and heavy-duty buses and trucks. Significant CO2 reductions
from electrification occur also in the industry sector, led by the continued
electrification of low-temperature heat needs through industrial heat pumps(Figure 2.9).
Electricity systems need to become more flexible in the face of increasing
electrification. With the expansion of electric vehicle (EV) fleets, EV charging could
increase the peak of daily loads, unless steps are taken to spread the load. Similarly,

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growth in the use of electricity for space heating or cooling via heat pumps inEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

buildings could raise peak loads, especially in countries with cold winters, even withthe much higher efficiency of electric heat pumps that is projected in the Sustainable
Development Scenario (IEA, 2020a).

GtCO₂/yrGlobal CO2 emissions reductions from electrification by sector in the
Sustainable Development Scenario relative to the Stated Policies Scenario,
2030-70
1050%
Buildings

8

40%

6

30%

4

20%

Transport - trucks
Transport - cars
Industry
Other

10%

2

0

2030

2040

2050

2060

2070

0%

Share in total annual
emissions reductions(right axis)

IEA 2020. All rights reserved.

Electrification accounts for almost 30% of the annual CO2 emissions savings in the
Sustainable Development Scenario in 2070, with industry and transport making the biggest
contributions.

At the same time, the much greater reliance on solar PV and wind power that isprojected would increase the need for system flexibility to deal with the natural dailyand seasonal variability of these sources of generation. That flexibility could comefrom additional dispatchable generation and stronger electricity networks, alongsideenhanced interconnections with neighbouring systems that would take advantage oflarger geographical areas to help smooth out variations. Long-distance high-voltage
direct current transmission lines could also facilitate energy transfers between
regions (east-west for short-term energy shift, and north-south for seasonal energy
shift). Demand response is another solution: for example, smart electric vehicle
recharging infrastructure that takes account of the operational aspects of theelectricity system could manage the timing of recharging in response to real-time
price signals to balance load with available output, allowing a higher share of variable
renewable capacity (Box 2.7). Electric vehicle batteries could provide additional
short-term storage, subject to the development of vehicle-to-grid inverters. Largeamounts of additional short-term storage (minutes to hours) and long-term electricity

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storage (hours to days or weeks) would also be needed, whether in the form of grid-Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

scale batteries, pumped hydro, hydrogen storage or some alternative to these.
Reducing the cost of storage technologies is a major challenge for global energy
transitions.
In the Sustainable Development Scenario, low-carbon heating systems in buildings
based on biomethane and hydrogen ease the need to use electricity directly forspace heating or cooling in buildings and for process heat in industry, as do district
heat and cooling from low-carbon combined heat and power generation District
heating, bioenergy and hydrogen account on average for almost 60% of global spaceheating demand in 2070, compared with around 20% from electricity. Both hydrogenand district heating could, however, stem indirectly from electricity, and the indirectelectrification that comes from the conversion of electricity into hydrogen,hydrogen-based fuels (ammonia, synthetic hydrocarbon fuels) and heat expands theuse of electricity in industry, transport and buildings. When this is taken into account,
the overall share of electricity in global final energy demand in the Sustainable
Development Scenario increases to 55% in 2070 (compared with 48% with directelectrification only), with the transport sector accounting for more than 60% of thedifference.

Box 2.7

The opportunity of cooling storage and electric vehicles in China

Two emerging trends in China will pose either a challenge or an opportunity inbalancing electricity demand and supply: the growth of electricity use and the rise ofvariable renewables.
An additional 900 million air conditioners will be sold over the next ten years in China,
equivalent to almost 2.5 times the number of air conditioners operating today in the
United States. The battery capacity of on-board electric vehicles (light-duty andheavy-duty vehicles, buses, and two to three wheelers) will also grow about 10-fold.
Many people are likely to run their air conditioner or charge their vehicle at roughly
the same time of day. In the Sustainable Development Scenario, for example,
residential space cooling represents only 4% of total electricity demand in China in
2030 but is responsible for 30-40% of the peak load (figure below).
At the same time, the falling costs of renewables mean that the contribution of windand solar to total power capacity will jump from 20% today to around 50% in 2030 in
the Sustainable Development Scenario. As supply and demand patterns may notcoincide, total electricity capacity could end up increasing three times faster thanannual electricity generation growth in order to ensure that demand can be met.
Assuming electricity storage and flexible generation technologies but no

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demand-side response capacity, China’s total installed capacity will have to increaseEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

to 3 250 GW by 2030 (including 1 650 GW of variable renewables, covering less thana third of annual electricity generation).

400

50%
40%

300

30%
200
20%
100

0

Share of the net load

GW

Contribution of residential cooling and electric vehicles to net electricity load in
China in the Sustainable Development Scenario, 2030

10%

0

Hours of the year
Electric vehicles

Residential cooling

8 760

0%

Share of total net load (averaged)

IEA 2020. All rights reserved.
Notes: Hours of the year are ranked based on non-variable renewable electrical capacity needs (from left toright). The increase in capacity needed to meet cooling demand on the left of the chart shows that cooling is amain driver of peak demand in China in 2030 in the absence of demand-side response.

Opportunities do, however, exist to trim the 300-450 GW of residential cooling peakdemand. Domestic ice and chilled water storage and district cooling networks offer
significant potential to reduce annual peak demand by displacing charging to offpeak hours over a day (for domestic applications) or seasonally (with geothermal
systems). Avoiding the charging of electric vehicle batteries during peak times could
save up to 40 GW and even enable batteries to supply electricity by means of vehicleto-grid technologies, potentially providing up to 300 GW of additional capacity (IEA,
2020a). Some measures require changes in regulatory frameworks, upfront
investments (e.g. in cooling storage systems, controls) and consumer active
participation, but they could avoid the need to build hundreds of underutilised peakgeneration plants.

While electrification of end-uses reduces reliance on fossil fuels, with energy security
benefits for countries that today rely heavily on fossil energy imports, it increases thedemand for the metals and minerals needed to produce the infrastructure andequipment associated with wider deployment of low-carbon electricity. Copper,
lithium, cobalt and platinum are at the core of the energy transition: copper is needed
for transmission and distribution lines; lithium and cobalt for the currently prevailing

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lithium-ion battery designs; and platinum in fuel cells. The material with the mostEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

fragile supply chain is cobalt, which has highly geographically concentrated mining
and processing facilities. The supply chain risks were made clear by a very sharp pricehike in 2018, which provided a strong incentive for battery producers to reduce thecobalt content of battery chemistries: several chemistries are now being developedthat do not require cobalt, although their timescales are uncertain. Lithium currently
has a more stable supply chain, but it is likely to keep its status as a critical material
because its physical properties make it nearly non-substitutable in the production ofhigh energy density batteries. 7
Global copper and lithium demand by sector and scenario
CopperProduction (kt)100%

Demand share (%)

80%
60%

60
45

40%

30

20%

15

0%

2019

2070 STEPS
Other

Power

Construction020102070 SDS
Transport

Production (kt)

80%
60%

Non-battery

Other batteries

0
2010

EVs

2060

2070

2060

2070

SDS

1 500

500

2070 SDS

2050

2 000

20%

2070 STEPS

2040

2 500

1 000

2019

2030
STEPS

40%

0%

2020

Lithium

100%

Demand share (%)

75

2020

2030

2040

STEPS

2050
SDS

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario. EVs = electric vehicles. Other
uses of copper are mainly for electronics and consumer products. Non-battery use of lithium is varied: ceramics,
lubricants, metallurgy, polymers, air purification or even pharmaceutical. The lifespan of batteries for electricvehicles is assumed to be the same as vehicles (between 14 and 17 years for light-duty vehicles). Electric trucks andbuses are assumed to use two sets of batteries during their lifetime.

7
There are two categoris of battery chemistries that avoid the use of lithium: sodium-ion batteries and multivalent-ion
batteries, with the latter being at a comparatively earlier stage of development. See Chapter 6 for a discussion ofadvanced battery chemistries.

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Demand for lithium, mainly for making batteries, increases twice as quickly in the
Sustainable Development Scenario as it does in the Stated Policies Scenario, as a result of
the faster penetration of electric vehicles and increased use of batteries in the power
sector.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Demand for copper, 60% of which is used today in construction, vehicles
manufacturing and power systems, is projected to grow only slightly faster in the
Sustainable Development Scenario than in the Stated Policies Scenario: in the Stated
Policies Scenario, faster electrification is largely offset by reduced demand forcopper in transport due to modal shifts and to more efficient use of materials in
vehicles manufacturing and construction. By contrast, demand for lithium, which isused for making Li-ion batteries, increases much faster in the Sustainable
Development Scenario due to the more rapid penetration of electric vehicles and toa greater need for batteries in the power sector (Figure 2.10). 8

Box 2.8

Impact of the Covid-19 crisis on electricity-based technologies

Electricity demand fell by 20% or more in countries with full lockdown measures,
though it is recovering quickly in countries where measures have been eased. Overthe year as a whole, global electricity demand is currently expected to be around 5%
lower than it was 2019 (IEA, 2020b).
Manufacturers of electricity-based technologies were affected to a varying extent byplant closures and supply chain disruptions. While heat pump manufacturing outputs,
for example, quickly returned to pre-pandemic levels in China and Europe, a numberof factories are still closed in India (as of June 2020). Daikin, accounting for an
estimated third of the global heat pump market, plans to maintain its R&D spendingin 2020 relative to 2019 (Daikin, 2020). Some governments are seizing theopportunity to include heat pumping technology in Covid-19 stimulus packages: forexample, the Italian “Super Eco-bonus” provides a 110% fiscal incentive for A-classheating and cooling systems (up to EUR 30 000), on top of other renovation
measures (Gazzetta Ufficiale, 2020). In transport, the Covid-19 pandemic brought
about contrasting impacts on electric car sales, but overall they are proving more
resilient than conventional car sales. In China, the decline was the largest in February,
with electric car sales falling by around 60% from the same month in 2019 before
rebounding in April and May to around 75-80% of the level of the previous year. In the
United States, electric car sales in April more than halved compared with the previous
year. In the largest European car markets combined (France, Germany, Italy and theUnited Kingdom), however, sales of electric cars in the first 5 months of 2020 wereabout 80% higher than in the same period the previous year as a result of recently

8

See Chapter 6 for analysis on implications on lithium demand of rolling out advanced batteries post Li-ion.

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revitalised incentive schemes.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Technology readiness of the low-carbon electricity value
chain
The accelerated electrification of end-use sectors and the decarbonisation of power
generation are essential to achieving net-zero CO2 emissions. In the low-carbon
electricity value chain, several technologies have reached maturity, such ashydropower and electric trains. In end-use sectors, some technologies such as
electric vehicles and heat pumps are commercially available, but innovation remains
an important issue: their ability to expand their markets depends on further
technology innovation to improve performance and reduce costs.
But there is still a long way to go for others (Figure 2.11). This is particularly true indemand areas such as heavy industry and long-distance transport that are proving
difficult to electrify: some key technologies in these areas are today still at small
prototype stage or below. In primary steelmaking, the use of electricity to convert
iron ore via electrolysis into steel is being explored in research projects and plans forpilot plants. In aviation, prototypes of electric planes are currently being developed
and tested by several companies, but the use of electricity for aviation is likely to belimited to short-haul flights given the technical limitations associated with the low
energy density of on-board batteries.
The need for further development applies to other areas of the low-carbon electricity
value chain too. Innovation to develop effective integration measures that provide
greater flexibility to lower carbon electricity grids is becoming increasingly
important: relevant technologies today are, however, generally between the early

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adoption and large prototype stages.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Technology readiness level of technologies along the low-carbon electricity
value chain

IEA 2020. All rights reserved.
Notes: CCUS = carbon capture, utilisation and storage. Each technology is assigned the highest technology
readiness level of the underlying technology designs. For more detailed information on individual technology
designs for each of these technologies, and designs at small prototype stage or below, see:www.iea.org/articles/etp-clean-energy-technology-guide.

PAGE | 102

IEA. All rights reserved.

Not all parts of the low-carbon electricity value chain are at commercial scale today; sometechnologies in end-use sectors and in electricity infrastructure are at demonstration orlarge prototype stage.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Carbon capture, utilisation and storage
In the Sustainable Development Scenario, CCUS plays a substantial and varied rolein the transition to a net-zero global energy system. 9 CO2 is captured for permanentgeological storage or use from industrial processes, fuel production andtransformation as well as power generation. CCUS also produces negative emissions(CO2 removal) through BECCS and direct air capture and storage. In total, CCUS
contributes almost 15% of the cumulative reduction in CO₂ emissions worldwide
compared with the Stated Policies Scenario, with the role and contribution of CCUS
growing over time.
Net-zero emissions are reached in the Sustainable Development Scenario in 2070,
and around 10 Gt of CO2 are captured in that year (Figure 2.12). The power sector
accounts for less than 40% of the total CO2 emissions captured, of which around half
are from fossil power plants, allowing the continued operation of existing plants after
CO2 capture retrofits and lifetime extensions. The other half is captured at biomassfired power plants, resulting in negative emissions to offset remaining emissions inheavy industry and transport.
Growth in global CO₂ capture by sector and fuel in the Sustainable
Development Scenario, 2019-70
GtCO₂/yrGlobal CO2 capture by sector

Fuel shares of global CO2 capture

12
10
8
6
4

100%

DAC

80%

Biomass60%

Natural gas

40%

Oil

2

20%

0

0%
2019

2030

2040

2050

2060

2070

Power

Iron and steel

Chemicals

CementOther energy transformation

DAC

Coal
Process emissions
2030

2050

2070

IEA 2020. All rights reserved.
Note: DAC = direct air capture.

9
The IEA will release an ETP-2020 Special Report on CCUS with more detailed analysis of the role of CCUS in clean
energy transitions to net-zero emissions.

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In the Sustainable Development Scenario, the role of CO₂ capture shifts from managing theemissions from existing assets towards capture from biomass and air to enable carbon
removal at scale.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

CCUS is particularly important in enabling the industry sector to capture process
emissions in the production of cement, chemical feedstocks and steel. Overall,industry produces a quarter of the total CO2 captured globally in 2070 in the
Sustainable Development Scenario (see also Chapter 4). Around 30% (or 2.9 GtCO2)of the global CO2 captured in 2070 is linked to the production of other fuels, with
40% of global hydrogen production in 2070 being in combination with CCUS, while
BECCS applied to biofuel production creates negative emissions of around
900 MtCO2 in the same year. CO2 is also used in combination with hydrogen to
produce synthetic hydrocarbon fuels for the transport sector, in particular for theaviation sector, where few alternative decarbonisation options are available (see also
Chapter 5). CO2 is captured from the air and stored for carbon removal or used in
combination with hydrogen for the production of clean fuels, and it accounts foraround 7% of the CO2 captured in the Sustainable Development Scenario.
CCUS goes through three phases in the Sustainable Development Scenario on thepathway towards net zero in 2070. Until 2030, the focus is on managing emissions
from existing infrastructure and assets: over 80% of all CO2 emissions captured inthis decade are linked to fossil fuel and feedstock use in retrofitted coal-fired power
units, chemical production (mainly for fertilisers), cement, and iron and steel
facilities. During the second phase, from 2030 to 2050, the focus of carbon capture
in power generation gradually shifts to natural gas, supporting the integration ofvariable renewables, while natural gas with CCS is also used to cover the growing
demand for hydrogen. The scale of BECCS in power generation and biofuel
production increases significantly and is responsible for around 15% of CO2 captured
in 2050. The final phase from 2050 to 2070 marks an important shift in the role of
CCUS in the energy sector: the emphasis moves away from reducing emissions fromexisting infrastructure and fossil fuel use towards CCUS for carbon removal and CO2
use for fuel production. In 2070, over one-third of all CO2 emissions captured arefrom BECCS or direct air capture for generating negative emissions of carbon-neutral
fuels.
Of the 10 Gt of CO2 captured globally in 2070 in the Sustainable Development
Scenario, more than 90% are stored. Nearly 3 Gt of the stored CO2 comes from
BECCS or direct air capture, which is more than a quarter of all CO2 captured. The
almost 1 Gt of the CO2 captured in 2070 that is used rather than stored goes
principally to produce fuels and feedstocks (Figure 2.13), and in particular to the
production of synthetic hydrocarbon fuels, primarily for the aviation sector. Around
250 Mtoe of aviation fuels are produced in 2070 in combination with low-carbonhydrogen. With the CO2 being sourced from the atmosphere (55% of all CO2 used in2070) or captured at biomass power or biofuel production plants (45%), the aviationfuel produced is carbon-neutral, and it helps to decarbonise the global aviation
requires electricity to source CO2 from the atmosphere through direct air capture,

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sector by meeting around 40% of its energy demand in 2070. Besides CO2, which

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

the production of this 250 Mtoe of synthetic kerosene requires around 120 MtH2(350 Mtoe) of electrolytic hydrogen, meaning that in total it requires 5 500 TWh ofelectricity, or around 8% of all the electricity produced worldwide in 2070 in the
Sustainable Development Scenario.
Global CO₂ use for fuel and feedstock production in the Sustainable
Development Scenario, 2019-70
Fuel and feestock production

800
600
400
200
0

2019

2030

2040

2050

2060

2070

Fuels (Mtoe/yr) or feedstocks (Mt/yr)

MtCO₂/yr

CO2 used
1 000

300
250
200
150
100
50
0
2019

Fuels - fossil CO₂

Fuels - biogenic CO₂

Fuels - DAC CO₂

2030

2040

2050

2060

2070

Chemical feedstocks - process emissions

IEA 2020. All rights reserved.
Notes: DAC = direct air capture. Feedstocks refer to the production of methanol and urea.

Almost 1 Gt of CO2 captured from biomass or the air is used to produce clean fuels in the
Sustainable Development Scenario, supporting in particular the decarbonisation of theaviation sector.

Trends by sector
In the Sustainable Development Scenario, cumulative CO2 capture through to 2070
is largest in the power sector at 88 Gt: this represents about 15% of the CO2 reductionin this sector. In industry, the cumulative CO2 captured through to 2070 is 77 Gt,
representing more than 20% of its CO2 reduction. Negative emissions provided in
combination with biofuel production in the other energy transformation sector andfrom direct air capture provide around 2% of the cumulative emissions reduction.

Power
Although there are a wide range of low-carbon alternatives available fordecarbonising power generation, CCUS has an important role to play, in particularthrough CCUS retrofits to the existing fleet of fossil fuel power plants. In the
Sustainable Development Scenario, over 190 GW of coal-fired capacity and almost
160 GW of gas-fired capacity is retrofitted. CCUS power plants also offer one option

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for facilitating the integration of growing shares of renewables into the power system

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

by providing system balancing services and flexibility over different timescales, while
the combination of CCUS and sustainable biomass (BECCS) in the power sector
enables it to become net-negative after 2050, and to provide net-negative emissionsof around 1.5 GtCO2 in 2070. As a result, carbon capture contributes some 20% to
the cumulative decarbonisation efforts of the power sector over the period to 2070.
By 2070, a total of 1 100 GW of generating capacity is equipped with CCUS,
producing around 6 000 TWh of electricity (or 8% of global power generation). All of
the remaining coal-fired and gas-fired electricity generation, and about 50% ofbiomass-fired generation are linked to CCUS.

Industry
CCUS accounts for around 45% of the total reduction in cumulative emissions from
cement, iron and steel, and chemicals production in the period to 2070 in the
Sustainable Development Scenario compared with the Stated Policies Scenario. In
the period to 2030, CO₂ emissions captured in industry increase by a factor of 4, andby a factor of 24 through to 2070. The amount of CO2 captured is largest in the
cement industry, followed by iron and steel and chemicals. By 2070, about 90% of
all the CO2 emitted globally in cement and around 75% in chemicals and iron andsteel is captured. For this to happen, an average of almost 40 cement plants, over
15 chemicals plants and over 10 steel plants operating with CO2 capture need to bebuilt every single year through to 2070.

Other energy transformation sector
The other energy transformation sector today accounts for annual emissions of
1 400 MtCO2, or around 4% of total energy sector emissions, mostly from refineries
and oil and gas production. In the Sustainable Development Scenario, the otherenergy transformation sector helps to support the target of reaching net-zeroemissions through the deployment of CCUS technologies. CCUS plays an importantrole in facilitating the production and use of low-carbon hydrogen from fossil fuels,
which offers a way to decarbonise a range of energy sectors, in particular long-haultransport. For example, almost 100 Mtoe of ammonia for fuelling ships are produced
from natural gas with CCUS, covering around 30% of fuel demand for shipping. CCUS
is also a source of CO2 for clean synthetic hydrocarbon fuels, and enables the captureand storage of biogenic CO2. In the Sustainable Development Scenario, the total
amount of biofuel production grows to more than 830 Mtoe in 2070, of which 35% is

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IEA. All rights reserved.

combined with CCUS, yielding to nearly 1 GtCO2 of negative emissions.

Energy Technology Perspectives 2020

Box 2.9

Chapter 2. Technology needs for net-zero emissions

Impact of the Covid-19 crisis on CCUS technologies

For CCUS, short-term uncertainty has been tempered by recent project and funding
announcements. In March 2020, the United Kingdom confirmed its pledge to invest
GBP 800 million (USD 995 million) in CCUS infrastructure. In Europe, theEUR 10 billion Innovation Fund will be available to support CCUS projects (and otherclean energy technologies) from 2020, while in Australia, the government announced
in May plans to make CCUS eligible for existing funding programmes. Direct air
capture research also received a boost in March 2020 when the US Department ofEnergy earmarked USD 22 million in research and development grants (US DOE,
2020a). Recent industry commitments to CCUS include investments in the UnitedStates and Europe.

Technology readiness of CCUS value chain
The capture, transport and utilisation or storage of CO2 emissions as a successful
decarbonisation strategy hinges on the commercial availability of technologies at
each stage of the process as well as on the development and expansion of CO2transport and storage networks on a sizeable scale.
Capture: While CO2 has been captured for decades in certain industrial and fueltransformation processes such as ammonia production and natural gas processing,it has just commercially emerged or is still being demonstrated at a large scale inmany of the other possible applications (Figure 2.14). In each of these potential new
applications, which range from power generation and fuels transformation to cement
and iron and steel production, a wide range of CO2 separation techniques need to be
tailored to the particular conditions of each individual process. Chemical absorption
is the CO2 separation technique for which there is the most operational experience,and it is currently used in commercial capture facilities and embedded indemonstration plants for most applications across different sectors. Chemical
absorption is therefore the CO2 separation technique the most widely used over the
next two decades in the Sustainable Development Scenario.
Use: CO2 is used commercially today in a few industries; it is, for instance, used in
the production of urea (the main precursor of nitrogen-based fertilisers) and ofcarbonated drinks. In both applications, CO2 is only stored temporarily and isultimately released to the atmosphere. Other potential uses of CO2 are emerging:

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they include building materials (which would provide long-term but not permanentEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

CO2 storage) and feedstock for synthetic fuels (which would prevent the CO2 frombeing released into the atmosphere only temporarily). 10
Storage: CO2 has been used for enhanced-oil recovery for more than five decades;
this counts as a form of storage because the vast majority of the CO2 is retained in
the reservoir. Most of the CO2 used is sourced from natural reservoirs, but anincreasing amount comes from CO2 captured from industrial sources. There isrelatively limited experience in operating other geological storage options at scale,although there are 5 large-scale facilities currently storing more than 7 MtCO2/year
in saline formations, one of which has been operating since 1995 (the Sleipner CCS
project). CO2 storage in depleted oil and gas wells has been limited to pilot
demonstrations, but there are plans to develop commercial facilities.
Negative emissions: Biomass-based CO2 emissions capture and storage and direct
air capture both have the ability to yield negative emissions, and therefore haveconsiderable potential long-term importance. With a few exceptions, however,neither technology has yet reached markets at a large scale. 11 Some demonstration
plants and pilots have been completed, and in some cases they have been
maintained in operation, particularly when a suitable commercial use for thecaptured CO2 was found nearby. Several small pilot-scale direct air capture plants
are currently operating around the world: they incorporate commercial facilities thatsell the captured CO2.

Even if released again, the use of fossil CO2 can contribute to CO2 reduction as, in principle, each carbon molecule
is being used twice: the carbon contained in a fossil fuel is used to produce energy or in an industrial production
process; then the resulting CO2 is used in combination with hydrogen to produce a synthetic hydrocarbon fuel.
11
An ethanol plant in Illinois (United States) captures and stores 1 MtCO2 per year.

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10Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Technology readiness level of technologies along the CO2 value chain

IEA 2020. All rights reserved.
Notes: Technologies included are at large prototype or at a more advanced stage. Each technology is assigned thehighest technology readiness level of the underlying technology designs. For more detailed information on
individual technology designs for each of these technologies, and designs at small prototype stage or below, see:www.iea.org/articles/etp-clean-energy-technology-guide.

Not all parts of the CO2 value chain are operating at commercial scale today: many of therelevant technologies are still at the demonstration and the large prototype stage.

Hydrogen holds great promise for the transition to a clean energy system. It can be
an option to decarbonise sectors where few alternative mitigation solutions exist,
such as long-distance transport, chemicals, and iron and steel production. With
increasing shares of variable renewables in the electricity generation mix, it is one ofthe very few technology options for storing large amounts of electricity over days,
weeks or even months. Hydrogen or hydrogen-based fuels can also be a means totransport renewable energy from regions with abundant renewable resources over

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Hydrogen and hydrogen-based fuels

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

thousands of kilometres to regions and cities with growing energy needs. Hydrogenis a very versatile energy carrier; it can be produced from a variety of energy
resources, including natural gas, coal, oil, renewables and nuclear energy. Hydrogencan also be converted into feedstocks for the chemical industry or, in combination
with CO2, into synthetic hydrocarbon fuels for the transport sector.
Despite these opportunities, hydrogen use today in the energy sector is largely
limited to the refining sector and the production of ammonia and methanol in thechemical industry. Global hydrogen demand in 2019 stood at 75 MtH2 (or 215 Mtoe):the hydrogen was mainly produced from fossil fuels without CCUS, and in particularfrom natural gas. In the Sustainable Development Scenario, this situation changes,
with global hydrogen demand increasing sevenfold to 520 Mt by 2070 (Figure 2.15).
The direct use of hydrogen in the transport sector for cars, trucks and ships accounts
for 30% of hydrogen use in 2070, while around 20% of hydrogen is used in the
production of synthetic kerosene from hydrogen and CO2 for the aviation sector, anda further 10% is converted into ammonia as a fuel for the shipping sector, meetingalmost half of all shipping fuel demand in 2070. Industry accounts for 15% ofhydrogen use in 2070, mostly for chemicals and iron and steel; the power sector
accounts for almost 15%, which supports flexible electricity generation; and thebuildings sector accounts for 5%, which is used for space and water heating, 5% in
the form of hydrogen blended together with natural gas and biomethane in the gas
grid, and 95% in the form of pure hydrogen transported in new pipelines or inconverted natural gas pipelines.

Hydrogen production

600

Hydrogen use

MtH2/yr

MtH₂/yr

Global hydrogen production by fuel and hydrogen demand by sector in the
Sustainable Development Scenario, 2019-70

500

600
500

400

400

300

300

200

200

100

100

0

0
2019

2030

2040

2050

2060

2070

Fossil without CCUS

Fossil with CCUS

Refining CNR

Electricity

2019

2030

2040

2050

Refining
Transport
Industry
Ammonia production

2060

2070

Power
Buildings
Synfuel production

IEA 2020. All rights reserved.
Notes: CCUS = carbon capture, utilisation and storage. Refining CNR refers to the production of hydrogen as a byproduct of catalytic naphtha reforming in refineries. Ammonia production refers to the fuel production for the
shipping sector. Hydrogen use for industrial ammonia production is included within the industry use.

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Global hydrogen production and use grows sevenfold by 2070 compared to today in the
Sustainable Development Scenario, with demand growth almost completely met by lowcarbon hydrogen.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

In the Sustainable Development Scenario, hydrogen and hydrogen-based fuelsaccount in 2070 for 13% of all final energy needs, compared to around 1% in 2019
(Figure 2.16), with most of these fuels being used in transport and industry:Transport accounts for 70% of the use of these fuels in 2070, which meetsignificant shares of the final energy demand for different transport modes: 52%
for shipping, 40% for aviation and a third and road transport. Within roadtransport, hydrogen and fuel cells become important for decarbonising trucks.
Almost a quarter of all medium-freight trucks on the road in the Sustainable
Development Scenario in 2070 use hydrogen and fuel cells, as do around 50% of
all heavy-freight trucks (see Chapter 5).

Industry accounts for approaching 20% of the use of these fuels in 2070, with
the introduction of hydrogen as a reducing agent in steel production being themain driver for growth in industrial hydrogen demand. Almost 15% of final energy
demand in the iron and steel sector is linked to hydrogen use, and more than aquarter of global primary steel production in 2070 is based on the electrolytichydrogen-based direct reduction technology route. Hydrogen remains also an
important feedstock in the chemical industry for the production of ammonia andmethanol, accounting for a fifth of the energy demand in this industry (seeChapter 4).

50%

800

8%

40%

600

6%

30%

400

4%

20%

200

2%

10%

0

0%

0%

2019

2030

2040

2050

Transport - ammonia
Electricity from hydrogen
Buildings
Industry - iron and steel
Hydrogen share in TFC (right axis)

2060

2070

Transport - synfuels
Transport - hydrogen
Industry - chemicals
Other Industry

Buildings - space
and water
heating60%

10%Iron and steel

12%

1 000

Chemicals

1 200

Share of hydrogen in final energy demandRoad transport

70%

Aviation

Final energy demand hydrogen

14%

1 400

Shipping

Mtoe/yr

Global final energy demand for hydrogen by sector and share of hydrogen in
selected sectors in the Sustainable Development Scenario

IEA 2020. All rights reserved.
Notes: TFC = total final consumption. Synfuels refer to synthetic hydrocarbon fuels produced from hydrogen andCO2. Shares of hydrogen in the final energy demand include for transport modes ammonia and synthetichydrocarbon fuels.

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Hydrogen and hydrogen-based fuels account for 13% of global final energy demandby 2070 in the Sustainable Development Scenario, and are mostly used in transport andindustry.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

On the production side, almost all hydrogen today comes from fossil fuels, withnatural gas accounting for around three-quarters of pure hydrogen production, coalfor almost a quarter (mainly in China), and oil and electricity for the remainder. As aconsequence, hydrogen production was responsible in 2019 for CO2 emissions ofmore than 800 MtCO2, around 2% of global CO2 emissions from the energy sector. In
the Sustainable Development Scenario, this situation changes as the focus switches
to Low-carbon hydrogen (hydrogen produced from fossil fuels in combination with
CO2 capture and storage or through water electrolysis from low-carbon electricity).
Low-carbon hydrogen totals 513 MtH2 in 2070 and accounts for 99% of global
production. More than half of this is produced through electrolysis, and requires
13 750 TWh of electricity to produce, or 19% of global electricity generation in 2070
– equivalent to around half of today’s total generation. The rest of the low-carbonhydrogen produced – some 40% – comes from fossil fuels with CCUS, and results inthe capture of 1 900 MtCO2. The use of low-carbon hydrogen and hydrogen-based
fuel provides 8% of the CO2 reductions in the Sustainable Development Scenario
relative to the Stated Policies Scenario in 2070 (or 6% of the cumulative emission
reductions over the period 2019-70) (Figure 2.17). Hydrogen use in the transport
sector accounts for 6% of the overall CO2 reductions, and industry for 2%.

GtCO₂/yrGlobal CO2 emissions reductions from hydrogen by sector in the Sustainable
Development Scenario relative to the Stated Policies Scenario, 2030-70
420%
Buildings

3

15%

2

10%

1

5%

0

2030

2040

2050

2060

2070

0%

Transport - aviation
Transport - road,shippingIndustryPower
Share in total annual
emissions reductions(right axis)

IEA 2020. All rights reserved.

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IEA. All rights reserved.

Hydrogen and hydrogen-based fuels account for 8% of the annual CO2 emissions savings in
the Sustainable Development Scenario in 2070, with transport making the biggest
contributions.

Energy Technology Perspectives 2020

Box 2.10

Chapter 2. Technology needs for net-zero emissions

Impact of the Covid-19 crisis on hydrogen technologies

The economic crisis resulting from the Covid-19 outbreak brought risks for hydrogenrelated projects. Hydrogen Europe initially estimated that up to EUR 130 billion of
investments in low-carbon hydrogen production projects might be at risk in Europe
alone (Hydrogen Europe, 2020). However, a number of governments and companies
have responded in ways that show a strong continuing commitment to maintaining
the momentum of hydrogen.
On the government side, several countries (including Germany, Norway and Portugal)
have adopted ambitious national strategies, while the European Commission (EC)announced a new Hydrogen Strategy in July which set a target of at least 6 GW ofrenewable hydrogen electrolysers by 2024 and 40 GW by 2030 (EC, 2020). The EC
also announced the creation of the European Clean Hydrogen Alliance to help deliveron the strategy and build up an investment pipeline for scaled-up low-carbonhydrogen production. In China, Beijing released its municipal “New Infrastructure
Action Plan (2020-2022)” in June 2020, showing that it plans to become thedemonstration city in China for hydrogen fuel cell vehicles, including by establishingnational-leading

manufacturing

centresforhydrogentechnologies(Beijing

Municipality, 2020).
On the industry side, several big companies have announced plans to accelerate thedevelopment of hydrogen technologies. Volvo and Daimler announced in April a joint
venture to work on hydrogen fuel cells for trucks, and Bosch announced plans to
manufacture fuel cells for mobile and stationary applications (Kahn, 2020; Daimler,2020). The consortium behind the development of iron ore reduction for steelmaking
based on electrolytic hydrogen has confirmed its commitment to commence theconstruction of an industrial scale demonstration plant in 2023 with the objective of
producing commercial fossil-free steel by 2026 (Hybrit, 2020). The production of lowcarbon hydrogen-derived products has also received a significant boost: Air
Products, ACWA and NEOM signed an agreement for a USD 5 billion project toproduce 1.2 million tonnes per year of green ammonia, and a consortium of 6 Danish
companies announced a joint effort to develop hydrogen-based fuels for longdistance transport and heavy industry, with the first projects starting operations in
2023 (Air Products, 2020; Financial Times, 2020).

Technology readiness of the hydrogen value chain
The value chain for low-carbon hydrogen is not completely developed at commercial
scale today. It comprises many technologies that are necessary to produce,transport, store and consume low-carbon hydrogen, each of them at a different stage

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of maturity and facing specific technical challenges (Figure 2.18).

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Technology readiness level of technologies along the low-carbon hydrogenvalue chain

IEA 2020. All rights reserved.

Not all steps of the low-carbon hydrogen value chain are operating at commercial scale
today: the majority of demand technologies are only at the demonstration or prototype
stage.

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Notes: CCUS = carbon capture, utilisation and storage. Technologies included are at large prototype or at a moreadvanced stage. For more detailed information on individual technology designs for each of these technologies,
and designs at small prototype stage or below, see: www.iea.org/articles/etp-clean-energy-technology-guide.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Among the low-carbon hydrogen production routes that are commercially available
today, the decline in the costs of renewable electricity is creating renewed interestin water electrolysis, with scaling up of deployment and manufacturing capacities
seen as critical to bring down costs. Natural gas reforming with CCUS is an alternative
commercially available option for hydrogen production.
Setting to one side its long-standing use in oil refining and chemical production,hydrogen use today is limited by current commercially viable technologies tolight-duty vehicles, space heating, and electricity generation in buildings anddistributed electricity systems. 12 The use of electrolytic hydrogen in heavy industrial
processes is at the demonstration stage today, whereas the use of natural gas with
CCUS is already in operation at several facilities. Large portions of the full potential
demand for hydrogen will remain untapped until technologies are developed to usehydrogen in iron and steel and heavy-duty transport, and until fuels derived from lowcarbon hydrogen (for example, synthetic hydrocarbon fuels and ammonia), aredemonstrated at commercial scale and then deployed. Technologies for transportingand distributing hydrogen will also be critical for its wider deployment. Infrastructuretechnologies such as hydrogen pipelines and hydrogen refuelling stations are
already mature or at an early adoption stage today, but others, such as long-distancetransport of hydrogen by ships or blending of hydrogen in natural gas grids, are still
being tested as large prototypes or are at commercial demonstration scale.

Bioenergy
Bioenergy has a central role to play in reducing carbon emissions from the energy
sector. In the Sustainable Development Scenario, bioenergy becomes thesecond-largest primary energy source worldwide after solar, its share in total energy
demand almost doubling from today’s level to nearly 20% in 2070 (Figure 2.19). In
absolute terms, primary bioenergy demand increases by 1 430 Mtoe (60 EJ),
reaching a level of 3 000 Mtoe (125 EJ) in 2070 in the Sustainable Development
Scenario. Ensuring that this growth in bioenergy demand can be realised in asustainable way, avoiding adverse social, environmental or economic impacts, willbe critical (Box 2.11).
Around 60% of final bioenergy use (and 40% of primary bioenergy use) is today inthe form of the traditional use of solid biomass for cooking in emerging economies,
which has negative impacts on human health through indoor air pollution andharmful social, economic and environmental consequences. The provision of clean
cooking fuels by 2030 is one of the United Nations’ Sustainable Development Goals.
Meeting this goal entails a reduction in traditional use of solid biomass by almost 90%

12

Stationary fuel cells deployed today mostly rely on natural gas as fuel, although they are capable of using hydrogen.

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over the next 10 years, which requires a steady increase in the efficient use ofEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

biomass in solid, liquid or gaseous forms (e.g. modern cooking stoves, space heating
boilers): in the Sustainable Development Scenario, the efficient use of biomass
accounts for 13% of total buildings energy needs in 2070.
The bulk of bioenergy use in 2070 is for making transport biofuels and for power andheat generation – in both cases much of it with CCUS. The combination of bioenergy
with CO2 capture and storage removes CO2 from the natural carbon cycle, creating
negative emissions: in the Sustainable Development Scenario, these negativeemissions enable the goal of net-zero emissions to be reached in 2070.
The contribution of bioenergy to reducing CO2 emissions is particularly important
where direct electrification is difficult. An important advantage of bioenergy is that it
can be converted into energy forms that are compatible with existing energy
technologies that rely on the combustion of fossil fuels: it can be used as feedstockin the chemicals industry and it can be used in existing vehicle fuelling networks andgas pipelines, for example in the form of biomass-to-liquid (BTL) thermochemically
produced fuels, hydrotreated vegetable oil or biomethane.

Gtoe/yr

Global bioenergy demand by sector and share of bioenergy use in key sectors
in the Sustainable Development Scenario, 2019-70
3.5

Bioenergy use by sector

3.0

30%
20%

2.5
2.0

10%

1.5

0%

1.0
0.5
02019

Share of bioenergy

2030
2040
2050
2060
Buildings, traditional
Industry
Agriculture
Power generation with CCUS
Other energy transformation with CCUS

2070

2019 2070 2019 2070 2019 2070 2019 2070 2019 2070
Buildings Industry Transport PowerPrimary
generation energy
final
final
final
energyenergyenergyBuildings, modern
Transport
Power generation without CCUS
Other energy transformation without CCUS

IEA 2020. All rights reserved.
Notes: CCUS = carbon capture, utilisation and storage. Other energy transformation includes coal mining, oil andgas extraction, oil refining, coal and gas transformation and liquefaction, production of hydrogen and hydrogenbased fuels, and biofuels production with and without CCUS.

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Maximising the potential of bioenergy depends on mobilising supply chains for abundant
and untapped waste and residue resources: the use of energy crops requires carefulconsideration of land-use competition.

Energy Technology Perspectives 2020

Box 2.11

Chapter 2. Technology needs for net-zero emissions

How much bioenergy is sustainably available?

For bioenergy to play the expanded role envisioned in the Sustainable Development
Scenario, it will need to be produced in a sustainable way to avoid depleting carbon
sinks or causing other types of environmental, social or economic impacts (IPCC,
2019). For this reason, bioenergy support policies need to integrate sustainability
criteria, ideally with third-party certification, to ensure that only truly beneficial
bioenergy is supported. Increased competition for arable land, which would drive up
food prices and potentially reduce biodiversity, is a potential concern.
Scientific studies have yielded a wide range of estimates of the availability ofsustainable biomass for energy purposes, from close to zero to levels well in excessof the amount of primary energy the world uses today. Nonetheless, there appears to
be a consensus that up to 2 400 Mtoe per year (100 EJ), or roughly twice current
consumption, could be produced sustainably without serious difficulties, while
estimates going up to as much as 5 000 Mtoe (200 EJ) are still considered reasonable(IPCC, 2014, 2019; IEA, 2017a). At 3 000 Mtoe (125 EJ) in 2070, the amount offeedstock supply needed in the Sustainable Development Scenario is well within therange.
The amount of feedstock supply needed in the Sustainable Development Scenario in
2070 is well within the range of what seems reasonable. However, securing thisamount of bioenergy would require significant contributions from agricultural wastes
and residues, as well as from energy crops. In the Sustainable Development Scenario,
energy crops provide with 840 Mtoe (37 EJ) around 30% of all the bioenergy needs,
which results in a land requirement in the range of 0.9-2.1 million km2, depending on
future energy crop yields.* Far-reaching measures would be needed to mobilise theseresources in a sustainable manner, including by improving crop yields, sequential
cropping, reducing waste in food supply, utilising abandoned and degraded lands,
and mobilising supply chains for dispersed wastes and residues. Developing new
biomass resources such as micro-algae for making biofuels (see Chapter 6) will also
have a role to play.
* Calculation of areas is based on energy crop yields of dry matter in the range of 10-23 tonnes per hectare andyear and a lower heating value of 18 GJ per tonne of dry matter.

In the Sustainable Development Scenario, liquid biofuels help to reduce emissions incars and (in particular) trucks with internal combustion engine technologies in the
period up to the 2040s. Thereafter, the increasingly widespread use of electricity andhydrogen as fuels for road transport leads to a decline in biofuel demand. Available
biofuel production is then diverted towards other transport modes: up to the 2050s,

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it helps meet biofuel demand in the shipping sector, before the uptake of alternative

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

fuels (hydrogen and ammonia) limits biofuel demand growth there too. Towards
2070, it increasingly goes toward meeting the growing demand for biofuels inaviation. Road transport accounts in 2040 for around 60% of biofuel demand in thetransport sector, but its share drops to one-third in 2070, with aviation and shipping
together accounting for the other two-thirds: the share of total energy demand inaviation and shipping which is met by biofuels rises from less than 0.1% today to 30%
by 2070.

GtCO₂/yrGlobal CO2 reductions from bioenergy use in the Sustainable Development
Scenario relative to the Stated Policies Scenario, 2030-70
840%Transport

630%

Buildings
Industry

4

20%Power with CCS
Power without CCS

2

10%

Other fuel transformation with CCS
Share in total emissions reductions(right axis)

0

2030

2040

2050

2060

2070

0%
IEA 2020. All rights reserved.

Notes: CCS = carbon capture and storage.

Bioenergy contributes one-fifth of the total annual CO2 reductions in 2070 in the
Sustainable Development Scenario relative to the Stated Policies Scenario, with the
reductions mostly occurring in power, followed by transport and industry.

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The use of biomass as a clean fuel and feedstock in industry doubles from today’slevels to 14% in 2070 in the Sustainable Development Scenario. Biomethane can be
blended up to any share into natural gas grids, reducing the carbon intensity ofheating in buildings while making use of existing gas infrastructure. In the
Sustainable Development Scenario, the global average blending share ofbiomethane reaches 16% in 2070, though regional blending shares can be muchhigher, such as 50% in the European Union and 67% in China in 2070. The share of
bioenergy in the global power mix more than triples, from 2% to 7% in 2070, withbiomass playing a vital role as a renewable and dispatchable source of electricity
generation to support the integration of more variable renewables into the powersystem and, in combination with BECCS, to produce negative emissions. The use of
BECCS in power generation and for biofuel production makes up 22% of primarybioenergy use in the Sustainable Development Scenario by 2070, resulting in
negative emissions of 2.5 GtCO2. Overall, the increased use of bioenergy in theEnergy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Sustainable Development Scenario – with and without CCS – provides one-fifth ofglobal annual CO2 reductions relative to the Stated Policies Scenario in 2070
(Figure 2.20). 13
Bioenergy technologies generally struggle to compete with existing fossil fuel-based
ones because of the higher costs involved, although the extent of the cost gap
depends critically on the availability of biomass feedstock and its cost (Figure 2.21).
Their uptake in the Sustainable Development Scenario therefore requires carbon
pricing and/or other regulatory measures, such as clean fuel standards in thetransport sector or blending mandates. For example, biomethane becomescompetitive with natural gas in gas turbines and combined-cycle power plants as aflexible generation option at a CO2 price of around USD 100/tonne in regions withcheap biomethane and high natural gas prices, while advanced biofuels produced
from lignocellulosic feedstock become an increasingly cost-effective alternative tofossil diesel as the CO2 price rises, especially in regions with low feedstock costs.
Competitiveness of bioenergy for power generation and biofuels, 2050

250
200
150
100
50
0

250
200
150
100
50
0
- 50
- 100

Levelised costs liquid biofuels

USD/bbl

USD/MWh

Levelised costs bioenergy for power generation
300$10/Mbtu$15/Mbtu

CCGT biomethane

CAPEX
25 USD/tCO₂
175 USD/tCO₂$10/Mbtu$10/Mbtu

CCGT
CCGT
natural gas natural gas
with CCUS

OPEX
50 USD/tCO₂

Fuel costs
100 USD/tCO₂$5/GJ$15/GJ

BTL$5/GJ$15/GJ $50/bbl

BTL with CCUS

FossildieselCO₂ price impact 150 USD/tCO₂
Fuel costs
OPEX
CAPEX

IEA 2020. All rights reserved.
Notes: CAPEX = capital expenditure. OPEX = operating expenditure. CCGT = combined-cycle gas turbine; BTL =biomass-to-liquids. Bbl =barrel. MBtu = million British thermal unit.
CCGT: load factor: 10%; CAPEX: USD 1 000/kW without CCUS and USD 1 660/kW with CCUS; OPEX: 2.5% of CAPEX;
gas price: USD 10-15/MBtu; net efficiencies: 61% without CCUS and 53% with CCUS; technical lifetime: 25 years;
representative discount rate: 8%.
BTL: load factor: 90%; CAPEX without CCUS: USD 46/(GJ/yr); OPEX without CCUS: USD 3/(GJ/a); conversion
efficiency without CCUS: 52%; CAPEX with CCUS: USD 63/(GJ/yr); OPEX with CCUS: USD 4/(GJ/yr); biomass
feedstock price: USD 5-15/GJ; conversion efficiency without CCUS: 52%; capture rate with CCUS: 90%; technicallifetime: 25 years ; representative discount rate: 8%..

The cost-competitiveness of biomass for the production of electricity and biofuels depends
on bioenergy feedstock costs, competing fossil energy prices and CO2 prices.

Following the 2006 IPCC Guidelines for National Greenhouse Gas Inventories, no CO2 emissions have been assigned
to the combustion of bioenergy; instead, these emissions are reported under agriculture, forestry and other land use(AFOLU). AFOLU CO2 emissions are accounted for within the agriculture sector if they are caused by energy use within
this sector.

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13

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

Bioenergy resources are unevenly distributed globally and are not always locatedclose to demand centres, so they need to be traded internationally. This is particularly
the case for transport biofuels. Today around 0.3 mb/d of biodiesel and ethanol aretraded between major world regions – equivalent to less than 1% of total trade in oil.
In the Sustainable Development Scenario, trade reaches close to 3 mb/d in 2070,
with emerging economies in the Asia Pacific region becoming major importers,
supplied principally by producers in South America, Eastern Europe and theRussian Federation.

Box 2.12

Impact of the Covid-19 crisis on bioenergy technologies

Biofuels is the bioenergy subsector hit the hardest by the Covid-19 crisis. Reduced
fuel demand from decreased travel coupled with falling oil prices has led to reduced
liquid biofuels production and some plant closures (World Bioenergy Association,2020). Though demand for solid biomass has generally remained steady, many pellet
producers in Europe have experienced reduced demand and disrupted supply chains(ENplus 2020; Voegele, 2020).
A number of positive steps have, however, been taken to support bioenergy acrossthe value chain. The United Kingdom’s Department of Business, Energy and Industrial
Strategy extended the Renewable Heat Initiative’s deadline to complete nondomestic projects by 14 months (UK BEIS, 2020), for example, and the United States
Department of Energy has announced USD 68 million of funding for projects toimprove the productivity and resiliency on bioenergy crops and USD 97 million for
projects to improve bioenergy conversion technologies (US DOE 2020b; 2020c). The
oil and gas industry has meanwhile announced new partnerships with biomethane
producers in Europe and the United States, with Shell signing a significant long-term
offtake agreement with Nature Energy, and Chevron teaming up with Clean Energy toprovide biomethane fuelling stations near ports for truck drivers (Nature Energy,
2020; Bioenergy Insights, 2020), while retail giant Amazon has acquired 6 million
gallons of sustainable aviation fuel in the form of renewable diesel (an advanced
biodiesel) from Shell Aviation and World Energy for its air cargo operations (Biofuels
International, 2020).

Technology readiness of bioenergy value chain

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Overall, the bioenergy value chain is on the threshold of achieving earlycommercialisation. Many bioenergy conversion technologies, such as conventional
biofuels and biomass-fired power plants, are at least at an early market adoption

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

phase (Figure 2.22). Technologies related to road transport and to heating andcooking are similarly moving their way up the technology readiness ladder. Ethanolfrom corn and sugarcane is widely available in countries such as Brazil and the UnitedStates, and fatty acid methyl esters (FAME) biodiesel and hydrotreated vegetable oil(HVO) diesel are commercially available in a variety of countries, notably in Europe
and parts of Southeast Asia. On the infrastructure side, biomethane blending is being
implemented in Europe, particularly in Germany, with the help of policy measures.
The state of technology development of many parts of the bioenergy value chain
underscores the potential of bioenergy as a near-term decarbonisation opportunity,
relative to other measures.
Technology readiness level of technologies along the bioenergy value chain

IEA 2020. All rights reserved.
Notes: CCUS = carbon capture, utilisation and storage. IGCC = integrated gasification combined cycle. Technologies
included are at large prototype or at a more advanced stage. For more detailed information on individual
technology designs for each of these technologies, and designs at small prototype stage or below, see:www.iea.org/articles/etp-clean-energy-technology-guide.

PAGE | 121

IEA. All rights reserved.

Not all steps of the bioenergy value chain are operating at commercial scale today, withseveral biofuels production technologies and end-use applications still in thedemonstration phase.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

However, there are critical links in the bioenergy value chain that remain in ademonstration or even prototype phase. These include advanced biodiesel and biojet
fuel technologies, notably biomass-to-liquid (BTL). Advanced biodiesel plays anessential role in decarbonising long-distance transport, specifically heavy-duty
trucks and shipping: heavy-duty trucking alone accounts for around half of advanced
biodiesel demand from 2025 onwards, the vast majority supplied by BTL. Perhaps
even more critical to achieving the Sustainable Development Scenario in the long run
is the use of biojet fuel from BTL to decarbonise aviation. Biojet fuel alone accounts
for over one-third of aviation fuel consumption by 2070 (fossil-fuel kerosene for 23%
and synthetic hydrocarbons from CO2 and hydrogen for more than 40%). The
remaining fossil fuel usage is offset using negative emissions, a significant portion ofwhich comes from BTL technology coupled with CCS. There are several commercialscale BTL projects now in the pipeline, mostly in the United States, but also in Europe
and Japan. The projects encompass a wide selection of BTL variations, fromfeedstock choices (forestry residues and municipal solid waste) to fuel output(advanced biodiesel and biojet fuel). One project will also include CCS to produce
negative emissions. The success of these projects is vital to moving forward thedevelopment of advanced biodiesel and bringing the bioenergy value chain closer to

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maturity.

Energy Technology Perspectives 2020

Chapter 2. Technology needs for net-zero emissions

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Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

No single fuel or technology can enable the entire energy sector to reach net-zero
CO2 emissions. Success depends upon a wide range of fuels and technologies,
tailored to individual parts of the energy sector and to country-specificcircumstances.



Net-zero CO2 emissions require a fundamental change in the way we produce anduse energy, as demonstrated in the Sustainable Development Scenario. At net-zeroemissions, low-carbon electricity, bioenergy, hydrogen and hydrogen-based fuels
combined provide more than 70% of final energy needs, about the same share as
currently provided by fossil fuels.

The power sector is among the first to decarbonise, drawing on a wide range ofavailable technologies including renewables, CCUS and nuclear. Global electricity
generation nearly triples to 2070, equivalent to adding the People’s Republic ofChina’s (“China” hereafter) current power sector to the global system every eight
years. About 70% of the growth is to satisfy rising electricity demand in end-use
sectors, and 30% is to produce low-carbon fuels, in particular hydrogen.

Around 300 Mt of hydrogen are produced from electrolysers in 2070 in the
Sustainable Development Scenario. This requires 13 750 TWh of electricity,equivalent to half of global electricity generation today. Electrolyser capacity rises
from 170 MW today to more than 3 000 GW by 2070. Hydrogen production with
CCS also plays an important role in regions with low cost gas resources and available
CO2 storage.

Industry, transport and buildings sector CO2 emissions each drop by 90% or moreby 2070. In the industry sector, electricity use doubles, but around three-quartersof cumulative emissions reduction to 2070 rely on pre-commercial technologies,
including CCUS. Electrification also accounts for over 30% of cumulative emissions
reduction in transport to 2070, followed by biofuels and hydrogen that play anincreasing role to 2070 for long-distance transport. In buildings, electrification is theprimary decarbonisation lever, alongside energy efficiency and renewables.

The transition to net-zero CO2 emissions requires significant investment in clean
energy technologies. Overall investment needs through to 2070 are USD 31 trillion(or 10%) higher in the Sustainable Development Scenario than in the Stated Policies
Scenario, and investment in new technologies becomes increasingly important overtime. In the 2060s, almost half of total annual average investment is spent ontechnologies that are at the demonstration or prototype stage today.

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Chapter 3. Energy transformations
for net-zero emissions

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Introduction
No single technology can deliver the emission reductions required for reaching netzero emissions. Decarbonising the entire energy sector means deploying a wide
range of energy technologies, tailored to the needs of individual parts of the energy
sector and to country-specific circumstances. The speed of progress towards net
zero will differ between sectors and between regions. In the Sustainable
Development Scenario, the global power sector is fully decarbonised in the 2050s
and the global buildings stock and passenger car fleet reach zero carbon dioxide(CO2) emission levels by 2070. However, some emissions remain in 2070 from longdistance transport modes (heavy freight, aviation, maritime shipping) and heavy
industries (chemicals, iron and steel, cement), despite CO2 reductions of up to 90%
from today’s levels in the case of heavy industries, and 55-85% in the case of longdistance transport modes (85% for heavy-duty trucks, 70% for shipping and 55% foraviation) (Figure 3.1).
There are a number of reasons for these decarbonisation trends across sectors. A key
reason is that the availability of suitable technologies differs from sector to sector: inthe power sector, for example, many clean energy technologies are commerciallyavailable today and are being deployed. In other sectors, fewer technology options
exist and those that do are at an early development stage. For example, we do not
yet have technologies to produce fossil-free iron and steel. In general we know thetechnologies that could contribute to achieving net-zero emissions, but they needfurther development. This underlines the critical importance of innovation. In the
Sustainable Development Scenario, innovation and technological change are driven
by necessity: they are simply needed to reach global net-zero goals. In the absenceof relevant policies to support these technologies, such change is unlikely to beachievable (see Chapter 6).
Another key reason to explain varying decarbonising trends is the age structure ofexisting assets: expensive and long-lived assets are an impediment to progress insome sectors, and in particular in the near to medium term in industry, power andbuildings stock, although technology options such as carbon capture, utilisation andstorage (CCUS) retrofits in power and industry can help to reduce emissions ofexisting plants, if storage is available. Maritime ships and aircraft are also examples
of expensive assets with long lifetimes.
The technology choices for decarbonising components of energy systems also vary
between countries. Governments in countries may have different policy priorities
reflecting local conditions and opportunities for specific low-carbon technologies.
Countries with excellent renewable resources may focus on renewable technologies
to cut emissions in the power sector, while regions with low cost fossil fuels and

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access to CO2 storage may put more emphasis on CCUS as part of their strategy toEnergy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

decarbonise power and industry. Choices about how to pursue decarbonisation in
the buildings and transport sectors are influenced by considerations about where
and how people live, with capital-intensive infrastructure technologies such as
district heating or metro systems likely to be more attractive in areas with highpopulation densities.
Against this background, this chapter explores the various technologies needed in
key energy sectors in the Sustainable Development Scenario to reach overall netzero CO2 emissions. It starts with the power sector, the largest CO2 emitter among all
sectors today, and then moves on to the fuel transformation sector, before turning
to the industry, transport and buildings sectors.

GtCO₂/yrGlobal energy sector CO2 emissions by sector in the Sustainable Development
Scenario, 2019-70
16
14

Power

12

Industry

10

Transport

8
6

Buildings

4

Other energy
transformation

2

Agriculture

0
-2
2019

2030

2040

2050

2060

2070

IEA 2020. All rights reserved.
Notes: GtCO2 = gigatonnes of carbon dioxide. Power includes heat generation. Other energy transformation
includes coal mining, oil and gas extraction, oil refining, coal and gas transformation and liquefaction, production ofhydrogen and hydrogen-based fuels, biofuels production with and without CCUS. Agriculture includes forestry andfishing.

The pace and degree of decarbonisation varies across sectors, with emissions from power
generation and other transformation sectors turning negative in the 2050s in the
Sustainable Development Scenario, while transport and industry continue emitting beyond
2070.

Power generation

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The technological transformation of the power generation sector is a central elementof the clean energy transition. Decarbonisation drives down the carbon intensity ofelectricity generation: it falls from 463 grammes of CO2 per kilowatt-hour (gCO2/kWh)in 2019 to below zero in net terms around 2055. Decarbonisation of the power
generation fuel mix coupled with the rising share of electricity in final consumption
makes a central contribution to achieving net-zero emissions in the SustainableEnergy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Development Scenario. Solar photovoltaics (PV), wind and other modern renewableenergy technologies, together with nuclear power and fossil fuel power plants
equipped with CCUS, convert energy into electricity without emitting significant
amounts of CO2, 1 while the rapid growth of electrification extends low-carbon power
to more end uses. The share of renewables (including bioenergy with CCUS or
bioenergy with carbon capture and storage [BECCS]) in the global power generation
mix reaches 86% in 2070, with the remaining 14% of power from nuclear plants (8%),
fossil fuel plants with CCUS (5%) and hydrogen (1%) (Figure 3.2). The share of primaryenergy that goes to power generation jumps from 38% today to over 60% in 2070.

80 000800

70 000700

60 000600

50 000500

40 000400

30 000300

20 000200

10 000100

0-10 000

0
2019

2030

2040

2050

2060

-100

gCO₂/kWh

TWh/yrGlobal power generation by fuel/technology in the Sustainable Development
Scenario, 2019-70
Other
Wind
STE
Solar PV
Biomass w/ CCUS
Biomass
Hydro
NuclearOil
Natural gas w/ CCUS
Natural gas
Coal w/ CCUS
Coal
CO₂ intensity

IEA 2020. All rights reserved.
Notes: TWh = terawatt-hours; gCO2/kWh = grammes of CO2 per kilowatt-hour; STE = solar thermal electricity;
PV = photovoltaic; CCUS = carbon capture, utilisation storage. Other includes geothermal power, ocean energy andhydrogen.

Global power generation sector achieves net-zero CO2 emissions before 2060, largely fromrenewables which account for over 85% of the generation mix by 2070.

Total power generation expands almost three-times over the next 50 years in the
Sustainable Development Scenario; this means that the equivalent of the People’s
Republic of China (“China” hereafter) current power generation is added to theworld’s electricity system every eight years. Increasing electrification of end-use
sectors is responsible for 70% of the growth in electricity generation between 2019and 2070 (see Chapter 2). Demand for electricity to be further transformed into otherenergy carriers or industrial feedstocks – heat, hydrogen, ammonia, methanol andhydrogen-based synthetic hydrocarbon fuels – is responsible for the other 30% (or14 000 terawatt-hours [TWh], equivalent to about half of global electricity generation
today). These fuels and feedstocks produced from low-carbon electricity are

In the case of bioenergy, the CO2 emitted in combustion is assumed to be entirely offset by the CO2 absorbed by thebiomass as it grows. For fossil fuel power plants with CO2 capture, different designs with capture rates of 90% and
99% are assumed.

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1

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

particularly important for the decarbonisation of those parts of the energy system
where direct electrification is more difficult, such as long-distance road freight,
maritime shipping and aviation. By 2070, around 19% of total electricity generation isused to produce hydrogen and hydrogen-based fuels, and feedstocks based onwater electrolysis.

Gt CO₂/yr

Global CO2 emissions in the power sector by scenario and decomposition of thedifference by technology type14

CO₂ reductions by technology

Electricity savings 11%

Cumulative CO2
reductions by TRL category
100%

10

Fuel switching & eff.
improv. 5%
Others 2%

8Wind 18%60%

6Solar 27%

40%

4

Hydro 5%20%

2

Bioenergy 10%0%0

Nuclear 4%

12

-2
2019

2030

2040

2050

2060

2070

Fossil CCUS 10%
Bioenergy CCUS 5%

80%

SDS
Large Prototype
Demonstration
Early Adoption
MatureIEA 2020. All rights reserved.
Notes: TRL = technology readiness level; eff. improv. = efficiency improvements; STE = solar thermal electricity.
Others include geothermal and marine energy as well as hydrogen. Electricity savings refer to electricity demand
reductions in end-use sectors through more efficient end uses of electricity, leading to emissions reduction in the
power sector. The percentages in the labels indicate the contribution of each technology type to cumulative overall
emissions savings by 2070. See Box 2.6 in Chapter 2 for the definition of the TRL categories large prototype,demonstration, early adoption and mature.

A broad portfolio of technologies decarbonises the power sector in the Sustainable
Development Scenario: most are available today, though BECCS has not yet been
demonstrated at commercial scale.

Overall, the power sector accounts globally for around 35% of the cumulative CO2
reductions in the Sustainable Development Scenario compared with the Stated
Policies Scenario. In the power sector, renewables provide about 62% of the
cumulative reductions, followed by CCUS (including BECCS) with 15% and nuclear
power with 4% (Figure 3.3). 2 Solar PV and wind combined account for more than 40%of the cumulative emission reductions: enabling technologies for the integration ofvariable renewables, such as demand response and energy storage, will be critical
for realising these reductions. More efficient uses of electricity in buildings, transport
and industry and material efficiency measures account for a further 15% of the
cumulative CO2 reductions in the power sector, while also reducing the need for

One should keep in mind that the CO2 reductions shown are relative to the Stated Policies Scenario, in which lowcarbon technologies already are being deployed and providing CO2 reductions over time. The share of low-carbon
electricity generation increases in this scenario from 37% in 2019 to 67% in 2070, a major factor for the reduction of
the average global CO2 intensity from 463 gCO2/kWh in 2019 to 190 gCO2/kWh by 2070.

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2

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

investment in generation and transmission assets. BECCS provides negativeemissions of 1.7 GtCO2 in 2070. These negative emissions offset remaining emissions
in other parts of the energy system, notably in heavy industry and long-distancetransport (see Chapters 4 and 5).
Decarbonisation pathways for the power sector differ across regions depending,among other things, on the availability of renewable energy resources and sites forCO2 storage (Figure 3.4). In addition to solar PV, wind and nuclear power, CCUS
applied to natural gas and bioenergy plants accounts for a share of 7% of thegeneration mix in 2070 in the United States, reflecting its vast CO2 storage potential. 3
Wind power dominates in the European Union and accounts for around 40% of thegeneration fuel mix, reflecting its favourable conditions for wind. Solar PV accounts
for 40% of the generation mix in India, where in combination with battery storage, it
serves growing electricity demand driven by air conditioning demand. Solar PV plays
an important role in China as well and together with wind provides more than half oftotal generation in 2070. Nuclear meets 13% of total generation in 2070 in China –more than three-times the current share – while power plants with CO2 capture reachwith 12% a similar share in 2070. Some countries reach net-zero emissions in the
power sector by around 2050, notably in Europe.
Electricity generation mix by region, fuel/technology and scenario, 2019 and
2070

100%

Other
Solar PV

80%

Wind

60%

Bioenergy

40%

Hydro

20%

Nuclear

United States

European
Union

China

India

World

SDS 2070

STEPS 2070

2019

SDS 2070

STEPS 2070

2019

SDS 2070

STEPS 2070

2019

SDS 2070

STEPS 2070

2019

SDS 2070

STEPS 2070

CCUS

2019

0%

Oil
Natural gas
Coal
Clean technology
share

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario; CCUS = carbon capture,utilisation and storage. Coal, oil, natural gas and bioenergy do not include CCUS. CCUS category includes coal,natural gas and bioenergy with CCUS. Other includes solar thermal, geothermal power, marine energy andhydrogen.

3

More detail will be presented in a forthcoming Energy Technology Perspectives special report on CCUS.

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Electricity in all regions is almost completely decarbonised by 2070 in the Sustainable
Development Scenario, with the technology mix reflecting local conditions andopportunities.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Reaching net-zero CO2 emissions in the power sector requires rapid deployment ofclean technologies. In the Sustainable Development Scenario, 475 gigawatts (GW) of
solar PV is added each year on average over the period to 2070 (compared with
108 GW in 2019), together with 190 GW of wind (60 GW in 2019), 15 GW of nuclear
power (5 GW in 2019), and 25 GW of fossil fuel plants equipped with CCUS and 7 GW
of BECCS (none in 2019 with projected large-scale deployment after 2025). Nuclear
power plays an important role in the transition to clean electricity in emerging
economies in Asia, where electricity demand is growing strongly. That region
accounts for more than 80% of the growth in global nuclear capacity, which climbs
from 415 GW in 2019 to more than 780 GW by 2070. Most of the growth in nuclear
capacity relies on existing nuclear reactor designs. Some advanced nuclear
technologies, notably small modular reactors (SMRs), support the rising share ofvariable renewables. Today SMRs are at the prototype development stage: theirpotential for shorter lead times and lower investment requirements reduceinvestment risks compared with large-scale nuclear plants.
A major obstacle to the decarbonisation of the power sector is the relatively young
age of many fossil fuel-fired power plants, in particular coal plants, notably in China.
If all the existing coal-fired power plants and those under construction around theworld today continued operating until the end of their technical lifetimes, they would
emit around 4.5 GtCO2 per year in the late 2050s. A mixture of measures is needed
to unlock the CO2 emissions from these plants and achieve net-zero power sector
emissions in the 2050s in the Sustainable Development Scenario (Figure 3.5).
Retrofitting with CCS helps to keep the youngest coal plants open where CO2 storageis available, and around 190 GW of coal capacity is retrofitted with CCUS, mainly in
China. Many existing coal plants change their role and are used mainly to provide
reserve capacity to power systems, thus generating smaller amounts of electricity
and CO2 emissions. Co-firing with biomass in proportions up to 15-20%, which
requires only minor technical modifications, also contributes to emissions savings in
the near term. It is possible to co-fire ammonia in coal plants, as successfully
demonstrated in Japan (Chugoku Electric Power Company, 2018). It is also possible
to fully convert from coal-firing to biomass-firing – a more costly solution than cofiring - as successfully demonstrated by several recent projects. Early retirements ofsome existing coal-fired power plants, nevertheless, are an important measure in the
Sustainable Development Scenario: 600 GW of the existing coal capacity of

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2 100 GW are retired earlier than in the Stated Policies Scenario.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

TWh/yrCoal-fired electricity generation from existing plants in the Stated Policies andSustainable Development scenarios, 2019-70
12 000
10 000SDS existing coal-fired power
plants retrofitted with CCS

8 000
SDS existing coal-fired power
plants without CCS

6 000
4 000

STEPS existing coal-fired
power plants

2 000
0

2019

2030

2040

2050

2060

2070

IEA 2020. All rights reserved.
Notes: TWh = terawatt-hours; SDS = Sustainable Development Scenario; STEPS = Stated Policies Scenario; CCS =carbon capture and storage. Existing coal-fired power plants refers to plants in operation or under construction in
2019. Co-firing of biomass is applied to around 85% of the coal power plants retrofitted with CCUS.

Electricity generation from existing coal-fired power plants without CCS is almost
completely phased out by 2045 in the Sustainable Development Scenario. Retrofitting with
CO2 capture allows coal generation of around 1 000 TWh to continue past this point.

Variable renewables – solar PV, onshore and offshore wind – dominate the generation
mix in 2070 in the Sustainable Development Scenario, with a global average share of
57%. Integrating increasing amounts of variable renewables into power systems is amajor task in the transition to clean electricity. As the share of variable renewables
increases, electricity systems need increasing flexibility to ensure that they can
supply sufficient power to meet demand when variable renewables generation (VRE)
is low. Various ways of providing such flexibility include:
Flexible generating technologies, which can be ramped up and down at short
notice and adjust their output to that of VRE. Examples include gas turbines,
steam turbines, combined-cycle power plants, gas engines, solar thermal plantsthat store energy, reservoir hydropower plants and nuclear power plants. In the
Sustainable Development Scenario, around 4 000 GW of gas turbines andcombined-cycle power plants without CCUS (12% of total installed capacity) thatrun with natural gas, biomethane or hydrogen as fuel for under 500 hours on
average in 2070 are the main source of flexibility and reserve capacity on thegeneration side. Thermal generation and hydro plants also provide ancillary
services, such as frequency support, voltage stability and inertia. New windturbines designs and PV systems are potential sources of frequency support.
Wind turbines can provide inertia support through very fast control of the blades(pitch control) or the ability to extract the kinetic energy from the rotor (Ramboll,2019).

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Energy Technology Perspectives 2020



Chapter 3. Energy transformations for net-zero emissions

Enhanced network interconnections, which can contribute to flexibility bybalancing the load across wider geographic areas and by pooling sources offlexibility from across those areas reducing the amount of ramping that needs tobe provided by generating plant. Long-distance high-voltage direct current(HVDC) east-west transmission lines are particularly valuable for providing PVgenerated power at early morning or late afternoon, while north-southtransmission lines offer potential for seasonal balancing. Flexible high-voltage
grid technologies, allowing better control of HVDC lines and the development ofmeshed HVDC grids, are currently at the demonstration stage, but will become
important for long-distance transmission lines, while also enabling the integrationof wind turbines in large offshore wind installations, where traditional alternate
current lines are not economic or feasible.



Demand-side response, which has a large part to play in meeting rising flexibility
needs, in particular by shaving peak demand and redistributing electricity to time
periods when the load is lower and electricity is cheaper. The growing use ofelectricity to power vehicles and heat pumps for water and space heating (incombination with thermal storage) will increase opportunities for shifting
electricity demand over time periods, facilitated by increasing digitalisation (seeChapter 2, Box 2.7).
Energy storage technologies, which can store electricity when VRE generates
more power than the system needs and then discharge it when VRE generation
is low. Pumped hydroelectric storage has been around for many decades, with
global capacity of 158 GW in 2019. It remains an important option, in particularfor storage of 10-15 hours, with global capacity of pumped storage almost
doubling to 300 GW by 2070. With cost declines, stationary batteries are
becoming more and more attractive as another storage option, whether in theform of behind-the-meter storage in combination with rooftop solar PV, utilityscale battery storage plants or grid storage to reduce bottlenecks. In the
Sustainable Development Scenario, utility-scale storage capacity worldwide
increases from 173 GW in 2019 to 2 100 GW in 2070, most of which is provided
by batteries with an average discharge duration of five hours. Expansion ofelectric vehicles could also boost energy storage: the 2 billion electric light-duty
passenger vehicles on the road in 2070 in the Sustainable Development Scenario
potentially represent over 150 TWh volume of energy storage that could be used
for grid support through vehicle-to-grid (V2G) inverters. In regions with goodsolar conditions for solar thermal electricity generation, plants with thermal
storage can provide additional flexibility. Hydrogen and hydrogen-based fuels
produced from electricity via electrolysis such as methane and ammonia provide
better options than batteries for long-term and large-scale storage, although they

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Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

are currently expensive compared to other seasonal balancing options, inparticular flexible generation from gas turbines.
Most of the technologies needed to reach net-zero CO2 emissions in the power sector
are commercially available today. Overall, around 80% of the cumulative CO2
reductions in the power sector in the Sustainable Development Scenario relative to
the Stated Policies Scenario can be achieved with technologies that today are mature
or at the stage of early adoption (Figure 3.3). Nuclear and hydropower are relatively
mature technologies, though both raise environmental concerns. Nuclear also faces
concerns about cost-competitiveness. New advanced reactor nuclear designs areunder development. Thanks to drastic cost reductions in recent years, solar PV andonshore wind are cost competitive in many parts of the world today. Offshore wind(technology readiness level [TRL] 5-9, depending on the design) is expected to reachcost-competitiveness with fossil fuels in the next few years. 4 There is further potential
to reduce costs and improve the performance of solar PV and wind throughinnovation, for example by using hybrid materials for wind turbines or smart inverters
for rooftop PV systems in distribution grids to collectively manage ancillary services
to electricity networks. The prospects for BECCS becoming cost competitive largely
depend on carbon credits/penalties (TRL 7-8); a pilot plant has been in operation in
the United Kingdom since 2019 and a 50 megawatt (MW) plant in Japan is expected
to start operation in 2020; learning from these plants may help to drive down costs.

Alternative clean fuels
To reach net-zero emissions, low-carbon fuels in the form of electricity, bioenergy,hydrogen and hydrogen-based fuels (ammonia and synthetic fuels) provide around
70% of all final energy needs in 2070 in the Sustainable Development Scenario,
similar to the share served today by fossil fuels. Clean liquid and gaseous fuels fromnon-fossil sources in particular will be needed in the decades ahead for those partsof the energy system where direct electrification is more difficult. In some cases,
alternative fuels are compatible with the existing fossil fuel distribution infrastructureand end-use technologies, often referred to as “drop-in” fuels. In the Sustainable
Development Scenario, alternative fuels in the form of liquid biofuels, biomethane,
low-carbon hydrogen and other hydrogen-based fuels (ammonia and synthetichydrocarbon fuels produced from hydrogen and CO2) play an important role in4

See Box 2.6 in Chapter 2 for more information on TRLs.

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decarbonising energy use in transport, buildings and industry.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Role of hydrogen and liquid and gaseous biofuels in the Sustainable
Development Scenario

20%

Share of biomethane in gas
grid consumption
20%

Share of hydrogen and hydrogenbased fuels in TFC by sector
20%

15%

15%

15%

10%

10%

10%

5%

5%

5%

Share of liquid biofuels intransport final energy

0%

2019

2050

2070

0%

0%
2019

2050

2070

Shipping
Aviation
Road transport

2019 2050 2070
Final electricity hydrogen
Buildings
Transport
Industry
IEA 2020. All rights reserved.

Notes: TFC = total final energy consumption. Hydrogen-based fuels refer to the fuel use of synthetic hydrocarbon
fuels produced from hydrogen and CO2, and ammonia. Final energy demand of hydrogen includes in addition to thefinal energy demand of hydrogen, ammonia and synthetic hydrocarbon fuels, the onsite hydrogen production in theindustry sector and the final electricity produced from hydrogen.

Clean fuels in the form of hydrogen, hydrogen-based fuels and biofuels meet 20% of global
final energy demand in 2070 in the Sustainable Development Scenario, in particular inareas where direct electrification is difficult.

Overall, alternative fuels meet 20% of global final energy demand in 2070, withhydrogen and hydrogen-based fuels alone meeting 13% of all final energy needs.
Liquid biofuels use, though only representing 5% of total final energy demand, iscritical for decarbonising the transport sector: they meet 16% of all transport energy
demands and are used in particular for aviation, maritime shipping and heavy-duty
trucking (Figure 3.6). Biomethane and biogas are responsible for just 2% of total final
energy use, but biomethane accounts on average for over 15% of global grid gas
consumption in 2070 as a result of being blended with natural gas in existing gas
grids. Both biomethane and biogas are used for cooking in emerging economies aswell as for power generation: overall biogas and biomethane consumption reaches
around 390 million tonnes of oil equivalent (Mtoe) in 2070.

Biofuels
Liquid biofuels derived from sustainable biomass can provide a lower carbon
alternative to conventional petroleum-based diesel and gasoline. Some liquidbiofuels can be blended with conventional fuels, while drop-in biofuels cancompletely replace conventional fuels (or be blended to very high levels): no change

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is required in either case to existing fuel distribution or vehicle technology.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Conventional biofuels consist of fatty acid methyl ester (FAME) biodiesel produced
from oilseed crops (such as soybean oil and palm oil), and ethanol derived from sugar
crops (such as sugarcane and sugar beets) or starchy crops (such as corn and wheat).
These technologies are well-established and conventional biofuels are produced ona large scale – output totalled around 2 million barrels per day (mb/d) before theCovid-19 pandemic. With conventional biofuels, careful attention must be paid tosustainability concerns. These include competition for agricultural land with foodcrops and potential direct and indirect land-use change impacts, which canadversely affect biodiversity. Sustainability assessments should be carried out on acase-by-case basis.
Advanced biofuels can mitigate some sustainability considerations. Sustainablebiofuels can be produced from residues and wastes from the agriculture, forestry
and food industries, or from non-food crops grown on marginal land. Advanced
biofuels require complex processing to turn biomass into usable biofuels. Advanced
biofueltechnologies

includecellulosic

ethanol,biomass-to-liquid(BTL)

thermochemically produced fuels, hydrotreated vegetable oil (HVO) biodiesel fromwastes and residues, and hydro processed esters and fatty acids (HEFA) biojet fuelfrom wastes and residues. BTL and HVO/HEFA are technically drop-in biofuels.
Cellulosic ethanol and HVO/HEFA are commercially operating today, with HVO/HEFA
facilities using both oilseed crop and waste and residue feedstocks (used cooking oil,animal fats). BTL is in the demonstration phase and requires further development toreach commercial application. However, it holds great promise as a means to tap intoabundant municipal solid waste, forestry residue and agricultural residue resources.
While HVO/HEFA are promising biofuels with potential to expand from current
production levels, their potential growth is ultimately constrained by limited
availability of low biogenic waste and residue resources and of sustainable oilseed
crops. For these fuels to be genuinely carbon neutral, clean energy needs to be usedduring the entire feedstock supply and production processes, which is notnecessarily the case today.
Globally, biofuels met 3.5% of all transport liquid fuel demand in 2019, totalling
95 Mtoe, the vast majority of it in the form of conventional biofuels. In the Sustainable
Development Scenario, liquid biofuels expand rapidly, reaching around 390 Mtoe(around 8 mboe/d, about one-quarter of transport liquid fuel production) by 2040:
this expansion is driven mainly by BTL technology, which is expected to begin largescale commercial deployment by 2030 (Figure 3.7). Ethanol use in the chemical subsector also takes off, accounting for almost one-fifth of the 147 Mtoe of ethanol
produced in 2040. Around the same time, CCUS begins to play a significant role inbiofuels production, though deployment starts earlier, with one ethanol plant with
CO2 capture in operation today in the United States. CCUS facilities can be added atcleaning and biogas upgrading all produce a stream of very pure CO2. The use of

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relatively low cost to biofuel production because ethanol fermentation, BTL syngas

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

CCUS in conjunction with sustainable biomass (BECCS) generates negative CO2
emissions that offset emissions elsewhere in the energy system. By 2070, CCUS is
used in conjunction with over one-third of the almost 840 Mtoe of biofuel production,yielding 870 million tonnes (Mt) of negative emissions. CCUS raises the cost of
biofuels production by 10-30% in 2070, but is economic in many parts of the world
thanks to rising carbon penalties or equivalent policy measures such as clean fuelstandards.

Mtoe/yr

Global biofuels production by technology in the Sustainable Development
Scenario, 2019-70
1 000
Biomethane and biogas with CCUS
Biomethane and biogas

800

Advanced biodiesel with CCUS
600

Advanced biodiesel (BTL and HVO)
Advanced ethanol with CCUS

400

Advanced ethanol
Conventional ethanol with CCUS

200
0Conventional ethanol
FAME biodiesel
2019

2030

2040

2050

2060

2070

IEA 2020. All rights reserved.
Notes: Advanced biodiesel here includes biojet fuel production. Biomethane and biogas numbers shown here
include power generation, gas grid injection and transport use. The vast majority of liquid biofuels are consumed intransport, while a small portion is consumed in industry.

Biomass-to-liquids – an emerging technology – drives rapid growth in biofuels supply in the
Sustainable Development Scenario.

Biogas and biomethane also play an important role in the Sustainable Development
Scenario. Biogas can be produced from organic waste feedstocks, such as crop
residues, animal manure and organic municipal solid waste or wastewater sludge, bymeans of anaerobic digestion, which is a mature technology (IEA, 2020a). The
resulting biogas, a mixture of methane, CO2 and smaller quantities of other gases, isused today for power generation in internal combustion engines with an installed
global capacity of around 8 GW, and for the production of electricity and heat in cogeneration plants. Biogas can also be used as a clean cooking fuel to replace
traditional biomass use in emerging economies. By removing the CO2 and othercontaminants, biogas in addition can be upgraded to biomethane, which can be
blended into natural gas grids and used in existing end-use applications. Biomethane
can also be produced via biomass gasification and methanation, but this production
route plays only a minor role today due to its higher costs. In both production routes

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for biomethane, the CO2 produced during the production process can be captured

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

and stored, resulting in negative emissions. Alternatively, the CO2 can be converted
together with hydrogen to produce additional methane. Germany is home to thelargest such plant, using hydrogen sourced from water electrolysis (Biocat, 2015).
In the Sustainable Development Scenario, total biogas and biomethane production
worldwide grows from 30 Mtoe today to 335 Mtoe in 2040 and 390 Mtoe in 2070.
Global average blending shares for biomethane into natural gas networks reach 8%
in 2040 and 16% in 2070. Biogas-fired internal combustion engines, a modular
technology with relatively high part-load efficiencies, are a flexible generation
operation in the Sustainable Development Scenario, supporting the integration ofvariable renewables. Anaerobic digestion remains the dominate route forbiomethane production in the Sustainable Development Scenario, as thelignocellulosic feedstocks needed for biomass gasification are used instead for liquidbiofuel production.
The cost of producing both liquid and gaseous biofuels is strongly influenced byfeedstock costs, which can account for as much as 80% of the levelised costs,
particularly for conventional biofuels. Fossil fuel and carbon prices also influence thecompetitiveness of biofuels with both conventional and other alternative fuels. The
growing role of CCUS in the Sustainable Development Scenario is driven mainly bymuch higher CO2 prices than prevail today.

Hydrogen and hydrogen-based fuels
Hydrogen today is produced primarily by steam reforming of natural gas and ismainly used as a feedstock in the chemical and refining industries (IEA, 2019a). Thischanges in the Sustainable Development Scenario, which sees global hydrogenproduction growing rapidly to around 445 million tonnes of hydrogen (MtH2)(1 280 Mtoe) for energy use and 75 MtH2 (215 Mtoe) for process use in 2070, or about
seven-times the current level of use of hydrogen as feedstock in industry and refining(Figure 3.8). Around 60% of the hydrogen used for energy purposes (260 MtH2 or
750 Mtoe) is consumed in the transport, buildings and power sectors and refineries,
while the rest is further converted into hydrogen-based fuels: ammonia for maritime
shipping and synthetic kerosene for aviation. Of the hydrogen consumed directly in
2070, the transport sector accounts for over 60% (covering almost 20% of thesector’s energy needs, mainly in road transport); the power sector for just under 30%(less than 3% of global electricity generation); and space and water heating in thebuildings sector for 10% (2% of the sector’s fuel mix). The hydrogen produced forprocess use in the Sustainable Development Scenario is used in chemical (60% of

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demand) and steel production (40%).

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Global hydrogen production and demand in the Sustainable Development
Scenario, 2070

IEA 2020. All rights reserved.
Note: CNR = hydrogen as by-product from catalytic naphtha reforming in refineries; prod. = production; NH3 =ammonia; H2 = hydrogen.

Today hydrogen is produced largely from unabated fossil fuels and is used only in refining
and chemical sub-sectors. In the Sustainable Development Scenario, low-carbon hydrogenproduction technologies dominate, and hydrogen has a wide range of uses across theenergy system.

HydrogenFossil fuels without CCUS initially continue as the main source of hydrogenproduction worldwide in the Sustainable Development Scenario. However, after
2030 almost all the growth in output comes from low-carbon hydrogen, increasingly
using renewables-based electricity in regions with good solar and wind resources, orfrom fossil fuels in combination with CCUS, and in particular from natural gas(Figure 3.9). The split between water electrolysis and fossil fuels with CCUS is roughly
equal, but moves slightly in favour of water electrolysis. In 2070, electrolytic

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hydrogen accounts for nearly 60% of global hydrogen production and fossil fuels

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

with CCUS for 40%, with the remainder coming mostly from unabated fossil fuels andfrom the creation of small amounts of hydrogen as a by-product of catalytic naphtha
reforming in refineries.

MtH₂/yr

Global hydrogen production by technology in the Sustainable Development
Scenario, 2019-70
800

100%

600

75%

Electricity
Fossil w CCUS
400

50%

200

25%

Refining CNR
Fossil w/o CCUS

0

2019

2030

2040

2050

2060

2070

Share of low-carbonhydrogen (right axis)

0%

IEA 2020. All rights reserved.
Note: CNR = hydrogen as by-product from catalytic naphtha reforming in refineries.

Today, hydrogen is produced almost entirely from fossil fuels without CCUS. Low-carbonhydrogen production dominates in the Sustainable Development Scenario, with almost allhydrogen production either from low-carbon electricity or fossil fuels with CCUS.

Water electrolysis splits water in an electrochemical process into hydrogen andoxygen. Electrolysis is not a new technology: alkaline electrolysis was used from the
1920s to the 1960s to produce hydrogen for fertiliser production before being
eclipsed by hydrogen produced from natural gas. Today, water electrolysis globally
accounts for less than 0.1% of dedicated hydrogen production. With declining costs
for renewable electricity, there is renewed interest in electrolytic hydrogen which has
resulted in an increasing number of projects with significant electrolyser capacities
being commissioned or announced. For example, a 10 MW electrolyser paired with
20 MW of solar PV started operation early in 2020 in Japan to provide hydrogen for
stationary fuel cell systems and fuel cell vehicles (NEDO, 2020). H2V has announced
the H2V59 project in France, which will produce 28 000 tonnes of hydrogen per year
(around 100 MW electrolyser) for injection into the natural gas grid (H2V59, 2020).
In the Sustainable Development Scenario, global installed electrolyser capacity
rapidly increases from around 170 MW in 2019 to more than 3 300 GW by 2070,
running on average at around 4 000 full-load hours per year to ensure least-costhydrogen production (IEA, 2019a) and being supported by a mixture of gridelectricity and dedicated renewables-based electricity plants, depending on local

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conditions. Production is dominated by regions and countries with low cost

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

renewable electricity, such as Chile, China, Europe, Africa and the Middle East
(Figure 3.10). This rapid growth depends on the scaling up of manufacturing
capacities and on its ability to bring down the costs of water electrolysers. While
today global manufacturing capacity stands at around 1.5 GW/year, the averageannual deployment rate to 2070 increases to 60 GW/year in the Sustainable
Development Scenario. As a result, the average cost of electrolysers fall from
USD 850-1 100 per kilowatt electric (kWe) today to below USD 300/kWe around 2050
in the Sustainable Development Scenario.
Besides the ramp-up of electrolyser capacity, clean electricity generation forelectrolysis needs to be rapidly expanded. By 2070, around 13 750 TWh of electricity
are used for hydrogen production in the Sustainable Development Scenario,
corresponding to almost 20% of global electricity generation. This required increasein electricity generation to produce low-carbon hydrogen is major challenge when it
comes to the roll-out of hydrogen, as it further adds to the significant infrastructure
requirements that are associated with the more widespread production and use of
low-carbon hydrogen. But it is also a major opportunity to tap into low-cost
renewables generation: dedicated electricity generation from renewables can be an
important option for hydrogen production. With declining costs for solar PV and wind
generation, electrolysers built at locations with excellent renewable resource
conditions can benefit from low electricity costs combined with relatively high fullload hours for the electrolyser, thus becoming a low cost option for hydrogen, evenwhen taking into account the transport costs from those locations to the end users.
In areas where both solar PV and onshore wind resources are favourable, combining
both in a hybrid plant has the potential to further increase the full-load hours and tolower costs. 5
Nuclear power can also be used for electrolytic hydrogen production. Projects atexisting nuclear power plants have been announced in the United Kingdom and theUnited States (Lancaster Guardian, 2019; Power Magazine, 2019). The heat from anuclear power plant could be used to provide electricity and steam for steam oxide
electrolysis. Research is underway to develop materials for an electrolysis cell thatare well suited to the temperature levels (around 300°C) of nuclear energy heatsources (US DOE, 2018).
Hydrogen production from natural gas with CCUS, which could include retrofittingsome existing steam reformers with CO2 capture equipment, is another option inregions with low cost natural gas and access to CO2 storage such as the Middle East,
North Africa, the Russian Federation (“Russia” hereafter) and the United States. Seven
projects based on the production of hydrogen from natural gas with CCUS are in
operation today with a combined annual production of 0.35 MtH2. Several more have

The analysis for some of the renewable electricity supply options for dedicated hydrogen production is based on
geospatial analyses done for The Future of Hydrogen (IEA, 2019a).

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5

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

been announced, including the H21 project in Leeds in the United Kingdom, whichaims to convert the city gas network to 100% hydrogen (H21, 2020). Existing coalbased hydrogen plants in China and elsewhere could similarly be equipped with CCS,
if adequate storage is available. In the Sustainable Development Scenario, hydrogenproduction from fossil fuels with CO2 capture reaches 210 MtH2 in 2070, meets 40%of global demand and leads to the capture of 1.8 GtCO2, representing one-quarter of
total CO2 being stored in the Sustainable Development Scenario.
Global development of electrolyser capacity and CO2 capture from hydrogenby region in the Sustainable Development Scenario, 2019-70
CO₂ captured at hydrogen production

MtCO₂/yr

GW

Global electrolyser capacity
3 500
3 000
2 500

1 750
1 500
1 250

2 000

1 000

1 500

750

1 000

500

500
0

2 000

250
2019

North America

2030

2040

2050

Central & South America

2060

0

2070

EuropeAfricaMiddle East

2019

2030

Eurasia

2040
China

2050
India

2060

2070

Other Asia Pacific

IEA 2020. All rights reserved.

Production and technology choice profiles for low-carbon hydrogen differ across regions
reflecting factors such as the availability of suitable renewable energy resources, CO2
storage and access to low cost natural gas.

The cost-competitiveness of low-carbon hydrogen produced from natural gas with
CCUS or from renewables-based electricity mainly depends on the costs of gas andlow-carbon electricity. Today, the cost of hydrogen produced from natural gas varies
between USD 0.7 and 1.6 kilogrammes of hydrogen (kgH2), and adding CO2 capture
increases the costs to around USD 1.2-2.0/kgH2, whereas producing hydrogen fromrenewables electricity generally costs around USD 3.2-7.7/kgH2 (Figure 3.11). With
cost reductions for renewable technologies as well as electrolysers in the Sustainable
Development Scenario, the cost of producing hydrogen from renewables-based
electricity becomes competitive with natural gas with CCUS in several parts of theworld.
Other factors are also relevant to the choice between alternative low-carbonhydrogen production options. For hydrogen production from fossil fuels in
combination with CCS, the geological availability and public acceptance of CO2
storage are prerequisites. For water electrolysis, access to adequate supplies forcosts (IEA, 2019a).

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seawater desalination represent only a small fraction of total hydrogen production

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Hydrogen production costs by technology in the Sustainable Development
Scenario, 2019 and 2050

USD/kgH₂

8

6

4

2

0

2019

2050

SMR without CCS

2019

2050

SMR with CCS

2019

2050

Coal without CCS

2019

2050

Coal with CCS

2019

2050

Electrolysis

IEA 2020. All rights reserved.
Notes: CCS = carbon capture and storage; SMR = steam methane reforming; coal = coal gasification. Electrolysis
based on dedicated renewables-based generation.
Capital expenditure (CAPEX) assumptions: SMR without CCUS - USD 910/kWH2 (2019 and 2050), SMR with CCS USD 1 583/kWH2 (2019) and 1 282/kWH2 (2050); coal without CCUS - USD 2 672/kWH2 (2019 and 2050); coal withCCS - USD 2 783/kWH2 (2019 and 2050); electrolysis - USD 872/kWe (2019) and USD 269/kWe (2050).
Operating expenditure (OPEX) assumptions (as % of CAPEX): SMR without CCS - 4.7% (2019 and 2050), SMR withCCS - 3.0 % (2019 and 2050); coal with and without CCS - 5.0% (2019 and 2050); electrolysis - 2.2% (2019) and 1.5%(2050).
Efficiency assumptions (lower heating value): SMR without CCS - 76% (2019 and 2050), SMR with CCS - 69% (2019and 2050): coal without CCS - 60% (2019 and 2050), coal with CCS - 58% (2019 and 2050); electrolysis - 64% (2019)
and 74% (2050).
Full-load hour assumptions: SMR and coal gasification 8 322 hours (2019 and 2050); electrolysis 3 000-4 000 hours(2019) and 2 000-3 000 hours (2050). Stack lifetime: 100 000 hours.
System lifetime assumptions: 30 years.
Fuel price assumptions: natural gas - USD 1.4-6.3 per gigajoule (GJ) (2019) and USD 1.7-7.0/GJ (2050); coal - USD 1.63.8/GJ (2019) and USD 1.0-2.2/GJ (2050); electricity - USD 36-116 per megawatt-hour (MWh) (2019) and USD 2060/MWh (2050).
CO2 capture rate assumptions: SMR with CCS - 95%, coal with CCS - 90%.
CO2 price assumptions: USD 0-15/tCO2 (2019) and USD 180/tCO2 (2050).
CO2 transport and storage cost assumptions: USD 20/tCO2. Representative discount rate for this analysis is 8%.

Low-carbon hydrogen production is not currently competitive with hydrogen from fossil
fuels, but could become competitive in the long term if large-scale deployment brings
down costs.

Hydrogen-based fuels: ammonia and synthetic fuels
The principal benefit of converting hydrogen into ammonia or synthetic hydrocarbon
fuels is their higher volumetric energy density, which makes them easier to store andtransport, and means that less fuel by volume is needed for vehicles, ships andaircraft. Such fuels also offer the benefit of broad compatibility with the existing fossil

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IEA. All rights reserved.

fuel-based infrastructure. The additional steps required to produce those means that

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

energy losses can be significantly higher than for producing pure hydrogen, making
them more expensive. In large part because there are no good alternatives for many
elements of the aviation and shipping sectors, they play an increasingly importantrole in those sectors in the Sustainable Development Scenario, especially in the longterm, supported by rising carbon prices and other policies.

Ammonia is produced from low-carbon hydrogen and nitrogen using the wellestablished Haber-Bosch process. The hydrogen used in the process is derived
from steam reforming of natural gas, but it can also be produced from electrolytichydrogen. Some small-scale demonstration projects producing ammonia fromelectrolytic hydrogen have been in operation for several years. Air Products,
ACWA Power and NEOM, a new city planned in Saudi Arabia, recently signed anagreement to invest USD 5 billion in a project for producing ammonia using
electrolytic hydrogen in Saudi Arabia (Air Products, 2020). With current
technologies, producing ammonia from electrolytic hydrogen requires in total
23 000 GWh of electricity per Mtoe of ammonia: around 90% of this is used to
produce hydrogen, around 7% to produce nitrogen and the rest is used in theHaber-Bosch synthesis. The overall energy efficiency of ammonia production
from electrolytic hydrogen is around 50% (lower heating value [LHV]). Unlike
hydrogen-based synthetic hydrocarbon fuels, ammonia production does not
require any carbon, but it does require nitrogen. The toxicity of ammonia meansthat its handling requires care and would probably be limited to professionallytrained operators, which could restrict its potential.
Synthetic hydrocarbons (methane, diesel, kerosene and methanol) are producedby converting hydrogen and a carbon source into long chain hydrocarbons,
which are then upgraded to usable fuels. There are several technological routes
that can be used to produce synthetic hydrocarbons, including the FischerTropsch process, which uses carbon monoxide (CO) as the carbon source. To be
carbon neutral, this CO has to be generated from biogenic CO2 from a bioenergy
source or alternatively from CO2 captured from the atmosphere using direct air
capture (DAC) technologies. The production of these fuels requires significant
amounts of electricity. Overall, the production of 1 litre of synthetic kerosene
from electrolytic hydrogen together with CO2 captured through DAC requires
around 25 kWh of energy. Over 80% of this is electricity used to producehydrogen, around 15% is electric and thermal energy used for the capture of CO2
through DAC, and the rest is used in the Fischer-Tropsch synthesis. With current
technology performance, only around 40% of the energy input ends up in the
final liquid product, although process optimisation could potentially increase theoverall conversion efficiency beyond 45%. Some projects aiming to produce
synthetic hydrocarbons

have beenannounced recently. For example,

the Norsk-e Fuel project is planning the first commercial plant in Europe using

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Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

this technology, which is expected to become operational in 2023 with aproduction capacity of 10 million litres annually (Norsk-e Fuel, 2020).
In the Sustainable Development Scenario, 250 Mtoe of synthetic hydrocarbons areproduced in 2070, mainly from electrolytic hydrogen, together with 130 Mtoe ofammonia, 70% of which is produced from natural gas with CCUS and the remainderfrom electrolytic hydrogen (Figure 3.12). Synthetic kerosene meets 40% of aviationenergy demand in 2070, while ammonia meets over 50% of fuel demand for maritime
shipping. Producing these fuels requires around 390 Mtoe of electrolytic hydrogen,or about 9% of total electricity generation in 2070, as well as 830 Mt of CO2 as
feedstock from biomass use or DAC. The electricity required in 2070 is roughly
equivalent to the current annual electricity generation of the United States, Canada
and Japan combined; the CO2 feedstock required is roughly equivalent to the current
annual CO2 emissions of Germany.
Production of hydrogen-based fuels in the Sustainable Development Scenario,
2019-70
Synthetic hydrocarbon fuelproduction by CO₂ source
400

400
350
Ammonia (natural gas
w CCUS)

300
250

Ammonia (electrolytichydrogen)200
150

Synthetic
hydrocarbons

10050

Mtoe/yr

Mtoe/yr

Hydrogen-based fuel production

350
300
250

Biogenic

200

DAC

150
100
50

0
2020

2030

2040

2050

2060

0

2070

2070

IEA 2020. All rights reserved.
Notes: Biogenic CO2 refers to CO2 captured at biomass conversion processes, such as biofuel production or
biomass-fired power plants.

Synthetic kerosene for aviation dominates the production of hydrogen-based fuels, with
the necessary CO2 mostly being sourced via direct air capture.

Hydrogen-derived fuels could also play an important role in energy trade, allowing
countries with significant renewable energy potential to export their solar or windresources in the form of hydrogen-derived fuels to other countries that lack similar
resources. This potential for trade is recognised in several national hydrogenstrategies, with Germany and Japan recognising the case for hydrogen imports andAustralia recognising the opportunity to provide them. In the Sustainable

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Development Scenario, around 60% of all ammonia being globally produced isEnergy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

internationally traded in 2070, while 50% of synthetic kerosene is traded, underlining
the opportunities for trade in hydrogen and hydrogen-based fuels. 6
The economics of producing clean ammonia and synthetic hydrocarbon fuels
depend on various factors, in particular the cost of hydrogen. Production costs are
influenced by the cost of fossil fuels in combination with CO2 storage for thehydrogen production route using CCUS, and by the availability of low cost and lowcarbon electricity for the electrolytic hydrogen route. The efficiency of theconversion process is currently around 40% for synthetic hydrocarbons and 50% forammonia: improving these percentages, would help to reduce production costs. In
the case of synthetic hydrocarbon fuels, the availability and cost of the CO2 feedstock
input is another factor affecting costs. CO2 costs currently range from USD 30/tonne
from ethanol plants to USD 135-340/tonne from DAC. However, whether a producerof CO2 would be willing to sell it to a synthetic fuel manufacturer at close to the costof capture would depend on the prevailing CO2 emissions price or the level of any
competing financial benefit for sending the CO2 to long-term geological storage, if
available. The competitiveness of hydrogen-based fuels will also depend on the
adoption of policy measures either penalising the use of fossil fuels, such as CO2
prices, or incentivising the use of clean fuels, such as clean fuel standards. If, forexample, synthetic kerosene can be produced at a cost of USD 200/barrel, a CO2
price of USD 375/tonne would be needed for synthetic kerosene to becomecompetitive with fossil kerosene at an oil price of USD 50/barrel (Figure 3.13). Thevery high CO2 prices (or equivalent policy measures) that would be needed forsynthetic hydrocarbon fuels to compete with fossil fuels means that their use islimited to parts of the energy system where alternative low-carbon options are notviable, such as aviation (see Chapter 5).

Ammonia production and trade here refers to its use as fuel in shipping and does not include ammonia production
and use in the chemical sub-sector.

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6

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

450

1000

400

875

350

750

300

625

250

500

200

375

150

250

100

100

125

0

50

800
700
600

High Electricity

500

Low Electricity
CO₂ feed

400

CAPEX+OPEX

300

Kerosene
Biokerosene

200

Grid electricity+biogenic CO₂

Renewable electricity+biogenic CO₂

Renewable electricity+DAC CO₂

0

20

40

60

80

100

CO2 price to match kerosene prcie
at 50 USD/bbl of oil

Impact of electricity price and full load hours on
synthetic kerosene costs

Levelised cost of synthetic kerosene
USD/bbl

USD/bblProjected synthetic kerosene production costs from different sources andimpact of electricity costs and full-load hours, 2050

0Electricity price (USD/MWh)
FLH 2000 h

FLH 4000 h

FLH 6000 h

IEA 2020. All rights reserved.
Notes: bbl = barrel; FLH = full-load hours. Costs projected in 2050. Left graph is a sensitivity analysis considering theuse of dedicated renewables-based electricity and CO2 from DAC as the CO2 feedstock.
Capital expenditure (CAPEX) assumptions: USD 355/kWe with grid electricity, USD 269/kWe for electricity fromdedicated renewables-based plants and USD 564/kW of fuel for the synthesis stage.
Operating expenditure (OPEX) assumptions: 1.5% of CAPEX for electrolysis and 4% for the synthesis stage.
Efficiency assumptions (lower heating value): 74% for electrolysis and 73% for the synthesis stage.
Full-load hour assumptions: 5 000 hours for grid electricity and 3 000 hours for electricity from dedicatedrenewables generation.
Stack lifetime: 100 000 hours. System lifetime: 30 years.
Electricity price assumptions: USD 55-160/MWh for grid electricity and USD 20-60/MWh for electricity fromdedicated renewables generation.
Kerosene and biojet fuel prices based on current prices.
CO2 feedstock price assumptions: USD 30/tonne CO2 for biogenic CO2 from biofuel conversion plants and
USD 142/tonne CO2 from DAC. Representative discount rate for this analysis is 8%.

A combination of low electricity costs and high CO2 prices is needed to make synthetichydrocarbons competitive with conventional fossil fuels.

Industry
The high energy intensity of industrial processes, long lives of factories andmachinery and a lack of currently viable low-carbon alternatives to conventional
fossil fuels in some sub-sectors make deep CO2 emissions reductions from industry
particularly difficult. 7 This is reflected in the Sustainable Development Scenario
projections: industry emerges as the second-largest CO2 emitter in 2070 after
transport, accounting for around 40% of residual emissions, even though emissions
are 90% lower than in 2019 (Figure 3.14). About 70% of industrial CO2 emissions today

7

Technology needs and readiness for the chemical, steel and cement sub-sectors are discussed in detail in Chapter 4.

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are generated when producing chemicals, steel and cement. This share increases toEnergy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

almost 80% by 2070, as other less energy-intensive parts of industry withcommercially available and scalable low-carbon alternatives reach near-zeroemissions by that year.

GtCO2/yrGlobal direct CO2 emissions in industry by sub-sector and region in the
Sustainable Development Scenario, 2019-70
10

10

8

8

6

6

4

4

2

2

0
2019

2030
Other industry
Cement

2040
Paper
Steel

2050

2060

0
2070 2019

Aluminium
Chemicals

ROW
China

2030

2040

2050

United States
India

2060

2070

European Union

IEA 2020. All rights reserved.
Notes: ROW = rest of world. Includes direct energy-related and process emissions. Other industry includes lessenergy-intensive industries such as food and beverage, mining and textiles.

Chemical, steel and cement production increase their share of total industrial emissions toalmost 80% by 2070 in the Sustainable Development Scenario as less energy-intensive
industries approach full decarbonisation.

In the Sustainable Development Scenario, all regions make major efforts to reduce
CO2 emissions drastically from their industrial portfolio. Asia remains the leading
producer of bulk materials, though production gradually shifts from China to India as
its economy further develops (see Chapter 4). China’s share of global industrial
emissions, currently at 45%, more than halves by 2070 in the Sustainable
Development Scenario. There are two main reasons for this. First, there is a structuralshift in China away from the production of bulk materials, especially cement, towards
less energy-intensive manufacturing activities such as electronics, batteries andindustrial equipment. This structural shift is already underway, and it is reflected in
the Stated Policies Scenario. Second, there are significant efforts to reduce the direct
CO2 footprint of industrial activity, leading to a reduction of 85-90% in direct CO2
emissions for heavy industry sectors by 2070. By contrast, India increases by 75% its
share of global industrial emissions by 2070 as its production of bulk materials grows
robustly to meet domestic demand, which partly offsets efforts to roll out low-carbon
industrial technologies. By 2070, India accounts for 15% of global CO2 emissions fromPAGE | 149

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industry. Emissions from the industrial sector in the European Union and the UnitedEnergy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

States are reduced by more than 90% in 2070 relative to current levels in the
Sustainable Development Scenario, such that together they account for less than
10% of total emissions from industry.
Fossil fuels today account for around 70% of total final industrial energy demand. The
production of chemicals, steel, and cement in turn accounts for about 60% of totalindustrial fossil fuel demand. Coal is the leading energy source used to produce thesematerials, accounting for roughly 50% of their total energy needs, although oil andgas are also heavily used as both feedstock and fuel in the chemical industry. By
2070, fossil fuel use in industry is reduced by over 60% in the Sustainable
Development Scenario, and replaced primarily by electricity and bioenergy (Figure3.15), while just over three-quarters of the remaining CO2 emissions are captured andpermanently stored.
Final energy demand by fuel shares for total industry and selected sub-sectors
in the Sustainable Development Scenario, 2019-70
Total industry

100%

100%

80%

80%

60%

60%

40%

40%

20%

20%

0%
2019
Coal

2030

2040

Oil

Electricity

Gas

2050

2060

Imported heat

2070

Heavy industry (chemicals, steel, cement)

0%
2019

Bioenergy and waste

2030

2040

2050

Other renewables

2060

2070

Energy for hydrogen

IEA 2020. All rights reserved.
Notes: Industry final energy demand refers to the IEA Energy Balance (IEA, 2020d) boundaries of total final
consumption by industry, non-energy use for chemical feedstocks and energy consumed in the transformation
sector by blast furnaces and coke ovens.

Fossil fuel use in industry is cut by over 60% in the Sustainable Development Scenario by
2070 and replaced primarily by electricity and bioenergy.

Electricity consumption in industry more than doubles by 2070 in the Sustainable
Development Scenario. Electricity is used in the short-to-medium term directly for
low and medium temperature heat and in secondary production routes for metals,
using technologies that are commercially available or close to being so. Electricity isalso used in the long term indirectly for electrolytic hydrogen production, for
reduction purposes in steel production and as a feedstock for chemicals. Hydrogen
increases by 80% (to around 360 Mtoe) by 2070, accounting for 9% of total industrial

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IEA. All rights reserved.

in particular requires more electricity as the demand for hydrogen in industry

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

energy demand. Virtually all industrial hydrogen is produced from unabated fossil
fuels today. In the Sustainable Development Scenario, 60% of the hydrogenconsumed in 2070 is produced onsite via water electrolysis, with the majority of therest being produced from fossil fuel plants equipped with CCUS. The bulk of thegrowth in renewables such as solar thermal and geothermal in the final industrial
energy mix in the Sustainable Development Scenario is attributed to less energyintensive industries, which have lower temperature heat requirements.
Technologies that enable the production of emissions-free bulk materials likechemicals, steel and cement are not yet available, but the industrial energy transition
envisioned in the Sustainable Development Scenario hinges on their successful
demonstration and widespread deployment. Around three-quarters of the
cumulative direct industrial CO2 emissions reductions by 2070 in the Sustainable
Development Scenario relative to the Stated Policies Scenario come from thedeployment of pre-commercial technologies or technology types for which somedesigns or components are not yet mature. Those technologies can be divided into
two broad categories: those that use fossil fuels with CCUS, and those that replacefossil fuels with low- or zero-carbon fuels.
Overall, the use of CCUS is slightly more advanced than the use of low- or zerocarbon fuels. CCUS use takes advantage of mature technologies from other sectors(e.g. chemical absorption for the separation of gases, already applied commerciallyin power and fuel transformation) or applies similar fundamental principles that avoid
the need to develop brand new processes based on new fuels. The separation of CO2
is already an inherent part of commercial processes in the chemicals sub-sector,
such as ammonia and methanol production, and capture and storage/utilisation
projects for such emissions streams are in operation in the United States and China,
with several other projects in the pipeline.
CO2 emissions could be avoided through the use of decarbonised electricity toprovide heat. While electric heating technologies are commercially available for low
temperature and in some cases medium temperature heating, the application ofelectric technologies such as microwave, infrared and plasma arcs for hightemperature heating is mostly at the prototype stage or below for large-scale
applications (TRL ≤ 5). Induction and electric arc furnaces are exceptions, but bothof these need a conductive material, and their main use is likely to be in specificapplications within the metal producing industries such as electric furnaces for
producing steel from scrap or sponge iron, and for aluminium smelting (Box 3.1).
Electrification of the production of non-conductive materials that involve hightemperature processes (e.g. cement, certain chemicals) is technically more complex,
and this is reflected in lower technology readiness levels (see Chapter 4). Swedish
cement producer, Cementa, and Vattenfall, a Swedish multinational power company,

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launched the CemZero project in June 2017 that aims to electrify cement kilns

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions(Cementa, 2019), and a feasibility study has indicated that it is technically possible toelectrify them using plasma technology; however, this technology would not
eliminate process emissions. In 2019, BASF, Borealis, BP, LyondellBasell, SABIC andTotal announced the creation of a consortium to jointly investigate how naphtha orgas steam crackers for the production of high-value chemicals could be operatedusing renewables-based electricity instead of fossil fuels (Borealis, 2019). VoltaChem
is also working on the electric cracking option in the framework of the power-to-heat
technologies (VoltaChem, 2020).

Box 3.1

Reducing process emissions and electricity needs in aluminium
smelting

Major innovation efforts are underway to develop new anode designs in order toeliminate process CO2 emissions associated with the degradation of the carbon
anodes used in primary aluminium smelting. These process emissions currently
account for about 40% of primary aluminium production direct emissions. In 2018,
Alcoa and Rio Tinto announced the formation of a joint venture called Elysis todevelop an inert anode (made from materials that do not degrade and thus do no
produce process emissions), which is expected to be available for retrofitting existing
smelters from 2024 (Elysis, 2018). RUSAL's Krasnoyarsk plant in Russia has alreadyproduced primary aluminium using inert anode technology at an industrial scale.
Further technological improvements are expected to lower production costs, andmass scale production may start within three years.
Other R&D work is focused on reducing electricity consumption and thus indirectemissions from aluminium smelting. While conventional aluminium smelter cells havea single-pole arrangement, multipolar cells could be produced by using bipolarelectrodes or having multiple anode-cathode pairs in the same cell. They have thepotential to reduce energy consumption by 40%, due to lower operating
temperatures and higher current densities (US DOE, 2007). However, multipolar cells
require the demonstration of inert anodes, and the technology for this is still at an
early stage. A prototype plant with a multipolar cell was developed by Alcoa in the
1970s, but it closed as a result of high costs and technical problems. More recent
exploratory research and testing have been conducted in the United States by
Northwest Aluminium and Argonne National Laboratory. Chloride electrolysis is
another alternative aluminium smelting process originally developed in the 1960s. It
offers potential to lower electricity needs by about 25% and enable easier carbon
capture (Øye, 2018). Renewed R&D efforts would be required to bring this early stage

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technology to market.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Aluminium smelters are large consumers of electricity. Improved load management
will become more important as the share of variable renewable in the power
generation mix rises, and options for integrating flexibility technologies andmodifying operations are being demonstrated which would help with this. In May
2019, the aluminium company TRIMET began a successful first industrial-scale
operation of its EnPot demand-response technology, consisting of 120 pots at its plantin Essen, Germany, following a smaller 12 pot trial that began five years earlier (Energia
Potior, 2020). This “virtual battery” concept relies on installing adjustable heatexchangers that can maintain the energy balance in each electrolytic cell irrespectiveof shifting power inputs.

Technologies that use low-carbon hydrogen for primary steel and chemical
production are more advanced than direct electrification technologies (seeChapte 4). Hydrogen-based direct iron reduction would open new low-carbon
avenues for primary steel manufacturing, and a large prototype of this technology iscurrently being operated in Sweden. Various companies in the chemical industry are
exploring means to produce low-carbon hydrogen using water electrolysis or CCUS.

Transport
Reducing CO2 emissions in the transport sector over the next half-century will be aformidable task. It will require structural shifts in the modes used to move people andfreight, a shift to low-carbon forms of energy and a stronger focus on using energy
more efficiently. This calls for a broad mix of technologies, many of which are at theearly stages of development and commercialisation. These include vehicle,
powertrain and engine technologies, and the infrastructure needed to support
alternative fuels, as well as digital technologies and software to enable service
providers to harness the power of data (IEA, 2017a).
In the Sustainable Development Scenario, global direct CO2 emissions from fossil fueluse in the transport sector fall by almost 90% from 8.1 Gt in 2019 to 1 Gt by 2070
(Figure 3.16). This primarily reflects a widespread shift to electric cars powered bydecarbonised electricity. Almost all the residual emissions in 2070 are from roadfreight, maritime shipping and aviation, where switching to alternative zero-carbon
fuels and technologies is particularly difficult. Their combined emissions fall by threequarters over the projection period, but overall transport emissions in 2070 are still
the highest of any sector (see Chapter 5).
Although transport demand growth in the Sustainable Development Scenario is lesspassenger-kilometres travelled doubles between 2019 and 2070 on the back of rising

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marked than in the Stated Policies Scenario, mobility per capita measured byEnergy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

prosperity and population, and car ownership rises by 60%. Passenger and freightaviation numbers more than triple over the period. This is reflected in the demand forfuels. For example, biofuels production scales up from 2 mb/d in 2019 to 5 mb/d inthe next decade in the Sustainable Development Scenario as it is used as analternative to fossil fuels in road vehicles, and later as a zero emissions high energy
density fuel for maritime shipping and aviation. By 2030, battery manufacturing
capacity equivalent to the size of about 90 Tesla gigafactories (battery gigafactory
capacity of 35 gigawatt-hours per year) is in place to support electric vehicles: by2050, total battery manufacturing capacity is equivalent to 300 Tesla gigafactories.
Meanwhile, supporting infrastructure for electric and fuel cell vehicles also scales up
in the Sustainable Development Scenario, with nearly 19 million public chargers andnearly 13 000 hydrogen refuelling stations built by 2030. Further infrastructure
deployment is needed in later years as heavy-duty trucking demands more fast
chargers and larger hydrogen refuelling stations.

GtCO2/yrGlobal CO2 emissions in transport by mode in the Sustainable Development
Scenario, 2000-70
10Aviation

9

Lightcommercial
vehicles8
7

Shipping
Medium- and heavy trucks

2&3-wheelers

65Buses and minibuses
Passengercars,
buses andminibuses

Rail

4
3

Light-commercial vehicles
Passenger cars
Two/three-wheelers
Rail

2
1
0
2000

2010

2020

2030

2040

2050

2060

2070

IEA 2020. All rights reserved.
Notes: Dotted lines indicate the year in which various transport modes have largely stopped consuming fossil fuels
and hence no longer contribute to direct emissions of CO2 from fossil fuel combustion. Residual emissions intransport are compensated by negative emissions technologies, such as BECCS and DAC, in the power and otherenergy transformation sectors.

Most modes of transport are decarbonised by 2070 in the Sustainable Development
Scenario, but trucking, shipping and aviation continue to produce some emissions due topractical difficulties with their decarbonisation.

In the Sustainable Development Scenario, the pace at which direct emissions decline
in different modes of transport is a function of several factors. These include asset
operating lifetimes, scope for electrification or adoption of alternative low-carbon
fuels, and the scope for providing passenger mobility and freight services in more

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sustainable ways.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Two/three-wheelers, with lifetimes rarely more than a decade, reduce operational
CO2 emissions to near zero by 2040, with new sales of these vehicles having
completely electrified in the 2030s. They also rapidly exploit the two to threefold
improvement in fuel economy that comes from switching from an internal
combustion engine (ICE) to an electric motor.
Rail is another mode where CO2 emissions are cut rapidly, primarily by electrifying
trains. New high-throughput conventional railway lines are almost entirely
electrified from a very early date, and virtually all existing lines are electrified by themid-2050s. A small stock of infrequently used and long-lived diesel locomotives
remain in use beyond then, but their emissions are tiny relative to the rest of thetransport sector, and options such as fuel cell or battery electric powertrains
gradually become available even for these operations. 8
Light-commercial vehicles switch rapidly in the short term to electricity and later
to hydrogen-powered fuel cells when longer ranges or hours of operation are
required. Large, well-coordinated fleets and logistics services, such as Amazon,
DHL, FedEx and UPS switch first as they are in the best position to make use of data
tracking, and to make upfront investments in efficient electric motors. Smaller andsingle-owner operations profit later from the growing range of available electricmodels, as well as from the roll out of charging stations for private cars andcommercial fleets. For these reasons, light-commercial vehicles switch toelectricity more quickly than privately owned cars, reaching net-zero emissions in
the mid-2050s. Hydrogen fuel cell technologies gradually enter the lightcommercial vehicle market in operations where costs and performance arecompetitive with electric vehicles, which mostly means in cases where taxis andfleet vehicles drive longer distances.
Passenger cars see the biggest fall in CO2 emissions in absolute terms in the period
to 2040 as electric vehicles make rapid headway. As the technologies enabling
electric mobility scale-up and mature through the 2020s, powertrains that bridge
the gap between conventional vehicles and electric ones play a significant
transitional role. Hybrid electric car sales peak at around 15% of total car
registrations in the early 2030s, and the market for plug-in hybrid vehicles peaks at
a similar share later in the same decade. As the performance of batteries for electric
mobility improves – notably as their energy density and durability increase andcosts decline – these hybrid powertrains are gradually displaced by full battery
electric vehicles in the years to 2050. China, the European Union, Japan and theUnited States lead the transition to zero-emission cars (including electric and fuel8
The contribution of railways to emissions is further diminished by the fact that it is the most energy-efficient
motorised passenger transport mode, requiring 60-90% less energy on average per passenger-km than other modes(IEA, 2019b).

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cell electric cars), with conventional car sales coming to an end in the 2040s.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

However other countries continue to sell conventional cars through to 2060, andpassenger cars as a whole approach zero emissions only in the final years leading
up to 2070. By 2070, electric vehicles make up nearly 90% of the total passenger
car fleet and fuel cell electric vehicles another 10%, and the remaining very small
share of conventional cars still in the fleet is mostly over a decade old. The energy
intensity of cars and other light-duty vehicles meanwhile declines through vehicle,
powertrain and engine efficiency measures through to 2040, and then more rapidly
in later years as more and more switch to electric powertrains, which are three-tofive times more efficient than ICE models. 9 Some electric vehicles (EVs), especially
fleets that intensively operate their vehicles, also incorporate fuel cells as range
extenders to store more energy on-board than batteries alone can.
Hydrogen fuel cell technologies gradually enter the light-duty vehicle market inoperations where costs and performance are competitive with EVs, mostly in cases,
such as taxis and fleets, where vehicles drive long distances. Several commercial
car models using hydrogen fuel cells are already available from Hyundai, Toyota,
Renault and Mercedes.
Electric buses and minibuses are increasingly being chosen by municipal fleet
purchasers and operators on the strength of their air quality benefits and purchasesubsidies and/or upfront financing. By 2070, about two-thirds of buses are battery
electric and one-fourth are powered by hydrogen (hydrogen fuel cell electric buses
are marketed today by Foshan, Geely, Van Hool and Toyota, among others). Long
distances and intensive usage make battery electric buses less practical due totheir low energy density and long recharging times, and these vehicles rely on
diesel or biofuel alternatives for a longer period in the projections, but
electrification using fuel cells, batteries and/or dynamic charging may becomecompetitive in time, as with regional and long-haul trucking (see Chapter 5).
Heavy-duty trucks lag their light-duty cousins by more than a decade in theiradoptionofmore

efficientelectric

powertrains,slowing

the

pace

of

decarbonisation. The lack of availability of fast charging infrastructure along longdistance freight corridors is an obstacle for regional and long-haul trucking
operations.
Shipping and aviation emissions also fall slowly relative to other transport modes,
similarly reaching net-zero well beyond 2070 (see Chapter 5).
For the transport sector as a whole, energy efficiency improvements make thebiggest contribution to cutting CO2 emissions in the Sustainable Development
Scenario relative to the Stated Policies Scenario, especially in the period to 2040.

The Sustainable Development Scenario achieves the targets of the EV30@30, which aims for 30% of all road vehicles
sold in 2030 to be electric. The target includes cars, LCVs, buses and trucks, and EVs include battery, plug-in, andfuel cell electric powertrains, but does not include two/three-wheelers.

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9

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

In road transport, fuel economy improvements in recent decades have been driven
primarily by fuel economy/CO2 standards, backed up by other market pullmechanisms such as “bonus-malus” type measures 10, as well as fuel taxes and citylevel policies that provide alternatives to personal cars. Measures such as
lightweighting, aerodynamics and the adoption of low rolling resistance tyres help
achieve the target set by the Global Fuel Economy Initiative (GFEI) of 50% better
fuel economy for newly registered passenger light-duty vehicles by 2030 relative
to 2005 (GFEI, 2019). Strengthening of all these policies is instrumental in driving
down the per-km CO2 emissions of both light- and heavy-duty vehicles through the
projection period in the Sustainable Development Scenario (IEA, 2017b). By
contrast, to date efficiency regulations in maritime shipping and aviation have notrequired business to adopt efficiency technologies at rates that exceed whatmarket signals already incentivise. In the Sustainable Development Scenario, theaverage energy intensity of passenger and freight transport falls by around 70% by2070. Putting these hard to abate modes onto a trajectory in line with this will
require measures to regulate or incentivise more rapid progress.
Global transport sector energy consumption by fuel in the Sustainable
Development Scenario, 2019-70

Final energy share

100%
90%

Ammonia80%

Synthetic fuels
Hydrogen70%

Advanced biofuels

60%

Conventional biofuels

50%

Electricity

40%

CNG / LPG
Residual fuel30%

Fossil fuel-based jet fuel20%

Diesel

10%
0%
2019

Gasoline
2030

2040

2050

2060

2070

IEA 2020. All rights reserved.
Notes: CNG = compressed natural gas; LPG = liquefied petroleum gas. Fossil fuel-based diesel takes longer to be
replaced in the transport sector fuel mix than fossil fuel-based gasoline, as alternatives for diesel in heavy-duty
trucking and intercity buses take longer to deploy.

10
France’s bonus-malus programme was the first to implement “feebates”: a tax at vehicle purchase or registration
on cars with high fuel consumption from which the revenues are used to finance subsidies for the purchase of energyefficient vehicles. Such schemes can be designed to be revenue neutral.

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Fossil fuels – today’s dominant source of energy in transport– account for just 14% of final
energy in 2070.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

A shift to electricity, biofuels and other low-carbon fuels (hydrogen and synthetichydrocarbons) accounts for 70% of the decline in global CO2 emissions from thetransport sector to 2070 in the Sustainable Development Scenario. At first, biofuels
play an important role, but they are eclipsed in the 2040s as electric powertrains,hydrogen and synthetic fuels become more available and competitive. The
destination of the biofuels also changes: biodiesel is redirected towards shippingin the medium term, later complemented by biomass-to-liquid for jet fuel, while
ethanol is used to produce biojet fuel for aviation. Modal shifts account for most of
the rest of the CO2 emissions reductions. By 2070, 30% of final energy needs in thetransport sector are met by electricity (up from 1% in 2019), with biofuels providing
36% (up from 3% in 2019), and ammonia, hydrogen and synthetic fuels almost onequarter of transport final energy demands (Figure 3.17).
Batteries are the core technology enabling the transport sector to decarbonise. 11
Lithium ion (Li-ion) batteries are projected to be widely used in light-duty EVs. Theircosts are falling rapidly as they are deployed more widely, bringing learning benefits
and economies of scale. Among alternative battery chemistries to Li-ion, solid statebatteries with Li-metal anodes, which could achieve a density of 400-500 watt-hours
per kilogramme (Wh/kg), are the most advanced. Prototypes have been tested andToyota expects to demonstrate solid state batteries in a vehicle early in the 2020s,
while a number of start-ups are focusing on the development of the technologies
required to develop solid state electrolytes. This type of battery is expected to
becomecommerciallyavailable

between2025

and2035. 12

Successful

demonstration and roll out of these alternative battery chemistries supports thenearly doubling in cell level energy density projected by 2070 in the Sustainable
Development Scenario. This trend aligns with a continuation of recent rates of battery
improvement and enables an expansion of the scope of batteries in transport,
primarily in road and rail. Other alternative chemistries at lower readiness levels (early
prototype or below and thus outside the scope of the Sustainable Development
Scenario), including Li-sulphur, multivalent ions and Li-air would offer more potential
for lowering costs, increasing energy density and improving recyclability. Such
substantial increases in energy density, together with improvements on otherperformance metrics such as cost and durability, could make electrification viable
for other transport modes and a more attractive commercial option for regional andlong-haul trucking more quickly (see Chapter 6).
Battery technologies are already making progress in road transport, not just in cars
and light-duty vehicles but also in trucks. Daimler, BYD and many other truck original

The contribution of lithium-ion batteries to the Sustainable Development Scenario is predicated on decarbonising
electricity generation and on ensuring that critical battery materials (such as cobalt and, later, lithium) are reused andrecycled (See IEA, 2020c).
12
For more details of recent and potential innovations in batteries for electromobility, see Chapter 4 of Global EV
Outlook 2020 (IEA, 2020c).

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11

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

equipment manufacturers already market medium-duty battery electric truckmodels, used mostly for urban deliveries or waste collection. Several other truck
manufacturers have announced plans to sell at least one model of plug-in hybrid orbattery electric truck, while Tesla and Freightliner have developed battery electrictrucks with a range of 400-800 km that are being tested by corporate fleets.
Beyond road transport, battery electric ships are being demonstrated (TRL 8), thoughcurrent battery energy densities limit their potential deployment to short routes. 13 In
Norway, for example, 16 electric car ferries were in operation in 2019 and a further 37
are expected to enter operation by the end of 2020 (Nordic Energy Research, 2020).
Yara, a global fertiliser company, in collaboration with Kongsberg, a maritime
technology company, has developed an all-electric and autonomous container
feeder ships. However, its demonstration, which was initially planned for early 2020,
has been postponed in light of Covid-19 pandemic (Yara, 2020).
The use of batteries in aircraft is severely limited by current battery energy densities.
Even if battery energy densities were to reach around 1 000 Wh/kg, electric aircraft
flight would be limited to around 1 400 km, or a maximum of about 25-30% of current
aviation fuel demand. Nonetheless, a number of aircraft manufacturers are planningto develop early prototypes of hybrid and full battery aircraft in the coming years. For
instance, Airbus has set a target of developing an all-electric aircraft capable ofseating 100 passengers by 2030.

Buildings
The buildings sector – including residences, offices, shops, hotels, schools and otherpublic and commercial premises – today accounts directly and indirectly for 30% of
the final energy consumed around the world, or around 3 100 Mtoe, including almost
55% of global electricity consumption. 14 When both the construction and use phases
are taken into consideration, it contributes around 37% of today's global CO2
emissions. Direct emissions from fossil fuel combustion in buildings for spaceconditioning and water heating as well as cooking and other service applications
amounted to about 3 GtCO2 worldwide in 2019 (Figure 3.18). Indirect emissions fromthe consumption of electricity and heat by the huge array of electrical and electronic
devices used in buildings (e.g. air conditioners, heat pumps, household appliancesand lighting) increase that figure to 9.8 GtCO2. Producing the materials andBesides purely battery electric ships, also ships with conventional engines can plug in at port to power their auxiliary
and hoteling loads, a practice known as ‘cold-ironing’. Mandates are making equipping both ships and ports with thenecessary infrastructure to cold iron are becoming more and more common, and the local air pollution and climate
benefits are compelling. For more details on this practice, see Global EV Outlook 2020 (IEA, 2020c).
14
The residential sector is by far the largest component in the buildings sector in terms of floor area (80%), final energyuse (70%) and CO2 emissions (60%).

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13

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

constructing buildings involves an additional 3.5 GtCO2 of energy- and processrelated CO2 emissions in the industry sector, mostly from cement and steel
manufacturing.
CO2 emissions from the use phase of buildings by sub-sector and region in the
Sustainable Development Scenario, 2019-70
By region

GtCO2/yr

GtCO2/yr

By subsector
12
10
8

12
10
8

6

6

4

4

2

2

0
2019

2030

2040

Non-residential (indirect)
Residential (indirect)

2050

2060

2070

0
2019

Non-residential (direct)
Residential (direct)

2030

Rest of World
European Union

2040

2050

2060

India
United States

China

2070

IEA 2020. All rights reserved.
Note: Indirect emissions include the emissions associated with the generation of electricity and heat consumed inbuildings.

CO2 emissions in the buildings sector fall to net-zero by 2070 through measures such as
high efficiency electric equipment, phasing out fossil fuel use and decarbonisation of heatand power supply.

Floor area – a key element of energy demand and related CO2 emissions in thebuildings sector – is projected to expand robustly in the period to 2070 as the world’s
population and GDP rise. In the Sustainable Development Scenario, floor area
increases more than twofold in the period to 2070, which is equivalent to adding acity the size of Paris to the world every week. Half of the floor area additions will bein sub-Saharan Africa and India. Direct and indirect emissions from the buildings
sector nevertheless are all but eliminated soon after 2060 thanks to the energy
savings associated with more efficient and affordable building envelopes andequipment, further electrification of end uses and switching to clean fuels inbuildings themselves and in the power sector.
Improvements to the building stock, achieved through new high performance
construction and deep energy renovation of building envelopes, contribute arounda third of the almost 30% reduction in the final energy use in buildings in the period
to 2070 relative to the Stated Policies Scenario. Over a third of total global floor area
is at the near-zero energy level by 2040. A number of regions, including China,
European Union and North America, already have substantial experience of usingbuilding energy codes. However, only a few, including France, have made near-zero

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energy buildings the norm for new construction. In the Sustainable Development

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Scenario, the buildings sector in the European Union is one of the first to hit net-zeroemissions, driven by its stated ambition of stepping up renovation efforts so that allbuildings are near-zero energy by 2050.
In 2019, the 3 GtCO2 of direct emissions from the buildings sector mostly derive fromthe combustion of fossil fuels for space and water heating (80%) and cooking (16%).
Over the course of the projection period in the Sustainable Development Scenario,
fossil fuel-based technologies for space and water heating are largely replaced by
low-carbon electric heat pumps and heat exchangers connected to renewableenergy sources, or to clean district heating systems (which mostly operate with largescale heat pump technologies such as power-to-heat). Heat pumps and district
energy systems account for almost half of global heating equipment sales in 2070
(Figure 3.19). Electrification and commercial heat are the largest contributors to thedecarbonisation of heat, and they reduce CO2 emissions related to heat demand by
an average of 0.6 Gt annually, equivalent to all CO2 emissions in Canada in 2019.
The proportion of heating equipment sales accounted for by heat pumps nearly
triples by 2030 and continues to grow thereafter: heat pumps become the leading
heating and cooling technology in buildings worldwide by 2040. For comparison,
this means that the number of heat pumps sold in the residential sector over the next
20 years is roughly equivalent to the number of natural gas boilers sold in the same
sector over the last 20 years. This sharp increase is driven by sales in high performing
buildings, where heat pumps meet increasing space cooling and heating demand inmany regions including China, North America and Europe Union. Heat pumps areprimarily deployed in suburban and rural areas due to space and building constraints,
although compact and/or retrofit solutions are emerging rapidly and being deployedon a larger scale, especially in Europe. While high efficiency heat pumps are scaling
up in most regions, technology designs are geographic specific related to existingbuilding stock and climatic characteristics and are able to provide high efficiency airto-air heat pumps for near-zero energy buildings, ground-source heat pumps for very
cold climates and compact systems including a heat battery for older renovatedbuildings. Nevertheless, there remains scope for some of these technologies toincrease their efficiency and range of use through further innovation (IEA, 2020b).
District energy is best suited to densely populated areas that can exploit waste heatand provide flexibility to the electricity grid through thermal inertia. Heating andcooling networks expand in particular in densely populated European cities and, to alesser extent, in the United States. The use of district energy does not lessen the needto decarbonise the existing heat supply, notably in Russia and China which together
account for 65% of current total district heat supply.
Energy use in the buildings sector makes use of renewables through solar thermal
heating, low-emission biomass boilers and geothermal energy with ground-source

deployed particularly in emerging economies such as India and ASEAN (Associationof Southeast Asian Nations) where the bulk of heat demand is related to sanitary hot

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heat pumps. Solar thermal technologies supply around a third of water heating
demand in 2040. This increases to around half in 2070 when solar thermal units areEnergy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

water, which solar thermal can provide with no or little operational expenditure.
Where they can be installed, geothermal ground-source heat pumps offer efficientand reliable solutions for the whole year, since underground temperatures are
relatively stable, enabling seasonal storage and offering high performance duringcold spells (as a heat provider) or heat waves (as a cooling provider). Overall, morethan 25% of final energy use in the buildings sector is met through direct use ofrenewables in buildings in 2070 in the Sustainable Development Scenario. 15
Heating equipment sales share and share of near-zero energy buildings byregion in the Sustainable Development Scenario
100%

Renewable equipment

80%

District heat60%

Other electric andhybrid equipment
Electric heat pumps

40%

Hydrogen boilers andfuel cells
Oil boilers

United States

European
Union

China

India

SDS 2070

SDS 2040

2019

SDS 2070

SDS 2040

2019

SDS 2070

SDS 2040

2019

SDS 2070

SDS 2040

2019

SDS 2070

SDS 2040

0%

2019

20%

World

Natural gas boilers andheat pumps
Coal boilers
Share of NZEBIEA 2020. All rights reserved.
Notes: SDS = Sustainable Development Scenario; NZEB = near-zero energy buildings.

Decarbonising heat in buildings requires increased co-ordination of measures to improvethe building envelope and to adopt clean and efficient heating technologies.

Hydrogen blended into natural gas networks or supplied to buildings throughdedicated networks accounts for only about 1.5% of the total reduction in cumulativeemissions related to heat in buildings in the period to 2070 in the Sustainable
Development Scenario relative to the Stated Policies Scenario. This small
contribution is explained by a phase-out of natural gas boilers as blending rates do
not exceed 6-7% in energy content (and 20% in volume), and that supply limitationsof biomethane make it challenging to decarbonise the remaining emissions from heatin buildings. Since the direct use of hydrogen in fuel cells or hydrogen boilers istypically much more energy intensive than low-carbon heating alternatives, their use
is limited to regions with existing gas infrastructure and/or in very cold climates (e.g.

15
Excluding own consumption of renewable electricity produced in the buildings, e.g. through solar rooftop PV aswell as the renewable share in purchased electricity.

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Russia, Canada) and poorly insulated buildings in the case of hydrogen boilers.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Energy efficient buildings designs, electrification and increased renewables
integration reduce residual direct emissions in the buildings sector to less than
300 Mt in 2070. Overall fossil fuel use in buildings is nearly phased out by 2070,
though this masks specific technology trends at end-use application and regional
levels.



Coal and oil use for space and water heating drops dramatically in developed
countries, falling to about 15% of today’s level as early as 2040.

The use of liquefied petroleum gas (LPG) and piped natural gas as improved
cooking fuels in emerging economies rises sharply to 2030 as universal energy
access is achieved. After 2030, growth in cooking services is met almost entirely
by clean energy sources, including efficient solid biomass used in stoves adapted
to local conditions, ethanol, biogas and electricity, and a small contribution fromnatural gas.

Natural gas use in conventional and condensing gas boilers declines steadily.
This drives their emissions down by 60% in the years to 2040, and nearly 95% by2070. The slower pace of natural gas phase out compared with coal and oil is dueto the presence of existing gas distribution networks in major heat markets, andthe time necessary for their decommissioning or conversion. Switching to gasfired heat pumps and hybrid heat pumps in the medium term contributes toprovide space heating more efficiently as they are more efficient thancondensing gas boilers. 16 Gas heat pumps are currently available for applicationin commercial and multi-family buildings, while hybrid heat pumps (combinedwith a condensing gas boiler) mostly are deployed in regions with extremely cold
climates.



Decarbonisation of power and heat generation causes indirect emissions fromthe electricity used by household applications and from district heat to fall evenfaster than direct CO2 emissions. Efficiency gains also help to reduce demand.
For example, the efficiency of LEDs increases from 90-110 lumens per Watt to150-170 lumens per Watt, while inefficient electric technologies, such as,incandescent, halogen and fluorescent lightbulbs, electric resistance heaters andnon-induction plates for cooking are phased out completely by 2070. Despite agrowing demand for cooling services and electrical appliances, efficiency gains
combined with power generation decarbonisation lead to savings of nearly
40 GtCO2 by 2070 relative to the Stated Policies Scenario. For comparison, total

16
The coefficient of performance of gas heat pumps is the ratio between the heat output relative to gas input. It
typically ranges from 130% to 200% depending on climate, operations and equipment size; a significant improvementcompared to gas boiler efficiencies (95-98%) for condensing gas boilers.

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energy-related CO2 emissions worldwide in 2019 were about 33 Gt.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Around 70% of cumulative CO2 emissions reductions to 2070 from the buildings
sector in the Sustainable Development Scenario results from the deployment ofsolutions that are available on the market today, although most still requireinnovation to fully integrate across the diversity of climates and building types.
Another 30% are currently at the demonstration or prototype phase (Figure 3.20).

35

By mitigation lever
GtCO2/yr

GtCO2/yrGlobal cumulative CO2 emissions reductions in the buildings sector by
mitigation lever and technology readiness level in the Sustainable Development
Scenario relative to the Stated Policies Scenario, 2020-70

30
25

35
30
25

20

20

15

15

10

10

5

5

0

Heating
HydrogenElectrification
Other levers

Cooling

Other end-uses

Renewables
Technology performance

By technology maturity

0

Heating
MatureDemonstration

Cooling

Other enduses
Early adoption
Large prototype

IEA 2020. All rights reserved.
Notes: Other levers include fuel shifts other than electrification, hydrogen and renewables (e.g. coal to natural gas
heat pumps) and other factors impacting service demand. Other end uses include lighting, appliances, cooking andother services. See Box 2.6 in Chapter 2 for the definition of the TRL categories large prototype, demonstration, early
adoption and mature.

Three-quarters of what is needed to decarbonise the buildings sector could be achieved
through the use of mature and early adoption technologies: further innovation would bring
additional gains.

The accelerated deployment of clean energy and envelope technologies that are
already available is the main driver of global CO2 emissions reductions in buildings in
the Sustainable Development Scenario. This acceleration depends on further
innovation and the achievement of economies of scale. For instance, high efficiency
heat pumps are mass produced today, mostly for use in new construction:
economies of scale would broaden their market potential. Broad application of early
adoption technologies can benefit technologies in the innovation pipeline by cutting
cost of common components and boosting learning-by-doing. For example, while
the heat pump market today is dominated by vapour compression technologies

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(TRL 10), there is room for innovation when it comes to systems efficiency, cold-Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

climate condition operations, use of cold and heat sinks, self-consumption (incombination with flexible electricity tariffs) and grid balancing using algorithms andother digital tools.
For the technology potential in the buildings sector in the Sustainable Development
Scenario to be realised, innovation is needed in the following areas:

Deploy packaged multi-service clean energy solutions that deliver cost
reductions and performance improvements by exploiting the synergies that avariety of technologies can provide. For example, the scaling up and upgradingof serial renovation models brings economies of scale for building renovations
through standardisation (e.g. prefabrication) and digitalisation (e.g. optimisation
using 3D scanners), and also brings down the cost of heating and coolingequipment through reduced component sizing and reduced labour costs, as
proposed by Energiesprong (Energiesprong, 2020). In the Sustainable
Development Scenario, around 4 billion square metres of floor space isrenovated to near-zero energy level each year to 2070, the equivalent of thecurrent floor area surface of France.



Exploit synergies across various end uses to improve the efficiency and qualityof the service provided to consumers. For instance, recovering waste heat fromthe compressors of reversible heat pumps operating in cooling mode for hot
water production could boost energy efficiency by 40-60% (TRL 8-9). There isalso potential for commercial projects that combine district heating and coolingsystems in an integrated district energy network to raise efficiency by 30-50%,
making it more economical to exploit geothermal and waste heat sources.



Deploy high performance technologies tailored for local conditions. For example,
cold-climate heat pumps (TRL 7-9) for very cold climates, and reversible heatpumps for heating, hot water, cooling (TRL 9) and evaporative cooling(standalone for hot and dry climates or coupled with a membrane or a desiccant
for humidity control in hot and humid climates).



Implement material efficiency measures to help support the decarbonisation of
the steel and cement industries, where emissions abatement is particularly
difficult and costly.

Further innovation could be supported by advanced planning tools, such as
integrated building simulation and optimisation tools (TRL 6-7) that can improve thedesign of complex and integrated solutions for new and renovated buildings.
It is difficult to know exactly where further innovation might lead, but promising areas
include:Electrification has much to offer, including through the deployment of active
components into the structure of buildings. For instance, electrochromic

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Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

windows (TRL 8) change their properties as an electric current passes throughthem to adjust heat gain depending on the needs of the building, while
photovoltaic (PV) windows (TRL 8) enable the use of some glass surfaces to act
as effective PV panels, thus breaking the maximum limit for decentralised PV
generation determined by roof surface area.



Flexibility measures can reduce the need for grid and networks investment in
upgrades: examples include demand-side response measures, pre-heating, precooling, energy storage, and power-to-heat and vehicle-to-home measures. In
the Sustainable Development Scenario, the combination of heat pumps andbuilding-based PV can boost onsite energy supply and progress towards 100%
renewable heating and cooling.

Combined technologies are likely to be important. For example the climate andcomfort box (TRL 4) developed under Mission Innovation Challenge 7 17 onaffordable heating and cooling aims to exploit synergies between a heat pump
and a battery to enhance onsite (e.g. rooftop PV systems, solar thermal) or gridscale renewable electricity consumption and reduce power demand when thegrid is congested. More generally, the automated control of individual oraggregated loads in response to price signals is being demonstrated in i.e. theUnited States, European Union and China (TRL 7). The development of district
heating and cooling micro-grids would also allow higher system efficiency, peakload management and renewable energy integration. Combined systems that
include distributed electricity generation (e.g. solar PV) and battery storage arein the early stages of market adoption in many markets.

Box 3.2

Technologies to reduce electricity and refrigerant needs for cooling in
the buildings sector

Given the projected surge in cooling demand, making this service more efficient andclimate-friendly is essential to limit its impact on the energy system and theenvironment. Integrating advanced components such as reflective roofs and dynamic
components into the fabric of buildings along with passive measures, integrated
storage and renewables has the potential to reduce space cooling needs. Ranging
from small individual air conditioning units to large central facilities, the majority ofspace cooling systems are based on vapour compression refrigeration cycles. Wider
deployment of more efficient vapour compression technologies offers important

Mission Innovation is a global initiative of 24 countries and the European Commission working to reinvigorate andaccelerate global clean energy innovation with the objective to make clean energy widely affordable. Mission
Innovation Challenge 7 aims to make low-carbon heating and cooling affordable for everyone.

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17

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

energy saving gains. These gains can be boosted through improved controls and by
exploiting surplus renewable energy, for example with ice storage heat pump system.
Other technologies for cooling are being researched and demonstrated.
Membrane heat pumps are a pre-commercial alternative to conventional electric air
conditioners. The technology couples a membrane vacuum dehumidification systemwith a membrane-based indirect evaporative cooler and operates using a vacuum
pump (Bukshaisha and Fronk, 2019). The coefficient of performance of membraneheat pumps could be up to twice as high as for conventional vapour compression
systems during extremely hot days, as they are much less sensitive to external
temperature. Membrane heat pumps have been successfully demonstrated in
expected operating conditions (TRL 7).
Considerable R&D is being carried out to identify refrigerants that minimise or
eliminate greenhouse gas emissions (e.g. R-32, R290, R744, HFO 1234ze), associatedwith the operation of space cooling technologies. Solid state cooling has emerged asa promising alternative to technologies using refrigerants. Solid state coolingtechnology exploits caloric effects – the reversible thermal response of a given
material to the adiabatic variation of the intensity of an applied field – in selectedmaterials (magneto-, electro-, elasto- and baro-caloric). The technology can operate
in reverse mode and several prototypes are being tested in laboratories. In hot andhumid climates, the combination of evaporative cooling or a desiccant with amembrane system that is able independently to cool and dehumidify air could
dramatically change the basic principles of conventional air conditioners. Several
experiments are underway aimed at improving evaporative cooler and desiccantperformance, and they include experiments to test solutions that were finalists in the
Global Cooling Prize (Global Cooling Prize, n.d.). These concepts, which promise toeliminate the need for refrigerants and make thermal control systems more energy
efficient than vapour compression cycle technologies, are at the validation level or
early prototype level (TRL 3-4).

Investment implications
The clean energy transition envisioned in the Sustainable Development Scenario
requires around 10% more global energy-related investment in the supply side thandoes the Stated Policies Scenario. Cumulative capital expenditure in the energy
sector (including end uses) totals around USD 31 trillion (or almost USD 610 billion
per year on average) more than in the Stated Policies Scenario over the period
2019-70 (Figure 3.21). The increased use of electricity and low-carbon technologies

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for power generation are the largest contributors to this higher investment need,Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

increasing investment needs in the power sector by around USD 39 trillion to 2070
(or almost USD 760 billion per year). At around USD 24 trillion, the lion’s share of thiscumulative additional investment is for renewable energy source (USD 475 billion
additional per year on average), followed by additional investment in the upgradeand extension of electric grids (around USD 10 trillion), CCUS with coal, gas andbioenergy(USD 3.6 trillion),andelectricity

storage(USD 3.2 trillion).

Itisaccompanied by additional cumulative investment of about USD 19 trillion to 2070
(around USD 370 billion per year) to make energy use in industry, transport andbuildings more efficient and to facilitate the use of low-carbon fuels such as
electricity and low-carbon hydrogen. The resulting increase in investment in power
supply and end-use sectors in the Sustainable Development Scenario is partly offset
by lower investment needs in fossil fuel extraction and fuel transformation.
Investments in fossil fuel supply are on aggregate USD 30 trillion (USD 595 billion peryear) lower than in the Stated Policies Scenario due to lower demand. On the other
hand, additional investment of USD 2.5 trillion through to 2070 (USD 48 billion peryear) is needed for hydrogen and hydrogen-based fuels, as well as almost
USD 915 billion for biofuels production.
On the demand side, additional investment in the Sustainable Development Scenario
in more efficient and low-carbon technologies increases rapidly to around
USD 550 billion per year by 2050, after which it goes into decline. In the buildings
sector, significant investment is required over the next couple of decades to improve
insulation. This investment extends the lifetime of the buildings stock relative to theStated Policies Scenario and thereby reduces investment needs in buildings in thelong-run, which in turn reduces overall demand for cement. In the transport sector,
policies to reduce travel (e.g. through more teleworking) and increase the use of
public transport reduce the need to invest in road vehicles in the long-run, leading tolower expenditure by individual consumers. Similarly, lower projected growth in air
travel demand in the Sustainable Development Scenario compared to the Stated
Policies Scenario offsets larger investments in energy efficiency measures in aircraft.
In contrast, maritime shipping requires about USD 6 trillion of additional investment
through to 2070 to meet the costs of a shift to low-carbon fuels such as ammonia
and hydrogen, together with energy efficiency measures. Additional investment intransport infrastructure of about USD 21 trillion is needed across the board through

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to 2070, in particular for railways.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Billion USD2019/yr

Change in average annual energy-related investment by sector and decade in
the Sustainable Development Scenario relative to the Stated Policies Scenario
2 000
Buildings
1 500

Industry

1 000

Transport
Electric grids

500

Fossil fuel supply and fueltransformation

0

Power
- 500
-1 000

Net total
2031-2040

2041-2050

2051-2060

2061-2070
IEA 2020. All rights reserved.

Notes: Building sector investment includes only energy efficiency measures. Transport sector investment includes
for vehicles the costs for the powertrain, but not the rest of the vehicles, also referred to as gliders (see ETP Model
documentation for more information on investment accounting boundaries).

Achieving net-zero emissions in the Sustainable Development Scenario requires anadditional annual average investment of USD 610 billion through to 2070, which is around
10% more than in the Stated Policies Scenario.

Reaching net-zero emissions by around 2070 in the Sustainable Development
Scenario requires the development and large-scale deployment of technologies thatare not commercially available today, particularly in heavy industry and long-distancetransport. Technologies that are mature today or are at an early stage of adoption
account for nearly 90% of overall investment during the 2030s in the Sustainable
Development Scenario (Figure 3.22). While investment in such technologies
continues to be needed, investment in new technologies becomes increasingly
important over time. In the 2060s, nearly USD 4 trillion/year – almost half of total
annual average investments – is spent on technologies that are at demonstration or
prototype stage today. This is around 60% more than in the Stated Policies Scenario.
The increase in average annual investments associated with heavy industries andlong-distance transport is particularly large. The need for innovation in existing
technologies and for the rapid development and deployment of new technologies

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underlines the importance of increased investment in R&D (see Chapter 6).

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

Average annual investment in technologies by technology readiness level in the
Sustainable Development Scenario
Total

2031-2040

2061-2070
0

2 000

4 000

6 000

8 000
billion USD2019

Heavy industry

2031-2040

2061-2070

0

15

30

45

60
billion USD2019

Long-distance transport

2031-2040

2061-2070
0

500

1 000

1 500

2 000
billion USD 2019

Early adoption

Demonstration

Large prototype

IEA 2020. All rights reserved.
Notes: Annual investments displayed here exclude those related to mature technologies. The three broad
technology readiness level categories refer to the status of technology types today.

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Investment in technologies that are today at demonstration or prototype stage becomesincreasingly important in the Sustainable Development Scenario, especially in areas whereemissions are hard to abate.

Energy Technology Perspectives 2020

Chapter 3. Energy transformations for net-zero emissions

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Chugoku Electric Power Company (2018), Test Results of the ammonia mixed combustion at
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Elysis (2018), Rio Tinto and Alcoa announce world’s first carbon-free aluminium smelting
process (press release), 10 May 2018, www.elysis.com/en/rio-tinto-and-alcoaannounce-worlds-first-carbon-free-aluminium-smelting-process.
Energia Potior (2020), EnPot-TRIMET Essen 120 cell installation (web page),www.energiapotior.com/trial-results.
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Global Cooling Prize (n.d.), Cooling for all, without warming the planet (website),
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IEA (International Energy Agency) (2020a), Outlook for biogas and biomethane: Prospects fororganic growth, IEA, Paris, www.iea.org/reports/outlook-for-biogas-and-biomethaneprospects-for-organic-growth.

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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

The materials produced by industry play a critical role in our daily lives. They include
steel for vehicles, petrochemicals for gloves and masks used in hospitals, cement
for buildings we live and work in, among many other uses.



Three heavy industries – chemicals, steel and cement – account for over half ofindustrial energy use and around 70% of direct CO2 emissions from industry. In the
Sustainable Development Scenario, heavy industry emissions fall 90% by 2070, withthe remaining 600 MtCO2 offset by carbon removal technologies.

Various factors make it difficult to reach zero emissions in heavy industries. Today,
most technologies that drastically reduce emissions are at an early stage ofdevelopment. This includes technologies for providing large amounts of hightemperature heat, which in many cases cannot be provided by electricity using
commercial technologies, and for reducing process emissions from chemical
reactions inherent to current industrial feedstocks.

Industry also requires expensive and long-lived equipment – blast furnaces andcement kilns typically operate for around 40 years – and this slows deployment of
low-emission technologies. Moreover, many industrial materials are highly pricesensitive due to being traded in highly competitive global markets.

Technology performance improvements and material efficiency together contributethe most to emissions reductions in heavy industry in the near term. Adopting thebest available technologies yields gains in technology performance, while
improving manufacturing yields, light-weighting and other material efficiency
measures reduce growth in demand for materials.



The buildings construction sector, which accounts for around 50% of demand for
cement and 30% for steel, plays a key role in reduced material demand throughbuildings lifetime extensions and new building designs.

In the long term, low-CO2 processes that are not commercially available today
account for around two-thirds of the total output of the three heavy industry sectors
in the Sustainable Development Scenario. Carbon capture utilisation and storage(CCUS) and electrolytic hydrogen play leading roles, with an average of about 75
plants incorporating CCUS and 20 plants incorporating low-carbon hydrogen being
added each year from 2030.

Despite these extensive changes, the impact on end-use consumers is expected tobe small – the cost increase for steel would raise the price of a car by only about
0.2% and that for cement would raise the price of a house by only about 0.6%.

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Chapter 4. Technology needs forheavy industries

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Introduction
Reducing CO2 emissions from heavy industries – in particular the chemicals, steel
and cement sectors – is far from straightforward, with many of the technologies that
we are likely to rely upon for decoupling emissions from bulk material production in
the future still at early phases of development. Exploiting these technology
opportunities, in conjunction with demand-side mitigation strategies, will be crucial
to meeting sustainability goals. This chapter explores these challenges and theopportunities available for achieving deep emissions reductions in heavy industry,
with a focus on chemical, steel and cement production.

The outlook for heavy industry in the wake of Covid-19
Our daily lives would be unimaginable without the materials and goods produced in
the industry sector. We need them for the buildings we live and work in, the vehicles
and transportation infrastructure that keep us mobile, and much more besides.
Economic and population growth are key drivers of demand for materials andmanufactured goods, the production of which is, in turn, a key driver of industrial
energy consumption and emissions.
The industry sector consumed around 3 900 million tonnes of oil equivalent (Mtoe)of energy in 2019, accounting for just over one-quarter of total primary energy
demand. 1 Industry is currently highly reliant on fossil fuels, which account for nearly
70% of the energy supplied to the sector. Of this fossil fuel consumption, coalaccounts for a little over 40% and oil and natural gas each account for a little under
30%. Electricity accounts for much of the remainder, with small amounts ofbioenergy also being used in specific sectors.
Direct industrial emissions amounted to about 9 gigatonnes of carbon dioxide(GtCO2) in 2019, or just over a quarter of the total attributable to the energy system,and slightly more than the direct emissions of the entire transport sector (about
8 GtCO2). 2 About a quarter of industry sector emissions are process emissions that
result from chemical reactions inherent to industrial production processes for certain
materials, among which the biggest contributor is clinker production for cement.
Indirect emissions resulting from power and heat generation for use in the industrial
sector account for a further 7 GtCO2.

Throughout, industrial energy consumption includes the IEA Energy Balance boundaries of total final consumption
by industry, non-energy use for chemical feedstock, and energy used in blast furnaces and coke ovens.
2
Direct industrial emissions includes CO2 emissions from fossil fuel combustion corresponding to the energy use
boundary described above, along with CO2 emissions from industrial processes within these sub-sectors. CO2
emissions from non-renewable waste, indirect emissions from electricity generation and process emissions from fueltransformation are not included within this definition, nor are non-CO2 greenhouse gases.

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1

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Production growth in key heavy industries, 2000-30
Steel

Gt/yr

Chemicals
1.0

2.5

5.0

0.8

2.0

4.0

0.6

1.5

3.0

0.4

1.0

2.0

0.2

0.5

1.0

0.0
2000

2010

2020

2030

Stated Policies Scenario

0.0
2000

2010

2020

2030

0.0

Cement2000

Sustainable Development Scenario

2010

2020

2030

Historical

IEA 2020. All rights reserved.
Note: Chemicals includes the primary chemicals ethylene, propylene, and benzene, toluene, mixed xylenes,
ammonia and methanol as an aggregate proxy for sector activity growth.

The Covid-19 pandemic is projected to interrupt production in heavy industries temporarily
before growth resumes. Material efficiency is the key to permanently bending the curve.

Over the past two decades, as the global population has grown by 25% and global
GDP has doubled, demand for key bulk materials like chemicals, steel and cement
has grown by 80% to 150% (depending on the material [Figure 4.1]). During thisperiod, some progress has been made in lowering the energy and emissions
intensities of production, driven mainly by the commercial incentive to reduce costly
energy inputs in what are highly competitive industries, and by government policies
promoting energy efficiency. Nonetheless, this progress has been outweighed byincreases in material demand, with the result that industrial energy use and CO2
emissions have risen by 60% and 70% respectively since 2000. 3 While the industry
sector is enormously complex, three energy-intensive “heavy” industries –
chemicals, steel and cement 4 – deserve particular scrutiny, as they account foraround 60% of the sector’s energy use and 70% of its emissions.

Demand growth over the period has been higher in a number of heavy industries relative to the less energy-intensive
industry sub-sectors. This structural change explains why emissions have grown at a somewhat higher rate thanenergy consumption, and also is a major contributor to total industry emissions and energy consumption growth (6070%) being less than demand growth for key bulk materials (80-150%); improvements in energy and emissions
intensities are a smaller contributor to the difference.
4
These sector names are used for brevity. They correspond to the IEA Energy Balance sectoral boundaries as follows:“chemicals” refers to the chemical and petrochemical sector, including non-energy use for chemical feedstock;“steel” refers to the iron and steel sector, including energy use in blast furnaces and coke ovens; “cement” refers toa portion of the non-metallic minerals sector. Throughout, “heavy industry” and “heavy industries” refer to these threesectors.

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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

The Covid-19 crisis led to a temporary decline in industrial energy consumption andemissions of around 5%, mainly due to reduced demand for key bulk materials. In thefirst half of 2020, demand was lower compared to the first half of the previous year
by about 6% for cement, 5% for steel and 2% for chemicals. 5 Recovery is alreadyclearly underway in the People’s Republic of China (“China” hereafter), the world’s
largest industrial producer of many materials. As one of the first countries toimplement and then subsequently lift lockdowns, industrial activity in China washardest hit in February, and by April-May had already recovered to levels of activity
higher than the same months the previous year (Bloomberg, 2020). This recovery
was largely driven by government-funded infrastructure projects, such as railways,
and by re-emerging demand for manufactured products like cars and electronics that
had been suppressed during lockdowns (Qiu and Woo, 2020). In many other key
economies, industrial production continued to decline in the second-quarter.
While material production has resumed in China, the country may struggle tomaintain the rise in industrial output if domestic demand and demand for exports
from other countries do not also return to growth. In the first four months of 2020,
most countries experienced a 10-20% slowdown in construction activity (Eurostat,
2020; NBS, 2020b; United States Census Bureau, 2020). Trends from May to
July 2020, however, seem to highlight a rebound in construction activity. As a result,global demand for bulk materials in 2020 is likely to be 3-5% lower than in 2019.
The pace at which the construction industry will recover will depend on a number offactors, including what policies are in place. Infrastructure and real estate measuresfeature in many stimulus packages because they are labour-intensive and can yieldlong-term economic value. This offers an opportunity to boost material efficiency andsustainability in construction. The circular economy is a major pillar of the European
Union’s recovery strategy in particular, encompassing construction waste
management, the promotion of bio-based products, lifetime extension throughenhanced product durability, as well as a doubling of renovation rates (EC, 2020). In
the Sustainable Development Scenario, material efficiency contributes around a thirdof the cumulative reduction in global emissions related to cement and steel use inbuildings construction compared with the Stated Policies Scenario. Policies andrecovery packages that incentivise action in this area can contribute to progress
towards long-term decarbonisation pledges.
The immediate future for the industry sector is highly uncertain, as it is for the energy
system as a whole. The speed of industrial recovery depends on a number of factors,
including whether additional lockdowns are required. Our projections are based on
the assumption that industrial production resumes its global growth trajectory in

The value for cement is an estimate based on various sources for national production including National Bureau of
Statistics of China (2020a), FXEmpire (2020), USGS (2020), TCMA (2020) and Global Cement (2020). The value forsteel is from World Steel Association (2020). The value for chemicals uses ethylene as a proxy, based on Platts (2020).

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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

2021, recovering to pre-crisis growth rates shortly afterwards, as occurred following
the 2008 financial crisis. Bending the demand curve in the medium to long term,
without reducing the quantity and quality of material services provided by theindustry sector, will require active efforts to improve the efficiency with whichmaterials are used and products are manufactured. However, even with significant
progress on material efficiency, vast quantities of materials will still be required tosupport growing populations and economic prosperity, especially in the developingworld. This means that deep reductions in industrial CO2 emissions will ultimately
require the decoupling of emissions from material production output, and newtechnologies have an essential role to play in making this happen.

Why are emissions from heavy industry “hard to abate”?
The overarching reason for designating emissions from certain sectors as “hard toabate” is the lack of maturity of the technologies that are likely to be relied upon to
mitigate their emissions. While solar PV and electric cars are in use today in manymarkets, the same cannot be said for many technologies that will be required toachieve deep reductions in emissions in heavy industry (see also Chapter 5 on longdistance transport). For the industry sector, the specific factors that make emissions
hard to abate include:High-temperature heat requirements: Heavy industry requires high-temperature
heat for many of its processes, which today is almost exclusively provided byburning fossil fuels. Generating high-temperature heat from electricity,
especially on a large scale and for electrically non-conductive applications, isimpractical and costly with today’s commercial technologies, and constraints on
the availability of sustainable biomass limit its use as a substitute. Carbon
capture, utilisation and storage (CCUS) and hydrogen technologies offer means
to provide high-temperature heat while eliminating most emissions, but industrial
applications of these technologies are in most cases still at early stages ofdevelopment.

Process emissions: Several industrial processes result in emissions fromchemical reactions that are inherent to today’s production processes. A key
example is the CO2 that results from the calcination reaction that is necessary to
produce clinker, the active ingredient in cement. Preventing these and several
other sources of process emissions requires CCUS, or fundamental shifts awayfrom conventional production processes to methods involving different raw
materials.
Long-lived capital assets: Industrial plants tend to have long lifetimes; typically
30-40 years for plants in heavy industries. Retiring them early to switch toalternative technologies would incur very large costs. As such, emissions fromPAGE | 177

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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

recently built plants can be considered “locked-in” unless options are available
to retrofit or adapt them to reduce their emissions intensity.



Trade considerations: Many industrial products are traded in highly competitive
global markets (e.g. steel, aluminium). This makes it challenging for an individual
producer or region to turn to more expensive production pathways in order toreduce emissions without being undercut on price. Thin profit margins also makeit challenging to fund the large upfront investments that are likely to be required
for near-zero emission technologies.

The Covid-19 crisis has the potential to exacerbate these challenges. Given the long
lifetime of industrial assets, investment decisions today will determine emissions
levels for decades to come. At a time when attention is focused on keeping
companies financially buoyant, there is a risk that the urgent (short-term financial
stability) could overshadow the important (developing and deploying near-zeroemissions technologies).
Pilot and demonstration projects for the innovative technologies that are required forachieving deep emission reductions in industry – many of which involve CCUS andhydrogen – could be at risk. Long delays to even a small number of these projects, ortheir cancellation, could prevent the technologies from reaching commercialisationin the next 5-15 years, imperilling the industry sector’s necessary contribution toreaching net-zero emissions at the broader energy system level. However, it does nothave to be like this. The Covid-19 recovery packages being developed bygovernments across the world present an opportunity to chart a new path for theindustry sector based on a strong and co-ordinated policy response that prioritises
clean technologies (Box 4.1).

Box 4.1

Accelerating progress in the wake of the Covid-19 crisis: The role ofgovernments in supporting the transition in heavy industry

It is hard to see how the challenge of achieving deep emissions reductions in industry
can be overcome without a multi-faceted policy response and collaboration between
multiple stakeholders. While many components of the policy response that is needed
are the same as or similar to those required for other sectors (see Chapter 7), someare unique, reflecting the specific nature of the challenges faced by industry.
The current Covid-19 crisis should not be a reason to halt progress in reducing
emissions in the short term, nor should it reduce momentum in achieving long-termgoals. Recovery packages present an opportunity to hasten progress: direct support
can help maintain or create jobs, while being made contingent upon reducing

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emissions from production processes. Key targets for stimulus include: incentives forEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

energy efficiency; improving material recycling systems; and strengthening progressin developing and demonstrating innovative clean technologies (IEA, 2020).
A policy framework for achieving deep emissions reductions in industry
Component

ExamplesImportance for industry

1. Long-termemissions reductions
planning and policy

Roadmaps and plans, legislated
carbon pricing and tradeable
emissions standards

2. Management ofexisting and near-term
assetsRequirements for retrofit-readyfacilities, sunset clauses

Provides confidence for lowemission investments andinnovations, helps low-emission
options compete in markets
Reduces or avoids potential for
long-term lock-in of emissionsintensive assets

3. Market creation forclean technologies

Contracts for difference,minimum content regulations,
low interest loans

Helps low-emission options
compete in globally competitivemarkets

4. Development ofearly-stage
technologies

R&D and demonstration funding,public-private partnerships,
innovation co-ordination

Brings forward options to provide
low-emission high-temperature heat
and address process emissions

5. Acceleration ofmaterial efficiency

Improved scrap collection andsorting networks, design
regulations that optimise
lifecycle emissions
Sectoral agreements, carbon
border adjustments, technology
transfer

Maximises secondary production
potential, alleviates pressure on low
emissions technology deployment

Co-ordination and finance forCO2 transport and storage,
decarbonised electricity, lowcarbon hydrogen
Increased data collection,
sustainability labelling,sustainable investment
classifications

Facilitates options to provide
high-temperature heat with low
emissions and to address process
emissions
Helps track progress, identify bestpractices, directs finance towards
low-emission options

6. International
co-operation and alevel playing field
7. Infrastructure
planning anddevelopment
8. Tracking progress
and improved data

Helps alleviate competitivenessconcerns in globally competitivemarkets

A longer-term policy framework for clean energy transitions for industry should
include the eight key components set out in the table above. All of these arenecessary, and each reinforces the others, but it is worth drawing particular attention
to the importance of long-term, predictable and credible policies in the light of thelong lifetimes of many industry assets. International co-operation, in light of the global

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and competitive marketplaces in which most industries operate, is also paramount.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Industry in a net-zero emissions energy system
Due to the limited availability of commercial and scalable alternative production
pathways, and the high costs and long lifetimes of existing facilities, reaching zeroCO2 emissions from heavy industry is expected to take somewhat longer than in otherindustries, and most other sectors. Nonetheless, industry makes strong progress in
the Sustainable Development Scenario, with both the industry sector as a whole andheavy industry in particular reducing emissions by around 90% in 2070 compared tocurrent levels (Figure 4.2).

6 000

GtCO2/yr

Mtoe/yr

Global industrial energy consumption and CO2 emissions in the Sustainable
Development Scenario, 2019-70

5 000
4 000

16
14
12
10

3 000

8
6

2 000

4
1 000
0

2
2019

2030

2040

2050

2060

2070

Chemicals

Steel

CementOther industry

0
-2

2019

2030

2040

Process emissions
SDS

2050

2060

2070

Indirect emissions
STEPS
IEA 2020. All rights reserved.

Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario. Industrial energy consumption
includes total final consumption in industry, energy consumed by blast furnaces and coke ovens (iron and steel),and non-energy use (of which petrochemical feedstock is included within chemicals). Direct industrial emissions
include energy-related emissions and industrial process emissions and those stemming from the transformation offuels in coke ovens and blast furnaces. Indirect emissions are approximated based on the regional average grid
intensity of imported electricity and heat, except for a portion of the electricity and heat consumed in the iron andsteel sector, where the first choice of fuel for electricity is assumed to be coke oven gas and blast furnace gas.
Markers on the right-hand graph correspond to the total direct CO2 emissions from industry in each scenario.

While energy demand remains relatively flat in the Sustainable Development Scenario,
steps taken to tackle CO2 emissions result in a 90% reduction in direct emissions by 2070.

Despite increasing demand for industrial products, total energy demand in the
Sustainable Development Scenario remains relatively flat in industry overall throughto 2070, with a modest decline in heavy industry. The fuel mix, however, shifts
considerably, with the share of fossil fuels in heavy industry declining from around
85% in 2019 to around 55% in 2070, and with commensurate increases in the share

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of electricity, including electricity for hydrogen production, and bioenergy. Fossil

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

fuels continue to play an important role in 2070, but most of their use is coupled with
CCUS. Of the residual heavy industry emissions in 2070, about 45% are process
emissions, which come mostly from the cement sector, and 40% are emissions fromcoal, which come mostly from the steel sector. The residual emissions from theseand other hard-to-abate sectors, in particular long-distance transport (seeChapter 5), are offset at the global level by carbon removal technologies in othersectors (primarily bioenergy with carbon capture and storage [BECCS] in power andheat generation), which are expected to prove cheaper than “last-mile” efforts toeradicate emissions entirely in the hard-to-abate sectors (see Chapter 2).

Gt CO₂/yr

The technology portfolio for reducing direct industrial CO2 emissions, 2040
and 2070
Total industry

12
10

6

8

4

6
4

2

2
0

Heavy industry

8

STEPS

SDS
2040

STEPS

SDS

0

SDS

STEPS
2040

2070

Mitigation levers (column graphs):
Technology performance
Material efficiency
Electrification
Hydrogen
Bioenergy
Other renewables
CCUS
Other fuel shifts

STEPS

SDS
2070

Current technology maturity category(pie charts):
MatureEarly adoption
Demonstration
Prototype

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario. CCUS = carbon capture,utilisation and storage. See Box 2.6 in Chapter 2 for the definition of the maturity categories: large prototype,demonstration, early adoption and mature.

An array of strategies is required to reduce industrial CO2 emissions, with innovativetechnologies like CCUS and hydrogen playing a large role, particularly in the longer term
and in heavy industry.

A variety of measures are required to achieve deep emissions reductions in industry(Figure 4.3). Technologies that are already mature or in the early adoption phase play
an important role. They deliver savings from technology performance improvements,
material efficiency gains, switching to bioenergy, and the electrification of low- andmedium-temperature heat. These savings are particularly important in the short term,

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but continue to play a role through to 2070. A particularly large contribution is made

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

to the gains from material efficiency by the construction sector (including buildings
and infrastructure), which currently accounts for about half of all demand for steel
and all of the demand for cement. In the longer term, fundamental technology shifts
are needed, and technologies currently at the demonstration and prototype stage
play an integral role in these shifts. This is especially the case in heavy industry, wherethese technologies account for nearly half of the emissions reductions in 2070
relative to the Stated Policies Scenario. Innovative technologies incorporating CCUS
and hydrogen – which are not yet commercially available – are key.
The remainder of this chapter provides a detailed assessment of the opportunities foremissions reductions in key heavy industry sectors – chemicals, steel and cement. It
concludes with a discussion of opportunities to make more efficient use of thesematerials in the construction sector, which is one of the key end-use consuming
sectors for heavy industry products.

Chemical production
Sector overview and demand outlook
The chemical sector, which directly contributes more than 1% of the world’s GDP(Oxford Economics, 2019), is the largest industrial consumer of energy worldwide,
accounting for 30% of total industrial energy use. Because around half of its energy
inputs are used for feedstock (raw materials), which means that a large proportion of
the carbon in the energy inputs ends up in the final product rather than being burnedor otherwise emitted during the production process, the sector produces fewer CO2
emissions than the steel and cement sectors do: it accounts for 16% of total directindustrial emissions. 6 Because oil and natural gas are the primary feedstocks for
producing chemicals, with coal also being used to a lesser extent, the share ofhydrocarbons in the overall sector’s energy use is very high, at 85%. Chemical
production accounts for around 14% of global oil demand (14 million barrels per day)and around 9% of global gas demand (315 billion cubic metres).
The chemical sector produces hundreds of thousands of different products, fromplastics and fertilisers to pharmaceuticals and explosives. The energy intensity of
production varies considerably from product to product. It is particularly energyintensive to produce primary chemicals, which include ammonia, methanol,
ethylene, propylene, benzene, toluene and mixed xylenes (the latter five are grouped

Process emissions make up around 0.2 GtCO2 of total chemical sector emissions of around 1.4 GtCO2. Theseemissions occur when the amount of carbon present in the feedstock is higher than that required in the product. The
most extreme example is ammonia, (which contains no carbon) produced using coal (which is 60-80% carbon byweight). This is widespread in China, as is coal-based methanol production, which contains a small share of carbon.
Coal-based chemicals production is rare elsewhere.

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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

together as “high-value chemicals”, while the latter three are known as BTX
aromatics). Primary chemicals account for around two-thirds of the chemical sector’s
total energy consumption and the vast majority of its feedstock needs. In some cases,
energy and feedstock account for as much as 90% of total primary chemical
production costs, including capital expenditure.
Primary chemicals are subsequently transformed through various processes into final
chemical products, including plastics, synthetic fibres, fertilisers, paints, additives
and solvents. These processes tend to use comparatively less energy. The other mainchemicals categories – speciality and fine chemicals, pharmaceuticals and consumer
chemicals – generally require much less energy to produce, but rely for their starting
materials on the production of energy-intensive upstream pre-cursors. Demand forsome kinds of chemicals is growing relatively fast (3-4% per year for various plastics
resins), whereas demand for others is growing more slowly (around 1% per year forammonia).
Chemical production facilities are less geographically concentrated than those in the
cement and steel sectors, with China accounting for around 20% of high-value
chemical capacity, as opposed to around half of all capacity for cement and steel(see Chapter 1). In recent years, additions to primary chemical production capacity
have been concentrated in the United States, the Middle East and China, and this is
set to continue in the coming years. The shale revolution drove expansion of US
production, which had previously been stagnating, and led to soaring output of
ethane – a primary component of natural gas liquids and the second-most important
feedstock for the chemicals industry globally after naphtha. Low feedstock costs
have also underpinned expansions in the Middle East, notably in Iran andSaudi Arabia. However, the Covid-19 crisis, together with overcapacity in several
regions, is likely slow expansions in the coming years.
CO2 emissions are considered hard-to-abate in the chemical industry for three key
reasons:High temperature needs for non-conductive materials: A steam cracker (a basic
unit for producing ethylene, propylene and BTX aromatics, which are the building
blocks of most chemicals) and other large units operate at temperatures close to
1 000°C. It is impractical and expensive to generate this amount of heat fromelectricity using current technologies, and research efforts aimed at lowering thecosts of electrification are at a relatively early stage of development, whileconstraints on sustainable biomass availability limit its application in the sector.
Other technologies like fossil fuels with CCUS and hydrogen-based production
are still at pre-commercial stages.
Long-lived capital assets: Upstream units such as steam crackers are very large,
expensive to build and typically operated for around 30 years (some in Europe

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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

and the United States are much older). Retiring them early is possible, but would
incur huge cost penalties, given the enormous investments required to constructthem (a large cracker costs around USD 4 billion).



Trade considerations: The markets for bulk chemicals and their derivatives, manyof which can be transported economically over long distances, are internationaland highly competitive, which makes it difficult for producing countries tointroduce any climate measure that raises costs without hurting its exports,
unless all others agree to do the same. Measures such as carbon borderadjustments could provide some protection, but would be politically challenging
and controversial. Chemical supply chains are also highly complex and often
span multiple countries, so measures in one jurisdiction could have a ripple effectacross markets for feedstocks (inputs) and derivatives (outputs).

Fuels used as material inputs: To eliminate emissions entirely from the chemical
sector supply chain and its products, including during their use and disposal
phases, all of the carbon and hydrogen required for feedstock would have to besourced from a combination of CO2 captured from the atmosphere andelectrolytic hydrogen, recycled chemical products, and/or bioenergy. Withcurrent technologies and the limited projected availability of sustainablebioenergy, this constitutes an enormous long-term challenge.

The demand for chemicals is projected to grow in parallel with economic activity inthe decades to come, as it has done historically, and this will require additional
production capacity (Figure 4.4). To take just one example, the extensive use offertilisers and agrochemicals to promote crop growth and provide protection against
harmful organisms and pathogens is strongly linked to agricultural output, which willneed to grow to meet the needs of a rising global population and increasing demand
for food. This growth in total demand takes place even as measures are adopted toincrease fertiliser application efficiency and reduce waste throughout the sustenancesupply chain. In line with recent trends, and as with other industrial sectors, most of
the growth in demand for these and other chemical products will come fromemerging economies.
Despite the lull in demand brought about by the Covid-19 crisis, there are few signs
yet of a sustained saturation in demand at the global level for plastics or otherchemical products (e.g. rubber for tyres, polyester for clothing). Several chemical
products, such as items of personal protective equipment, have actually seen a surge
in demand during the crisis. The disposable mask market for example, is projected to
grow from USD 800 million in 2019 to USD 166 billion in 2020 (The Economist, 2020).
Nonetheless, there is growing interest in curbing the use of plastic for environmental

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reasons. Several countries have announced policies to phase out the unnecessaryEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

use of plastics, including single-use items like drinking straws and plastic bags, in
response to their accumulation in the ocean and the grave consequences of this forhuman health and wildlife.
Whether and to what extent policies to phase out single-use plastics will have an
impact on overall demand is uncertain, given the limited availability of affordable
substitutes. Without effective and efficient packaging that today is often provided byplastics, waste in food and other supply chains would increase due to spoilage anddamage to products during transit, thereby substituting one form of damage foranother. Effective plastic waste management systems are needed, together withefforts to use plastics and other chemical-based materials more efficiently, andefforts to eliminate plastic from specific end uses. It is also important to keep in mind
that packaging only makes up about one-third of demand for plastics, and that newuses of plastics, for example in textiles, are likely to continue contributing toincreased demand.
Global primary chemical production by scenario and plastic demand by market
segment, 2019-70
Plastic demand by market segment in 2019

Mt/yr

Global primary chemical production
1 200

Textiles15%

25%
Material efficiency

1 000
800

Other
12%

600
400

Machinery
1%200

Consumer goods
10%0Transportation
7%

2019

Methanol

2030

2040

2050

2060

Ammonia

HVCs

STEPS

2070

SDS

Electrical
4%

Construction
16%

Packaging
36%

IEA 2020. All rights reserved.
Note: HVCs = high-value chemicals. STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario.
Source: Plastic demand by market segment based on Geyer, R., J.R. Jambeck and K.L. Law (2017).

Collection rates for key plastics more than triple in the Sustainable Development Scenario
from today’s levels. This and other material efficiency strategies reduce demand forprimary chemicals by around 25% by 2070 relative to the Stated Policies Scenario.

Material efficiency can help to decouple virgin primary chemical production from
GDP, and to limit growth in demand to some degree. An important aspect ofmaterial efficiency is the recycling and reuse of plastics. In the Sustainable
Development Scenario, the rate of plastic waste collection more than triples
by 2070, compared with today’s levels, even as developing economies with low

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collection rates today dramatically increase their share of global plastic

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

consumption. This increase is brought about by a strong policy push in the areas ofsorting and collection at the local municipal level, and by incremental increases inthe yield rates of commercial recycling processes.
Today, plastics are often “down-cycled”, meaning that recycled plastic often
cannot directly substitute for virgin plastic in several applications. In the
Sustainable Development Scenario, there is a greater than twofold increase in therate of secondary plastics providing direct substitutes for virgin resins by 2070,
facilitated by enhanced collection and sorting practices, along with advances inplastic recycling technologies (such as chemical and feedstock recycling
processes). The increase in collection rates and decrease in down-cycling rates
results in around 180 Mt of primary chemical savings in 2070, relative to the Stated
Policies Scenario. High-value chemicals account for over 90% of these savings,
reflecting the fact that they play a bigger role in the supply chains of plastic
materials than ammonia and methanol.
Demand for methanol (a chemical building block used mainly as an intermediate)peaks in the mid-2040s in the Sustainable Development Scenario, instead ofgrowing continuously as it does in the Stated Policies Scenario. This divergence intrajectory arises partly because additional plastic recycling reduces the need formethanol production, but the main reason for this is the reduced use of liquid fuelsin the transport sector in the Sustainable Development Scenario in modes where
methanol and its derivatives are used as fuel additives. Fuel applications accountfor around one-third of the demand for methanol today, and are nearly phased out
in the Sustainable Development Scenario (Levi and Cullen, 2018; Methanol Institute,2019).
Because methanol contains carbon, and virtually all of it is derived from fossil fuelfeedstock, it does not make sense on a life-cycle basis in the context of the
Sustainable Development Scenario to displace gasoline or diesel in the transport
sector with methanol derived from coal or gas. While methanol is produced on alarge scale via electrolysis in the Sustainable Development Scenario, the limited
availability of affordable biogenic or atmospheric CO2 feedstock in the context of adecarbonising energy system raises the cost of methanol and makes it lessattractive in substitutable applications. Another factor that plays a role in methanol
demand peaking in the 2040s in the Sustainable Development Scenario is its
declining share in the production of plastics via the methanol to olefins process
which is deployed on a large scale today in China to open up the route to plastics
produced from coal.
Ammonia production peaks in the late 2040s in the Sustainable Development
Scenario, whereas it continues to grow slowly and steadily in the Stated Policies
Scenario. As with methanol, plastic recycling plays a minor role in this peaking, but

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an increase in fertiliser application efficiency in the agriculture sector is the mainEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

driver. The combined impact of these strategies in the Sustainable Development
Scenario is a reduction of around 17% in ammonia demand by 2070, relative to theStated Policies Scenario. Sustainable farming practices, such as soil testing,precision application and enhanced monitoring, help to minimise the amount ofsynthetic fertiliser used per unit of food production in the Sustainable Development
Scenario, while reductions in food waste (around one-third of food produced iswasted globally [FAO, 2011]) also help to reduce the quantities of fertiliser required
to provide the same level of sustenance. Because of its zero-carbon and highhydrogen content, ammonia is increasingly used as an energy vector in the
Sustainable Development Scenario: the ammonia used for this purpose isaccounted for separately in the fuel transformation and transport sectors (seeChapters 3 and 5).
Another important point on the demand side for the chemical sector concerns urea.
Urea is a carbon-containing fertiliser synthesised from ammonia and CO2 (CO2 isgenerally sourced from the concentrated emissions streams that arise in ammonia
plants). Today more than half of the ammonia produced globally is converted tourea, with the remainder being used for a variety of nitrate-based fertilisers(containing no carbon atom) and various smaller volume industrial applications.
When urea is applied to the soil in the agriculture sector, the CO2 that was utilised
to make it is released. In many cases, urea can be directly substituted by a nitratebased fertiliser, although there are hurdles to overcome with respect to safety andsecurity – ammonium nitrate is used to make explosives, and fertilisers that containit are strictly controlled in several regions. In the Sustainable Development
Scenario, urea demand increases initially, but then declines as nitrate-based
fertilisers are used as substitutes where possible. By 2070, urea demand is around
40% of today’s level, requiring around 135 Mt less CO2 for feedstock than in theStated Policies Scenario.

Technology pathways towards net-zero emissions
Because of the challenges involved in abating CO2 emissions in the chemical sector
described above, they are only eliminated worldwide after 2070 under theassumptions of the Sustainable Development Scenario, with residual emissions
in 2070 being offset by negative emissions in the power and other energy
transformation sectors. Total sector emissions nonetheless fall by about 90% from
1.4 GtCO2 in 2019 to 0.2 GtCO2 in 2070, with emissions intensity – the quantity ofemissions incurred in producing 1 tonne (t) of output – also falling by 90%

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(Figure 4.5).

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Global chemical sector direct CO2 emissions and energy consumption in the
Sustainable Development Scenario, 2019-70

1 200

60

1.5

900

45

0.6

1.0

600

30

0.3

0.5

300

15

0.0

0

2.0

0.9

Gt CO2/yr

1.2

0.0

2019

Emitted CO₂
CO₂ intensity

2030

2050

2070

Captured CO₂
CO₂ intensity (STEPS)

Mtoe/yr75

2.5

t CO2/t

1 500

1.5

2019

2030

Coal
Gas
Imported heat
Other renewables
Energy intensity

2050

2070

GJ/t

Final energy consumption

CO2 emissions

0

Oil
Electricity
Bioenergy and waste
For hydrogen
Energy intensity (STEPS)IEA 2020. All rights reserved.

Notes: STEPS = Stated Policies Scenario. Captured CO2 includes that which is captured then used as feedstock for
urea production, as well as that which is captured and stored. Energy consumption includes that used as feedstock.
Sectoral energy and CO2 intensities are calculated based on total primary chemical production and total chemical
sector energy consumption.

Emissions from the chemicals sector fall by around 90% between 2019 and 2070 in the
Sustainable Development Scenario, thanks to material efficiency and technology
performance improvements, increased use of bioenergy and electricity-derived hydrogenfeedstock, and an extensive CCUS roll-out.

Most of the technologies needed to achieve deep reductions in the chemicals sector
emissions – including CCUS and electrolytic hydrogen using variable renewables –are still at the pre-commercial or small-scale deployment stages of development formost types of chemicals production. It will probably take five to ten years fortechnological development, cost declines and supply chain scale-up to reach thepoint where they can start to be deployed on the very large scale required. Since itwill take at least 25 years to replace all the chemical production capacity around theworld, including that associated with plants that will be built in the coming years
before alternative production pathways are available, CCUS – both for retrofits andnew plants – is going to have a very important part to play.
In the short to medium term (2020-40), technology performance improvements andswitching to alternative fuels provide a considerable portion of emissions savings in
the Sustainable Development Scenario, accounting for around 30% and 40%
respectively of reductions relative to the Stated Policies Scenario (Figure 4.6).
Incremental gains in technology performance are obtained as the energy intensity of

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process units improves from current levels towards the best attainable levels. Further

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

gains stem from higher levels of heat integration, updating ancillary equipment andutilities to the most efficient units available, smart process control and monitoring,and predictive maintenance, among other operational strategies.

Gt CO₂/yr

Global CO2 emissions reductions in the chemical sector by mitigation strategy
and current technology maturity category, 2019-70
2.0

2.0
STEPS

STEPS

1.5

1.5

1.0

1.0

0.5

0.5

0.0

2019

SDS
2030

Material efficiency
Electrification
Bioenergy
Other fuel shifts

2040

2050

2060

2070

0.0

2019

Technology performance
Hydrogen
Other renewables
CCUS

SDS
2030

2040

MatureDemonstration

2050

2060

2070

Early adoption
Prototype

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario. CCUS = carbon capture,utilisation and storage. Electrification here includes only direct electrification, primarily via conventional
technologies. See Box 2.6 in Chapter 2 for the definition of the maturity categories: large prototype, demonstration,
early adoption and mature.

CCUS and electrolytic hydrogen routes play the largest role in cumulative chemicals sector
emissions reductions in the Sustainable Development Scenario. Electrification and the useof bioenergy for low- to medium-temperature process heat play an important role
downstream.

A switch to alternative (less carbon-intensive) fuels and feedstocks and the adoptionof more selective processes both also contribute to reducing the energy intensity ofchemical production, reducing emissions directly (due to the lower carbon content
of the feedstock) and indirectly (due to the reduction in energy required to processit). In addition, wider access to highly selective feedstocks enables producers toadapt production to the slate of products demanded. For example, 1 t of ethane canyield around 0.8 t of high-value chemicals (nearly all ethylene), whereas naphtha
yields 0.6 t of a more balanced mix of ethylene, propylene and BTX aromatics, andcatalytic cracking of naphtha is scaled up and adopted more widely in the
Sustainable Development Scenario than in the Stated Policies Scenario (there iscurrently only one small plant operating in Korea). Ethanol dehydration to produce
bioethylene is also a more selective process that helps to cut emissions. While

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bioenergy makes only a small contribution to emissions reductions in the first half ofEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

the projection period, by 2070 it accounts for around 10% of energy consumption in
the chemical sector, five times its share in the Stated Policies Scenario.
Material efficiency gains that reduce virgin primary chemical production through therecycling and reuse of plastics also help to cut CO2 emissions. These strategies
account for almost 15% of cumulative emissions reductions in the Sustainable
Development Scenario relative to the Stated Policies Scenario.
In the longer term, the key technologies that bring further reductions in emissions
are the electrolytic production of hydrogen for making ammonia and methanol, andthe deployment of CCUS in conjunction with conventional process routes for all
primary chemicals. The latter includes so-called “blue hydrogen” – hydrogenproduced from fossil fuels in conjunction with CCUS.
By 2070, electricity makes up around a quarter of total chemical sector energy use
in the Sustainable Development Scenario, compared with 10% in 2019. This electricity
is used primarily for electrolysis in primary chemical production; it is also used toprovide low/medium temperature process heat when primary chemicals areconverted into intermediates and end-use chemical products. Electrolytic hydrogenproduction (see Chapter 2 and 3) in the chemical industry is not new: ammonia wasproduced via electrolysis (and other less efficient electrified methods) for decades
during the mid-20th century, but those plants were generally powered by low-costhydroelectric facilities with high capacity factors. Today there are no large-scaleammonia or methanol plants being fed by electrolytic hydrogen because electricity
prices tend to be too high to make the technology competitive with natural gas. There
are further challenges when it comes to utilising variable renewable electricity to
produce chemicals and other industrial materials. Industrial process equipment
tends to be limited in its ability to ramp up and down in response to variability in its
energy inputs. Buffer storage can be used to overcome this challenge, but it adds
significantly to the cost of production.
There is another technical constraint on the extent to which electrolytic hydrogencan be deployed in the short to medium term which relates to CO2 requirements. The
carbon in fossil fuels is currently the building block for most key chemical supply
chains. While methanol requires carbon either in the form of CO2 or CO, the ammonia
supply chain specifically requires CO2 for the production of urea. This CO2 could be
supplied from bioenergy or direct air capture, so that the process remains carbonneutral when the CO2 is later released downstream in other sectors (e.g. during
fertiliser application or when plastic products reach the end of their lives). However,this would significantly increase the cost of producing these chemicals in a scenario
in which limited biomass availability means that there are few point sources ofbiogenic CO2, and in which direct air capture CO2 supplied by low-emission sources

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remains costly. Despite these challenges, production of ammonia and methanol from

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industrieshydrogen increases considerably in the Sustainable Development scenario, with anaverage of eight plants being added per year from 2030 to 2070.

Mt/yr

Global primary chemicals production routes by energy feedstock in the
Sustainable Development Scenario, 2000-70
1 000
Refinery production
800
Electrolytic hydrogen-based
production

600

Biomass-based production
400
Fossil fuel-based production
with CCUS

2000Fossil fuel-based production(no CCUS)
2000

2010

2019

2030

2040

Historical

2050

2060

2070

SDS
IEA 2020. All rights reserved.

Notes: SDS = Sustainable Development Scenario. CCUS = carbon capture, utilisation and storage. Refinery
production refers to quantities of high-value chemicals sourced from refinery operations.

From just a small share of carbon capture and utilisation applied to ammonia for urea
production today, CCUS-equipped routes expand rapidly, accounting for 50% of chemicals
production by 2070, with hydrogen- and bioenergy-based routes accounting for a further
16% and 4% respectively.

The proportion of ammonia being converted to urea declines substantially in the
Sustainable Development Scenario due to substitution by nitrate-based fertilisers,
paving the way for greater use of electrolysis, which accounts for half of totalammonia production by 2070. Around one-third of methanol is currently used as fuel,either directly or through one of its downstream derivatives (e.g. methyl tert butyl
ether), but this use is expected to diminish relative to other uses in which the carbon
contained in the methanol becomes sequestered in a durable product. In methanol’scase, however, the carbon is still required for synthesis, so the use of fossil fuel-based
capacity equipped with CCUS is expected to remain the most competitive methodof production through to 2070.
In the Sustainable Development Scenario, CCUS applied to fossil fuel-based
chemical production increases to more than 400 Mt of chemicals production
in 2070, by which time around 85% of all production based on fossil fuels is equippedwith CCUS (excluding refinery-sourced chemicals) (Figure 4.7). This roll-out isequivalent to 19 chemical plants with CCUS being added on average each year fromPAGE | 191

IEA. All rights reserved.

2030 to 2070 and results in 14 GtGO2 captured cumulatively by 2070. The

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

concentrated CO2 streams in ammonia plants – where they are not being used tosynthesise urea – are already captured on a significant scale today, notably in
Canada, China and the United States. These emissions streams are currently used inenhanced oil recovery applications, but permanent storage projects are in theplanning phase (Table 4.1).
Several process routes for high-value chemical production are equipped with CCUS
across all regions towards the end of the projection period in the Sustainable
Development Scenario, mainly because a large amount of oil and natural gas is stillused in high-value chemical production and there are few alternative ways of
reducing emissions. The oil is mainly used for feedstock, but it leads to process
emissions, and the natural gas is mainly used to provide heat in steam crackers, whichleads to energy-related emissions: both types of emissions need to be captured.
High-value chemicals can be produced via electrolytic methanol and the methanolto-olefins/aromatics pathways, but the same constraint on the availability of biogenic
or direct air capture CO2 feedstock at a reasonable cost applies as it does formethanol generally, and that means it is cheaper to use conventional processes (e.g.
steam cracking) equipped with CCUS. For ammonia and methanol, unabated coalbased production in China is substituted by a mixture of CCUS-equipped capacity(both retrofit and new-build) and electrolytic hydrogen-based production.
The application of CCUS and electrolytic hydrogen varies over time and by region,
with the CO2 requirements of each chemical’s supply chain, rising electricity prices
and the cost of electrolysers of adequate size being key hurdles for the electrolyticroute in the medium term. CCUS provides a bridge to substantial shares ofelectrolytic hydrogen-based ammonia production in the long term for two main
reasons. The first is that it has already been commercially applied in the chemical
sector and thus can be used immediately to reduce emissions. The second is that it
has potential for early large-scale application, whereas electrolytic capacity relies on
widespread, large-scale integration of renewables into the electricity supply, or thedevelopment of large captive renewables projects with associated buffer storage
requirements, both of which may take time to develop.
Were all of the fossil fuel-based ammonia and methanol production equipped with
CCUS in 2070 to be substituted by electrolytic hydrogen, a further 1 250 terawatt
hours (TWh) of electricity and 300 gigawatts (GW) of electrolyser capacity would be
required, assuming a 50% average capacity factor. This is nearly 10% of the total
electrolyser deployment in 2070 in the Sustainable Development Scenario.
Electrolytic hydrogen plays a larger role over time in the chemical sector, particularly
in regions where the uptake of CCUS is limited for geological or political reasons, andwhere there is long-term access to low-cost, large-scale, captive variable renewables,

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for example in China.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Readiness and competitiveness of emerging
technologies
The technologies that contribute to emissions reductions in the Sustainable
Development Scenario are at varying stages of development (see Chapter 2 for across-sectoral discussion). In the chemical sector, CO2 capture and technologies
applied to conventional process routes are closest to widespread deployment,
though further development efforts will be needed to improve their operational
performance and lower their cost (Table 4.1). Maintaining momentum on pilot anddemonstrations projects currently underway, and ensuring that the current Covid-19
crisis does not divert attention from this, will be crucial to achieving long-termemission reductions in the chemical sector.
Several methods of CO2 capture have already been proven in the chemical sector.
Commercial production processes for ammonia and methanol require CO2 removal
to obtain the correct chemical composition. The CO2 that is captured must, however,be used or stored safely for the long term if emissions are to be reduced, and that ismuch less often the case today. It is common for CO2 captured during the productionof ammonia and methanol to be used to make urea or to boost methanol production
from natural gas, but CO2 storage is limited to a few current and proposed projects.
Current CCS projects include two commercial ammonia plants in the United States
which have been operational since 2003 and 2013 (each 0.7-0.8 MtCO2/yr) and one
methanol plant in China which has been operational since 2016 (0.1 MtCO2/yr): all
three projects store CO2 via enhanced oil recovery. Several more ammonia andmethanol plants with CCS are scheduled to come online in the next few years – one
in Canada, two in the United States and one in China. CCUS requires further scaling
up for high-value chemicals, having not yet been applied at the commercial scale(TRL 7). Two pilot plants have been built in China (50-100 ktCO2/yr), and there are

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plans to scale-up towards three larger-scale plants (0.4-0.5 MtCO2/yr).

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Status of the main emerging technologies in the chemical sector

Technology

Year available(importanceTRL
for net-zeroemissions)

Deployment status
Carbon capture, utilisation and storage

Chemicalabsorption

11

Ammonia: Multiple commercial plants in operation capturing CO2 for use(TRL 11 for CCU), e.g. Petronas Fertilizer plant in Malaysia since 1999 andToday
Indian Farmers Fertilizer Co-op since 2006 (MHI, 2020). Koch’s Enid
(Very high)Fertilizer plant (0.7 MtCO2/yr) in operation since 2003 using CO2 for EOR(TRL 9 for CCS) (MIT, 2016a).

9

Methanol: Commercial coal-based plants use capture as part of the
production process (TRL 11 for the capture technology). Projects
Todaysubsequently using the CO2 at a plant in Brazil operating since 1997 and one(Very high)in Bahrain operating since 2007 (TRL 9 for CCU) (ZeroCO2, 2016; GPIC,
2020). No projects currently storing the CO2 (TRL 5 for CCS).

7

High-value chemicals: The Sinopec Zhongyuan Carbon Capture Utilization
2025
and Storage Pilot Project at a petrochemical plant in Henan, China has been
(Very high) capturing 0.12 MtCO2/yr for EOR since 2015, with plans to expand to
0.5 MtCO2/yr (Global CCS Institute, 2018a).

9

Ammonia: Capture technology widely used commercially as part of the
production process (TRL 10-11 for capture); Coffeyville Resources plantcommissioned in 2013 at commercial scale (0.7-0.8 MtCO2/yr) in the UnitedStates, with CO2 used for EOR (TRL 9 for full CCS chain) (MIT, 2016b).
Today
Several further plants with CCS are scheduled to come online in the near
(Very high)term at the Nutrien Redwater plant in Canada, Wabash Valley Resources
plant in the United States, and the Sinopec Qilu Petchem facility in China(OGCI, 2019; Enhance Energy Inc., Wolf Carbon Solutions and North West
Redwater Partnership, 2019; Sharman, 2019).

7

Methanol: Lake Charles Methanol is developing an industrial scale plant in2023
the United States, with CO2 stored via EOR; construction aiming to start in(Very high)2020 (Lake Charles Methanol, 2020).

7

High-value chemicals: Yangchang Petroleum built a capture plant at the2025
Yulin coal-to-chemical plant (50 kilotonnes [kt] CO2/yr) and is currently(Very high) building a large-scale unit (0.36 MtCO2/yr) at a second plant in Jingbian;CO2 is stored via use for EOR (Global CCS Institute, 2016).

8

Today
Methanol: The Xinjiang Dunhua (0.1 MtCO2/yr) plant in China was(Very high) commissioned in 2016, with CO2 stored via EOR (Asiachem, 2018).

8

Ammonia: Two medium-sized demonstration projects are planned inAustralia with 60-160 MW electrolysers (Arena, 2019; Yara, 2020). Various
2025
other pilot projects are in development, along with longer-term plans for(Very high)larger scale projects, in other countries including Chile, Germany, Morocco,
the United Kingdom and the United States (IEA, 2019).

Physicalabsorption

Physical
adsorption

Hydrogen72025(High)

Methanol: Several pilot plants – George Olah pilot (4 kt/yr) in Icelandcommissioned in 2011, with plans to scale up to small demonstration scale(CRI, 2020); Mitsui Chemicals (0.1 kt/yr) in Japan since 2009 (Green Car
Congress, 2009); the Carbon2Chem project in Germany since 2018, usinghydrogen from electrolyser and CO2 from steel plant (Thyssenkrupp,
2020a). Two planned demonstration projects received funding from theGerman government in 2019 (BMWi, 2020).

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Electrolytichydrogen
supplied byvariablerenewables

Energy Technology Perspectives 2020

Technology

Year available(importanceTRL
for net-zeroemissions)

Methanolproduction
from methane
pyrolysis

62030(Medium)

Steam cracker
electrification(high-value
chemicals)

3--(Medium)

5--(Low)

8

Today
(Low)

5-9

Today
(Medium)

Biomass
gasification

Ethanoldehydrationfor ethylene

Lignin-based
BTX
production

Chapter 4. Technology needs for heavy industries

6

2030(Medium)

Deployment status
Direct electrification• This process to produce hydrogen and solid carbon by heating methane
using electricity is being tested by BASF in a pilot plant in Germany, aiming
for an industrial-scale plant by 2030 (BASF, 2019). While tests for methanol
production are fairly small scale, testing of methane pyrolysis outside of thechemical sector for hydrogen production puts the technology at TRL 6.
• Six petrochemical companies together launched the Cracker of the Future
Consortium in 2019 to explore using renewable electricity to run naphtha orgas steam crackers; the first steps involve screening technical options(Borealis, 2019).
• VoltaChem is also exploring options (VoltaChem, 2020).
Bioenergy
Ammonia: Techno-economic evaluation of producing ammonia via biomass
gasification completed, but suggest it is not yet economically viable (Brown,
2017; Andersson and Lundgren, 2014). Higher TRLs for other applications(for example biomethane, ethanol and methanol production), but not yet
applied to ammonia.
Methanol: A first commercial plant began in Canada in 2016, deriving
methanol from waste (Enerkem, 2016). Production is also taking place at the
BioMCN facility in the Netherlands (OCI, 2020). A pre-commercial
biomethanol project is also being considered in Sweden(VärmlandsMetanol, 2017).
• Several commercial plants using ethanol produced via fermentation are
currently in operation in multiple countries, two of the largest being the
Braskem plant (0.2 Mt/yr) in Brazil and the India Glycols plant (0.175 Mt/yr) in
India (ETSAP and IRENA, 2013; Mohsenzadeh, Zamani and Taherzadeh,2017).
• The spread of TRL corresponds to the ethanol feedstock: 9 forfermentation routes (first generation) and 5 for lignocellulosic biomass
gasification (second generation). Ethylene production process is technicallysimilar, but has not yet been linked to lignocellulosic feedstocks, which areless advanced and costlier.
• Successful pilot-scale test of BioBTX technology in the Netherlands(BioBTX, 2020).
• ALIGN project launched by eight partners from Belgium and Germany in2018 to upscale three lignin extraction processes, including through the
LignoValue pilot in Flanders (200 kg/day) (Biorizon, 2018; Vito, 2018).
Feedstock substitution

BTX
production
from methanol
Naphthacatalytic
cracking(high-value
chemicals)

7

2030
(Low)

• Three pilot plants were commissioned in 2013 and several commercialscale demonstration projects are under development, mainly in China(Nextant, 2015).

9

Today
(Low)

• A first commercial plant (40 kt/yr) is in operation at the KBR plant in Korea(Arne, 2017).

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Notes: TRL = technology readiness level. CCU = carbon capture and utilisation. CCS = carbon capture and storage.
EOR = enhanced oil recovery. For CO2 capture technologies, the specified TRL refers to the whole carbon capture
and utilisation or carbon capture and storage value chain applied within the chemicals sector (whichever is at ahigher TRL), rather than the TRL of the capture technology only.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Electrolytic hydrogen has been used in the past for ammonia and methanol
production, with the hydrogen supplied from hydropower, but most of these projects
have been supplanted by natural gas. Development is currently underway to produce
ammonia and methanol instead from hydrogen supplied by variable renewables, withcommercial projects at substantial scale expected within a few years (currently at
TRL 7-8). Two medium-sized demonstration projects are planned for ammonia fromelectrolytic hydrogen produced using variable renewables in Australia (60-160 MW),and there are other such projects as well in countries such as Chile, Germany,
Morocco, the United Kingdom and the United States. Pilot projects for methanol havebeen operating in Iceland since 2011 (4 kt/yr), Japan since 2009 (0.1 kt/yr) andGermany since 2018, and larger projects are now planned for Iceland and Germany.
Several routes using bioenergy are also under development. Ethanol dehydration
technology for producing ethylene is also well-advanced, with a number of small
plants already operating in countries such as Brazil and India using fermentation
processes (TRL 9). Ethylene has not yet been produced from ethanol derived fromlignocellulosic biomass gasification: while the ethylene production process is similar,
lignocellulosic ethanol is costlier to produce and the technology is less advanced.
The gasification of biomass and waste is meanwhile being applied to methanol
production in Canada and the Netherlands (TRL 8), and has been considered intechno-economic studies for ammonia production. The production of BTX (a subcategory of high-value chemicals) from lignin is also being piloted (TRL 6) in Belgium,
Germany and the Netherlands. Despite these various innovation efforts, however,bioenergy is still expected to play a relatively minor role in chemical production in
the Sustainable Development Scenario, given the limited availability of sustainablebiomass and the competition for this biomass from other sectors.
Various other innovative processes are also being explored. Direct electrification of
steam crackers for high-value chemicals production is in the early stages ofdevelopment (TRL 3), with technology options being explored by several companies,
but prototypes have yet to be developed. While its low TRL suggests it may havedifficulty competing with more advanced options, it could play an important role if
the technology develops rapidly. Methanol production through methane pyrolysis,
whereby methane is heated using electricity to produce hydrogen gas and solidcarbon, is also being piloted in Germany. Other innovative options like BTX
production from methanol and naphtha catalytic cracking provide potential for someemissions reductions relative to conventional processes, but the reductions are notlarge enough for them to play a key role in the Sustainable Development Scenario.
Numerous initiatives are underway to develop new recycling techniques for plastics. 7
Many of today’s plastic recycling techniques result in “down cycling”, in which
recycled plastics are used to produce a lower value material. New techniques could
produce recycled plastics of comparable quality and functionality as their virgincounterparts. Several processes are in the demonstration and early adoption phases

For further information on specific projects, see the IEA’s ETP Clean Energy Technology Guide at:www.iea.org/articles/etp-clean-energy-technology-guide.

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7

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries(TRL 7-9). Key processes under development can be categorised as follows: chemical
depolymerisation, which uses chemicals to break down polymers into monomers;solvent dissolution, which uses solvents to purify and separate out a virgin-quality
polymer; pyrolysis, which uses high temperatures to convert mixed plastic wastes
into liquid hydrocarbons; and hydrothermal upgrading, which uses water under
supercritical conditions to break down polymers. Once sufficiently developed, theseprocesses will provide the opportunity to recycle a broader range of waste material
and produce higher quality substitutes for virgin polymers.
The rate of long-term deployment of CCUS and electrolytic hydrogen technology in
the Sustainable Development Scenario varies markedly across regions according todifferences in natural gas prices, the availability of low-cost electricity, and the public
acceptability and technical feasibility of CCUS. Once CO2 feedstock sourcing isalleviated in the longer term (i.e. once atmospheric or biogenic CO2 is available fromvarious carbon removal and bioenergy transformation processes), the key
determinant in the choice of technology for ammonia and methanol production ineach region is the cost of natural gas relative to that of electricity.

USD/t

Levelised cost of ammonia and methanol production under varying
techno-economic assumptions
MethanolAmmonia

1 000

750

500

250

0

0

20

40

60

80

100

Electricity price: USD/MWhNatural gas, low (USD 2/MBtu)
Natural gas with CCUS, low (USD 2/MBtu)
Electrolysis, low (USD 285/kWe, 74% LHV)

0

20

40

60
80
100
Electricity price: USD/MWhNatural gas, high (USD 10/MBtu)
Natural gas with CCUS, high (USD 10/MBtu)
Electrolysis, high (USD 1 067/kWe, 64% LHV)IEA 2020. All rights reserved.
Notes: CCUS = carbon capture, utilisation and storage. MBtu = million British thermal units. kWe = kilowatt electrical
capacity. LHV = lower heating value. For the CCUS-equipped routes, both concentrated (process CO2) and diluted(energy-related CO2) streams are captured, with a 90% capture rate. CO2 transport and storage costs of
USD 20/tCO2 captured are included, as are engineering, procurement and construction costs. An 8% discount rate,
25-year lifetime and 95% capacity factor are used for all equipment.

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At electricity prices of USD 10-60/MWh for ammonia and USD 5-70/MWh for methanol,electrolytic hydrogen can compete with conventional production routes equipped with
CCUS, with the specific break even costs depending on the price of natural gas.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Installing facilities to capture CO2 increases significantly the overall levelised cost of
production – by around 20-40% in the case of near-100% capture of bothconcentrated and diluted streams of CO2, based on today’s costs. Nonetheless, inmost regions, CCUS is still more cost-competitive than electrolytic hydrogen for
producing ammonia and methanol in most instances. In regions with low natural gas
costs (e.g. the Middle East), electricity costs below USD 20-25/MWh (megawatthours) would be required to make electrolytic hydrogen competitive with CCUS. For
regions with higher natural gas prices, hydrogen can compete at somewhat higher
electricity costs (below USD 60-70/MWh) (Figure 4.8).
In a context in which low-carbon electricity is in high demand across the energy
system, such low prices for non-variable grid electricity may be difficult to achieve inmost regions. Captive variable renewables (non-grid connected, sized and run for aparticular application) could make the electrolytic route more competitive in a wider
range of locations, if the cost of electricity generation regularly falls below
USD 25/MWh. However, these conditions may only prevail in regions with abundant
renewable resources, which may lie at some distance from centres of chemical
production or demand, and in such a case, the cost of transporting the ammonia ormethanol to those centres would need to be factored in. The variability of renewables
also depresses the average capacity factor of the system, with the need for hydrogen
buffer storage increasing the share of capital costs in the total levelised cost of
production.

Steel production
Sector overview and demand outlook
Iron and steel production – a central pillar of the world economy – is a highly energyintensive industrial sector. Worldwide, the sector accounted for 22% of industrial
energy use and 8% of total final energy use in 2019. Energy typically makes up 1025% of total production costs. Coal is currently the main source of that energy: it
accounts for about 75% of the sector’s energy use, with electricity and natural gas
responsible for most of the rest in almost equal measure.
The CO2 intensity of steel production is high, with each tonne of crude steel resulting
in around 1.4 t of direct CO2 emissions on average, or 2.0 t when including indirectemissions from imported electricity and heat generation. 8 Iron and steel production
requires lime fluxes and graphite (graphite for anodes in electric furnaces), which

Direct emissions include process emissions and energy-related emissions from fossil fuel combustion andtransformation, including for the onsite provision of heat. Indirect emissions include both onsite electricity generationfrom off-gases and electricity/heat imports from the grid, with the latter calculated based on the average regional
CO2 emission intensity of power generation.

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8

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

together with ferroalloy production contribute 11% of the sector’s emissions in theform of process emissions. Globally, the sector’s direct CO2 emissions amounted to
2.6 Gt in 2019, or 7% of total energy sector emissions and 28% of industrial emissions.
When indirect emissions from electricity and heat generation are included (includingfrom electricity and heat which is generated onsite from steel off-gases and thatwhich is imported from the power and fuel transformation sector), total emissions
amount to around 3.6 Gt.
The principal inputs to steelmaking today are iron ore, energy (mainly coal, natural
gas and electricity), lime fluxes and steel scrap. Iron ore and scrap are used to provide
the metallic charge, with scrap having a significantly higher metallic concentration(>95%) than iron ore (typically in the range of 50-70%). Metallic input of 1.05-1.2 t isrequired per tonne of steel. Energy inputs are used to provide heat to melt themetallic input, and in the case of iron ore, to chemically reduce it (remove oxygen)from its naturally occurring states found in the earth’s crust. 9 “Primary” steel
production refers to that which uses iron ore as its main source of metallic input,
whereas “secondary” production is that based on scrap. However, in many instances,
this distinction can become less clear-cut, as scrap is often used in primary
production (typically up to 15-25%), and iron is commonly used in electric furnaces,
which are the main units for secondary production. Consequently, when describing
the situation in a given region or portfolio, it is instructive to quote the share of scrap
in total metallic inputs alongside the shares of primary and secondary production.
Once scrap is collected and sorted, the secondary production route mainly requires
electricity to melt the steel in an electric furnace, often along with a small amount of
natural gas or coal to form a protective slag foam. Highly conductive graphite
electrodes are also consumed during the process of heating the scrap metal totemperatures of up to 1 800°C. Electric arc furnaces are the most commonly usedfurnace for scrap-based production, but typically less energy-efficient induction
furnaces are also used, particularly in China and India. Producing 1 t of steel via thescrap-based route requires around 2 GJ of final energy per tonne of crude steel.
The primary production pathway is more complex than the secondary route,comprising multiple different process arrangements. The most common primary
production pathway is the blast furnace-basic oxygen furnace (BF-BOF) route, which
accounts for around 70% of global steel production and around 90% of primary
production. Coke and iron ore are both fed into the blast furnace from the top along;simultaneously, hot air and pulverised coal or natural gas (and in an experimental sitein Germany also hydrogen) are injected through pipes in the side of the lower part of
the furnace called tuyeres. This results in a counter-cyclical process of descending

Key iron ore constituents include: magnetite, Fe3O4, 72.4% iron content; haematite, Fe2O3, 69.9% iron content;
goethite, FeO(OH), 62.9% iron content; limonite, FeO(OH)·n(H2O), 55% iron content; siderite, FeCO3, 48.2% ironcontent.

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9

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

iron ore met by rising reducing gases. Lime fluxes and other additives are also usedin the blast furnace in varying quantities to control the level of impurities and thetemperature. The blast furnace produces molten iron (“hot metal”) at temperatures
up to 1 400-1 500°C. The hot metal is then fed to the BOF, often in conjunction withsome scrap, where oxygen is injected to lower the carbon content fromapproximately 4-5% to the required level of carbon for the steel grade produced(typically around 0.25%).

Box 4.2

Iron and Steel Technology Roadmap

For more than a decade, the IEA’s Technology Roadmap series has provided in-depth
analyses of key technologies and sectors within the energy system. The publications
have provided guidance to both the public and private sectors, with a focus onevidence-based recommendations about the priorities and steps needed toaccelerate technology innovation and deployment, while placing an emphasis on
broad stakeholder engagement. The Roadmap series already includes titles covering
energy-intensive industrial sectors, including the cement and chemical industries,and steel is next.
The IEA’s forthcoming Iron and Steel Technology Roadmap will explore thetechnologies and strategies necessary for the iron and steel sector to become moresustainable, providing an in-depth sectoral analysis that complements the material inthis chapter. The Energy Technology Perspectives 2020 analysis presented here will
form the broader energy system context for the Iron and Steel Technology Roadmap
publication. The Roadmap will look at both the challenges and the opportunities
facing the sector and analyse the key technologies and processes that could bringabout substantial CO2 emissions reductions in the sector. It will also assess thesector’s potential for resource efficiency, including increased reuse, recycling anddemand reduction.
Realising a more sustainable trajectory for the sector will require co-ordinated efforts
by all the main stakeholders, including steel producers, governments, financial
partners and the research community, and the publication will contain an outline ofpriority actions, policies and milestones for these stakeholders to accelerate thesustainable transition of the iron and steel sector.

The other main method of primary steel production is the direct reduced iron-electricarc furnace (DRI-EAF) route. The principal differences between this route and the

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BF-BOF route are:

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries•

The type of iron ore that is typically used – high-quality DRI pellets in the firstroute, whereas BF-BOF has the flexibility to use iron ore with more impurities,
and a combination of pellets, fines, sinter and lump ore.

•

The state of the material when it is reduced – the iron ore is reduced in a solidstate in the DRI furnace (as opposed to the liquid phase in the blast furnace),
before being melted in the EAF, often in conjunction with some scrap.

•

The main reduction agents – they are carbon and carbon monoxide in the
BF-BOF route, while hydrogen and carbon monoxide play more balanced rolesin the DRI-EAF pathway.

•

The balance of energy inputs – DRI-EAF facilities today mainly use natural gas
to generate the reducing syngas (carbon monoxide and hydrogen), but canalso use coal, while BF-BOF producers mainly use coke and coal, with natural
gas injection being less common.

The main BF-BOF and EAF (both DRI-EAF and scrap-based EAF) routes combined
account for 98% of global steel production. Two other process units are also in use
today, but see very limited penetration. Smelting reduction is an alternative class ofprocesses for ironmaking that facilitates the use of iron ore fines directly (rather than
agglomerated pellets and sinter) and avoids the use of a coke oven or coking coal.
Several designs are currently commercially available or under development, but theprocess is yet to see widespread adoption within the industry. The open-hearth
furnace is an outdated alternative to the BOF, and has largely been phased out given
its inferior energy performance.
The iron and steel sector faces several hurdles in lowering its emissions over the
coming decades:A high share of coal in the sector’s energy inputs: Primary production relies
heavily on coal (and in some cases natural gas) and coke made from metallurgicalcoal, the key role of which is to serve as a reducing agent in the production ofmolten iron while providing process heat. Although innovations are underway inhydrogen- and electricity-based production, and in production using biomass fora portion of fuel, switching away from fossil fuels entirely will be technically andeconomically challenging.
Long-lived capital assets: The sector makes use of complex, capital-intensive
process equipment with long economic lifetimes: a blast furnace is normally built
to last at least 25 years, and many remain in operation for more than 40 years. Of
the 2 300 Mt of annual steelmaking capacity today, 1 500 Mt is for steel
production via the BF-BOF route. It is expected that more than 90% of the existing
BF-BOF steelmaking capacity could be still operating in 2030 and around 35% in
2050. In certain instances, the existing stock could be retrofitted with carbon
capture technology, and this could provide a more economical option thanreplacing it with a completely new processes, given that the basic surrounding
infrastructure of the original plant could then be maintained. However, current

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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

CCUS retrofitting is no more technologically mature for the bulk of existing
capacity than some alternative production routes.



Trade considerations and low margins: The international steel market is highlycommoditised and competitive, making the economics of steel production very
sensitive to local energy costs. For that reason, the industry has already invested
heavily in lowering the energy intensity of steel production in recent decades,leaving relatively limited room for further energy intensity improvements withina given process route. Furthermore, competitive markets pose a challenge for
adopting breakthrough technologies, since they are likely to significantly
increase production costs and undermine competitiveness, especially for early
adopters.

The use of steel is expected to increase in the coming decades, particularly forbuildings and infrastructure. Many technologies that will be needed for a net-zeroemissions energy system, including rail infrastructure, wind turbines, CCUS
equipment and nuclear power plants, make use of large amounts of steel (Figure 4.9).
In other words, steel needs energy and the energy system needs steel. In 2019, an
average of around 240 kg of steel was produced for every person on the planet; in
the Stated Policies Scenario, this figure rises to 260 kg by 2050, and to 270 kg by
2070.

Gt/yr

3.0
2.5

29%
Material efficiency

2.0

Gt/yr

Global steel production by region and end use, 2019-70
3.0

1.5

1.0

1.0

0.5

0.5
2019

Middle East
India
STEPS

2030

2040

2050

European Union
China
SDS

2060

Other

2.0

1.5

0.0

Losses2.5

Mechanical andelectrical equipment
Vehicles

0.0

2070

United States
Rest of world

STEPS
2019

2070

SDS

Infrastructure Transport and other
Infrastructure Power, renewable
Infrastructure Power, conventional
Buildings

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario. Other includes metal goods,
domestic appliances and food packaging. Losses is equivalent to scrap generated in the semi-manufacturing andmanufacturing stages.

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The contraction of steel production in China is expected to be offset by rapid growth inIndia. In the Sustainable Development Scenario, material efficiency strategies help reduce
global demand for steel by 29% by 2070.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

The Covid-19 pandemic has had a marked impact on steel production in 2020. We
project that overall sectoral output will be down by around 5%, relative to 2019,
although this estimate is highly sensitive to government policies on lockdowns in theremainder of 2020. This decline is broadly in line with the global trend for GDP, which
is currently projected to fall 4.9% in 2020 (IMF, 2020). Not all regions see declining
output. China, which accounts for just over half of global steel production, actually
produced more steel during the first half of 2020 than it did during the corresponding
period in 2019. While some of this material will have stocked up inventories, domestic
demand has remained robust, and this accounts for around 90% of its production. In
other countries, the outlook for the industry is more bearish, with output in the firsthalf of 2020 in the United States and Europe down 18% and 17% respectively.
Material efficiency offers one way to reduce demand for steel – and therefore theneed for energy to make it – while continuing to provide the same steel-based
products and services that people demand. There remains considerable potential for
reducing the need to produce new steel through light-weighting of products that are
made of steel, reducing losses in the form of scrap in the production process, reusing
steel components in products that reach the end of their life (such as steel beams inold buildings) and delaying the retirement of steel-based products and buildings(Allwood and Cullen, 2012). In the Sustainable Development Scenario, global steel
demand grows only very gradually to 2060, after which it enters a gentle decline,
and it is 29% lower in 2070 than in the Stated Policies Scenario, thanks to theadoption of a suite of material efficiency strategies. In both scenarios, thegeographical distribution of steel production also changes. By 2070, China produces
30% of global steel production and India 20%, whereas today China accounts formore than half of global output, followed by the European Union with 9% and India
with 6%.

Technology pathways towards net-zero emissions
In the Sustainable Development Scenario, the average direct emissions intensity ofcrude steel production declines to 10% of today’s value, falling to 0.13 tCO2/t by
2070, driven primarily by deployment of innovative technologies and increased
secondary production (Figure 4.10). Since overall production levels are relatively
similar in 2070 to the levels seen today in this scenario (they are kept from rising by
the adoption of material efficiency strategies), this emission intensity reduction
translates into a similar reduction in the total emissions of the sector, with emissions
falling to around 0.3 GtCO2 in 2070.
A variety of measures is required to make the Sustainable Development Scenario a
reality (Figure 4.11). The most important measures in the short to medium term

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include technology performance, material efficiency and increases in the share ofEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

secondary production, with the latter two being inter-dependent and continuing toplay a significant role throughout the projection period.
Global iron and steel sector direct CO2 emissions and energy consumption in
the Sustainable Development Scenario, 2019-70

1.8

2.5

1.5

2.0

1.2

1.5

0.9

1.0

0.6

0.5

0.3

0.0

2019
Emitted CO₂
CO₂ intensity

2030

0.0
2050
2070
Captured CO₂
CO₂ intensity (STEPS)

1 000

20

800

16

600

12

400

8

200

4

0

2019
Bioenergy
Electricity
Oil
For hydrogen
Energy intensity

2030

2050
2070
Imported heat
Gas
Coal

GJ/t

3.0

Mtoe/yr

Energy consumptiont CO₂/t

Gt CO₂/yr

CO₂ emissions

0

Energy intensity (STEPS)IEA 2020. All rights reserved.

Note: STEPS = Stated Policies Scenario.

Iron and steel emissions fall by around 90% by 2070 in the Sustainable Development
Scenario, thanks to widespread deployment of CCUS and hydrogen-based steelmaking.

Gains in technology performance lower the quantity of energy required for
production in conventional process routes, though the contribution that this makes
has an upper limit dictated by technical constraints. It may be possible to reduce thecurrent average energy requirement to produce 1 t of crude steel via the BF-BOF
route by around 20%, with the adoption of the best available technologies as well as
operational improvements. 10 Specific measures include, for example, the applicationof coke dry quenching to coke ovens (which facilitates the recovery of latent heatand results in a higher quality coke, reducing the quantity required for blast furnaces)
and top pressure recovery turbines (which facilitate the generation of electricity fromblast furnace gas and consequently require less electricity from the grid). Most of thispotential is exploited by around 2050 in the Sustainable Development Scenario, withtechnology performance improvements accounting for 19% of the annual emissions
reductions in 2040 relative to the Stated Policies Scenario, but this technology

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10
In addition to the technologies used, energy intensity of steel production is also influenced by energy inputs, rawmaterial inputs and operational conditions.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

performance gap disappears by 2070 because optimal technology performance isalso achieved in the Stated Policies Scenario by then.

Gt CO₂/yr

Global CO2 emissions reductions in the iron and steel sector by mitigation
strategy and current technology maturity category, 2019-70
3.0

3.0
STEPS

2.5
2.0

2.0

1.5

1.5

1.0

1.0

0.5
SDS

0.0

2019

2030

Material efficiency
Electrification
Bioenergy
CCUS

2040

2050

2060

2070

STEPS

2.5

0.5
SDS

0.0

Technology performance
Hydrogen
Other fuel shifts

2019

2030

MatureDemonstration

2040

2050

2060

2070

Early adoption
Prototype

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario. CCUS = carbon capture,utilisation and storage. Electrification here includes only direct electrification, primarily via conventional
technologies, including shifts towards secondary production and electrification of ancillary process equipment likepre-heaters and boilers. Hydrogen here refers specifically to electrolytic hydrogen, while so-called blue hydrogen(via natural gas-based direct reduced iron with CCUS) is included under CCUS. See Box 2.6 in Chapter 2 for thedefinition of the maturity categories: large prototype, demonstration, early adoption and mature.

“Mature” and “early adoption” technologies are key to achieving early emissions
reductions, while the long-term trajectory relies more heavily on “demonstration” and“prototype” technologies.

Material efficiency plays an important role by reducing the overall amount of steel
that needs to be produced, accounting for a further 42% of the emissions reductions
relative to the Stated Policies Scenario in 2040, and 25% in 2070. The lower share ofemissions reductions attributable to material efficiency in 2070 is a result of otherstrategies such as innovative process routes playing a much larger role in the latter
half of the scenario, even as savings from material efficiency also continue to grow.
The key material efficiency strategies that are adopted in the buildings andconstruction sectors are explored in more detail in the final section of this chapter.
Increasing the share of scrap-based production is another important way of reducing
the average emissions intensity of steel production. In the Stated Policies Scenario,
an increase in scrap-based production relative to today is expected to occur: thisreflects increasing scrap availability as steel-containing goods reach the end of theirlives, and it results in scrap accounting for about half of total metallic inputs in 2070,
compared with about one-third today (Figure 4.12). In the Sustainable Development

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Scenario, lower levels of steel production in the decades leading up to 2070 reduceEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

scrap availability, but scrap-based inputs still reach half of metallic input in 2070
(lower total metallic input is needed in the Sustainable Development Scenario due tolower demand for steel). Targeted efforts help ensure that scrap availability is
maximised: these include increases in scrap collection and improved sorting
methods, particularly for reinforcing steel (rebar) and packaging, which currently
have the lowest collection rates. The need for recycling measures is particularly
important in emerging economies, where large amounts of steel-containing products
will begin to reach the end of their lifetimes in the coming years. Also important ispreventing copper contamination to ensure all grades (quality levels) can beproduced from scrap. As copper is increasingly combined with steel in end-use
applications in the Sustainable Development Scenario (e.g. motors in electricvehicles), the need for effective processes and methods to separate the two metals
will become increasingly important, as will product design for recyclability.
Increases in scrap-based EAF production, as well as DRI-EAF, increase the share ofelectricity used in the Sustainable Development Scenario. Electrification of ancillaryequipment and processes, such pre-heaters and boilers used for hot air provision andfor rolling and casting, also contributes to direct electrification and thereby
emissions reductions. Electrification contributes 9% of cumulative emission
reductions, with shifts from coal to natural gas providing another 7%. Bioenergy plays
a role too, with small amounts being blended into existing process units, andcontinued small-scale steel production in regions with access to low-cost sources ofcharcoal (e.g. Brazil) and other forms of biomass. The use of bioenergy contributes
7% of cumulative reductions.
In the longer term, the burden of emissions reductions shifts to the uptake ofinnovative processes for primary (ore-based) production, comprising technologies
that are at earlier stages of their development. The four key technologies in thiscategory are commercial natural gas-based DRI equipped with CCUS, in whichhydrogen and carbon monoxide are the key reducing agents (gas-based DRI with
CCUS); 100% electrolytic hydrogen-based direct reduction (100% H2 DRI); oxygenrich smelting reduction in conjunction with CCUS (innovative smelting reduction with
CCUS); and conventional blast furnaces fitted with CCUS (innovative blast furnaces
with CCUS).
By 2070, CCUS and electrolytic hydrogen together account for 43% of emissions
reductions in the Sustainable Development Scenario, relative to the Stated Policies
Scenario. As in the chemical sector, hydrogen generated using fossil fuels andequipped with CCUS (sometimes referred to as blue hydrogen) offers a relatively
inexpensive way of reducing emissions from certain processes in the steel sector,
especially for natural gas-based DRI-EAF production: a CCUS-equipped plant isalready operating in employing this method of production in the United Arab

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Emirates.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Global steel production by route and iron production by technology in the
Sustainable Development Scenario, 1990-2070
Steel production

Mt/yr

100%
80%

Iron production

1 500
1 250
1 000

60%

750

40%

500

20%

250
0

0%

STEPS
2019

Scrap

Ore

SDS

2070
Electric furnace

1990

2000

2010

2019

2030

2040

2050

2060

2070

Historical

SDS

100% H₂ DRI
Commercial DRI
Commercial SR
Commercial BF

Commercial DRI with CCUS
Innovative SR with CCUS
Innovative BF with CCUS

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Development Scenario. CCUS = carbon capture,utilisation and storage. DRI = direct reduced iron. SR = smelting reduction. BF = blast furnace. Commercial BF
includes traditional coal, gas and charcoal-based blast furnaces, with and without top pressure recovery turbines,
without CCUS. Innovative BF with CCUS includes blast furnaces with process gas hydrogen enrichment and CO2
removal for use and storage (for example, as being developed by the COURSE50, IGAR and 3D projects), including
CCUS retrofits to existing blast furnaces and those newly installed over the coming decade. Commercial SR refers
to smelting reduction without CCUS (COREX and FINEX). Innovative SR with CCUS includes application of CCUS toexisting smelting reduction concepts (for example COREX and FINEX) and novel smelting reduction concepts with
CCUS (for example, as being developed by the HIsarna project). Commercial DRI includes gas and coal-based DRI
without CCUS, including that which has a portion of blended electrolytic hydrogen. Commercial DRI with CCUS
includes gas and coal-based DRI with CCUS. 100% H2 DRI comprises fully electrolytic hydrogen-based DRI (forexample, as being developed by the HYBRIT project and ArcelorMittal in Hamburg). For further details on examples
of projects developing these technologies, see Table 4.2.

While incremental gains in energy and material efficiency contribute the most to lowering
iron and steel sector CO2 emissions in the short to medium term, innovative technologies
are the main drivers in the long term.

Electrolytic hydrogen plays a critical role in reducing emissions from primary steel
production in the Sustainable Development Scenario in a variety of ways. It can be
blended into existing process units, as is happening in initial pilot projects in Europe.
Without any major changes to existing equipment, it can be used in the BF-BOF routeas a substitute for up to 30% of the process energy requirements, which are currently
met by coal; this type of arrangement is being explored in Germany. And it can besimilarly used in the DRI-EAF route, where substitution of up to 30% of natural gas byelectrolytic hydrogen can be achieved in existing furnaces. These blending efforts
are perhaps best seen as a transition strategy to bridge the gap before deploymentof the 100% H2 DRI route, which starts to replace substantial amounts of existing
capacity by the mid-2030s. Together these hydrogen-based technologies result in
30 Mt of hydrogen production via electrolysis by 2070 in the Sustainable

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Development Scenario. The H2 DRI route alone accounts for 35% of primary steel

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

production by 2070, requiring 12 new plants to be built on average each year from2030 to 2070. The additional electricity demand to produce this hydrogen is
1 400 TWh – roughly equivalent to the total electricity demand of the whole iron andsteel sector today – offsetting around 140 Mtoe of fossil fuels.
While electrolytic hydrogen-based routes seek to avoid CO2 arising during
production, the commercial DRI, innovative smelting reduction and innovative blast
furnace routes – all equipped with CCUS – seek to manage the CO2 that is generated
by concentrating, capturing and storing it, or by using it for other products. Theseroutes are deployed extensively in the Sustainable Development Scenario, whichsees existing blast furnaces and DRI units retrofitted with CCUS, and CCUS
incorporated into new-build facilities by initial design. Together they account for 55%
of global primary steel production by 2070. Their roll-out is equivalent to 14 steel
plants with CCUS being added each year from 2030 to 2070, amounting to over
15 GtCO2 captured cumulatively by 2070. While there are no advanced blast furnace
CCUS retrofit concepts ready for large-scale deployment very early in the projection
period, their development is critical for the capture of emissions from both recently
installed or refurbished equipment with good energy performance (e.g. in Europe
and Japan) and those units that will be built in growth regions over the coming
decade (e.g. in India). Most of the captured CO2 in the period to 2040 is from existing
plants, but by 2070 it stems primarily from newly built innovative plant designs.
Were CCUS deployment to be limited by some external factor – for instance a lack ofpublic acceptance or sluggish technology and infrastructure development – theindustry would likely need to rely more heavily on hydrogen-based production tomaintain the same trajectory of emissions reductions. If all CCUS-equipped
innovative smelting reduction and blast furnace installations in 2070 in the
Sustainable Development Scenario were to be replaced by hydrogen-based
production, the impacts on hydrogen and electricity generation infrastructure would
be considerable. The additional demand for electrolytic hydrogen would require afurther 250 GW of electrolyser capacity, and around 1 100 TWh of electricity,
assuming a 50% average capacity factor for the electrolyser. This increase isequivalent to 30% of the total electricity demand of the iron and steel sector in 2070
in the Sustainable Development Scenario.
Energy use in the iron and steel sector varies among regions in the Sustainable
Development Scenario, primarily reflecting differences in energy costs and thecorresponding technologies that are deployed (see discussion and Figure 4.14
below). In the Middle East and the United States, the availability of cheap gas leads
to widespread deployment of DRI with CCUS. In China, cheap coal favours innovative
smelting reduction technologies in the medium term, while the H2 DRI route plays anequally important role in the longer term and could potentially use low-cost

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dedicated renewables as the source of the electricity. In India, rapidly increasingEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

demand for steel means that large amounts of new production capacity come online
before innovative technologies are fully ready. These young plants are thenretrofitted with CCUS in parallel with the roll-out of innovative smelting reduction,with H2 DRI deployment following later. In European countries, where demand andlocal production are projected to remain flat or undergo a slight decline, emissions
are reduced largely by increasing the share of secondary production and by atransition to hydrogen-based production in the longer term.

Readiness and competitiveness of emerging
technologies
New technologies that have yet to be commercialised play an increasingly importantrole in the Sustainable Development Scenario, particularly in replacing existingproduction capacity over the second half of the projection period. A wide array oftechnologies is under development (Table 4.2), with the timing of their introduction
and the rate at which they are deployed in the Sustainable Development Scenario
varying according to their TRL, their economic competitiveness and supporting
conditions. The acceleration of their commercialisation hinges on a substantial
increase in RD&D efforts and supportive policy action (see Chapter 7), support that is
critical now more than ever given the current challenges posed to the steel sector by
the current Covid-19 crisis. It also hinges on the availability of the required inputs(renewable electricity and hydrogen) and infrastructure (CO2 pipelines and storage
facilities, grids, hydrogen networks).
Substantial innovation efforts are being directed towards lowering emissions fromconventional blast furnace production. A number of projects at the pilot or large
prototype stage (TRL 5) aim to deal with process gases by reforming gases intohydrogen for reuse in the blast furnace and CO2 for later use or storage: they include
the COURSE50 project in Japan and the IGAR, 3D, ROGESA and STEPWISE projects
in Europe. If technologies that apply CCS to blast furnaces are successfullycommercialised, they could enable retrofits and thus play an important role inaddressing emissions from plants already built or to be built in the next decade. Some
projects are specifically focused on converting steel off-gases to fuels or chemicals;
their contribution to emissions savings is dependent on various factors, including
what product they displace and what happens to the embodied CO2 when the fuel isused or the product reaches end of life. While CCU could be useful for some
applications and for helping develop capture technologies, in the longer term CCS
will also be needed. Efforts are also underway to replace a portion of injected coal in

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blast furnaces with torrefied biomass (TRL 7) or hydrogen (TRL 6).

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Status of main emerging technologies in the iron and steel sector
Year available(importanceTechnology TRL
for net-zeroemissions)

Deployment status

Carbon capture, utilisation and storage• Japan’s COURSE 50 project has completed the first experimental testing
Blast
5
2030
(Very high) phase; the second phase aims to reach full commercial scale by 2030; it canfurnace: offbe deployed with CCUS (JISF, 2011).
gas• Top gas recycling using vacuum pressure swing absorption proven in anhydrogenexperimental blast furnace under ULCOS (EC, 2014). Concepts being further
enrichment
developed at the ArcelorMittal site in Dunkirk, France. IGAR project testing
and/or CO2
reforming with plasma torches, with a lab-scale pilot successfully completed
removal forin 2017 and an industrial-scale demonstration likely to be completed by 2025use or
27. The “3D” project launched in mid-2019 by a consortium of 11 stakeholders
storagewill test amine-based carbon capture for blast furnace process gases, aiming
for pilot scale (4 kt/yr CO2) by 2021 and industrial scale (1 Mt/yr CO2) by 2025.
Final arrangement would feed plasma torches with recovered CO2 fromprocess gases. (ArcelorMittal, 2019a; 2019b; 2017).
• The ROGESA pilot is testing H2-rich coke oven gas in a blast furnace inGermany, with implementation in two blast furnaces expected as early as2020 (Saarstahl, 2019).
• The STEPWISE project is piloting a technology in Sweden to decarbonise
blast furnace gas for use in power production (14 t/day CO2 removal)(STEPWISE, 2020).
8

Blast
furnace:Converting
off-gases tochemicals

7

DRI: Natural
gas-basedwith CO2
capture9

Smelting
reduction:with CCUS

7• The first commercial plant began in 2018 in China by Lanza Tech, ShougangGroup and TangMing; it produced 30 million litres of ethanol for sale in its
first year of operation (Lanzatech, 2018; 2019). A second large-scale plant isunder construction in Ghent, Belgium under the Steelanol/Carbalyst project
by ArcelorMittal and Lanzatech, to be completed by early 2021 and with acapacity of 80 million litres of ethanol (ArcelorMittal, 2019a).
• The FReSMe project, by a consortium of European partners, is piloting steel
off-gas conversion to methanol (1 t/day); it builds on research from the
STEPWISE project on CO2 capture and the MefCO2 project on producing
methanol from CO2 (FReSMe, 2020; EC, 2019).
• The Carbon2Chem pilot plant in Germany initiated by thyssenkrupp in 20182025
(Medium) has produced ammonia and methanol from steel off-gases; it is aiming for anindustrial-scale plant by 2025 (thyssenkrupp, 2020a; 2020b).
• Carbon4PUR, a project by a consortium of 11 partners across Europe, ispiloting converting steel off-gases to polyurethane foams and coatings(20 t/yr) (Carbon4Pur, 2020).
• Operating plant since 2016 in Abu Dhabi with 0.8 Mt/yr of CO2 capture
Today(Very high) capacity, with CO2 used for enhanced oil recovery at nearby oilfield (ADNOC,
2017).
• Two plants of Ternium in Mexico operating since 2008 capturing 5% ofemissions (0.15-0.20 Mt/yr combined) for use in the beverage industry, withplanning underway to upscale capture capacity (Ternium, 2018).
• Commercial Finmet plant since 1998 at Orinoco Iron, Venezuela with aminebased CO2 separation achieving close to 100% CO2 concentrations as anintegral part of the process, but captured CO2 is not currently used or stored.*• Developed by the ULCOS consortium, the HIsarna pilot plant is currently
2028(Very high) operating at a Tata Steel plant in Ijmuiden, Netherlands (60 kt steel produced,
CCS not yet implemented) (Tata Steel, 2017); a demonstration scale (0.5
Mt/yr) plant (TRL8) is expected in 2023-27 in India and an industrial scale (1.5
Mt/yr) plant with CCS (TRL 9) is targeted in the Netherlands in 2027-33.
• Initial testing of amine-based CO2 scrubbing in FINEX plant (Primetals,2020).
Today(Medium)

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Blast
furnace:Converting
off-gases tofuels

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Year available(importanceTechnology TRL
for net-zeroemissions)

Deployment status

Hydrogen
Blast
furnace:Electrolytic
H2 blending
DRI: Natural
gas-basedwith highlevels ofelectrolytic
H2 blending

7

2025(Medium)

7

DRI: Basedsolely onelectrolytic
H2

5

Smelting
reduction:
H2 plasma
reduction

4• In the 1990s, Tenova tested 90% hydrogen use in Mexico (scale of 9kt/yr DRI
production) (Tenova, 2018).
• Salzgitter steelworks is undertaking MW-scale electrolyser demonstration inGermany and conducting a feasibility study for integrating a hydrogen DRI
plant into the existing site, as part of the SALCOS project (SALCOS, 2019).
• thyssenkrupp is planning to build commercial DRI plants incorporatinghydrogen by the mid-2020s (thyssenkrupp, 2020b).
• Pilot plant began operation in August 2020 in Sweden as part of the HYBRIT
2030(Very high) project; targeting a 1 Mt/yr demo plant by 2025 (HYBRIT, 2020).
• Pilot plant under design also in Hamburg lead by ArcelorMittal, to be built by
2030 (ArcelorMittal, 2019c).
• Thyssenkrupp is also planning to transition towards eventually full hydrogen
reduction (thyssenkrupp, 2020b).
• SuSteel research project at voestalpine plant in Austria; currently in the--(Medium) process of upscaling a 100 g reactor to 50 kg batch operation, aiming forcommissioning in 2020 (K1MET, 2018; Primetals, 2019).
• Flash Ironmaking Technology under development at the University of Utah,
with a mini pilot reactor commissioned (Sohn et al., 2017).
• In early 2020, Ovako and Linde completed a successful trial of using2025
hydrogen to heat steel before rolling in Sweden (Ovako, 2020).
(High)• CELSA (a recycled steel producer), Statkraft and Mo industrial park in
Norway signed an agreement in mid-2020 to produce hydrogen to replacefossil fuels used in steel production (Statkraft, 2020).

Since 2019, thyssenkrupp has been testing the use of hydrogen in a blast
furnace in Germany, replacing a portion of injected coal (thyssenkrupp, 2019).

2030(High)

Ancillary5
processes:
H2 for hightemperature
heat
Direct electrification
Electrolysis:
Lowtemperaturealkaline

4--(Medium)

Siderwin project building on the ULCOWIN process (electrowinning),
previously developed by the ULCOS programme; working towards developing
a pilot-scale plant by the end of 2020 (Siderwin, 2019).

Electrolysis:Hightemperaturemoltenoxide

4--(Medium)• ULCOS proposed a concept called MIDEIO during its 2004-12 work
programme (Wiencke et al., 2018).
• Research at Massachusetts Institute of Technology led to the founding of
Boston Metal, which commissioned the first prototype cell in 2014 (more than
1 t of metal produced); now aiming for pilot-scale size plant (Boston Metal,2019).

7

2025(Medium)

The Torero partnership project is testing the use of bio-coal (torrefied wastewood) to partially substitute coal in ArcelorMittal’s plant in Ghent, Belgium;the large-scale demonstration is expected to be operational by the end of2020 (ArcelorMittal, 2019a).

10

Today
(Medium)

Charcoal is currently being used commercially to substitute for a portion of
the coal used in blast furnaces, primarily in Brazil. Some development
continues to further optimise charcoal production to improve its productspecifications for steel production.

Bioenergy
Blastfurnace:
Torrefiedbiomass
Blast
furnace:
Charcoal* Personal communication with Christian Boehm (2020), Primetals.

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Notes: DRI = direct reduced iron. CCUS = carbon capture, utilisation and storage. For CO2 capture technologies, thespecified technology readiness level (TRL) refers to the whole carbon capture and utilisation or carbon capture andstorage value chain applied within the iron and steel sector (whichever is at a higher TRL), rather than the TRL of thecapture technology only.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Other R&D projects are focused on reducing emissions by adapting technologies
other than the blast furnace. CCS was applied commercially in steelmaking for the
first time with the commissioning of a DRI plant with CCS in 2016 in Abu Dhabi, which
stores the captured CO2 via enhanced oil recovery. Oxygen-rich smelting reduction
also presents a promising option for applying carbon capture, given that the offgases have a very low nitrogen content (compared to a relatively high nitrogencontent in typical blast furnace off-gases), which makes separation considerably
more cost-efficient. The HIsarna project is developing a process of this kind that
could lead to a 90% reduction in CO2 emissions compared to conventional blast
furnace production. A pilot plant is already operational in the Netherlands (TRL 7),
although not yet connected to storage, and there are plans to build a demonstrationscale plant in India as well as a commercial-scale plant in the Netherlands during theperiod 2023-33.
Initial testing is also underway to integrate full carbon capture and storage into thealready commercial COREX and FINEX smelting reduction technologies. These
technologies currently incorporate physical CO2 scrubbing using pressure swing
adsorption in order to isolate higher ratios of CO and H2 for recirculation to thesmelting reduction process or for use in a subsequent direct reduction plant.
Upgrading to an amine-based chemical CO2 scrubbing capture system would lead toCO2 concentrations in the tail gas that are suitable for CO2 use or storage.
A number of efforts are also being made to integrate electrolytic hydrogen into DRI
production, either through blending to replace a portion of natural gas, or more
ambitiously through 100% hydrogen-based reduction. If zero-emission electricity
were to be used to produce the hydrogen, the latter would lead to virtuallyzero-emission primary steel production. It is already possible to use electrolytichydrogen to displace up to 30% of natural gas in commercial DRI furnaces, but blends
involving more than 30% displacement require further development (TRL 7) and theuse of 100% electrolytic hydrogen is still at the pilot stage (TRL 5). There is, however,a good deal of piloting and developmental work going on. The SALCOS project inGermany is demonstrating an electrolyser at the MW-scale alongside a feasibility
study for integrating a hydrogen DRI plant into its existing site, while thyssenkrupp isplanning to build commercial DRI plants incorporating hydrogen by the mid-2020s.
In Sweden, the HYBRIT project began operation of a pilot plant in August 2020 using
100% electrolytic hydrogen from non-fossil fuel sources, and a demonstration plantis being targeted by 2025. A separate project led by ArcelorMittal is also aiming for apilot plant with full hydrogen production in Germany by 2030.
Technologies currently at demonstration phase (i.e. TRL of 7 or more) start to be
deployed within a decade in the Sustainable Development Scenario, while thosecurrently in prototype phase (i.e. TRL of 5 to 6) are commercially deployed from the

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mid-2030s, with some initial ramp-up taking place earlier (Figure 4.11). Technologies

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

with a TRL of 4 and below, including direct iron ore electrolysis and hydrogen plasma
reduction, are not factored into the Sustainable Development Scenario, given thelack of availability of reliable techno-economic information, but we nonethelessexplore the potential of some of these early-stage technologies to deliver further
emissions reductions across the energy system in Chapter 6.

USD/t

Levelised cost of steel production for selected production routes when theyreach commercialisation
1 000

Commercial
scale expected
in 2035

800

Cost range across regions
Commercial

600

Commercial,
1st plant in 2016

Commercial

CO₂ transport and storage

Commercial
scale expected in2028

Raw materials
Fuel

400

Fixed OPEX
CAPEX

200

0

BF-BOF

Gas-based
DRI-EAF

Gas-based
DRI-EAF
with CCUS

Innovative
SR-BOF
with CCUS

100% H₂
DRI-EAFIEA 2020. All rights reserved.
Notes: BF-BOF = blast furnace-basic oxygen furnace. DRI-EAF = direct reduced iron-electric arc furnace. CCUS =carbon capture, utilisation and storage. SR-BOF = smelting reduction-basic oxygen furnace. OPEX = operating
expenditures. CAPEX = capital expenditures. Presented costs consider regional variation. Fuel costs: natural gas =USD 2-10/MBtu (million British thermal units), thermal coal = USD 35-80/tce (tonne coal equivalent), coking coal =USD 75-155/tce and electricity = USD 30-90/MWh. CO2 streams are captured with a 90% capture rate. CO2 transportand storage = USD 20/tCO2 captured. CAPEX comprises process equipment costs (including air separation units,
carbon capture equipment and electrolysers where applicable) plus engineering, procurement and construction
costs. An 8% discount rate, 25-year lifetime and a 95% capacity factor are used for all equipment. Electrolyser
CAPEX = USD 452/kWe (kilowatt electrical capacity) and OPEX = USD 7/kWe. No regulatory cost on emitting CO2 is
imposed in this analysis.

Innovative technologies for steel production are generally around 10-50% more expensive
than their commercially available counterparts, with the gas-based DRI with CCUS and H2
DRI being highly sensitive to the cost of natural gas and electricity respectively.

Cost will be crucial to determining which of the emerging innovative technologies
for producing low-CO2 steel are ultimately deployed. The innovative process routes
considered within this analysis generally cost around 10-50% more than theircommercially available counterparts within a given regional context, a cost increasesignificantly exceeding profit margins from steel production today (Figure 4.13). The
future costs of CAPEX, OPEX, energy and raw material costs are all highly uncertain
for all the emerging innovation technologies under consideration, so ranges arenecessary to explore the key sensitivities. Among the emerging low-emissions

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technologies, the innovative smelting reduction route at present seems likely to haveEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

the lowest overall production cost in most regions on the basis of the typical rangesof energy prices seen today, and the lowest estimated capital and operating costs at
commercial scale.

USD/t

Levelised cost of steel production for selected production pathways at varying
gas, electricity and CO2 prices
Gas price

800

Electricity price

800

800

600

600

600

400

400

400

200

200
0

2

4

6

8
10
USD/MBtu

0

12

24

36

BF-BOF
Commercial gas-based DRI-EAF with CCUS
100% H₂ DRI-EAF low

CO2 price

200
0
30
60
90
48
60
USD/MWh
Commercial gas-based DRI-EAF
Innovative SR-BOF with CCUS
100% H₂ DRI-EAF high120 150
USD/t CO2

IEA 2020. All rights reserved.
Notes: BF-BOF = blast furnace-basic oxygen furnace. DRI-EAF = direct reduced iron-electric arc furnace. CCUS =carbon capture, utilisation and storage. SR-BOF = smelting reduction-basic oxygen furnace. Fuel costs: natural gas =USD 6/MBtu, thermal coal = USD 70/tce, coking coal = USD 140/tce and electricity = USD 45/MWh. CO2 streams arecaptured with a 90% capture rate. CO2 transport and storage = USD 20/tCO2 captured. Includes engineering,procurement and construction costs. “H2 DRI-EAF low” corresponds to an electrolyser cost of USD 285/kWe andlower heating value efficiency of 74%. “H2 DRI-EAF high” corresponds to an electrolyser cost of USD 1 067/kWe andlower heating value efficiency of 64%. Left- and right-hand side graphs use electricity costs of USD 60/MWh for “H2
DRI-EAF high” and USD 30/MWh for “H2 DRI-EAF low”. An 8% discount rate, 25-year lifetime and a 95% capacity
factor are used for all equipment.

At a gas price of USD 6/MBtu, the H2 DRI route becomes competitive with its gas-based
counterpart equipped with CCUS at electricity prices below USD 35/MWh.

The economics of the gas-based DRI with CCUS and H2 DRI processes are particularly
sensitive to the cost of gas and electricity respectively. In the absence of sufficiently
high CO2 prices, switching to hydrogen produced via electrolysis for DRI-EAF steel
production would increase overall costs, making it less competitive withconventional gas-based DRI-EAF and BF-BOF routes, except where electricity prices
are very low. To compete in the long term with its natural gas-based counterpart
equipped with CCUS, the H2 DRI would need reliable low-carbon electricity prices
below USD 35/MWh, based on estimates of likely capital and operating costs at thetime of commercialisation and a gas price of USD 6/MBtu (Figure 4.14). These prices
may be achievable in certain regions with ample low-cost renewable resources, but
those regions may not be well-endowed with reserves of iron ore and other input
materials. Furthermore, there is an ongoing need to demonstrate the flexible
operation of relevant near-zero emissions pathways for steelmaking (e.g. the H2 DRI
route) and other bulk materials, in combination with variable renewable electricity

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and buffer storage systems where applicable. Existing industrial hubs are likely toEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

contribute significant inertia in the determination of where future production will takeplace. Ports, railways and other trade infrastructure take decades to develop and are
not usually viable propositions on the basis of a single project.
While the additional cost of producing steel via innovative processes is considerable
on a “per tonne of primary steel production” basis relative to conventional routes,
this needs to be put into context. There is much uncertainty about future costs for anumber of reasons, one of which is that the future prices of steel, iron ore and scrap
are impossible to predict through to 2070. We estimate, however, that the averageincrease in the cost of steel production by 2070 in the Sustainable Development
Scenario is around 15% relative to today, with the size of the uplift in the cost of
primary production being partially cushioned by the much larger share of secondary
production, which is substantially less energy-intensive than primary production andtherefore less expensive. At the consumer end, it is worth noting that only a small
fraction of the cost of most end-use goods is attributable to the cost of the steel
embedded in them. We estimate that the construction cost of an average family
home (costing USD 300 000) would be 0.4% higher, while an average mid-sized car(costing USD 25 000) would increase in cost by around 0.2%.

Cement production
Sector overview and demand outlook
The production of cement – the binding agent for making concrete 11 and a primary
input to the construction industry – currently emits large amounts of CO2, both fromthe combustion of fossil fuels used to generate process heat and from the chemical
reaction that forms an integral part of the production process, the latter of which are
known as process emissions. Concrete is the second-most consumed substance on
Earth after water, with half a tonne of cement being used each year for every personon the planet, so reducing emissions from cement production could make asignificant contribution to global efforts to tackle climate change. About half of all
the cement used in the world goes to construction of residential and non-residentialbuildings, while the rest is used in making various types of infrastructure, including
roads, railways and energy facilities.
Making cement requires large amounts of energy for process heat to produce alumpy substance known as clinker – the key active ingredient in cement – from a
mixture of limestone and clay in a kiln, which is then mixed with gypsum andsometimes other elements like slag, fly ash and limestone, and crushed and ground

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11
Concrete is made by mixing roughly 10-15% cement in terms of mass (depending on the end-use application) in
conjunction with aggregates such as sand, gravel and crushed stone, as well as water and chemical additives.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

into a fine powder. Around 2.8 GJ (0.07 toe) of energy are needed to produce 1 t ofcement on average, with energy typically accounting for between about 15% and
40% of total cement production costs. The production of 1 t of cement emits
0.5-0.6 tCO2 on average. In 2019, the sector consumed 280 Mtoe of energy,
accounting for 7% of total industrial energy use, and emitted 2.4 GtCO2, or around
26% of total industrial emissions (about 7% of world energy sector emissions,
including process emissions). Of those emissions, around two-thirds are process
emissions.
Abating emissions from cement is difficult and costly for several reasons:Process emissions: Direct emissions from cement production occur through achemical process called calcination, which occurs when limestone, which ismade of calcium carbonate (CaCO3), is heated, causing it to break down into
calcium oxide (CaO) and CO2. In practice, these emissions can only be reducedby capturing and ultimately storing the CO2, by reducing the need for clinker by
blending it with other cementitious materials (e.g. fly ash and blast furnace slag),or by using alternatives to limestone to produce binding agents that generateless CO2. These technologies are generally either at a pre-commercial stage ofdevelopment or are restricted by building regulations in many countries in thecase of the latter two options.



Fossil fuel-based process: The clinker production process is highly energyintensive and tends to rely heavily on coal, which is generally the cheapest sourceof energy. While alternative fuels like bioenergy and waste are an option,
sustainable biomass availability is limited and faces competition from otherend uses, while the CO2 footprint of non-renewable waste is very variable: insome cases, the emissions from such waste are higher than those of coal. Given
the high temperatures, the large quantities of energy needed and the technicalrequirements of kilns, switching to direct electrification, hydrogen or direct
heating from concentrated solar power would be technically challenging andvery costly. Work on some of these switching options is underway, but it is at an
early stage of development.
Regional constraints: Cement plants are highly dispersed geographically, andare often located close to sources of raw materials and to centres of cement
demand. They normally make use of locally available energy resources, which
may mean limited access to cost-effective, low-carbon fuels (e.g. biomass).
Furthermore, the limited regional availability of alternative constituents of
cement may constrain the extent to which particular cement plants can lower
emissions through reducing their clinker-to-cement ratio. While cement is lessinternationally traded than chemicals and steel, some trade of clinker is possible,
and this means that large cost increases could well undermine competitiveness.

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Energy Technology Perspectives 2020



Chapter 4. Technology needs for heavy industries

Long-lived capital assets: The fact that cement factories last a long time hinders
the pace at which they can be replaced with new ones using lower emission
technologies without early retirement. Many of these facilities have been added
to the existing stock in the past decade or so, and further additional capacity isalso expected to be added in developing regions in the coming decade. Retrofits
of existing capacity with CCS technologies are therefore likely necessary (seeChapter 1), perhaps together with conversion of some assets to enable them toprocess alternative lower emission raw materials like calcined clay.

Cement and concrete naturally reabsorb CO2 from the air throughout the lifecycle ofthe materials and building components of which they become a part. This process,known as recarbonation, occurs at very slow rates for in-use buildings andinfrastructure, and at somewhat quicker rates for waste arising from cement kilns andduring the construction and demolition of concrete structures. The amount of CO2
absorbed can vary considerably depending on factors such as surface area and theintensity of atmospheric exposure. Studies suggest that about 10-30% of theemissions generated during the production of cement are typically reabsorbed
within the subsequent 50-100 years of the material’s lifecycle (Andersson et al., 2019;
Cao et al., 2020). While these impacts on lifecycle CO2 emissions are non-trivial, theycannot substitute the reductions in emissions required in the production phase – thefocus of this energy system analysis.
Cement is indispensable for the construction of all types of buildings andinfrastructure, including facilities in the energy sector, so demand for it is linked toeconomic activity and a region’s stage of economic development. Despite thedecline in demand of around 4% expected in 2020 due to the Covid-19 crisis, cement
demand is projected to continue rising in the longer term, especially in emerging
economies that have growing populations and infrastructure needs. In the moreadvanced developing economies that have already industrialised to a large degree,
such as China, construction activity and, therefore, cement demand has alreadystabilised and is beginning to decline, as the huge wave of construction over recent
years recedes. In advanced economies, cement is used largely for maintaining
existing infrastructure and replacing it when it becomes non-repairable, so demand

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is much lower.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

5

26%
Material efficiency

4

Gt/yr

Gt/yr

Global cement production by region and end use, 2019-70
5
4

3

3

2

2

1

1

0

2019

2030

Middle East
India
STEPS

2040

2050

2060

European Union
China
SDS

2070

LossesInfrastructure Transport andotherInfrastructure Power
Buildings Commercial

0

United States
Rest of world

SDS

STEPS
2019

Buildings Residential

2070
IEA 2020. All rights reserved.

Notes: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario. Losses represent onsite
construction waste and other losses throughout the value chain.

Material efficiency gains have the potential to reduce global cement demand substantially,
notably in China and the advanced economies.

As with other industrial sectors, there is considerable potential for material efficiency
gains to curb the demand for cement and the need for energy to make it, whileproviding the same level of services from buildings and infrastructure. In the
Sustainable Development Scenario, material efficiency measures cut global cement
demand in 2070 by one-quarter compared with the Stated Policies Scenario (Figure4.15). The main measures that yield these gains are higher renovation rates to extend
the lifetime of existing buildings, lower levels of waste on construction sites and the
optimisation of building designs to reduce the materials needed to construct thesame floor area. In the Sustainable Development Scenario, global demand
progressively falls to around 3.5 Gt by 2070 – about 15% lower than in 2019 – with asizeable contraction in China and advanced economies more than offsetting growth
in India and other developing economies. A more detailed discussion of material
efficiency measures that could curb cement (and steel) demand in the buildings
construction sector can be found below in the section “Bulk materials forconstruction”.

Technology pathways towards net-zero emissions
In the Sustainable Development Scenario, global CO2 emissions from cement
production fall by more than 90%, from 2.4 Gt in 2019 to just 0.2 Gt in 2070
(Figure 4.16). The size of this reduction reflects a large role from CO2 capture andstorage, through which over 80% of the total CO2 generated in 2070 is captured. In
the Stated Policies Scenario, on the other hand, emissions are relatively constant over

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the modelling period, increasing slightly to a peak of 2.6 Gt in 2040 due to growth inEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

production before declining with a small drop in production to 2.3 Gt in 2070 – a level
12 times higher than in the Sustainable Development Scenario.
There is no silver bullet for decarbonising the cement sector: a range of technologicalsolutions are needed to achieve the emissions trajectory of the Sustainable
Development Scenario, and their relative contributions vary over time according totheir maturity and relative costs. Reductions in demand levels facilitated by the
adoption of material efficiency strategies contribute a quarter of cumulative
reductions to 2070 (Figure 4.17). Many measures that reduce demand are alreadymature from a technology standpoint, and they play a particularly large role over the
next decade, accounting for about 40% of reductions to 2030. Over time, demand
reduction strategies that are currently at earlier stages of development also play anincreasingly important role.
Global cement sector direct CO2 emissions and energy consumption in the
Sustainable Development Scenario, 2019-70

250

2.5

0.4

200

2.0

1.5

0.3

150

1.5

1.0

0.2

100

1.0

0.5

0.1

50

0.5

2.5

0.5

2.0

0.0

2019

Emitted CO₂
CO₂ intensity

2030

2050

2070

Mtoe/yr3.0

0.6

t CO₂/t

Gt CO₂/yr

300

3.0

0

0.0

Captured CO₂
CO₂ intensity (STEPS)

2019
2030
Non-renewable waste
Imported heat
Gas
Coal
Energy intensity

2050
2070
Bioenergy
Electricity
Oil

GJ/t

Energy consumption

CO₂ emissions

0.0

Energy intensity (STEPS)IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. Energy intensity here includes all energy used per tonne of cement,
including additional energy needs for some strategies deployed in the Sustainable Development Scenario –chemical absorption carbon capture and storage, calcined clay use and alternative fuel use. This explains theincreasing overall energy intensity by 2070.

CO2 emissions from the cement sector fall by around 90% between 2019 and 2070 in the
Sustainable Development Scenario, largely due to material efficiency and the large-scale
deployment of CCUS.

In addition to the cement demand reduction measures discussed above, about 35%
of material efficiency-related emissions reductions and 14% of total cumulativeemissions reductions for cement come from a fall in the clinker-to-cement ratio. This
strategy reduces the need for emissions-intensive clinker through the addition of

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other less energy-intensive materials to blended cement mixes. In 2019, clinker made

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

up about 71% of cement on average worldwide, with blast furnace slag and fly ash
from coal plants accounting for a significant proportion of the rest. The supply ofthese materials falls significantly in the Sustainable Development Scenario, which
increases reliance on alternatives like limestone and calcined clay (Figure 4.18). While
the availability of these materials is constrained in some parts of the world, global
reserves of raw clay are more than adequate to meet projected demand.

Gt CO₂/yr

Global CO2 emissions reductions in the cement sector by mitigation strategy
and current technology maturity category, 2019-70
3.0

3.0
2.5

STEPS

2.5

2.0

2.0

1.5

1.5

1.0

1.0

0.5
0.0

2019

STEPS

0.5
SDS
2030

2040

Cement avoided demand
Technology performance
Bioenergy
CCUS

2050

2060

2070

0.0

Clinker-to-cement ratio
Hydrogen
Other fuel shifts

SDS

2019

2030

MatureDemonstration

2040

2050

2060

2070

Early adoption
Prototype

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario. CCUS = carbon capture,utilisation and storage. Cement avoided demand and clinker-to-cement ratio both fall within the broader category ofmaterial efficiency. The thermal energy used by chemical absorption CCUS deployment is subtracted from the
CCUS contribution, and thus does not impact the efficiency contribution. See Box 2.6 in Chapter 2 for the definitionof the maturity categories: large prototype, demonstration, early adoption and mature.

Material efficiency and CCUS together play the leading role in reducing cement sector
emissions in the Sustainable Development Scenario. Over 60% of cumulative reductions
come from technologies that are not yet commercially available.

Incremental gains in technology performance play a minor role, as most of thepotential has been exploited in recent decades, mainly due to the phase-out in mostregions of wet kilns and traditional vertical kilns. 12 The most efficient kilncommercially available today is the dry kiln with a precalciner and a staged cyclone
preheater. 13 It has already been deployed extensively, including in China and India,
which are the largest cement-producing countries. Some CO2 reduction measures
deployed in the Sustainable Development Scenario require more energy inputs,
partially offsetting the energy savings from switching to modern kilns and resulting

Wet kilns involve adding water to the slurry fed into the kiln and thus require more energy for drying. Vertical kilns
are less efficient in heating the slurry.
13
The precalciner and staged cyclone preheater are units that heat the raw materials before they enter the kiln.

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12

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

in a higher energy intensity compared to the Stated Policies Scenario. For example,
using calcined clay requires considerable energy for processing even after recent
energy efficient improvements, while using bioenergy and waste leads to somewhat
higher energy needs for pre-treatment to ensure uniform composition and optimum
combustion, as well as to minimise the content of potentially problematic
substances. In addition to thermal energy intensity improvements, switching to more
efficient grinding technologies, such as from ball mills to high-pressure grinding rollsand vertical roller mills for the grinding process, leads to a reduction in electricity
intensity, while efficiency is also improved by onsite power generation using excess
heat recovered from the kiln. However, much of the remaining potential fortechnology performance improvements is already exploited in the Stated Policies
Scenario, leading to minimal additional gains in the Sustainable Development
Scenario.
Fuel switching – mainly from coal to natural gas, hydrogen, biomass and renewablewaste (including waste wood, sawdust and sewage sludge) – makes a relatively minor
contribution to emissions reductions in the Sustainable Development Scenario,
accounting for about 1% of cumulative reductions. Both renewable waste and nonrenewable waste (including tyres, waste oil, plastics and municipal solid waste) are in
use today. Use of non-renewable waste, which can have CO2 intensities higher thancoal in some cases, is reduced by 35% by 2070. Rigorous emissions accounting of
mixed renewable and non-renewable wastes needs to be undertaken to determine inwhat instances its use leads to emission reductions.
Use of hydrogen plays a very small role via the blending of hydrogen into natural gas
grids. Larger scale use of hydrogen faces considerable technical challenges andwould require big changes to equipment and practices. The challenges include thehigh combustion velocity and non-luminous flame of hydrogen, which makes it
difficult to monitor optically; the comparatively lower radiation heat transfer, which
requires other media to be introduced into the fuel stream, necessitating redesign ofburners to deal with the new media; the corrosiveness of hydrogen when in contact
with some metals, necessitating new coatings inside kilns; and the intermittency ofhydrogen sourced from variable renewables, which leads to a requirement forstorage facilities (IEA, 2019). Given these challenges, as well as the early TRL and
expected high costs of hydrogen use in kilns, hydrogen is likely to play a muchsmaller role in the cement sector than in the chemicals and steel sectors. Directelectrification is also at too early a stage of development to play a role in cement in
the Sustainable Development Scenario.
The leading source of emissions reductions is CCUS, which accounts for 60% of
cumulative reductions to 2070. While it begins to play a role in the mid-2020s as themost advanced capture types become commercially available, its role increases

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particularly after 2030 as additional capture types are commercialised and costs fall

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

with economies of scale and technological learning. The projected pace of
deployment is equivalent to an average of 41 new 2 Mt annual capacity cement plants(existing or new-build) around the world being equipped with CO2 capture
equipment every year – or nearly one every week – over the period 2030-70. By 2070,
80% of clinker production is equipped with CCUS, and a total of over 40 GtCO2 iscaptured cumulatively. The extent to which different CO2 capture technologies areused changes over time as their performance and cost change with scaling up andlearning.

5

1.0

4

0.8

3

0.6

2

0.4

1

0.2

0

2000 2010 2019 2030 2040 2050 2060 2070

Historical
Alternative cement constituentsClinker - Dry kiln
Clinker-to-cement ratio

Clinker-to-cement ratio

Gt/yr

Global cement production by technology and material composition in the
Sustainable Development Scenario, 2000-70

0.0

SDS
Clinker - Dry kiln with CCUS
Clinker - Wet kiln

100%

Calcined clay
Fly ash80%

Blast furnaceand steel slag
Naturalpozzolana
Limestone

60%
40%

Gypsum20%
0%Clinker
2019

2070

IEA 2020. All rights reserved.
Notes: SDS = Sustainable Development Scenario. CCUS = carbon capture, utilisation and storage. While historicallyvertical shaft kilns were considerably less efficient than dry kilns, recent technology improvements have brought
their efficiency towards the level of dry kilns (Tsinghua University, 2008). Thus, inefficient shaft kilns are groupedwith wet kilns while efficient shaft kilns are grouped with dry kilns. Wet kilns include semi-wet/semi-dry.

Adoption of CCUS technologies in the cement sector, along with a reduction in theclinker-to-cement ratio, is needed in the long term to achieve the Sustainable Development
Scenario emissions trajectory.

The deployment of CO2-reduction technologies in the cement industry is broadly
similar across regions in the Sustainable Development Scenario. Nonetheless, there
are some differences in the contribution made by reductions in the clinker-to-cement
ratio as its potential is highly dependent on the local availability of the materials thatare capable of replacing clinker, as well as on the required properties of the final
concrete product, which are determined by local standards and end-use
applications. The potential also varies according to the extent to which it has alreadybeen exploited. For example, China already has a comparatively low clinker-tocement ratio (0.65 in 2019), and based on raw material availability and current
building standards, its ratio is expected to remain relatively low (it could fall further

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with technological advances). Brazil is expected to remain a leader in calcined clay

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

production, having produced about 2 Mt per year since the 1970s. Regions like Italy
that have good availability of natural pozzolana – an alternative cement constituent –rely more on that to lower cement-related emissions. Regions that move to concrete
standards that are not prescriptive and do not require pre-specified amounts ofclinker could facilitate increased uptake of blended cements without compromisingsafety and performance.

Readiness and competitiveness of emerging
technologies
Most of the technologies that are deployed in the cement industry over the near termin the Sustainable Development Scenario are already mature or on the verge of largescale commercialisation. Achieving the required emissions reductions in the longer
term hinges on efforts over the next decade to develop technologies that are still
being piloted or are at demonstration stage today, and then to use them to replaceor retrofit the overwhelming bulk of existing production capacity over the second
half of the modelling period. Near-term enhanced support for projects underway may
be needed to ensure that the Covid-19 crisis does not hinder progress towards longterm goals. The emerging technology categories with the highest TRLs (above 6) thatoffer potential for deep emissions reductions include CCUS and alternative cement
constituents and binding materials (Table 4.3).
Among CO2 capture technologies, chemical absorption and calcium looping are theclosest to large-scale commercialisation (TRL 7). The first commercial chemical
absorption facility opened in 2014 in Texas, although with only partial capture rates
of about 15% of emissions. A pilot plant with a much higher capture rate began
operation in Wuhu, China in 2018. A large-scale demonstration plant is expected tostart operations in 2023 or 2024. Following successful demonstration of calcium
looping technologies at pilot scale, a pre-commercial demonstration plant is
expected to begin operation in Italy soon, and a commercial-scale plant is expected
in Chinese Taipei by 2025. Other capture technologies – including oxy-fuelling, direct
separation and novel physical adsorption approaches – are also in the testing phase.
The relative contribution of these capture technologies will depend on their success

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in reaching commercialisation and achieving cost reductions.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Status of main emerging technologies in the cement sector

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Year available(importanceTechnology TRL
Deployment status
for net-zeroemissions)
Carbon capture, utilisation and storage
Chemical• Commercial facility opened in 2014 at Capitol Aggregates plant in Texas,
absorption
Todaycapturing 15% of emissions (75 ktCO2/yr) for use in materials like baking
8(partial capture(Medium) soda, bleach and hydrochloric acid (Capitol Aggregates, 2020; Global
rates, <20%)
Cement, 2014).
Chemical• Successful industrial-scale feasibility study in 2016 at the Norcem plant
absorption (fullin Norway; operations of full-scale plant (0.4 MtCO2/yr) expected in
capture rates)
2023/24 (Norcem, 2020).
• Industrial-scale feasibility study being conducted at the Lehigh Cement
2024
7plant in Canada (0.6 MtCO2/yr) (Lehigh Hanson, 2019; Voorhis, 2019).
(Very high)• Dalmia Cement will undertake large-scale demonstration (0.5 MtCO2/yr)
at plant in India (Perilli, 2019).
• Anhui Conch pilot plant (50 ktCO2/yr) began operation in 2018 in China(Global CCS Institute, 2018b).
Calcium• Testing at Heping Plant by Taiwan Cement since 2017, pilot-scale trials
looping
successfully completed; aiming for commercial scale (0.45 MtCO2/yr) by
2025 (Taiwan Cement, 2020; Cemnet, 2019).
2025
7• Pilot-scale demonstration completed by CEMCAP in Germany; pre(Very high)commercial retrofit demonstration (1.3 Mt cement/yr) in Italy by
CLEANKER project expected to begin in 2020 (Buzzi Unicem, 2019;
Hornberger, Sporal and Scheffknecht, 2017; Jordal, 2018).
Oxy-fuel• Successful pilot in kiln precalciner in Denmark (Davison, 2014).
• The European Cement Research Association aims to develop oxy-fueling;
however, its two proposed pilot plants appear to be on hold due to2030
6funding challenges (ECRA, 2020a).
(High)• A joint research initiative by four European cement producers, formed inlate 2019, is planning to build a semi-industrial oxy-fuel test facility inGermany (Beumelburg, 2019).
Novel physical• The CO2MENT project in Canada launched trials in 2019 of Svante’s CO2
adsorption
capture technology at a LafargeHolcim cement plant; it will trial using the(using silica or
CO2 for low-carbon fuels and concrete (LafargeHolcim, 2019; Financial
2035
organic-based 6
Post, 2019).
(High)
adsorption)• In early 2020, several companies announced a joint study to assess thedesign and cost of a commercial facility (0.725 MtCO2/yr) at the Holcim
Portland cement plant in Colorado, United States (Total, 2020).
Direct• Successful pilot-scale demonstration at the Heidelberg Cement plant in
2030
separation
6
Belgium by the LEILAC project in 2019, targeting large-scale(High)
demonstration in 2025 (0.1 MtCO2/yr) (LEILAC, 2019; Perilli, 2020).
Other capture• Various other capture technologies could be applied to cement,
technologies
including membrane separation, chilled ammonia process and cryogenics.
--4-5
Some laboratory and small-scale trials have taken place, but these(Medium)technologies remain in relatively early development stages (ECRA, 2017;
Sayre et al., 2017; Pérez-Calvo, 2018).
Sequester/• Multiple commercial-scale plants using CO2 for producing aggregates ormineralise CO2
in concrete curing (Carbon8, 2020; CarbonCure, 2020; Blue Planet, 2020).
in concrete• Sinoma International and CNBM completed a project in 2016 in China
and other inertthat uses CO2 to produce precipated barium carbonate (50 kt/yr).*carbonate
Today• CO2Min, led by HeidelbergyCement and RWTH Aachen University, has
9materials(Medium) proven the ability of olivine and basalt to absorb CO2 (Beumelburg, 2017;
Stopic et al., 2019).
• The FastCarb project in France is investigating accelerated carbonationin recycled concrete aggregates; research is currently at the lab scale(FastCarb, 2020).

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Year available(importanceTechnology TRL
Deployment status
for net-zeroemissions)
Raw material substitution
Calcined clay
• Currently used in a limited number of countries in low proportions;developed by collaboration between researchers in Cuba, India andToday
Switzerland (Scrivener et al., 2018; UNEP, 2016).
9(High)• A large-scale flash calciner that would considerably improve the energy
efficiency of calcinating clay is under development in China, with two 300
t/day lines already built (Sui, 2020).
Carbonation of• First produced in 2014 by Solidia Technologies at a Lafarge plant in the
calcium
Today
United States, with production now at an additional plant in Hungary; in
8silicates(Medium) 2019, a first commercial venture was announced to supply a paver plant(Aggregates Business, 2019).
Magnesium• R&D largely remains in university labs; at present, largely on hold after a--silicates3
venture (Novacem in the United Kingdom) ended in 2012 due to lack of(Medium)(MOMs)
funding (Majcher, 2015).
Alkali-activated• Some cements already commercially available, but primarily used in nonTodaybinders
structural applications. An example is Vertua Ultra Zero developed by
9(Medium) CEMEX in Switzerland (CEMEX, 2020). Others are at earlier stages of(geopolymers)
development.
Direct electrification or heating
Direct• A Feasibility study, beginning in 2017 by the CemZero project in Sweden,
electrification
has shown that electrification of cement kilns is technically possible;--currently exploring the possibility to build a pilot plant (Cementa, 2019;4(Medium) Vattenfall, 2020).
• The ELSE project initiated in Norway in 2018 found in a technicalfeasibility study that electrification of precalciners is probably possible(Norcem, 2018; Tokheim et al., 2019).
Concentrated• The SOLPART project in France successfully commissioned a pilot-scalesolar power
calcination solar reactor in mid-2019; it aims to open a partially solardirect heating
powered cement plant by 2025 (SOLPART, 2019).
• US-based start-up Heliogen proved in 2019 at its test facility in the--6
Mojave desert the possibility of generating heat above 1 000°C using(Medium)
concentrated solar power (Heliogen, 2019).
• The Paul Scherrer Institute, ETH Zurich and LafargeHolcim are
performing a study using concentrated solar power in kilns(LafargeHolcim, 2015).
HydrogenPartial use of• The Mineral Products Association has received funding to conducthydrogen--physical trials in the United Kingdom using hydrogen and biomass in
4(Medium) combination in a kiln (another trial will test electrical plasma and biomassin combination), aiming for completion by mid-2021 (MPA, 2020).
Decarbonating• Electrolyser-based concept proven through laboratory-scale testing at--calcium
3
Massachusetts Institute of Technology, with results published in late 2019
(Medium)carbonate(Ellis et al., 2019).
Technology performance
AdvancedToday• Various technologies are at different stages of development, some
6-9
grinding(Medium) nearing commercialisation (ECRA, 2017; 2020b).

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* Personal communication with T. Sui (2020), Sinoma.
Notes: TRL = technology readiness level. This table aims to include key emerging technologies with good potential
to achieve considerable CO2 emissions reductions. Various other alternative cement constituents and binding
materials may also contribute to reducing emissions in cement. This table does not include alternative cement
constituents that are already commonly used or do not require considerable further development (e.g. steel slag, flyash, ground limestone) and alternative binding materials that achieve only moderate emissions reductions and/or
may face considerable challenges related to material availability or structural properties. For a full discussion of allalternative cement constituents and binding materials, please see the IEA Cement Technology Roadmap (IEA, 2018).
For CO2 capture technologies, the specified TRL refers to the whole carbon capture and utilisation or carbon
capture and storage value chain applied within the cement sector (whichever is at a higher TRL), rather than the TRLof the capture technology only.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

CO2 mineralisation involves the absorption and storage of CO2 in inert carbonate
materials such as concrete or concrete aggregates. As mentioned above, thisrecarbonation process happens naturally at very slow rates over the lifetime of
concrete as it reacts with CO2 in air. Various methods can be used to accelerate theabsorption of CO2, most of them involving the use of concentrated exhaust streams:
this makes mineralisation a CO2 utilisation technology and a potential source ofrevenue for captured CO2. In the case of curing – the process of maintaining
adequate moisture and temperature while concrete is being formed by adding waterto cement – CO2 enrichment can actually improve the strength of the concrete.
Accelerated CO2 mineralisation is already used commercially in concrete curing andwith aggregates and other inert minerals like barium carbonate. Additional researchand development is underway to enable the storing of CO2 in other mineralised
forms, including in recycled concrete aggregates and in olivine and basalt that could
be used as concrete aggregates. The amount of CO2 stored and thus the potential foremissions reductions can vary considerably by process, and total demand formaterials with mineralised CO2 has an upper limit, so storage sites for captured CO2
from cement production will also be needed.
Alternative cement constituents – materials that reduce the clinker-to-cement ratioof blended cements – also have the potential to bring about near-term emissions
reductions. As alternative cement constituents like blast furnace slag and fly ash
which are currently used become scarcer in the Sustainable Development Scenario(fewer coal power plants and blast furnaces), other materials will be required.
Limestone calcined clay cement is one option that is already being used in somecountries to a limited extent and could be further deployed. The technology, which
was developed through a partnership among research institutes in Cuba, India andSwitzerland, reduces CO2 emissions by replacing up to 50% of clinker with limestone
and calcined clays. Calcining clay does require considerable energy, but research
efforts are underway to reduce the energy it requires: these include a large-scale
flash calciner under development in China. Natural pozzolana (e.g. rice husk ash,silica fume) and limestone are also likely to play an increasing role.
Cements based on alternative binding materials – in which conventional Portland
Cement clinker is fully replaced by binding agents derived from raw materials withdifferent mineralogical compositions but with the same or similar processes andfacilities – offer further potential to reduce process emissions. Some alternative
binding agents are in commercial use now, but their CO2 reduction potential isrelatively limited and a number of them are facing technical challenges or are
applicable only to specific applications (for more information see IEA [2018]).
Innovation may help to bring forward options with greater process emissions
reductions. Cement based on carbonation of calcium silicates is perhaps one of themost promising alternative binding agent technologies, and a commercial plant is

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now under development (TRL 8). It can be produced in conventional cement plants

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

by modifying the raw material mix, greatly increasing its potential deployment, andit can capture CO2 during curing (see discussion on CO2 mineralisation above),potentially leading to zero process emissions in net terms. However, its application
is limited to pre-cast applications, as curing needs a controlled environment, and it
only works effectively with thin slabs of concrete, because of the slow kinetics of CO2during curing.
Magnesium oxides derived from magnesium silicates have strong potential to lower
CO2 intensity by absorbing CO2 during curing, and have the potential to absorb more
CO2 than the amount released in manufacturing, but this technology is at a muchearlier stage of development (TRL 3). Various cements based on alkali-activatedbinders are under development, with some commercially used today (TRL 9),
primarily in non-structural applications, and others at much earlier stages ofdevelopment. Their CO2 savings potential is highly variable – ranging from 10% to ashigh as 97% – and depends on the materials and processes used to produce them
(Provis, 2017). Raw material availability may limit their application in some regions,and it may be more efficient in any case to use the raw materials in blended cements
than for alkali-activated binders.
In the longer term, other currently less-advanced technologies could play a role indecarbonising the cement industry. Direct electrification of cement kilns, forexample, is currently under investigation in Sweden – the concept of using electricalplasma has been proven and the possibility of building a pilot plant is being explored(TRL 4). The partial use of hydrogen in combination with biomass, as well as use ofelectrical plasma in combination with biomass, is being investigated in early trials in
the United Kingdom (TRL 4). Using concentrated solar power to provide hightemperature heat for cement kilns has reached pilot stage (TRL 6), with research
projects underway in Europe and the United States, but faces the challenge of solar
energy’s intermittency and would be limited to areas with sufficiently high solar
irradiance. If successfully developed, these various fuel-switching technologies
would eliminate fuel combustion emissions, and while they wouldn’t address process
emissions directly, they would at least result in a purer CO2 stream of process
emissions, making the CO2 easier to capture. Another early-stage technology provenat the lab scale (TRL 3) is use of an electrolyser to electrochemically decarbonate
calcium carbonate prior to clinker production in the kiln: this would produce a
concentrated stream of CO2 that could be captured, together with hydrogen that
could be used in subsequent stages of production.
A number of initiatives are examining new techniques for recycling cement andconcrete. Today, concrete is recycled by crushing it and reusing it as aggregate, but
this is a form of “down-cycling” as the aggregate does not form a substitute for theuse of cement. Several projects are aiming to recover concrete fines (particles with

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grain size of less than 4 mm) produced while recycling concrete, and to use theEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

calcium oxide present in place of a portion of limestone in cement kilns, which could
reduce process emissions by about a factor of three (University of Lorraine, 2018;
VEEP, 2020; Oksri-Nelfia et al., 2015; Lotfi and Rem, 2017). Another initiative hasdeveloped a new concrete crushing technology that recovers unhydrated cement(cement that does not come in contact with water during cement curing) from endof-life concrete for direct use as new cement, thus displacing new production(SmartCrusher, 2020).

USD/t cement

Levelised cost of cement production under varying techno-economic
assumptions
Alternative cement constituent price

200
175

175

150

150

125

125

100

100

75

75

50

50

25

25

0

0
0

25

50

75

100

CO2 price

200

125

0

40

USD/t
No CCUS, 0.6 clinker ratio
No CCUS, 0.9 clinker ratio

High-cost CCUS, 0.6 clinker ratio
High-cost CCUS, 0.9 clinker ratio

80

120

160
200
USD/t CO2

Low-cost CCUS, 0.6 clinker ratio
Low-cost CCUS, 0.9 clinker ratio
IEA 2020. All rights reserved.

Notes: CCUS = carbon capture, utilisation and storage. CCUS costs are the expected costs once commercialised,assuming full capture rates (90% of CO2 captured). CO2 transport and storage costs of USD 20/tCO2 captured areincluded, as are engineering, procurement and construction costs. Assumes best available technology efficiency forkilns of 2.9 GJ/t clinker; fuel mix: 60% coal, 25% natural gas and 15% biomass-based fuels; raw material (limestone)
cost for clinker production = USD 4/t; cost for alternative cement constituents in the right-hand graph = USD 75/t. An
8% discount rate, 25-year lifetime and 95% capacity factor are used for all equipment.

At a CO2 price of about USD 80/tCO2, CCUS starts to become a cost-competitive option for
cement production.

The competitiveness of the different technologies and pathways for reducing CO2
emissions from cement will vary according to factors such as the level of cost
reductions achieved for innovative technologies and regional raw material availability(Figure 4.19). Given their higher TRL levels relative to other options for cement, CCUS
and the increased use of alternative cement constituents in order to reduce theclinker-to-cement ratio are currently two of the main competing options. The cost ofalternative cement constituents varies by type and according to regional availability.
At costs of less than USD 100/t, they are competitive with low-cost CCUS. In otherwords, it is less expensive to increase alternative constituent blending to the extent
possible, thereby lowering the clinker-to-cement ratio, than to produce the additional

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clinker required in the absence of alternative constituents in a CCUS-equippedEnergy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

facility. However, neither technology competes on cost with unabated kilns. For
CCUS to be competitive with an unabated kiln, a CO2 price of between about
USD 80/t and USD 130/t would be required (depending on the clinker-to-cement
ratio and cost of CCUS). The actual costs of CCUS will depend on the type oftechnology, and could fall significantly once commercialised on a large scale.
Policies such as CO2 performance standards, minimum market share regulations ormarket pull incentives could make CCUS competitive in the absence of an adequate
CO2 price.
In the Sustainable Development Scenario, the cost of cement in 2070 is on average
55% higher than in the Stated Policies Scenario in that year, and 60% higher than it
is now. This cost increase is sensitive to parameters such as the clinker-to-cement
ratio, the eventual cost of CCUS and energy prices, all of which are uncertain andcould vary by region. The cost increase in 2070 compared to the Stated Policies
Scenario could therefore be as low as 35% or as high as 115%. Fortunately, this cost
increase has a minimal effect on end-user prices, given that materials account for a
relatively small proportion of the costs of construction projects. For an averagedetached concrete-framed home in the United States (costing USD 300 000), theconstruction cost would be only about 0.6% more in 2070 in the Sustainable
Development Scenario than in the Stated Policies Scenario due to the increase in
cement costs, assuming that material efficiency measures were not adopted. The
adoption of material efficiency measures might well nearly eliminate the difference
between the construction costs in the two scenarios, as reduced demand for cement
would offset most of the increased cost per tonne of cement.

Bulk materials for construction
Overview
The construction sector, as well as being a major industrial consumer of energy, isalso a large consumer of raw and intermediate materials, the production of which
involves large amounts of energy and, therefore, CO2 emissions. Global demand forthese bulk materials for construction and renovation has been rising rapidly in recent
decades in parallel with economic and demographic growth. Despite improvements
in manufacturing processes, the emissions related to construction materials are
therefore rising, especially in emerging economies. Curbing this rise throughmaterial efficiency measures could make a major contribution to wider efforts to cut
emissions in hard-to-abate materials sectors. This section assesses the technologicaloptions for improving material efficiency in the construction of residential andcommercial buildings, focusing on steel and cement (technologies to reduce directemissions in those industries, as well as in the chemicals industry, are discussed in

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the first part of this chapter).

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

The manufacturing, transportation and use of all construction materials for buildings
resulted in energy and process CO2 emissions of 3.5 Gt in 2019, or 10% of all energy
sector emissions. For the construction sector, these embodied emissions are
categorised in the standard emissions accounting framework as scope-3, i.e. indirectemissions from sources not owned or directly controlled by construction companies
but related to their activities, such as those arising from the extraction andproduction of purchased materials, the transportation of purchased fuels, and theuse of products and services. Scope-1 emissions are direct emissions from energy
and other sources that are owned or controlled by those companies, while scope2 emissions are indirect emissions from the production of electricity and heatpurchased and used by them. Worldwide, the sector consumes over 2 Gt of cement
and 0.5 Gt of steel, which corresponds to around 50% and 30% of total cement andsteel demand respectively. Those two materials are primarily responsible for theemissions embodied in the construction materials used for buildings. Glass accounts
for the bulk of the rest in the form of flat glass for windows and glass fibres forinsulation, alongside aluminium, plastics and other insulation materials (e.g. rockfibres).
The primary driver of demand for cement and steel for buildings construction
historically is floor area (Figure 4.20). Since 2000, the total floor area of all types ofbuildings worldwide has expanded by almost 60%, adding 90 billion m2 globally.
Cement and steel usage per unit floor space has also tended to increase over that
period because reinforced concrete and steel framing have come to account for a
growing proportion of buildings construction materials, especially in Asia. One
secondary cause of this is an increase in the average height of buildings. Since 2000,
the number of new buildings more than 150 m high has increased around fivefold,
and their average height has increased from 170 m to 230 m (CTBUH, 2018).
Global historical trends hide important differences across regions. Most advanced
economies have experienced only a moderate increase in the embodied emissionsof buildings construction materials in recent decades, reflecting decelerating rates
of increase in population and income, well-established non-energy buildings
construction codes and continuity in basic construction techniques. By contrast,
booming construction on the back of rising population, urbanisation and risingincome levels have resulted in a very large increase in embodied emissions fromconstruction materials in developing and emerging economies in Asia andelsewhere. In China, those emissions increased by around threefold between 2000
and 2019 as total floor area increased by 30 billion m2 (or almost today’s built surface
in the United States) and as the percentage of reinforced-concrete and steel-framebuildings rose from 10% to 45%, increasing demand for more carbon-intensive
materials (Wang et al., 2015). Chinese growth has, however, slowed since 2015 as a

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result of market saturation and slower economic growth, and India is now emerging

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

as a primary driver of global demand for construction materials and the primarysource of growth in embodied emissions (NBS, 2018).
Decomposition of embodied cement and steel sector CO2 emissions inbuildings construction, 2000-20
Cement

1 200

750

800

500

400

250

0

0
2000
Emissions

Buildings Industry
factors factors

Steel

1 000

Mt CO2/yr

1 600

2019

Construction (floor space)

2020*
Building frames

2000

Buildings Industry
factors factors

Height

Other

2019

2020*

Material CO₂ intensity

IEA 2020. All rights reserved.
* Projected emissions for the year 2020 account for construction activity indicator for the first half of 2020 followedby an assumed economic recovery facilitated by no further major lockdowns for the second half of 2020.
Notes: This figure is based on a logarithmic mean divisia index which compares each influencing factor contributing
to embodied emissions in 2019 relative to 2000 to assess their contribution to the change in emissions. Other
includes increased material use per unit of new floor area related to changes in building code enforcement andconstruction practices, as well as the effect of existing floor area renovation.

Embedded emissions in the cement and steel used in buildings have increased sharply
since 2000, with increased construction and other factors outweighing the effect of a fallin the carbon intensity of both materials – particularly cement.

Since the beginning of 2020, most countries have experienced a significant
slowdown in construction activity. Buildings completions in January-April 2020
decreased by 14.5% in China (NBS, 2020) year-to-year, but picked up soon after andwill likely only be about 5% lower in 2020, relative to 2019 (Figure 4.21). There arestrong regional differences in how the Covid-19 crisis has impacted the construction
market across the world, and the situation remains very dynamic. While the European
Union registered a 25% drop in buildings construction in April 2020 relative to April
2019, it bounced back to a 10% drop in May 2020 relative to May 2019 (Eurostat,2020), suggesting that construction rates will go back to pre-Covid-19 levels over thecourse the remainder of 2020 in the absence of new lockdowns. Construction forsmall businesses and services buildings appears to have been impacted the mostmarkedly, although this segment has also seen a resumption in activity in May 2020and close to pre-crisis levels in June. In developing economies such as India andIndonesia, housing construction growth in 2020 is likely to be modest, and well below

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the typical annual increases before the crisis.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Growth rate

Projected year-to-year growth of residential construction activity in 2020
relative to 2019
10%

0%

-10%

-20%

CanadaUnitedStatesJapan

United France Germany
Kingdom

Italy

EU
Other EU
Nordics

China

India

IEA 2020. All rights reserved.
Notes: Buildings construction activity is estimated based on the average number of square metres under active
construction for a given year, itself derived from construction starts and housing completions data. The EU Nordics
country grouping includes Demark, Finland and Sweden.

Material demand sectors are strongly affected by the Covid-19 pandemic, as residential
construction activity could decline by up to 10-15% in 2020 relative to 2019 at the country
level.

Should local outbreaks be limited geographically and temporally during the second
half of 2020, embodied emissions from buildings construction are expected to beabout 5% lower in 2020 than in 2019 (Figure 4.20). A 5% decrease in CO2 emissions
is less than the annual average increase since 2000.

Material efficiency pathways towards net-zero embodied
emissions
The endorsement of the World Green Buildings Council’s Bringing Embodied Carbon
Upfront campaign by 80 public and private entities calls for co-ordinated action to
decarbonise the buildings construction value chain by 2050 (WorldGBC, 2019), on
top of decarbonising buildings operations by 2030. Material demand sectors willneed to play a major role in achieving net-zero embodied emissions in buildings
construction because clean material manufacturing technologies are at early stagesof deployment, under demonstration or even at the prototype phase (see above) andbecause current manufacturing assets are long-lived: while investment cycles are
typically around 25 years long, cement kilns and blast furnaces are typically operated

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for around 40 years (see Chapter 1).

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Gt CO2/yr

CO2 emissions in the buildings and construction value chain in the Sustainable
Development Scenario, 2010-70
1470%

Buildings use phase

12

60%

Coal

10

50%

8

40%

6

30%

4

20%

2

10%

0

2010

2019

2030

2040

2050

2060

2070

0%

Oil
Natural gas
Electricity and heat
Buildings construction
Construction energy use
Material manufacturing
Cement and steel
manufacturing
Share of cement and steel
manufacturing

IEA 2020. All rights reserved.

Despite gains in material efficiency, the share of cement- and steel-related emissions in
total buildings emissions jumps from less than a fifth today to 40% by the 2060s.

Material efficiency strategies also have a major part to play. Despite a range ofmeasures to improve material efficiency, the share of cement- and steel-related
emissions in total buildings emissions jumps from under 20% in 2019 to about 30%
by 2040, and keeps increasing to 2070 in the Sustainable Development Scenario.
This happens because, while emissions related to the manufacturing of cement andsteel fall by 40% by 2040, emissions from fossil fuel consumption in buildings fall
faster, by around 55%, thanks mainly to switching to electricity and renewables.
Likewise, emissions associated with the electricity and heat purchased and used bybuildings fall to zero with the complete decarbonisation of the power sector
supported by efficiency and flexibility measures in buildings and other end-use
sectors (Figure 4.22).
Notwithstanding the rise in their share of overall cement- and steel-related buildings
emissions by 2070, measures to improve material efficiency play an essential part inachieving the CO2 emissions reductions from materials used for buildings
construction that are required in the Sustainable Development Scenario. They
contribute around a third of the total reduction in global emissions related to cement
and steel use in 2070 in the Sustainable Development Scenario compared with theStated Policies Scenario (Figure 4.23), with lower carbon intensity manufacturing of
cement and steel accounting for the other two-thirds. Material efficiency measurescovering cement and steel reduce emissions in the buildings construction sector byaround 900 Mt in 2070. In volume terms, material efficiency measures for cement
contribute to a larger emissions reduction than for steel because of its larger size; in

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relative terms, their impact on emissions from steelmaking is greater.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Gt CO2/yr

World cement- and steel-related CO2 emissions in the buildings construction
sector by scenario and driver, 2019-70
Cement

1.5
1.2

STEPS

1.2

0.9

0.9

0.6

0.6

0.3
0.0

Steel

1.5

STEPS

0.3
SDS
2019

2030

2040

Material efficiency

2050

2060

2070

0.0

SDS
2019

2030

2040

2050

2060

2070

Structural optimisation
Precasting, prefabrication, reuse, recycling, material properties
Lifetime extension
Material manufacturing

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario. SDS = Sustainable Policy Scenario. Structural optimisation refers toinnovative design or composite framing that reduce material overuse while ensuring that buildings elements fulfil
their structural functions. Material properties refers to the use of best available steel and concrete to reduce overallmaterial use. Lifetime extension includes renovation and construction strategies.

Material efficiency measures contribute to around a third of the total reduction in emissions
by 2070 in the Sustainable Development Scenario relative to the Stated Policies Scenario.

The projected declines in emissions follow uneven paths. The contribution of material
efficiency to emissions grows rapidly until 2050, in large part because building
lifetime extensions have a cumulative impact on reducing the need for materials forconstructing new buildings. In the period from 2050 to 2070, the contribution ofmaterial efficiency strategies increases only marginally: by 2050, most of the existingbuilding stock has been renovated, and other strategies start to have a wider impact.
From 2050 onwards, most of the additional reduction in the emissions embodied inbuildings comes from materials manufacturing, as innovative low-carbon cement
and steel production technologies, including CCUS, are deployed on a massive scale,although material efficiency continues to play an important role in reducing the needfor costly low-carbon material manufacturing processes. As a result of these various
measures, the level of embodied carbon in the Sustainable Development Scenario in
2070 is reduced by 95% from today’s levels.
Reducing the underlying need for cement and steel in construction through material
efficiency is central to achieving these emissions reductions. Total cement and steel
demand for buildings construction worldwide peaks between 2025 and 2030 and
falls to well below 2010 levels by 2070 in the Sustainable Development Scenario.
Total cumulative material demand to 2070 is lower by roughly 30 Gt for cement and
7 Gt for steel relative to the Stated Policies Scenario. That is a roughly equivalent to

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a reduction of 20% over a 50-year timeframe.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Contribution of material efficiency to reducing cumulative cement and steel
demand for buildings construction in the Sustainable Development Scenario,
2019-70
Cement

Steel

40

Gt

160
120

30

80

20

40

10

0

STEPS

Material
efficiency

Lifetime extension

0

SDS

STEPS

Material
efficiency

Precasting, prefabrication, reuse, recycling, material properties

SDS

Structural optimisation

IEA 2020. All rights reserved.
Notes: Lifetime extension includes renovation and construction strategies. Material properties refers to the use ofbest available steel and concrete to reduce overall material use. Structural optimisation refers to innovative design
or composite framing that reduce material overuse while ensuring that buildings elements fulfil their structuralfunctions.

Material efficiency measures contribute to reducing cumulative cement and steel demandby 20% to 2070, with the main contribution coming from lifetime extensions.

The principal material efficiency measures that drive these demand and emissions
reductions are extensions to buildings lifetimes, structural optimisation andenhanced material properties. Using fewer structural elements and optimising design
could reduce concrete and steel use by 20-25% and 35% respectively (Ghayeb, Razak
and Sulong, 2020), but lifetime extensions make the biggest contribution,accounting for more than 40% of the cumulative fall in cement and steel demand
over 2019-70 relative to the Stated Policies Scenario. There are multiple ways ofextending the lives of buildings, including by using better materials and construction
techniques to make them last longer, by creating more flexible and modular spaces
to facilitate repurposing at a later date, and by renovating or refurbishing old
buildings so as to delay their demolition.
Renovation offers the biggest potential for material savings from lifetime extensions.
Renovating a building, as a general rule, involves the use of 40-80 times less material
resources in terms of mass than reconstruction from scratch (Leonardon et al., 2019).
The material savings are even higher for steel and cement, as most renovations
require very little of either material. Generally, a newly refurbished commercial orindustrial building lasts 70-100% as long as a new one, while renovations typicallyprolong the life of a residential building by 30-60%. Yet renovations can be costly.
For certain types of buildings, such as high-rise office buildings, refurbishment costs

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can be of the same order of magnitude as those for demolition and reconstruction.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Structural optimisation refers to innovative design or composite framing that reducesmaterial overuse while ensuring that buildings are structurally sound. Structural
engineers have the opportunity to work with other design disciplines to include
whole life carbon as an additional criterion, and the scope for this to bring aboutmaterial savings in construction is significant: structural optimisation reduces
cement demand by about 15% and steel demand by about 25% in 2070 in the
Sustainable Development Scenario relative to the Stated Policies Scenario, mainly
from improved modelling and planning.
Voided concrete slabs, either cast onsite or prefabricated, are one example of amaterial-efficient building component. Post-tensioning of floor slabs is anothercommercially available example: it offers material savings of around 15%, and can be
combined with voiding. Unreinforced funicular floors and concrete shell roofs are
now being tested in the NEST HiLo experimental building in Switzerland (Block et al.,2017). For new, tall and commercial buildings, the 3for2 design uses façade and floorintegrated mechanical and electrical elements to improve ventilation and reduceheating and cooling needs. In addition to their potential for operational energy
efficiency gains of up to 75%, voided concrete slabs can save over 15% in material
mass (Schlueter et al., 2016). Building layouts can also be designed in ways that
reduce material needs, including by optimising the shape of buildings and reducing
the length of perimeter walls (D’Amico and Pomponi, 2019). Holistic approaches,
digital design and digital manufacturing could enable wider adoption of these typesof designs (Box 4.3).
Enhancing material properties can be an effective way of reducing the amounts ofmaterials needed for construction, yielding potentially large emission savings.
Quality standards avoid the use of low-grade concrete that would lead to a building’s
early demolition. Optimising structural element size, concrete strength and concrete
mix further reduce cement demand while delivering the same performance. Lightweighted elements also reduce lifecycle emissions, particularly from transportation.
For example, cold-formed steel framing, which has been widely adopted since the1990s for interior, non-loadbearing partition walls in commercial construction, is now
starting to be adopted for structural applications in mid-rise and multi-housingbuildings, aided by technological advances such as panellised systems. Suchcomponents are relatively light to transport and assemble, and can support heavier
loads than hot-rolled alternatives.
Other material efficiency measures could also help lower cement and steel demandin construction. Precasting and prefabrication provide greater control over the size,
shape and manufacturing of buildings components, and help to speed up
construction processes. Concrete precast also allows lower cement-to-water ratios,enhancing product durability. The centralisation of best practices in dedicated

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workshops would help to reduce the risk of wasting materials, while digital processes

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

such as additive manufacturing (3D printing) could also make a contribution, though
digitalisation has yet to demonstrate its practical and economic viability at a large
scale and for broad applications.
The reuse and recycling of cement and steel components can also reduce material
needs. Steel-based elements, including structural elements and cold-formed steel
framing, may be reused without harming their material properties, safety and overallsustainability. When steel elements cannot be reused, collection for recycling anduse in secondary steel production can help achieve lower production emissions for
new steel elements than production from iron ore (see the iron and steel section
above). Opportunities for cement reuse and recycling are more limited, partly
because of the costs of transporting heavy blocks over long distances. There may bepotential for recovery and reuse of unhydrated cement from used concrete, but
technologies for this have yet to reach the commercial stage. Recycling concrete
aggregates is possible, though the potential emissions savings are small due totransport needs, the non-carbon-intensive nature of aggregates and the potential
need to add cement to facilitate recycling (Zhang et al., 2017).

Box 4.3

How digital technologies can support material efficiency

The digitalisation of construction and renovation along their value chains could
contribute to various aspects of improving material efficiency in the use of cement
and steel in construction:At the planning stage: Some digital tools can optimise material use throughbetter component design, while others such as thermal imaging systems canidentify poor-performance buildings and renovation strategies.

Prefabrication and precasting: Digitalisation could standardise off-sitecomponent design and manufacturing processes, saving an estimated 20-35%
of concrete relative to cast-in-place concrete. 3D printing has potential toenhance structural optimisation further by ensuring the use of only the exact
amount of cement and steel that is needed, reducing construction waste by 3060% (Zhang et al., 2019).
During construction: A number of new businesses are creating new digitalconstruction management platforms to help construction companies monitor
progress, the use of resources and material reporting. These tools for tracking
material use could provide significant opportunities to quantify a building’s
embodied carbon, serve as a basis for mandatory or voluntary certifications, andoptimise concrete delivery (Gurmu, 2018).

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Energy Technology Perspectives 2020

At the end of a building’s life: Data from material tracking tools could be used
to create a repository of building components that will be available for reuse or
recycling prior to a building’s demolition. Banking on construction materials
could allow construction companies to save costs on materials costs, reduce
expenditure on transportation and logistics, and reduce the carbon footprint of
the buildings they construct, which could enhance the value of the buildings
through certification (EC, 2020).

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

Chapter 4. Technology needs for heavy industries

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

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K1MET (2018), Energy in Future Steelmaking,https://europa.eu/sinapse/webservices/dsp_export_attachement.cfm?CMTY_ID=0C46
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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

LafargeHolcim (2015), Solar Energy in Cement Manufacturing, press release, LafargeHolcim,
https://www.lafargeholcim.com/solar-energy-cement-manufacturing.
Lake Charles Methanol (2020), Frequently Asked Questions, Lake Charles Methanol,
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LanzaTech (2018), World’s First Commercial Waste Gas to Ethanol Plant Starts Up,
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mercial.html.

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MIT (Massachusetts Institute of Technology) (2016a), Enid Fertilizer Fact Sheet: Commercial
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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

MIT (2016b), Coffeyville Fact Sheet: Commercial EOR Using Anthropogenic Carbon Dioxide,
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Ovako (2020), First in the World to Heat Steel Using Hydrogen, press release, Ovako,
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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Oxford Economics (2019), The Global Chemical Industry: Catalyzing Growth and Addressing
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Schlueter, A. et al. (2016), 3for2: Realizing spatial, material, and energy savings throughintegrated design, CTBUH Journal, Issue 2, pp. 40-45,
https://global.ctbuh.org/resources/papers/download/2783-3for2-realizing-spatialmaterial-and-energy-savings-through-integrated-design.pdf.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Scrivener, K. et al. (2018), Calcined clay limestone cements (LC3), Cement and Concrete
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Taiwan Cement (2020), Circular Economy, webpage, Taiwan Cement,
https://www.taiwancement.com/en/circular1.html.
Tata Steel (2017), Hisarna: Game Changer in the Steel Industry, Tata Steel,https://www.tatasteeleurope.com/static_files/Downloads/Corporate/About%20us/hisa
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TCMB (Turkish Cement Manufacturers’ Association) (2020), Statistics: Monthly Data, TCMB,
https://www.tcma.org.tr/en/statistics/monthly-data.

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Tenova (2018), HYL News, December 2018, Tenova,
https://www.tenova.com/fileadmin/user_upload/HYL_News_-_December_2018.pdf.

Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

Ternium (2018), Low Carbon Energy Cases at Ternium, presentation at the American SteelExpert’s Dialogue in the Framework of the IEA Global Sustainable Technology
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University of Lorraine (2018), Recycling of Construction and Demolition Waste in Cement,
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Energy Technology Perspectives 2020

Chapter 4. Technology needs for heavy industries

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Zhang J. et al. (2019), A review of the current progress and application of 3D printed
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Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Chapter 5. Technology needs inlong-distance transportIn 2019, transport accounted for nearly 30% of global final energy use and 23% of
total energy sector direct CO2 emissions. Reducing oil use and CO2 emissions inlong-distance transport modes – heavy-duty trucking, maritime shipping andaviation, the focus of this chapter – is particularly difficult because of their energy
and power density requirements: technically viable alternative fuel technologies areEach of the three sub-sectors have been hit hard by the Covid-19 pandemic; aviation
most of all with passenger volumes in 2020 expected to be half of 2019 levels. In
the longer term, however, rising incomes and population growth are expected tocontinue to drive up demand, exacerbating the decarbonisation challenge.

In the Sustainable Development Scenario, operational and technical innovations
unlock energy efficiency gains in the short to medium term, while switching to lowcarbon fuels and electric powertrains drives emissions reductions in the long term.
Yet none of the three sub-sectors is decarbonised by 2070 when collectively theyemit 1.0 GtCO2.



In trucking, electricity and hydrogen dominate the fuel mix in 2070, powering
vehicles that no longer rely on internal combustion engines. This hinges on rapid
developments in batteries and fuel cells, as well as massive investment in new
infrastructure, including hydrogen refuelling stations, fast chargers for electrictrucks and electric road systems (which power vehicles as they drive).



In maritime shipping, biofuels, ammonia and hydrogen meet more than 80% of fuelneeds in 2070, using around 13% of the world’s hydrogen production. Energy
efficiency also makes a significant contribution. These changes require further
tightening of efficiency targets and low-carbon fuel standards to close the price gap
with fossil fuels and de-risk investment.



In aviation, where technical fuel requirements are most stringent, biofuels andsynthetic fuels account for three-quarters of the fuel demand in 2070. Synthetic
fuels, which do not face the same supply constraints as biofuels, increase fromabout 2030 to meet almost half of demand by 2070. Policies will need to manage
demand growth and promote new aircraft and engine technologies.



The decarbonisation of these sub-sectors will require long-term planning andgovernment support. R&D of alternative powertrains and fuels is needed to reduce
costs and improve performance, and measures to develop associatedinfrastructure. More than 60% of the emissions reductions in 2070 come fromtechnologies that are not commercially available today.

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not yet very advanced and are also likely to initially cost more than oil-based fuels.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Introduction
The transport sector encompasses all forms of mobility and freight services ranging
from road and rail transport to travel by river, sea and air. It plays a vital role in ourlives and it uses a lot of energy, particularly in the form of oil: it accounted for around55 million barrels of oil per day (mb/d) in 2019, or more than half of total global oil
demand. Transport is a major source of emissions, accounting for nearly one-quarterof energy sector carbon dioxide (CO2) in 2019. In addition, transport is a major sourceof air pollution. Steps have been taken in recent years to mitigate the impacts oftransport on the environment, in particular from cars. Regulations to reduce harmful
local pollutants and fuel economy standards to cut fuel consumption have become
the norm in practically all major car markets, and the application of fuel economy
standards for heavy-duty vehicles is expanding.
More and more countries and regions are now going further by promoting zero
tailpipe emissions technologies through zero-emission vehicle (ZEV) mandates andannouncing bans of internal combustion or diesel engines. 1 Countries with anambition to phase out internal combustion engine (ICE) cars between 2025 and 2050
together accounted for close to one-quarter of global car sales in 2019. Cities aroundthe world are looking to reduce traffic congestion and to do more to tackle air
pollution. In 2019, 2.1 million electric cars were sold accounting for 2.6% of global car
sales. The pace of electric vehicle (EV) sales is set to accelerate and to shake up global
car markets. Analysis of market trends to date in 2020 indicate that sales of EVs arelikely to be more resilient than those of conventional cars in the wake of the Covid-19
pandemic, with many EV sales bolstered by policy support measures, especially inEurope and the People’s Republic of China (“China” hereafter) (IEA, 2020a).
Electrification, accompanied by a shift to low-carbon electricity generation, willundoubtedly play a central role in reducing emissions from the transport sector.
There are limitations to the possibilities that electrification offers for long-distanceforms of transport, and in particular for heavy-duty trucks, maritime shipping andaviation, which together were responsible for 45% of both global energy demand fortransport and CO2 emissions from the sector in 2019. The limitations reflect thepractical difficulties that come with the energy and power density requirements oflong-distance transport, as well as the fact that ocean-going vessels and aircraft arevery long-lived assets.
Patterns of freight transport have been dramatically altered in the Covid-19 crisis,with lockdowns and plant closures leading logistics companies to reconfigure global
supply chains in response to supply disruptions and rapid changes in demand.

For more details on these announcements, see Global EV Outlook 2020, Chapter 2 (IEA, 2020a). Further, that reportcovers recent trends, current status and the future prospects for transport electrification, with focus chapters on
battery technologies, battery end-of-life and EV-grid integration.

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1

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Reduced activity has led to a sharp reduction in energy use across all three longdistance transport modes (Figure 5.1). Sourcing patterns of raw materials andfinished goods, as well as energy commodities, have been disrupted, while some are
beginning to recover in mid-2020, the return of cargo trade will vary substantially bycountry, mode and product. Vehicle supply chains have been among the hardest hit.
Commercial passenger aviation has been hit particularly hard: current industry
expectations are for a full demand recovery only sometime between late 2022 and2025. As discussed in more detail in the following sections, some of the adjustments
to global trade and passenger aviation activity will be transitory, but others are likely
to be longer lasting. 2

2 500

STEPS

GtCO2/yr

Mtoe/yr

Global energy consumption and CO2 emissions in long-distance transport by
sub-sector in the Sustainable Development and Stated Policies scenarios

2 000
1 500

Aviation

6
5
4
3

1 000

Shipping

500

2

Heavy-duty trucking 1

0
2000

2010

2020

2030

2040

2050

2060

2070

0

2000

2019

2070
STEPS

2070
SDS

IEA 2020. All rights reserved.
Note: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario.

In 2019, heavy-duty trucking, shipping and aviation consumed nearly 25 mb/d of oil andaccounted for about 45% of energy demand and CO2 emissions from the transport sector.

In the Sustainable Development Scenario, the heavy-duty trucking, maritime
shipping and aviation sub-sectors reduce CO2 emissions in 2070 by three-quartersfrom 2019 levels, despite a significant increase in energy demand. Though not fully
decarbonised, together they emit nearly 1.0 gigatonnes (Gt) of CO2 in 2070, or about
40% of total remaining energy sector emissions at that time. The challenge of
decarbonising these sub-sectors is not one of technology availability alone; it also
encompasses resource availability and costs, including the costs of new
infrastructure. Various production pathways for biofuels, for example, arecommercially available and the resulting biofuels can be made compatible with

For a more detailed analysis of the impacts of the Covid-19 crisis on transport, see Covid-19 Crisis and Clean Energy
Progress (IEA, 2020b).

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Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

existing vehicles and infrastructure, but they face limitations on the availability ofsustainable feedstock supplies due to demand from other sectors and cost barriers(see Chapter 2).

Heavy-duty trucking
Overview and outlook in the wake of Covid-19
Road freight is a vital component of global economic activity. Trucks deliver all kindsof commodities from their points of production to the factories that use or transformthem and on to their final points of sale. The types of trucks used, and theirimplications for energy use and emissions vary by size, weight and power according
to the nature of the goods transported (Box 5.1). In recent years, three-quarters ofroad freight activity measured in tonne-kilometres (tkm) has been carried out by
heavy-freight trucks, which can be rigid body or articulated tractor-trailers.
While overall road freight volumes were not hit as hard as maritime shipping or
aviation by the Covid-19 crisis, specific activities such as regional and long-distancetrucking were hit in the early period of the pandemic, though at the time of writing in
mid-2020 are showing signs of recovery. Volumes in China, for example, dropped to
15% of 2019 levels for a month in early 2020. They have now recovered to levels
above those of 2019 (IFC, 2020), but in many places long-distance trucking iscontinuing to suffer. Social distancing to ensure the safety of truckers and warehouse
workers, border checkpoints (especially in Europe) and other operational constraints
have led to bottlenecks, delays, congestion, long queues and other logisticalchallenges. These matters have increased the rates that shippers charge for roadfreight, maritime shipping and cargo aviation. These rate increases, together with areduction in activity on passenger rail lines, in some regions have led to an increasein the demand for rail services for freight, improving the position of some rail
corridors, such as those between Europe and China.
The impact of simultaneous supply and demand shocks on small trucking operations
has been severe. As in other sectors, some consolidation is likely. This has immediateshort-term implications for fleet wide efficiency: it will result in an accelerated
retirement of older and less efficient trucks, and provide an opportunity for bigger
fleets to exploit operational and technical efficiency measures. While large logistics
operations, such as Amazon, DB Schenker, DHL, FedEx, Kenco Group, UPS and XPO
logistics, are certainly not immune to the economic impacts, they are better able towithstand the pressures. Indeed, against an economic backdrop where many
companies continue to struggle, companies such as Amazon with a strong digitalpresence and data analytic capabilities have seen stock prices surge. Policies that

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require and assist companies that emerge stronger from the crisis to invest capital inEnergy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

efficiency and emissions-reducing technologies could help to ensure that theCovid-19 crisis does not delay emission reductions, or even help to accelerate them.
The global fleet of heavy-duty trucks (referred to here simply as trucks) – was lessthan 6% of the size of the global car fleet in 2019. Trucks include medium-freighttrucks (MFTs) and heavy-freight trucks (HFTs), which are differentiated on the basisof gross vehicle weight (GVW) (Box 5.1). In 2019 there were 33 million MFTs and27 million HTFs, which is much smaller than the passenger light-duty vehicle fleet of
1 billion cars on the road today. China has the world’s largest truck fleet, with morethan 10 million HFTs on the road. The next largest fleets were in the United States(7.8 million trucks) and Europe (7.1 million trucks). Despite these relatively small
numbers, trucks account for about 30% of total road fuel consumed in the world. In
many regions this share is much higher. In India, for instance, trucks accounted forover 40% of road fuel used in 2019 (Figure 5.2). On average, per unit of cargo (tonnekilometre [tkm]) moved, heavy-duty road freight is more energy-intensive (using
about 2.5 litres of diesel/100 tkm) than rail or maritime freight: trains use about 30%
as much energy as trucks, while maritime ships use about 10% as much.
Heavy-duty truck fleet and share of road fuel demand, 2019

Share of heavy-duty vehicles on the road

Million vehicles
4.8
6.6

8.1

3.9

10.3

8.9

7.1

2.7

9.9

61.1

100%

HFTs

80%

MFTs

60%

Heavy-duty freightshare of road demand

40%

20%

0%

India

AfricaCentral Middle
andEast
South America

China

Other
Asia
Pacific

EuropeEurasia

North
AmericaWorld

IEA 2020. All rights reserved.
Note: HFTs = heavy-freight trucks; MFTs = medium-freight trucks.

Heavy-duty trucks account for less than 6% of vehicles on the road worldwide, but they
consume about 30% of all the fuel and about two-thirds of the diesel used in road transport.

Today virtually all trucks run on oil-based fuels. Globally, trucks consumed more than
12 mb/d in 2019, equivalent to 12.5% of global oil demand and total oil production of
the United States in that year. Oil demand from trucks is only outstripped by demand
from passenger cars, which accounted for around 22% of total oil demand in 2019.

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More than 90% of the fuel consumed by trucks is in the form of diesel due to its higher

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transportenergy density relative to gasoline, the reliability and efficiency of diesel engines inheavy-duty applications, and the higher torque for a given size of diesel versus sparkignition engines. Gasoline provides around 6% of final energy demand for heavy-duty
trucks, mostly in regions where fuel prices favour gasoline over diesel, in cases where
fleet operators are capital constrained, and in operations with lower mileage andlower load and torque requirements. Alternative fuels currently play a minor role infuelling trucks at a global level. Biofuels, usually blended into conventional diesel orgasoline, contribute nearly 3% of final energy use in heavy-duty trucks. Many cities in
the United States and Europe have switched municipal fleets (e.g. transit buses andgarbage trucks) to run on biomethane produced from municipal solid waste. Sweden
leads the world in shares of blended biodiesel (fatty acid methyl esters [FAME] andhydrotreated vegetable oils [HVO]). Natural gas, in compressed or liquefied form,
supplies less than 1% of energy for trucking.
While oil use in passenger cars had begun to plateau and decline in a growing
number of industrialised countries, oil consumption in trucking continued to risestrongly prior to the Covid-19 crisis. Over the past decade, worldwide growth in fueluse has risen faster for trucks than it has for passenger cars. While this trend began
in developed economies like Germany, it has become more widespread and is now
visible in some developing economies such as India. Since 2000, worldwide fuel use
by trucks has risen by about 50%, and trucks have been responsible for half of the
global net increase in diesel demand in the transport sector. Today trucking accounts
for about half of total global diesel demand. Rising road freight activity, which isbroadly linked to economic growth, is the underlying driver of increasing energy use
and emissions in trucking.
Heavy-duty road freight is a big contributor to CO2 emissions. In 2019, it accounted
for 22% of all transport-related CO2 emissions and over 5% of total energy-related CO2
emissions. Road freight is also a leading cause of transport-related pollutant
emissions, which can have detrimental impacts on human health, particularly inurban areas. Trucks contribute more than one-third of total transport-related
emissions of nitrogen oxides (NOX) and nearly half of total transport-related emissionsof fine particulate matter (PM2.5). The sulphur dioxide (SO2) share is much lower, at
7% of transport-related emissions, largely because fuel quality standards forautomotive diesel fuel in most major economies mandate low concentrations ofsulphur and because emissions from international shipping are much larger, though
the sulphur cap that came into force in 2020 will change this picture going forward(IEA, 2016). Trucks that use internal combustion engines need to use costly aftertreatment systems to reduce pollutant emissions. As pollutant emissions standards
across world continue to ramp up, after-treatment costs will continue to increase,

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giving an advantage to zero-emission powertrain technologies.

Energy Technology Perspectives 2020

Box 5.1

Chapter 5. Technology needs in long-distance transport

Types of trucks and their energy and emission implications

One way to categorise trucks is by their gross vehicle weight (GVW) – the maximum
rated curb weight of the vehicle plus its maximum rated payload.
Heavy-freight trucks (HFTs) have a GVW of more than 15 tonnes and are typically used
for long-haul delivery of goods. In some cases, multiple trailers are pulled by a single
tractor unit (called a “road train”). In regional and long-haul operations, the heaviest
HFTs often cover more than 100 000 kilometres (km) per year and, in some instances,
twice this distance. HFTs account for three-quarters of road freight activity, measured
by tonne-kilometres, and more than half of total truck energy use and CO2 emissions.
Medium-freight trucks (MFTs) are commercial vehicles with a GVW of 3.5-15 tonnes.
They include small trucks, rigid trucks and tractor-trailers as well as large vans. They
tend to be used in regional and urban operations but also include public andcommercial service vehicles, such as garbage trucks or firefighting vehicles. In
countries with a less-developed highway network, the function of some MFTs mimics
that of HFTs, i.e. they carry out long-haul operations and transport goods from central
distribution hubs (warehouses and ports) to their final destinations or transport bulk
building materials and resources. MFTs consume around one-quarter of total energy
used in road freight and an equivalent share of emissions. Together, HFTs and MFTs
are categorised as heavy-duty trucks.
Light-commercial vehicles (LCVs) have a GVW of less than 3.5 tonnes and are used
for a variety of tasks, including small-scale postal and commercial ”last-mile”
deliveries, transporting industrial goods and building materials to and from work sites,and providing other non-freight commercial services (e.g. by plumbers andelectricians). Their mostly urban operations and lower total weight make LCVs goodcandidates for electrification (Chapter 2), with range extenders or additional powersystems (e.g. fuel cells) in the case of very intensive use. Hence, while the spread of
LCVs will help with the deployment of alternative fuelling infrastructures, they are notconsidered “hard to abate” like heavy-duty trucks, and so are not considered in thischapter.

Despite the sizeable contribution to global oil demand and CO2 emissions, roadfreight historically has not been the focus of policy as much as passenger vehicles.
Although policies to curb air pollution emissions from road freight vehicles exist in
many countries, only five countries – Canada, China, India, Japan and United States– and one regional block, the European Union, have adopted regulations for fueleconomy/CO2 standards for heavy-duty vehicles (trucks and buses). However, this isstarting to change, with more countries planning to introduce standards for heavy-

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duty vehicles. In 2019, while more than 85% of global light-duty vehicle (LDV) sales

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

were covered by fuel economy/CO2 standards, less than 70% of heavy-duty vehicles
sales were in regions where such standards have been put in place (Figure 5.3). 3
Share of vehicle sales covered by fuel economy and/or CO2 emissions
standards by vehicle type and country/region
100%

Others90%

Others with recent LDV regulations

80%

India

70%

European Union

60%

Canada50%

United States

40%

China

30%

Japan

20%
10%
0%

LDVs

HDVs
2005

LDVs

HDVs

LDVs

2016

HDVs
2019e

IEA 2020. All rights reserved.
Notes: LDVs = light-duty vehicles; HDVs = heavy-duty vehicles; e= estimated. Countries and regions shown without
outline and in transparent colours have not adopted standards. India put new HDV fuel economy standards in placein April 2018. Mandatory reporting of fuel consumption and CO2 emissions began in the European Union in January
2019, and binding standards will come into force for four classes of heavy-duty trucks in July 2025.

Vehicle efficiency and CO2 emissions standards for heavy-duty vehicles are catching up
with those for light-duty vehicles.

Reducing CO2 emissions from road freight to zero is hampered by several factors.
There is limited scope for decoupling road freight activity from economic activity,
given that there are few practical alternatives to trucks for transporting goods inland.
Railways and inland waterways could take a larger share of the freight market, but
the infrastructure is not always in place, nor is it always feasible to build it. Alternative
low-carbon fuels, including biofuels and renewables-based electricity and hydrogen,could displace oil-based diesel and gasoline, but there are constraints on supply inthe case of biofuels, while electricity and hydrogen are not yet either technically or
economically viable for many truck operations, and in particular for regional andlong-haul operations. Major advances in all these technologies will be needed forthem to play a leading role in decarbonising road freight in the long term. While

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3
Fuel economy / CO2 emission standards do not yet cover all the heavy-duty truck sales, as they have yet to comeinto effect in some regions. For instance, in the European Union, CO2 emission standards will come into effect as from2025.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

improved fuel economy could reduce fuel use in the near term, trucks tend to be
used for more than a decade, slowing the pace at which they can be replaced. 4
The market for trucks is highly regional and specialised. There are fewer
manufacturers of heavy-duty trucks than cars in both the North American andEuropean Union markets, and most of them are national or regional. Elsewhere,
original equipment manufacturers (OEMs) in China and India are increasing sales oflow cost trucks in the Middle East, Africa, some Asian countries and Latin America,
where markets are more price sensitive. In the case of rigid trucks and, to a lesser
extent, tractor-trailers, one or two vehicle platforms tend to dominate sales for eachmanufacturer. Truck manufacturing plants tend to be more flexible than car
manufacturing plants in terms of being able to customise vehicle variants on an
assembly line. Engines, powertrains and other components (e.g. the axle
configuration and, in the case of tractors, the trailer type) can be fitted onto one or
two vehicle platforms, making it possible to produce hundreds or even thousands ofvariants capable of operating according to specific mission profiles and applications.
OEMs are more flexible than other manufacturers in accommodating customer
needs, not only in terms of loads and power, but also in terms of fitting diverse
powertrain options. This flexibility enables truck OEMs to customise the powertrains
ordered by clients on a single production line, including plug-in, battery and fuel cellelectric trucks, as well as fuel cell range extended trucks.
Limited model offers, together with higher purchase prices and limited
infrastructure, are the main barriers to adoption of zero-emission trucks.
Nevertheless, some logistic companies are responding to the growing pressure towork towards net-zero emissions in their operations by either retrofitting to electrictrucks on their own (e.g. Schenker AG, Climategroup and UPS), or placing large
orders from start-ups that are developing electric trucks in which they hold shares(e.g. Amazon) (Table 5.1). However, most of the retrofits and orders to date have beenin the light-commercial vehicle segment (i.e. less than 3.5 tonnes GVW).

They are typically operated for less than a decade by the first owner before being sold, either within the country or
exported (often from a developed economy to a developing one) where they may be used for another decade.

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4

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Logistic companies and electric trucks
Company

Target / action
All last-mile delivery to customers by ZEVs and 50% of all logistics to be net-zerocarbon by 2030.

AmazonIn 2019, ordered 100 000 battery electric delivery vehicles from the start-up
Rivian.
FedEx
Ingka Group (Ikea)

In 2018 acquired 1 000 commercial electric vehicles from Chanje.
Last-mile delivery to costumers to be fully electric by 2025. For Paris, Los Angeles,
Amsterdam, New York by 2020. It was achieved in Shanghai in 2019.

Schenker AG

Retrofitting existing diesel trucks to run on electricity due to a lack of models
available from automakers.

Deutsche Post DHL
Group

Net-zero emissions logistics by 2050 and delivery of mail and parcels to bedelivered by electric vehicles powered by renewables-based electricity in themedium term.

UPS

Ordered 10 000 electric trucks in 2020.

Technology pathways towards net-zero emissions
In the Sustainable Development Scenario, global CO2 emissions from the road freightsub-sector fall by 90% from around 1.8 Gt in 2019 to just 200 million tonnes (Mt) in
2070 (Figure 5.4). Net-zero emissions are not achieved until after 2070 due to thehigh cost of fully decarbonising road freight relative to other options to reach netzero emissions in the energy system as a whole. In the Stated Policies Scenario,
emissions continue to increase through 2045, peaking at 2.7 Gt around mid-century,
before gradually declining to around 2.3 Gt in 2070, about a 40% increase from 2019

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levels.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Global CO2 emissions from trucks by abatement measure (left) and technology
readiness level (right) in the Sustainable Development Scenario relative to theStated Policies Scenario, 2019-70

Gt
Gt CO
CO22/yr
/yr

3.0
3.0

Gt CO2

CO22reductions
reductions bybytechnology
technology
CO
Policies Scenario
Stated PoliciesStated
Scenario

2.5
2.5

Cumulative CO2 emissionsby TRL category
70
60

2.0
2.0

50

1.5
1.5

40
30

1.0
1.0
0.5

20
Sustainable Development Scenario

0.5
0.0
2019
0.0
-0.5
2019

10

2030

2040

2050

2060

2070

2030

2040

2050

2060

2070

Operational efficiency

Technology performanceElectrification

Hydrogen

Bioenergy

Other fuel shifts

0MatureEarly adoption
Demonstration
Prototype

IEA 2020. All rights reserved.
Notes: Some operational efficiency technologies and measures, such as platooning and retiming urban deliveries,
improve technical vehicle efficiency. The effects of switching to biofuels, electricity and hydrogen (fuel cell electric)
vehicles are distinguished from other fuel switching, which are primarily from diesel to natural gas and synthetic
fuels. TRL = technology readiness level. See Box 2.6 in Chapter 2 for the definition of the maturity categories: large
prototype, demonstration, early adoption and mature.

For heavy-duty trucks, operational and technical efficiency together contribute nearly 45%,
electricity an additional 31%, and hydrogen and biofuels together almost 35% of cumulative
CO2 emission reductions in the Sustainable Development Scenario.

The kinds of action envisaged to reduce CO2 emissions from heavy-duty trucks in the
Sustainable Development Scenario fall into three main categories: 5Systemic improvements in road freight operations and logistics. Such
improvements, akin to material efficiency improvements in the industrial sector,
can help to curb the growth in road freight trucking activity and improve the onroad efficiency of trucking. These include near-term measures with low barriers
to adoption (e.g. retiming urban deliveries to periods of the day when congestion
is low, driver fuel efficiency training and a wide range of measures to improve theutilisation of vehicles to maximise load). 6 Mid-term measures with moresignificant technological or institutional barriers to adoption (e.g. platooning or

For further discussion of the three key strategies for decarbonising road freight, see: The Future of Trucks:
Implications for Energy and the Environment (IEA, 2017).
6
Operational efficiency measures, such as maximising loads (e.g. via digital freight matching or backhauling), routing
or driver training, as well as vehicle efficiency retrofits, can have an immediate impact on road freight emissions,
thereby making attractive targets for elements of economic recovery packages to respond to the Covid-19 crisis.

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5

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

broader adoption of high-capacity vehicles) that could transform road freight
operations entirely, but for which eventual adoption and impacts are uncertain,
for example measures involving the use of autonomous trucks. Companies in
China and the United States (e.g. MangBang Group, Uber Freight), have taken thelead in adopting new information and communication technologies, including
digital freight matching which helps to ensure that trucks operate closer to theirfull weight or volume loads in order to increase operational efficiency. Suchbusiness models are likely to catch on in other regional markets.

Improved fuel efficiency. For the existing stock of trucks, aerodynamic retrofits
can yield immediate improvements in fuel economy. For new trucks, othertechnologies, such as the use of lightweight materials and improvements to truck
engines, transmissions and drivetrains can increase vehicle efficiency. 7

Adoption of low-carbon alternative fuels. These include biofuels, synthetic fuels,
natural gas, electricity and hydrogen. Under stringent regulatory and technicalregimes, they can all contribute to reducing air pollution and, in the case ofelectricity and hydrogen, do not directly emit CO2. 8 Biofuels account for most of
the increase in the use of alternative fuels in the Sustainable Development
Scenario, though electricity and hydrogen make a growing contribution,
especially in the second half of the projection period (Figures 5.4 and 5.5). The
consumption of biofuels jumps more than six-fold from 13 million tonnes of oil
equivalent (Mtoe) in 2019 to 80 Mtoe in 2070.

In the near term in the Sustainable Development Scenario, technical and operational
efficiency (including hybridisation) contribute most to reducing the carbon intensityof heavy-duty truck operations, though electric trucks begin entering the fleet insmall but growing numbers in the 2020s. Driven by favourable economics in someregions, truck operations that require large vehicles and are heavily utilised (typicallymore than 100 000 km/year) shift to liquefied natural gas (LNG), while smaller trucks
with lower mileage and less regular operations adopt compressed natural gas (CNG).
Natural gas consumption growth by trucks is modest, reflecting its limited potential
to reduce CO2 emissions on a well-to-wheel basis. The share of biofuels also increases
in the 2030s, including biofuels that can be blended directly with gasoline and diesel,
as well as biomethane, which is virtually indistinguishable in chemical properties
from conventional natural gas.

Many of the improved fuel efficiency measures that can be retrofitted in the existing fleet or are available in new
trucks are not taken up, despite the attractive financial savings they can bring. Some reasons include capitalconstraints, uncertainty on payback period, misalignment of economic incentives and inconsistent regulations andenforcement across jurisdictions. Hurdles to efficiency technologies are particularly pronounced in the case ofindividual truck owner-operators or small fleets, which account for a large share of road freight operators, even insuch countries as Canada, members of the European Union and the United States.
8
IEA accounting of direct combustion emissions of fossil fuels treats emissions from the production of synthetic fuels
separately (as upstream emissions) and treats biofuels as net-zero emissions. Hence it excludes the emissions
considered by analytical frameworks and regulations based on well-to-wheel accounting for non-fossil based fuels.

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7

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

In the longer term, decarbonising trucks requires a transition to powertrains that relyon electricity and hydrogen. The scaling up of plug-in and battery electric trucks inthe projections starts with medium-freight trucks in the 2020s in urban operations,and then extends to broader regional operations. Fuel cell electric MFTs as well as
HFTs begin to diversify the fuel mix away from fossil and liquid alternative fuels
starting in the late 2030s and operations extend to long-haul routes (Figures 5.5 and5.6). As battery, plug-in, and fuel cell electric trucks penetrate road freight their more
efficient powertrains drive improvements in the energy intensity of trucking. By 2070,
in the Sustainable Development Scenario, the equivalent of more than 33 Tesla
gigafactories are needed to equip heavy-duty trucks with batteries for energy
storage. Hydrogen and electricity together account for around 70% of global final
energy use from trucks in the Sustainable Development Scenario, requiring nearly
2 400 terawatt-hours (TWh) of electricity (equivalent to the current combined
electricity use of the Russian Federation and India) and 83 Mt of hydrogen (more than
15% of total hydrogen used in 2019).

800

4.0

700

3.5

600

3.0

500

2.5

400

2.0

300

1.5

200

1.0

100

0.5

0

2019

2030

2040

2050

2060

2070

0.0

Synthetic fuels
Average vehicle efficiency (Lde/100 tkm)

Final energy demand (Mtoe)

Global heavy-duty trucking energy demand by fuel and average vehicle
efficiency in the Sustainable Development Scenario, 2019-70
HydrogenElectricity
Biomethane
Ethanol
Biodiesel
Natural gas
Gasoline
DieselMFTs
HFTs

IEA 2020. All rights reserved.
Notes: Lde = litres of diesel equivalent; tkm = tonne-kilometres; MFTs = medium-freight trucks (3.5-15 tonnes GVW);
HFTs = heavy-freight trucks (> 15 tonnes GVW). Efficiency improvements more than offset activity growth in the2030-60 time period, but after 2060 activity demand growth overwhelms efficiency improvements, leading toincreases in final energy demand.

Biofuels, electricity, hydrogen and synthetic fuels progressively displace oil-based fuels fortrucks in the Sustainable Development Scenario.

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Market entry in the 2020s of electric trucks in plug-in hybrid, fuel cell electric, andbattery electric powertrains is accelerated by policies such as zero-emission vehicles(ZEV) mandates for medium- and heavy-duty trucks, as pioneered by California andother US states, and by the co-ordinated roll out of supporting infrastructure.
Installation of fast, ultra-fast and mega charging (from 100 kilowatts minimum to ashigh as 1-2 megawatts or more) on regional and long-haul routes enables long-Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transportdistance electric trucking operations. Hydrogen refuelling stations, which to datemostly serve LDVs, will need to be designed and equipped to serve MFTs and HFTs.
Electric road systems, which enable vehicles equipped with batteries and electricmotors to draw power and charge while driving – and so are capable of charging
plug-in-, battery-, and fuel cell electric trucks – expand their operations. Initial roll out
is likely to be in the most heavily trafficked road freight corridors.
By around 2040, fuel cell electric trucks using hydrogen begin to enter the fleet insignificant numbers as the cost of fuel cells and hydrogen storage tanks decline as
economies of scale are achieved in the LDV sub-sector. This requires thedevelopment of supply and refuelling infrastructure capable of delivering hydrogenat competitive prices, particularly for long-haul intensive use on regular routes andoperations (IEA, 2019a).
Heavy-duty truck fleet by powertrain in the Sustainable Development Scenario
million units

100

FCEV

80

BEV

60

PHEV
HEV

40

CNG/LNG

20

ICE
0

MFTs

HFTs
2019

MFTs

HFTs
2040

MFTs

HFTs
2070
IEA 2020. All rights reserved.

Notes: FCEV = fuel cell electric vehicle; BEV = battery electric vehicle; PHEV = plug-in electric vehicle; HEV = hybrid
electric vehicle; CNG/LNG = compressed natural gas/liquefied natural gas vehicle; ICE = internal combustion engine;
MFTs = medium-freight trucks; HFTs = heavy-freight trucks.

Nearly half of medium-freight trucks have hybrid or full electric powertrains by 2040, whilemost medium- and heavy-freight trucks operate with batteries or hydrogen fuel cells in
2070 in the Sustainable Development Scenario.

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As late as 2050, most trucks in the global fleet continue to rely on internal
combustion engines, although hybrid powertrains become more common in MFTs
and a growing numbers of medium- and heavy-freight trucks begin to electrify.
Countries that roll out charging/fuelling infrastructure in a timely manner while
promoting the adoption of these vehicle technologies are the first to transition to
zero-emission trucks. Broadly speaking, this implies that early deployment of zeroemission trucks is likely in China, Japan, Korea, EU countries and North America.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

The lower technology readiness level of zero-emission powertrain technologies forroad freight suggests that their uptake will take time to reach cost competitivenessfor long-haul operations. This has two main implications: first, it suggests that future
uptake in particular of hydrogen- and electricity-based trucks is very uncertain andthe balance of long-term technology uptake might shift depending on progress on
relevant technologies and the supporting infrastructure as well as policy support overthe next decade. Second, it means that some HFTs with ICE powertrains using a mixof bio- and fossil-based diesel, natural gas and methane and synthetic fuels are likely
to still be in operation at the time the energy sector as a whole reaches net-zeroemissions. Alternative low-carbon liquid fuels will be crucial to facilitate a fastertransition away from high-carbon fuels. Biofuels, particularly biodiesel (but alsoethanol and biomethane), are a key alternative to fossil fuels for trucks in the
Sustainable Development Scenario. Policy frameworks that encourage R&D of biofuel
production pathways with low or net negative lifecycle greenhouse gas (GHG)
emissions can foster their deployment and help address the entry hurdles of higher
costs than conventional fuels and limited production volumes. Cellulosic and lipidbased feedstocks feed repurposed biorefineries (e.g. via biomass-to-liquids andalcohol-to-jet pathways) and transition to this new, highly specialised fuel pool.
Synthetic fuels enter the fuel mix for heavy-duty transport in the 2040s, and while
the share of these synthetic “drop-in” diesel substitutes remains low, it grows
steadily. As with biofuels, synthetic fuel production also has the potential to transition
from the road freight sub-sector to aviation, which continues to require liquid fuels
throughout the second half of the century.

Readiness and competitiveness of emerging
technologies
As discussed, the three categories of technology-related measures – systematic
improvements in operations and logistics, better fuel efficiency and uptake of lowcarbon fuels – plays an important part in decarbonising trucks in the Sustainable
Development Scenario. In the near term, technologies are available to improvelogistical, operational and energy efficiency which contribute to system-level
improvements and lower trucks’ fuel consumption, while efforts are ongoing todevelop cleaner fuels and the powertrains capable of running on them (Table 5.2). In
the longer term, progress is needed to enable the use of electricity and hydrogen inroad freight operations, including the infrastructure to produce, transport andprovide power to fuel cell EVs and BEVs as they displace trucks burning fossil fuels.
There are many emerging technologies that may be able to contribute. They are atvarious stages in the development process and which ones succeed and to what

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extent depends on a variety of factors.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Status of the main emerging technologies in heavy-duty road freightTRL

CO2 reduction
means

System and logistics efficiency
Platooning
8-9
Reduction in
aerodynamic
drag

Present-2025 (Lowmedium)

Autonomous
trucksEnergyand fuel
efficiency

2025-35(High)

Energy efficiency
Lithium-ion
5-9
batteries

Electrification

Present-2050 (High)PEM fuel cells

HydrogenPresent-2030 (High)

5-8

7-9

Alternative fuels and powertrains
ED95 engines
8-9
Fuel switching

Present(High)

Electric HDTs

8-9

Electrification

Present(High)FCEV HDTs

8-9

HydrogenPresent(High)

PAGE | 265

Deployment status

2008: Japan Energy ITS demonstration of CAV
platoons.
2011: California PATH programme.
2014: NREL SmartTruck demonstrations.
2016: European Truck Platooning Challenge.
United States Caltrans/Volvo,
Auburn/Peterbilt demonstrations.
2017: European Union SARTRE project
demonstration of V2V.
2019: Plus.ai made an autonomous truck trip
across the United States.
2020: Einride recruits remote operators forautonomous trucks.
Various chemistries and designs are available.
Li-ion batteries with various chemistries
installed on cars (NMC, NCA), and buses andtrucks (also LFP) are continuously improving.
Other lower TRL chemistries, such as solidstate Li-metal, could make battery electrictrucks commercially viable in the mid to longterm.
The US Department of Energy, through its
national laboratories, together with Toyota,
Ballard, and Hyundai, are leading in basic andapplied PEM research and commercialisation.
Scania has pioneered compression ignitionengines that can run on 95% ethanol.
Hundreds of trucks are operating in Sweden.
2019: cumulative global deliveries of electric
HDTs totalled more than 23 000, more than
95% in China. Most of these were battery
electric trucks, and most were MFTs. BYD,
Cummins, Daimler, Emoss and Fuso were theearliest manufacturers. The Tesla Semi model
will soon be on the market.
Daimler, Fuso, Toyota, Hyundai, Scania,
Volkswagen and PSA are developing FCEV
trucks, ranging from prototypes tocommercial models. The start-up Nikola has
secured substantial funding and many preorders for its semi-trucks. FedEx and UPS are
testing fuel cell range-extender Class 6
delivery vehicles. In Europe, the h2Share
Project is demonstrating several heavy trucks
over 12 tonnes.
IEA. All rights reserved.

TechnologyYearavailable(Importancefor net-zeroemissions)Energy Technology Perspectives 2020

Technology

TRL

CO2 reduction
means

Alternative fuels infrastructure
Megachargers / 5-6
Electrification
HPCCV

Chapter 5. Technology needs in long-distance transportYearavailable(Importancefor net-zeroemissions)
Present- 2030 (High)

Hydrogenrefuelling
stations

9

HydrogenPresent(High)

Electric roadsystems

6-9

Electrification

Present(High)

Deployment status

Tesla is developing prototype super-fastchargers (1.2-2 MW). Daimler is working on acharger with a rate of up to 3 MW.
2019: more than 400 HRS stations, most ofwhich are in Japan, Germany, United States
and China, supply H2 to road vehicles. Morelarge stations dispensing H2 at 700 bar are
being built.
Siemens has built a handful of demonstration
catenary systems on highways, totalling morethan 30 km, in Sweden and Germany. In-road
conductive and inductive designs are also
being tested.

Notes: TRL = technology readiness level. BEV = battery electric vehicle. PHEV = plug-in hybrid electric vehicle. FCEV =fuel cell electric vehicle. HDT = heavy-duty truck. CAV = Connected and autonomous vehicles. NREL = National
Renewable Energy Laboratory. V2V = Vehicle-to-vehicle. NMC = Nickel manganese cobalt. NCA = Nickel manganesealuminium. LFP = Lithium iron phosphate. PEM = Polymer electrolyte membrane. HPCCV = High power charging forcommercial vehicles. HRS = Hydrogen refuelling stations. A broader list of technologies compatible with a lowcarbon transition for the heavy-duty road freight sub-sector is presented in the technology mapping portion of The
Covid-19 Crisis and Clean Energy Progress (IEA, 2020b).

Cost-effective and technically viable energy efficiency technologies for trucks andtrailers, engines, transmissions and drivetrains are capable of reducing the specificfuel consumption of road freight trucks by 15-25% in 2025 and by 25-35% in 2035
relative to a 2015 baseline – improvements that are achieved in the Sustainable
Development Scenario. 9 This represents a marked acceleration compared withrecent trends. Vehicle efficiency standards that effectively mandate adoption oftechnologies at or near the limit of economic viability would be needed to achieve
this acceleration. Technical and operational barriers to efficiency improvements,
such as imperfect information, can be addressed in various ways, particularly
through green freight programmes. 10
The adoption of alternative fuels and the powertrains that are designed to use themis a critical factor in the longer term, particularly for heavy-duty trucks that makeregional and long-haul journeys. The eventual mix of low-carbon and, eventually,

Techno-economic analyses of the cost-effective potential for technical efficiency improvements vary by truck typeand mission profile, and according to differing methodologies and baselines. The range presented here reflects
analyses undertaken by: Dünnebeil et al., 2015; Norris and Escher, 2017; Verbeek et al., 2018; US EPA & NHTSA, 2016;
Krause and Donati, 2018; ICCT 2018.
10
Green freight programmes are consortia of public and commercial stakeholders that share technical and operational
efficiency information and promote technologies and practices across the freight sub-sector by combining carbon
emissions accounting and disclosures with action plans to reduce emissions and improve operational and technicalefficiency.

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9

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

zero-emission trucks that will be rolled out is highly uncertain and will depend on thepace of technology development in competing – and sometimes complementary –options on the fuel supply side and in batteries and fuel cells. The high costs of
biofuels reflect feedstock harvesting, collection and processing, each of which
involves considerable expense and requires substantial energy inputs (ICCT, 2011;
Holland et al., 2015). In addition to costs, biofuels face concerns about sustainability,competition with food production and the extent to which they can deliver
meaningful reductions in GHG emissions. Today synthetic fuels are far lesstechnologically advanced and commercially viable than biofuels, though they have
many potential advantages. For example, using hydrogen produced by electrolysis
or via steam reforming of natural gas or biomethane with carbon capture, utilisationand storage (CCUS) to produce drop-in substitute diesel via Fischer-Tropschtechnologies may prove to be more attractive than using many types of biofuels interms of sustainability, availability and emissions impacts and eventually morecompetitive in terms of the total cost of vehicle ownership.
Battery electric and fuel cell electric vehicles – the only vehicles with no exhaustemissions – are both promising options to reduce CO2 and air pollution emissions
from the transport sector. Relative to LDVs, the challenges to electrify freight trucks
are high due to vehicle weight, haulage weight and volume, hours in service anddistances driven. Notably though an increasingly wide selection of all-electric trucks
is entering the market in the less than 15 tonnes category.
The most promising fuel and vehicle platforms for decarbonising long-distance roadfreight – electricity and hydrogen – are crucially dependent on the development of
supporting infrastructure. In the case of electricity, the rapid deployment of lightduty EVs, including LCVs and urban buses, requires growing networks of charging
infrastructure. In the case of hydrogen, the deployment of fuel cell EVs depends onhydrogen refuelling stations (HRS). Japan, Germany, California, China and Korea haveeach deployed between 60 and 120 HRS, which primarily serve cars. China has taken
the lead in deploying fuel cell electric buses and trucks, and it may benefit as the firstmover in learning from successes and failures in co-ordinating the roll out of HRS
with fuel cell electric and range extended fuel cell heavy-duty trucks.
Led by Sweden and Germany, European Union members and the United States areleading in pre-commercial demonstration of electric road systems (ERS). 11 Over the
past decade, the United States and Sweden have built small-scale prototypes anddemonstrations of both conductive and inductive ERS. These trials together with agrowing body of academic and industry research suggest that the capital costs of
ERS systems can be quickly amortised on heavily trafficked freight corridors. For thetruck owner/operator, the additional costs of vehicle systems that are needed toElectric road systems provide power to vehicles while driving which enables dynamic charging. The simplest version
of ERS uses catenary (overhead) cables and a pantograph, and is essentially a higher speed version of trolley bus
systems. Conductive and inductive systems built into a roadway (‘in-road’ systems) at technology readiness level 6-7
also have been demonstrated.

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11

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

enable dynamic charging, e.g. a pantograph, in the case of overhead catenary
systems, can be recovered through reduced fuel expenditure for hybridised electric
powertrains, which can include plug-in hybrid trucks and fuel cell or range extended
trucks, or through reduced battery capacity of pure battery electric or fuel cellelectric trucks operating on an ERS. If such research and demonstration projects are
successful in improving the economic, environmental, and operational benefits of
ERS, it may provide a strategic opportunity to stimulate ZEV truck adoption for heavily
trafficked freight corridors. There may be scope for ERS to expand and accelerate
the application of ZEV trucks for drayage (i.e. short-distance moving of freight in the
shipping and logistics industries), regional and long-haul journeys. Overall, ERS canserve as a near-term bridge to catalyse commercialisation of ZEV powertrains in awide range of applications.
The future mix of low-carbon fuels and powertrains will be determined by cost
reductions and performance improvements, including in energy and power density,
durability of batteries and fuel cells, and the cost of delivering electricity andhydrogen. Assuming that the costs of delivering hydrogen at the pump can bebrought down to less than USD 5 per kilogramme (kg), and also assuming that fuelcells can be mass produced to meet performance targets envisioned by OEMs andgovernment, fuel cell trucks would compete favourably against battery electric

Total cost of ownership (USD/km)

trucks at vehicle ranges above 500 km, opening a niche in regional and long-haultrucking (Figure 5.7) (IEA, 2019a).

1.00

The effect of battery and fuel cell prices on total cost of ownership of heavyduty trucks in long-haul operations
160 USD/kWh

0.95
0.90
0.85

80 USD/kWh

0.80
0.75

176 USD/kW

0.70

60 USD/kW

0.65
0.60

BEV
200

400

600
Vehicle range (km)

800

1000

FCEV

IEA 2020. All rights reserved.
Notes: kWh = kilowatt-hour; kW = kilowatt; BEV = battery electric vehicle; FCEV = fuel cell electric vehicle. The
delivered price of hydrogen is assumed to be USD 5/kg, with about USD 4/kg related to the cost of hydrogenproduction (via centralised steam methane reforming with CCUS or electrolysis), and, in the case of off-site
production, of transporting the hydrogen to the refuelling station. An additional 1 USD/kg mark-up comes from theamortised capital and operating costs of the hydrogen refuelling station itself.

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The prospects for competing powertrain options hinge on improvements in the cost andperformance of batteries and fuel cells.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Installing hydrogen refuelling stations, EV fast chargers and ERS will be very
expensive. Plus they need to be deployed as to ensure high utilisation in order tokeep costs down. Depending on infrastructure utilisation, the total costs of owningand operating fuel cell electric trucks are lower than those of battery electric trucks
at daily mileages of 500-700 km. In the medium term, the utilisation rate of hydrogen
refuelling stations has a bigger impact on the total cost of ownership than theutilisation rate for fast chargers.
In the medium term, hybrid electric trucks using biofuels or synthetic fuels may well
be able to compete on a total cost of ownership basis with oil-based diesel in somecases, particularly in regions with high diesel taxes. In the longer term, once thenecessary infrastructure has been rolled out and more efficient zero-emission
powertrains are available, alternative electric powertrains (i.e. battery and fuel cellelectric trucks) look likely to become more competitive than internal combustion
engines, assuming higher fuel taxes based on local pollutant and CO2 emissions, asin the Sustainable Development Scenario, or an approach which has an equivalenteffect (Figure 5.8).

USD/kmTotal cost of ownership of heavy-duty trucks by low-carbon fuel in the
Sustainable Development Scenario, 2040 and 2070
1.4

Synthetic fuel (best case)
Biofuels (best case)

1.2

Low utilisation of infrastructure

1.0

Refuelling, charging

0.8

Electricity, H₂, fuel: supply + T&D
Operations and maintenance

0.6

Battery, fuel cell
0.4
0.2

FCEV

BEV 700

Hybridcatenary

2040

DieselHybridFCEV

BEV 700

Hybridcatenary

DieselHybridBase truck cost

2070

IEA 2020. All rights reserved.
Notes: T&D = transmission and distribution losses; FCEV = fuel cell electric vehicle; BEV = battery electric vehicle. The
Y-axis intercept of the right-hand side figure corresponds to the cost of the vehicle glider (i.e. the vehicle basewithout the powertrain) plus minor component costs. Infrastructure covers stations, charging points and catenarylines. Fuel supply costs include all upstream costs in the case of conventional fuels, biofuels and synthetic fuels, but
include only the costs of producing and transporting electricity and hydrogen for these two energy carriers. For
electricity and hydrogen, the additional costs of dedicated infrastructure are broken out explicitly in the items
shown in yellow. These reflect the price mark-up for hydrogen and electricity that is determined by how quickly the
infrastructure provider is able to amortise the capital and operating costs of hydrogen refuelling stations (for fuelcell electric trucks), fast charging (for battery electric trucks) and catenary lines, as the representative technology
for the electric road system (for hybrid diesel trucks with 25 km of all-electric range). The speed of this amortisation
depends on the frequency of infrastructure of utilisation; the yellow boxes in the figure show the variability arisingfrom representative assumptions of this frequency. In the case of hydrogen stations, the utilisation ranges from 1050% in 2040 and 20-50% in 2070. In the case of fast charging, the range is 10-15% both in 2040 and 2070. For
catenary systems, the utilisation ranges shown reflect daily truck traffic of 600 - 2 000 vehicles in 2040, and 1 000 2 000 vehicles in 2070, reflecting the current range of heavily utilised truck corridors. For biofuels and synthetic
fuels, costs reflect the lower threshold of potential production costs in 2040 and 2070 (for a mix of biomass-toliquids [BtL] and hydrotreated vegetable oil [HVO] in the case of biofuels), plus taxation (33%) to reflect the
detrimental impacts of local pollutant emissions.

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IEA. All rights reserved.

Prospects for competing powertrain options hinge on the future costs and performance ofbatteries and fuel cells as well as accompanying infrastructure.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Strong policy intervention will be needed to drive the needed technological changes.
Policy approaches should support and promote technology demonstrations to test
the cost competitiveness, performance and emission impacts of the various fuel andpowertrain options in diverse contexts. Earmarking a share of fuel taxes to fundpublic-private cost-sharing for the infrastructure required for alternative fuels has
accelerated deployment of fast charging stations and hydrogen refuelling stations in
California and could be adopted elsewhere. Schemes that prohibit or adequately
price emissions of air pollutants (i.e. zero- and low-emission zones) can promote thedeployment of ZEV infrastructure and vehicles in cities and ports. Government
support has also been of critical importance in the development of first-of-a-kindElectric Road Systems demonstration projects in Sweden and Germany, and has
played a major role in enabling recent and on-going development of hydrogen
refuelling stations in California, China, France and Japan, which are only beginningto be designed and equipped to fuel heavy-duty vehicles. 12 Programmes such as
California’s Low Carbon Fuel Standard, which ensures that the overall carbon
intensity of fuel declines at a clearly defined pace, could provide an effective
incentive to invest in the fuels that are needed to power the transition to low-carbon
road freight transport.
Continued support for R&D – from basic research through to demonstration andmarket deployment – is needed to accelerate battery and fuel cell advances, and tointegrate electrochemical energy storage technologies with motors and powertrains.
Supply-oriented policies such as ZEV mandates 13 would help to ensure that, once
market ready, alternative fuelled vehicles hit the road (see Chapter 7).
Given the various strengths and weaknesses of competing fuel and powertraintechnologies, a range of low-carbon fuel and powertrain options may emerge andco-exist in markets, as projected in the Sustainable Development Scenario. In
contrast to the case of LCVs operating in urban environments, where fully electric
powertrains (perhaps relying on fuel cells or fuel cell range extenders) look likely todominate, at the current point it is too early to be able to discern a winner (or winners)
for heavy-duty trucks for long-distance and more intensive applications among
known options such as biofuels, plug-in hybrids, battery electric vehicles and fuel cell

Hydrogen refuelling stations servicing heavy-duty vehicles need to be equipped to handle storage pressures ofgreater than 350 bar (typically 700 bar), precooling for hydrogen to be dispensed, and other equipment (e.g. valves
and nozzles) that enable faster flow rates and hence deliver hydrogen at acceptably short fueling times, among otheradditional requirements beyond what is needed to provide hydrogen to light-duty fuel cell electric vehicles.
13
The US state of California has highly successful ZEV mandates for LDVs to accelerate electrification and other zeroemission technologies. In July 2020 it took steps to pave the way to extend that scope to heavy-duty trucks. Spurredby the passage of California’s Advanced Clean Trucks rule, which requires original equipment manufacturers that
produce trucks for the California market to sell increasing shares of ZEV trucks in each segment starting in 2024.
Fifteen other US states and the District of Colombia have joined California to sign a memorandum of understandingthat aims to boost the ZEV truck market.

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12

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

electric trucks. More demonstrations and deployment are needed to learn, gain
experience and see which technologies and fuels can evolve to deliver zero-emission
heavy-duty trucking.

Maritime shipping
Overview and outlook in the wake of Covid-19
Maritime shipping is a critical part of international trade and the primary means bywhich physical goods are transported over long distances. For many countries it
accounts for a significant portion of national freight movements. 14,15 Maritime
shipping (referred to as shipping in this section) accounts for about three-quarters of
total freight transport activity (including inland transport) worldwide as measured bytonne-kilometres. Shipping is the least energy-intensive way to carry goods: despite
the size of its share of total freight transport activity, it is responsible for about onefifth of the energy used for freight transport and just 8% of total transport energy use.
The vast majority of energy used in shipping relies heavily on oil-based fuels and iscarbon intensive. Maritime shipping consumed 221 Mtoe in 2019, of which almost
180 Mtoe (about 3.7 mb/d) was heavy (residual) fuel oil and 45 Mtoe (about 1 mb/d)
was distillate oil products (maritime diesel oil and maritime gas oil). Gas, mainly
liquefied natural gas, accounted for 0.1 Mtoe. CO2 emissions from shipping in 2019
totalled 710 Mt – equal to one-fifth of total CO2 emissions from freight transport,almost 10% of total transport emissions and around 2% of total energy sector
emissions.
The Covid-19 pandemic has hit the maritime shipping sub-sector hard. Global tradefell by about 3% in the first-quarter of 2020 and estimates suggest that it fell by morethan 20% in the second-quarter (CCSA, 2020). Maritime shipping typically accounts
for three-quarters of global trade: shipping volumes have plunged as a result of
sharply reduced demand and supply constraints caused by the closure of industrial
facilities and critical trade routes across borders during the lockdown. In ports
located in Asia, Europe and North America, cargo and container trading volumes
were 10-17% lower in the first half of 2020 than the same period in 2019; at major
Chinese hubs they were 20-50% lower at the peak of the pandemic in China in thefirst-quarter of 2020 (Shanghai International Shipping Institute, 2020). Large

The data and projections in this section refer to international maritime shipping. National shipping, which accounts
for around 5% of fuel consumption and CO2 emissions from freight transport (2% of total transport), faces similar
technology challenges as international shipping, except for generally shorter trips.
15
The IEA’s international shipping CO2 emissions estimates, which are based on national statistical data on fueldelivered to internationally registered vessels, are lower than those estimated by the International Maritime
Organization (IMO), which are based on ship activity and associated fuel consumption. For instance, for 2012 the IEA
estimates international shipping emitted about 600 MtCO2, while the IMO estimates that it emitted about 800 MtCO2.
The analysis presented in this section is calibrated to IEA’s statistics.

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14

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transportshipping operators, particularly of container ships, have responded to reduced tradewith blank sailings. 16 On some important shipping route container ship capacity was
reduced for a time by up to 50% (Agility, 2020). At the third-quarter 2020, shipping
volumes have started to recover, and estimates suggest that shipping activity in 2020
as a whole is set to be about 7% lower than in 2019. A recovery to pre-Covid-19 activity
levels in 2021 is possible, but this ultimately will depend on the duration of thepandemic and the speed of economic recovery.
The maritime shipping sector is at a crossroads. There are a growing number ofregulations requiring ships to reduce their GHG and air pollutant emissions. Thisposes a real challenge for the industry. Shipping by its nature mostly involves large
vessels travelling long distances, and existing alternatives to oil-based fuels are either
impractical or very costly. Moreover ships have a long lifetime of 20-35 years, which
inhibits the uptake of new low-carbon technologies. The extent of the challenge
varies according to the type of vessel. Reducing emissions from large transoceanic
ships will be particularly onerous, requiring large investments and co-ordinatedefforts among fuel suppliers, ports, shipbuilders and shippers, (especially so-called
tramp shipping) (Box 5.2).
Various short term and longer term decarbonisation options for shipping areavailable. In the short term, there is considerable potential for curbing fuelconsumption with energy efficiency, measures to optimise supply chains and slow
steaming. In the medium to longer term, significant emissions reductions could beachieved by switching to low-carbon fuels such as biofuels and emissions-freehydrogen-based fuels (ammonia and hydrogen), which look likely to be particularly
important for long-range transoceanic travel. Larger ships that carry freight over long
distances need fuels with high energy density. Coastal short-distance ships can use
less energy-dense fuels, making a switch to battery electric power technicallyfeasible.

Box 5.2

Types of ships and their energy and emissions implications

Ships come in many types and sizes, each designed for specific cargos, routes or
purposes and each with differing fuel consumption characteristics. The maincategories by types of cargo are:

A scheduled sailing that has been cancelled by a carrier or shipping line so that a vessel skips certain ports or eventhe entire route.

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Energy Technology Perspectives 2020



Chapter 5. Technology needs in long-distance transport

Tankers: liquid or gaseous bulk commodities. Oil tankers and chemical tankers
are the most common. The fleet of LNG tankers has been expanding rapidly inrecent years (DNV-GL, 2020a).



Bulk carriers: non-liquid unpackaged bulk cargo such as grain, ore or coal.

Container ships: cargo packed in containers.

General cargo ships: any type of dry non-bulk cargo. These ships are adaptable
vessels that can be equipped with one or more cranes to facilitate loading andunloading.



Other ships: includes several types of vessel, e.g. roll-on/roll-off ferries (Ro-Ros)such as ferries and dedicated car carriers, and service vessels – such as tugs andoffshore supply vessels.

Ships can also be categorised according to two main types of operations, which have
implications for how easily they can be refurbished, replaced or converted to run onalternative fuels. The first type is liners, which travel on fixed schedules and routes.
Worldwide there are approximately 6 000 liners in operation, primarily in the form ofcontainer ships and RoRo ferries (World Shipping Council, 2020). Liners are likely to
be well placed to make the transition to new fuels, as it is easier to predict their fuelneeds when new bunkering facilities are installed at ports along their regular shipping
routes. The other type – tramp-trade ships – do not have a fixed schedule and arechartered on the spot market, going from port to port dropping off and picking up
cargo according to shippers’ needs.
Specific fuel consumption (energy use per kilometre travelled) depends on several
variables, but the most important ones are speed and deadweight tonnage. Container
ships generally have the highest fuel consumption as they travel at high speeds(specific fuel consumption increases with the square of the speed), carry large
volumes of goods and cover the longest distances. This is due to the fact that theynormally operate as liners, which means that they have a busy schedule with only
short stops to load and unload containers. This explains why container ships are thelargest contributors to energy consumption and CO2 emissions in the shipping sector,
even though bulk carriers account for a larger share of total transport activity in

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maritime shipping (Figure 5.9).

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

120

250

Mt CO2140

Mtoe

Trillion tonne-km

Global freight activity, energy consumption and CO2 emissions in international
maritime shipping by vessel type and fuel, 2019

200

700
600

100

500

150

80

800

400

60

100

300

40

200

50

20
0

By vesseltype

By fuel0100
By vesseltype

By fuel0

Final energy demand

Activity

By vesseltype

By fuelCO₂ emissions

Vessel types:

Tankers

Bulk carriersContainer ships

General cargos

Fuels:

HFO

DieselOthers

LNG

Other ships

IEA 2020. All rights reserved.
Notes: HFO = heavy fuel oil. Other fuels include LNG, biofuels and electricity.

Bulk carriers and container ships dominate in international shipping, together accounting
for about 60% of total energy use in the sub-sector – almost entirely in the form of oil – andCO2 emissions.

Some national and international policies and regulations aiming to reduce pollution
and GHG emissions in shipping are in effect (Table 5.3). These include theInternational Maritime Organization (IMO) regulations to limit air pollution through acap on sulphur levels in fuel and a target to reduce GHG emissions by at least 50%
by 2050 compared with 2008 (IMO is the United Nations agency responsible forregulating international shipping). There is a risk that short-term measures to reduce
sulphur and other pollutant emissions may lock-in investments in fossil fuels,

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hampering efforts to reduce CO2 emissions in the longer term.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Main international regulatory policies covering air pollution and GHG emissions
in maritime shipping
Name

Geographic
coverageYearintroduced

IMO Initial
Strategy

GlobalAdopted in
2018

Data collection
system (DCS) for
fuel oilconsumption

Global2019

Submission of
CO2 emissions
reports (MRV)

Ships callingat EU ports

2018

EU Emissions
Trading System(ETS)

Ships callingat EU ports

2022(expected)

EnergyEfficiency Design
Index (EEDI)

GlobalEnforced in2013

Ship Energy
Efficiency
Management
Plan (SEEMP)

GlobalAdopted in
2016

Global Sulphur
Cap

GlobalJanuary 2020

Emission Control
Areas (ECAs)

Baltic Sea,
North Sea,
Caribbean
Sea and
North
Americansea

Enforcedrespectively in
2005, 2006,
2012 and 2014

Description

Regulatory
actor

Reduce absolute GHG emissions fromshipping at least 50% by 2050
relative to 2008.
IMO
Reduce CO2 emissions per transport
work at least by 40% by 2030, pursue
efforts towards 70% by 2050.
All ships over 5 000 tonnes engaged
in international voyage must collectconsumption and other data for eachtype of fuel oil consumed. Flag states
must collect and aggregate the dataand submit to the IMO.
Companies must submit a CO2
emissions report for all voyages in theEuropean Union for all vessels under
their responsibility.
Proposal to include shipping in the
ETS as part of the Green Deal.
Requires minimum energy efficiency
per tonne-km for new large vessels
and mandates improvement steps
depending on vessel type: 10% in
2015, 20% in 2020 and 30% in 2030
compared with average performanceof vessels built in 2000-2010.
Monitors ship efficiency performance,
mandates collection and submissionof relevant data and establishes
mechanisms to improve efficiency of
existing ship operations.
Limits the sulphur content ofmaritime fuel used on board vessels
trading outside of sulphur ECAs to a
maximum of 0.5%. Ships without
exhaust gas scrubbers are notpermitted to carry fuel for use with asulphur content exceeding 0.5%.
To operate in these areas, ship
engines must comply with stricter
standards for SOx and NOx than inglobal waters. In particular, there is alimit of 0.1% sulphur for fuel used byships operating in SOx ECAs and NOx
TIER III standards apply to ships
operating in NOx ECAs.

IMO

EuropeanCommission
EuropeanCommission

IMO

IMO

IMO

IMO

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Notes: IMO = International Maritime Organization; MRV = monitoring, reporting and verification; EC = European
Commission; SOx = sulphur oxides; NOx = nitrogen oxides.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

International trade is expected to recover from the disruption caused by the Covid-19
pandemic and to continue to expand in the years ahead. In the Stated Policies
Scenario, shipping activity increases by an annual average of 2.5% and expands by
260% between 2019 and 2070. In the Sustainable Development Scenario, it increases
by 2.4% a year on average and by 230% over the period to 2070. The growth inactivity is slightly lower in the Sustainable Development Scenario because of areduced need for oil tankers and coal carriers, which is partially offset by the rise ofinternational trade in hydrogen and hydrogen carriers and biofuels. The increase inshipping activity in both scenarios underlines the need to reduce pollution andeliminate CO2 emissions in the coming decades.

Box 5.3

Is the Covid-19 crisis impacting marine regulations?

The International Maritime Organization (IMO) continues to enforce the 2020 global
sulphur cap (Table 5.3). Covid-19 safety precautions have made it more difficult toreport compliance, but that reduced ability does not necessarily imply increased
levels of non-compliance. The two main options available for complying with the cap
are the installation of sulphur dioxide (SO2) scrubbers and the use of very low sulphur
fuel oil (VLSFO). Since the sulphur cap was announced in October 2016, ships havebeen preparing for it by installing scrubbers or adapting their vessels to use VLSFO
and refineries have been increasing their production of VLSFO.
Overall, lower oil demand due to the Covid-19 pandemic and an oversupplied oil
market have caused bunker fuel prices to drop. Prices for VLSFO spiked in January
2020 as the IMO cap kicked in, but prices plummeted in March with the outbreak of
the pandemic. In April, VLSFO recorded prices of USD 150/tonne, effectively closing
the price gap with high sulphur fuel oil (IEA, 2020b). This fall in the VLSFO price has
affected the short-term competitiveness of the technology options for compliancewith the sulphur cap. Before the pandemic, some ship owners viewed the use of SO2
scrubbers as a least cost compliance option. Low VLSFO prices have now made theuse of the fuel more economically attractive than installing a scrubber: many scrubber
installation projects have been cancelled (Bockmann, 2020). It is unclear which
technologies shippers will choose over time based on the extent of a VLSFO pricerebound.
There are a number of options with varying degrees of technological readiness andeconomic competitiveness to help shippers meet the targets set out in the IMO initial
GHG strategy. The IMO has given no indication that it intends to delay implementing
these targets in light of the Covid crisis. New regulations are still expected to be

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implemented before 2023 (Lloyd’s List, 2020).

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Technology pathways towards net-zero emissions
CO2 emissions from maritime shipping are projected to rise again after the 2020 drop
related to the Covid-19 pandemic. In the Sustainable Development Scenario, CO2
emissions from shipping peak in the early 2020s at about the same level as 2019, i.e.
710 Mt, and thereafter decline to 120 Mt in 2070 (Figure 5.10). This trajectory is
broadly in line with the IMO GHG emissions target for 2050. Maritime shipping does
not reach zero emissions until after 2070 reflecting the difficulty and high cost of
abating emissions in this sub-sector (see Chapter 3). CO2 emissions frominternational shipping in 2070 are higher in the Stated Policies Scenario, in which
they rise to almost 1 100 Mt in 2050, up almost 50% from 2019 levels, and thenstabilise through to 2070 as efficiency measures and fuel switching counterbalance
activity growth .

CO22 reductions
reductions byby technology
technology
CO

1.4
1.4

Gt CO2Gt
Gt CO
CO22/yr/yr

Global CO2 emissions reductions in shipping by mitigation category (left) andtechnology readiness level (right) in the Sustainable Development Scenario
relative to the Stated Policies Scenario, 2019-70

Stated Policies
Policies Scenario
ScenarioStated1.2
1.2

Cumulative CO2 emissionsby TRL category
35
30

1.0
1.0

25

0.8
0.8

20

0.6
0.6

15

0.4
0.4

10
Sustainable Development
Development Scenario
Scenario
Sustainable

0.2
0.2
0.0
0.0
2019
2019

2030
2030

2040
2040

2050
2050

2060

Operational efficiency

Technology performanceElectrification

Hydrogen

Bioenergy

Ammonia

5

2070

0

MatureEarly adoption
Demonstration
Prototype

IEA 2020. All rights reserved.
Note: TRL = technology readiness level. See Box 2.6 in Chapter 2 for the definition of the maturity categories: large
prototype, demonstration, early adoption and mature."

Biofuels and energy efficiency are the main contributors to international shipping emission
reductions in the Sustainable Development Scenario in the short term, while hydrogen andammonia contribute more in the long term.

CO2 emissions reductions envisaged in the Sustainable Development Scenario aremainly achieved through a combination of technical and operational efficiency
measures, lower levels of cargo transport as energy commodity trade falls, and aswitch to low-carbon fuels and bioenergy. Efficiency measures make the biggest

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initial contribution to reducing emissions below the level in the Stated Policies

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Scenario, and offset activity growth until about 2050, after which overall demandrises again. Efficiency measures include but are not limited to hybridisation (withelectricity), kites, sails and Flettner rotors (spinning cylinders that convert wind
power into thrust to help propel the ship), slow steaming (reducing vessel speed),
contra-rotating propellers, improved hull coatings to reduce friction and waste heatrecovery. Over time, however, the largest share of emissions reductions in the
Sustainable Development Scenario relative to the Stated Policies Scenario isachieved through a combination of fuel switching and new marine propulsion
technologies (Figure 5.11). A more detailed look at the short, medium and long termbrings out the changing contributions of different technologies and their overlaps
over time in the Sustainable Development Scenario.

300

900

250

750

200

600

Electricity

150

450

Gas

100

300

Biofuels

50

150

Oil

0

2019

2020

2030

2040

2050

2060

2070

0

Mt CO2

Mtoe

Global energy consumption and CO2 emissions in international shipping in the
Sustainable Development Scenario, 2019-70
HydrogenAmmonia

CO₂ emissions

IEA 2020. All rights reserved.
Notes: Efficiency improvements more than offset activity growth in the 2030s and 2040s, but by 2050 activity
demand growth overwhelms efficiency improvements, leading to increases in final energy demand. The category
biofuels includes biomethane and is considered to be carbon neutral.

Emissions from international shipping fall by more than four-fifths between 2019 and 2070
in the Sustainable Development Scenario, mainly due to switching to biofuels andhydrogen-based fuels.

In the short term, to meet mandatory regulations such as the IMO sulphur cap,
shipping operations switch from high sulphur fuel oil to other oil-based fuels such as
VLSFO, distillate fuels (marine diesel oil or marine gasoil) and LNG. Some large
shipping operations install SO2 scrubbers, but this locks in the use of carbonintensive bunker fuel for the remaining lifetime of the ship, which levels only blending
with biofuels as a partial mitigation option. Other shipping operations opt to use LNG
in the early 2020s (mainly driven by its low cost, subsidies for developing

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infrastructure and IMO sulphur cap compliance), which improves air quality, but does

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

not do much to reduce emissions: the tank-to-wheel GHG emissions reductions of
LNG compared with diesel/HFO is up to 25% when burned in a high pressure injection
fuel engine, and the level of emissions reductions can be minimal (or even negative)
if gas leakages occur (ICCT, 2020a). In the 2020s, there is also some initial fuelswitching from oil-based fuels to biofuels as well as some blending of biofuels withbunker fuels.
In the medium term, blending with biofuels increases. Biofuel use jumps fromnegligible levels today to more than 25 Mtoe in 2040 and to almost 50 Mtoe in 2060,
by which time it accounts for more than one-fifth of total energy use in shipping.
From about 2025, biofuel oil (BFO) is blended with VLSFO in increasing amounts; by2070, blending accounts for 7% total energy use in shipping, displacing conventional
residual fuel. 17 However, the supply of biofuels for all transport sectors is constrainedby the availability of sustainable biomass, and a substantial amount – nearly 220 Mtoe
– is required to decarbonise aviation in the long term (as discussed in this chapter).
In the longer term, biomass-to-liquids (BTL) – an alternative technological pathway
to making diesel substitutes – makes an increasing contribution in shipping energy
use as BTL moves to large-scale production from about 2050, while ammonia andhydrogen come increasingly to the fore. As ships using fossil fuels blended with somebiofuel reach the end of their life from 2050 onwards, they are replaced by new
vessels equipped with propulsion technologies compatible with ammonia andhydrogen, two technologies that become steadily more competitive after their firstuse on short and medium-distance trips from 2025, gradually replacing vessels using
oil and, later, LNG, as they retire. Together they are used on over 60% of new vessels
sold after 2060. Ammonia use for shipping reaches roughly 130 Mtoe in 2070, almost
twice as much as was used worldwide for fertiliser production in 2019. The role ofhydrogen as a fuel for large vessels is more limited, due to the high costs of hydrogenstorage and its lower energy density 18. Nonetheless, hydrogen use reaches 12 Mt in
2070, equivalent to 16% of 2019 global maritime bunker demand and 16% of today’s
global hydrogen use. By this time, oil and gas are responsible for only one-sixth of
total shipping fuel consumption.
Ports have an important role to play in facilitating a switch in shipping to alternative
fuels such as hydrogen and ammonia for refuelling operations. The 20 largest ports
in the world account for more than half of global cargo (UNCTAD, 2018) and they
could act as industrial hubs producing hydrogen and ammonia to be delivered to

Combustion of bioenergy is considered carbon neutral in line with IPCC guidelines (IPCC, 2006) (see Chapter 2,
Box 1).
18
It is likely to be in vessels equipped with ICEs capable of burning hydrogen, as fuel cells are not expected to reachthe required power outputs for covering transoceanic routes.

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17

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

both the chemical and refining industries, as well as for refuelling ships. The majorityof these hubs are located in China, with others in key locations in the United Statesand Europe.
Throughout the period to 2070, the use of electricity as a fuel for maritime shipping
remains limited, accounting for approximately 3 Mtoe in 2070. Electricity is usedmainly in hybrid vessels, which are projected to account for around 5% of all new
vessel sales in 2030. Hybridisation reduces energy consumption by 0.5 Mtoe andCO2 emissions by 30 MtCO2 in 2070 relative to the Stated Policies Scenario. Cold
ironing – the provision of electrical power to a ship at berth which allows its main andauxiliary engines to be turned off – also helps to lower CO2 emissions and pollution.
There are some purely electric vessels, but their numbers are limited as they are only
economically viable for short-distance trips.

Readiness and competitiveness of emerging
technologies
Several of the technologies that are needed to move the maritime shipping subsector towards carbon neutrality – especially those enabling a switch to alternative
fuels – are not yet commercially available (Table 5.4). Achieving the Sustainable
Development Scenario trajectory therefore will require more intensive RD&D
efforts. 19
Cold ironing, the use of shore power when berthed, is the only main technology
commercially available today (with a technology readiness level [TRL] of 9). 20 It was
first adopted in Alaska in 2001 (other than military uses), then championed by thePort of Los Angeles from 2004 as a measure to limit air pollution (Port of Los Angeles,2020). Cold ironing is increasingly being installed across the world (IEA, 2020a). Few
other technologies have a TRL above 7, and none could completely decarbonise
long-distance shipping. Pure electric battery powertrains, with a TRL of 8, are being
increasingly adopted in the Nordic countries, not least as a result of regulatory
measures limiting ferry traffic to zero-emission vessels, but electric battery
powertrains cannot power larger vessels travelling long distances. Wind-assisted
propulsion systems, such as kites and Flettner rotors have a TRL above 7, have gained
official certification (DNV-GL, 2019), but are not widely available in the market place.
No technology to replace the main engine of ocean-going vessels is yet commerciallyavailable.

In recognition of this, the shipping industry has proposed to the IMO to levy USD 2 per tonne of fuel purchased for
consumption to support a global R&D fund aiming at accelerating the development of zero-carbon technologies for
ocean going ships.
20
Cold ironing is when a berthed ship turns off its main engines and powers its auxiliary equipment with electrical
power from shore facilities.

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19

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Status of main emerging technologies in shipping
CO2
Year Available
reduction(ImportanceTechnology TRL
mechanism for net-zeroemissions)

Deployment status

Ocean-going vessels
Ammonia
4-5
fuelled ICE

Fuelswitching2022/
Leading shipbuilders have recently joined forces to develop
2030 (High) an ammonia ICE deep-sea tanker to be commercialised by
2030.
Various shipbuilders have announced the development oflarge vessels running on ammonia ICE vehicles.
Both MAN-Energy and Wartsila have each (separately)
announced the development of an ammonia fuelled engine
expected to enter in operation in 2023.

Hydrogen 4-5
fuelled ICE

Fuelswitching

2025/
Hyundai Heavy Industries has announced a plan to develop a2030 (High) large-scale hydrogen ICE by 2022.
Japan’s roadmap for zero emissions from maritime shipping
aims to commercialise hydrogen fuelled ICE large-scale
vessels by 2030.

Short and medium-distance vessels
Ammoniafuel cell

4-5

Fuel
switching2030 (High) The European Union ShipFC project aims to develop a 2 MW
ammonia powered fuel cell ship to be operational in 2023.

Hydrogenfuel cell

7

Fuel
switching2020 (High) Several large prototypes of hydrogen fuel cell ships havebeen tested. The Horizon2020 FLAGSHIP project isdemonstrating technical feasibility on two small ships.

Hydrogenfuelled ICE

8

Fuelswitching2020 (High) Hydroville, a ship that simultaneously burns hydrogen anddiesel, has been operating since 2017.
BeHydro has announced plans to develop hydrogen ICEs from
0.8 MW to 2.8 MW from 2020.

Purebatteryelectric
powertrain

8

Fuel
switching2020 (High) Nordic countries are pioneering the development of purebattery electric ships, which can cover distances of a few
hundred kilometres before recharging. Several electric ships
are in operation. By 2022 there are to be 80 purely electric
ferries in Norway.

Shore power when at berthColdironing9

Fuelswitching2020 (Medium) Onshore infrastructure for cold ironing is available in morethan 80 ports worldwide (mainly in Europe). An increasing
number of vessels are being equipped with provisions forcold ironing.

Wind-assisted propulsion
Kite

7-8

Energyefficiency

2020 (Medium) A few companies are commercialising and installing kites on
new and existing ships.

Flettnerrotor / sail8

Energyefficiency

2020 (High)

Some companies are commercialising these technologies andsome vessels equipped with this technology are operating.

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IEA. All rights reserved.

Notes: ICE = internal combustion engine. A broader list of technologies compatible with a low-carbon transition forthe maritime shipping sub-sector is presented in the technology mapping portion of The Covid-19 Crisis and Clean
Energy Progress (IEA, 2020b).

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

At present it looks likely that any low-carbon or carbon-neutral fuel suitable forshipping will be more expensive than the fossil fuels currently used. Moreover, withthe exception of some biofuels and synthetic fuels (synthetic hydrocarbons that are
made by storing electrical energy from renewable sources in the chemical bonds ofliquid fuels), low-carbon fuels are expected to have a lower volumetric energy density
than fossil fuels. The adoption of low-carbon and carbon-neutral fuels is therefore
likely to depend on the adoption of appropriate regulations or market incentives. The
prospects for the main alternative fuel technologies vary.
Pure electric ships powered by batteries are limited by their low energy density,
which requires frequent recharging, making them impractical for long voyages. They
could be competitive with other non-fossil fuel options for distances up to 200 km(such as ferry routes) on the assumption that costs fall, but less than 1% of thetransport activity of vessels operating on international routes fall into that category(ITF, forthcoming). Major advances in battery technology would be needed forelectric ships to become economically viable for longer distances (Figure 5.12).

USD/kmTotal cost of ownership of hydrogen, ammonia and electric vessels by ship
type, 2030
180

Battery

160
140

Hydrogen / ammonia /electricity

120

Infrastructure

100
80Storage60
ICE / Fuel cell

40
20
0

Base vesselFC
ICEhydrogen ammonia
TankerElectricFC
ICEhydrogen ammonia

Electric

Container shipFC
ICEhydrogen ammonia

Electric

Bulk carrier

IEA 2020. All rights reserved.
Notes: FC = fuel cell; ICE = internal combustion engine. Battery capacity and hydrogen/ammonia tankers aredesigned to cover a distance of 10 000 km. Annual travel: 96 000 km for an oil tanker, 98 000 km for a bulk carrierand 180 000 km for a container ship (in line with average speeds and days at sea registered by IMO, 2014). Fuelcosts in 2030 (including production and distribution): USD 0.17/kWh for hydrogen (produced via electrolysis),
USD 0.13/kWh for ammonia (produced via electrolysis) and USD 0.2/kWh for electricity.

The high cost of storing hydrogen makes it less economical than ammonia. The economics
and technical performance of electric vessels need to improve to become a competitivetechnology for long-distance shipping.

Biofuels are the most promising fuel option for shipping in the short to medium term

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because they can be blended at gradually higher shares as a drop-in fuel into heavy

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

fuel oil or diesel, which avoids the need for new vessels and fuel systems. Biofuels
could play a smaller role depending on the pace of progress of hydrogen andammonia technologies, and on the speed of the scale up of second- and thirdgeneration biofuels production capacity. However the majority of vessels sold today
run almost exclusively run on fossil fuels, and they will still be operating in 2050
unless regulations encouraging or mandating early retirements are put in place.
Several pathways are available for biofuels to be blended with the maritime fossil
fuels, each with advantages and disadvantages. Biofuel oil (BFO) is the cheapest
option, although it is currently only being pursued by a few companies. Its potential
to scale up is not limited by any technology barrier, but rather by sustainable
feedstock availability and fatty acid methyl esters (FAME) production rates (BFO is a
residue of FAME production). For diesel vessels the biofuel pathways for markedly
reducing CO2 emissions are essentially FAME in the medium term and biomass-toliquids (BTL) in the longer term, both of which are drop-in biofuels for marine
technology 21 and so can be blended in any share. However, the fuel specification of
FAME is higher than required for many marine engines and therefore incurs an
unnecessary high cost premium. FAME is currently produced commercially on a large
scale (TRL 9), while BTL requires further development (TRL 5-6) to be deployed atcommercial scale. However, BTL is less limited by sustainable feedstock constraints
than FAME, as BTL can use a wide variety of feedstocks, including residual waste fromagriculture and forestry. Furthermore, BTL may offer opportunities to efficiently
integrate carbon capture, utilisation and storage (CCUS) technology with fuelproduction at costs that can be commercially attractive if there is an adequate carbon
price.
Hydrogen-fuelled ships are at an early stage of technological development. Some
projects demonstrating the viability of hydrogen fuel cells and ICEs in small ships areunderway but large-scale deployment is not expected before 2030. Hydrogen used
as a fuel does not produce CO2 emissions: its only product is water when used in afuel cell and NOx emissions when used in an internal combustion engine. When
produced via steam methane reforming with CCUS, hydrogen can be low-carbon,
and when produced via electrolysis with electricity from renewable or nuclear
sources hydrogen can be zero-carbon (see Chapter 2). But hydrogen does have somedisadvantage for use in shipping. It needs to be liquefied to increase its volumetricdensity for use as a long-distance fuel – a very energy- and capital-intensive process– making it expensive to produce. It needs storage equipment when in liquid form,
which is capital intensive, consumes significant energy and takes up more space thanalternative low- and zero-carbon fuels. Plus hydrogen is flammable, which is an

Unlike FAME biodiesel, BTL diesel has identical characteristics to fossil diesel and is considered a drop-in fuel for alltransport sectors. However, FAME biodiesel can be used up to 100% blend in marine diesel engines and fuel systems(IEA Bioenergy, 2017).

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21

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

important safety consideration. For these reasons, hydrogen in maritime shipping ismost likely to be used as a fuel for short- and medium-distance ships, mostly in theform of compressed hydrogen thus avoiding the need for a complex and onerous
storage system on-board. While hydrogen may also be used on long-distance vessels,
it is likely to be confined mainly to those routes where frequent bunkering is possible,
thus limiting the size (and cost) of on-board hydrogen storage. 22
The “chicken-and-egg” dilemma of developing hydrogen vessels and hydrogen
refuelling infrastructure in tandem is another barrier. Ports will need to play a crucialrole in this area. Ports located close to refineries or other industrial plants that alreadyuse hydrogen could use excess supplies of hydrogen to fuel vessels and scale up
production capacity to provide fuel to an increasing number of vessels (IEA, 2019a).
The Port of Rotterdam, the sixth biggest in the world by annual cargo throughput,
has declared its ambition to become a hydrogen hub. 23 Other ports around the world
located close to industrial facilities or power plants that use (or could use) hydrogen
could also become hubs, opening the possibility of establishing a hydrogen
bunkering network.
Ammonia – a compound of nitrogen and hydrogen – is attracting interest as apotential carbon-free fuel for shipping and other sectors because of its highliquefaction temperature and energy density compared to hydrogen when both arein liquid form (see Chapter 2). Ammonia also benefits from a well-establishedinfrastructure system, plus it is easier to store and transport than hydrogen (The Royal
Society, 2020). 24 Moreover, since ammonia is the most traded chemical, there isalready significant industry expertise when it comes to handling it on-board as acargo as opposed to hydrogen. The main barrier to its use as a shipping fuel is that itis acutely toxic and leaks can cause severe water pollution. Its cost is also a problem.
Ammonia can be used in a fuel cell (in the same way as hydrogen) as well as in aconventional ICE, but further technology advances are needed for ammonia fuel cells
to see lower costs and become a viable technology on a large scale. The maintechnological challenge to be addressed for ammonia use in ICEs is related to its low
flame speed (AMF TCP, 2020).
Energy efficiency alone is not sufficient to achieve zero emissions in shipping, but it
can reduce the cost of doing so. Although low-carbon shipping fuels are more
expensive than fossil fuels, energy efficiency measures reduce energy needs for any

A study found out that 99% of the trips by container ships along the corridor between the United States and China
could be fuelled by liquid hydrogen with minor addition of the capacity of on-board tank (ICCT, 2020a).
23
www.portofrotterdam.com/en/news-and-press-releases/energy-transition-results-in-extensive-plans-for-hydrogen.
24
However, the ammonia infrastructure is currently used only for carrying ammonia across countries and not forbunkering it to ships. Therefore, while there is much know how on ammonia handling in harbours and ships, thestorage and bunkering capacity for ammonia needs to be largely expanded for it to play the role envisioned in the
Sustainable Development Scenario.

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22

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

given service, thus helping ship operators to limit additional fuel costs. There are anumber of technologies under development to improve the energy efficiency ofships. The main policy at present to foster improvements in energy efficiency in themaritime sector is the Energy Efficiency Design Index (EEDI) (see Table 5.3), although
there is indication that observed energy efficiency improvements may have resulted
from the need of ship operators to cut operational costs in the face of high fuel prices
rather than by the need to comply with the EEDI regulation (CE Delft, 2016). Some
organisations are therefore pressing the IMO, which is responsible for the EEDI, tointroduce tougher standards to encourage the uptake of new technologies thatwould improve energy efficiency in vessels even further (ICCT, 2019).
Energy efficiency measures for shipping can be divided in two categories:Technical measures, which reduce the power requirement of the propulsion
system by improving fuel efficiency. Leading technical measures to improveenergy efficiency include wind assist (Flettner rotors, sails and kites), hull
lubrication systems and waste heat recovery. Flettner rotors and sails both use
aerodynamics to provide thrust to the vessel (Norsepower, 2020; DNV-GL,
2020b). Automatically controlled kites can be attached on the bow of the vessel
when the wind conditions are favourable, thus pulling the vessel along (CNBC,
2015). These three technologies use different principles to exploit the free energy
provided by the wind to gain propulsion, thus reducing fuel consumption. The
actual potential fuel saving largely depends on the type of vessels and on theroute covered, but in general it ranges between 5-20% (DNV-GL, 2019). Waste
heat recovery consists of reusing the heat dissipated by the engine, and can save
approximately 5-10% of fuel. Hull coating and air lubrication systems aretechnologies that improve the vessel’s aerodynamics to limit drag and thus thepower requirement, implying fuel savings ranging between 3-12%. These
technical measures are generally more applicable on new vessels, due to the highcost or technical impossibility of retrofitting existing ones. A further tightening of
the EEDI targets (which is currently being discussed by the IMO) could promote
more RD&D on these technologies.



Operational measures, which reduce fuel consumption via improved operationand maintenance of the vessel. Operational measures can be implemented bothby existing and new vessels and do not require significant investment inadditional equipment. One example is slow steaming, which consists of reducing
the vessel’s speed and as a consequence its specific fuel consumption.

Currently, all low-carbon fuel options to decarbonise the shipping sector are more
expensive than conventional fossil fuels; ship owners and operators are unlikely toadopt them without policy measures that mandate or encourage such action. The
fuel supply market for international maritime shipping is not a captive market – ships

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do not need to bunker every time they call at a port – so policies that increase theEnergy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

price of fossil fuels implemented by a single country or region would probably resultin “fuel leakage” (ships would bunker in other countries to avoid the higher fuel priceresulting from a single country’s action). This points to the need for collective
measures implemented worldwide. There is a good case for policy action targeting
vessels, particularly since the IMO regulates vessels and not their fuel suppliers.
One policy well worth considering is “operational fuel standards” (also called goalbased mechanisms), which would mandate objectives for ships to reduce theiroperational carbon intensity. Such standards could be implemented at regional
and/or global level, using as a baseline the emissions levels registered in theEuropean Union Monitoring Reporting and Verification (MRV) and the IMO Data
Collection System (see Table 5.3). Set at progressively more stringent levels, theoperational carbon-intensity objectives would reduce the CO2 intensity of the vessel
over time and, if stringent enough, eventually encourage the adoption of zero-carbon
fuels. This mechanism would also provide the flexibility to market actors to choose
the most convenient and suitable compliance strategy, within a stable and long-term
regulatory framework that reduces the risk linked to developing new technologies
and building the associated refuelling infrastructure.

Aviation
Overview and outlook in the wake of Covid-19
Commercial passenger aviation is the energy demand sub-sector hardest hit byimpacts related to the Covid-19 crisis. Passenger volumes hit bottom when they
dropped by nearly 95% in April 2020, and the number of scheduled flights in the firstweek of May was nearly 70% lower than in the same week in 2019, but with as few as
37% of seats occupied. More than a third of the world’s aircraft remained groundedin late July 2020. Industry estimates indicate that passenger volumes as a whole(measured in revenue passenger-kilometres [rpk] 25) will decline by 50% in 2020, andthat international passenger volumes will decline by 60% (IATA, 2020a).
Demand rebounded rapidly after previous crises, including the 2008 financial crisis.
However, the nature and extent of the current crisis is fundamentally different, anddemand is unlikely to return quickly to anywhere near its pre-Covid levels. In themeantime, airports have been forced to adopt screening and social distancing
procedures that dramatically reduce throughput, and airlines have scrambled toreconfigure standard procedures, cabins and seating to minimise risks of spreading
the virus. Current industry estimates project that passenger volumes will recover to

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25
Revenue passenger-kilometres (rpk) refers to the number of revenue-generating passengers (i.e. excluding crew)
carried, multiplied by the distance flown. It is the common metric of passenger activity for commercial passenger
aviation.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

2019 levels sometime between late 2022 and 2025 (IATA, 2020b; ICF, 2020; Oliver
Wyman, 2020), but that there will be permanent changes to the structure of demand– to the relative shares of essential, leisure and business flights, and of domestic andinternational flights. The question is not whether such changes can be expected, but
how big they will be. Demand is set to decline in long-distance leisure and especiallybusiness flights (IEA, 2020c), and this has potentially wide implications because
corporate travel has a disproportionate impact on airline profitability, even thoughbusiness travellers account for only a small fraction of commercial aviation demand.
Shifts have also occurred between commercial passenger operations and freight:
fewer flights meant reduced airplane belly cargo capacity, and that reduced capacity
resulted in rate increases for freight; those rate increases have in turn led airlines torepurpose passenger aircraft for dedicated cargo freight.
The impacts of the Covid crisis are beginning to pose an existential threat to many
players in an industry where only about 30 out of more than 120 major airlines out of
more than 120 in total earn profits in a given year (IATA, 2020c), and where margins
typically range from 6-8%. Airlines will sustain losses in 2020 that, at a minimum,
exceed their combined revenues from 2018-19. In 2019, more than 30 airlines
declared bankruptcy, and by July 2020 another 23 had joined their ranks. 26
Consolidation will inevitability follow, and may result in operational efficiencies andgreater flexibility in deploying newer, more efficient aircraft on routes that suit them.
Older, inefficient aircraft, especially wide-body planes that serve long-distance
flights where demand contracted most, are already being stored or scrapped. For
those that are still operating, plans for accelerated retirement are being made, as in
the case of British Airways retirement of 31 Boeing 747s, Air France’s early phase outof their remaining A340s, and many other airlines’ retirements of Boeing 747 andAirbus 380 planes. Years of reduced, deferred or cancelled orders lie ahead foraircraft and jet engine manufacturers, delaying the entry to service of the most recent
and most efficient models. The efficiency implications of airline bankruptcies andaircraft retirements are discussed briefly in the following section and will be
examined in depth in a forthcoming IEA publication (IEA, forthcoming).
Despite these existential challenges to individual airlines, aviation may well regain its
place as the fastest growing mode of passenger transport in activity terms by the2030s at the latest, driven by rises in population, prosperity and international trade.
What was once a marginal source of CO2 emissions has become increasingly criticalto efforts to fight climate change and constitutes a potential hurdle to net-zeroemissions. Aviation as a whole accounted for nearly 3% of energy sector direct CO2
emissions from fossil fuel combustion in 2019. The current framework for reducing

The concurrent fall in fuel prices has offered airlines some degree of relief; while jet fuel averaged USD 77/barrel in
2019, the projected average price in 2020 is just under USD 37/barrel. Consequently, fuel is expected to drop to only
about 15% of overall costs, as opposed to nearly 24% in 2019 (IATA, 2020d).

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26

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

emissions as administrated by the International Civil Aviation Organization (ICAO),
including the Carbon Offsetting and Reduction Scheme for International Aviation(CORSIA), is generally regarded as lacking sufficient stringency and ambition to leadto effective reductions in CO2 emissions. CORSIA was also recently weakened byresetting its benchmark year to 2019 (Box 5.4).

Box 5.4

Making CORSIA work for the climate challenge

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is
a carbon market-based system that was adopted in 2016 by the International Civil
Aviation Organization Assembly as part of a broader package of measures to help
achieve ICAO’s aspirational goal of carbon-neutral growth for civil aviation from 2021
onwards. CORSIA is designed to complement the other climate mitigation measuresof the package relating to technological innovations and operational improvements
within the aviation sector. The scheme provides credits to airlines that use sustainableaviation fuels or purchase offsets of CO2 emissions that cannot be reduced within theaviation sector itself. The ICAO Council will conduct a periodic review of the CORSIA
every three years from 2022.
CORSIA consists of three phases: pilot phase (2021-23), first phase (2024-26) andsecond phase (2027-35). The pilot and first phases are voluntary, while the second
phase will be mandatory for all ICAO member states and is expected to cover one halfof all aviation emissions (ICCT, 2020b). Airlines operating on routes between
participating states will be subject to offsetting requirements under CORSIA basedon growth over baseline emissions for the aviation sub-sector. Offset credits are
generated through emissions reductions arising from the implementation of carbon
mitigation projects in other sectors. There are currently six eligible programmes
through which to purchase carbon offset credits (ICAO, 2020). Some of these
programmes, however, have been criticised for not guaranteeing the environmental
integrity of the generated credits. To address this risk, CORSIA’s Technical Advisory
Board has adopted various eligibility criteria that could limit the risk of carbon offset
credits not representing real emission reductions.
Originally, the baseline from which to calculate the carbon-neutral growth of thesector was set to be the average of total CO2 emissions for 2019 and 2020. Due to the
Covid-19 pandemic, however, flight activity is expected to be 50% lower in 2020 thanin 2019. Including 2020 CO2 emissions level in the baseline calculation for CORSIA
would therefore decrease the previously anticipated baseline emissions level by atleast 25-30%. Driven by concern that this reduced baseline would place an undue
economic burden on airplane operators by effectively requiring the purchase of more

PAGE | 288

IEA. All rights reserved.

carbon offsets than originally envisioned under the scheme, the ICAO Council,

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

following a request from the International Air Transport Association (IATA), agreed
that 2019 emissions alone should be used as the baseline for the pilot period between
2021 and 2023. If flight activity rebound takes as long as most industry projections
expect, this decision will nullify any offset obligations during CORSIA’s pilot phase,
putting at risk CORSIA’s credibility.

Prior to the outbreak of the Covid pandemic, worldwide passenger aviation activity
was at record high: it exceeded 8.6 trillion revenue per passenger- kilometre in 2019–75% higher than in 2010 and more than 350% on 2000. Both international anddomestic activity has been growing strongly. Asia-Pacific, which saw growth of over
9% per year over the six years to 2019, is now the leading regional market, accounting
for over one-third of total travel, followed by Europe (26%) and North America (22%)(Figure 5.13).

Trillion rpk

Growth of revenue passenger-kilometres by region, 2013-19
10%

3.5

9%

3.0
2.5

7%
6%

2.0

5%

1.5

International

4%
3%

1.0

2%

0.5
0.0

Domestic

8%

1%
2013

2019

Asia and
Pacific

2013

2019

Europe2013

2019

North America

2013

2019

Middle East

2013

2019

Latin America
and Caribbean

2013

2019

CAGR
(2013-2019)0%

AfricaIEA 2020. All rights reserved.
Notes: rpk = revenue per passenger kilometre, CAGR = compound average growth rate. 2019 estimates are based onregional annual growth rates, which are applied equally to domestic and international aviation segments, andverified to match domestic and international growth from 2018-19 as reported by IATA.
Sources: International Civil Aviation Organization (ICAO) annual reports (2013-2018) and International Air Transport
Association press release on 2019 industry growth (IATA, 2020d).

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Asia-Pacific is the largest passenger aviation regional market, followed by Europe andNorth America.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Jet kerosene 27 refined from crude oil accounted for practically all of the fuelconsumed by aircraft worldwide in 2019. Total consumption of jet kerosene
amounted to 6.8 mb/d (340 Mtoe), accounting for 7% of global oil demand (aviation
gasoline accounted for most of the rest); biojet kerosene accounted for 50 million
litres (44 thousand tonnes of oil equivalent [ktoe], or about 0.01% of fuel used).
Passenger traffic growth increased by an average of 6.9% annually from 2000 to
2019, led by growing demand in international flights. Thanks to technical andoperational efficiency improvements, fuel demand and CO2 emissions grew at a
slower average annual rate of 2.2% a year (IATA, 2020d; ICAO, 2007; 2013-2018; IEA,
2020d). Commercial passenger aviation (including cargo carried on passenger
flights) accounted for about 86% of jet kerosene fuel use in 2019; the remaining 14%
was consumed by non-scheduled flights (both commercial and private) (4.5%),
dedicated cargo freight (about 8%) and military (about 1%).
Demand for air travel is strongly related with income levels across the world, withflying becoming affordable above a certain income threshold (a single return flight
per year on average becomes affordable in countries where per capita income inpurchasing power parity terms exceeds USD 60 000) (Box 5.5). Demand for air travel
tends to rise fastest in developing countries where an affluent middle class isemerging: it rises less rapidly in the richest countries where there are saturation
effects. Despite tremendous growth in recent years, people in emerging economies
fly much less than those in advanced economies. Deregulation of passenger aviation
has helped to drive the growth of route networks and enabled the strong growth of
low-cost carriers, which, for example, now claim market shares of up to 62% ofavailable seat capacity on short-haul routes in Southeast Asia (Boeing, 2019). The
short-haul market segment (less than 1 500 km) accounts for about one-fifth of allpassenger boardings worldwide.

Fossil jet kerosene, the term adopted here, is consistent with the terminology used in the IEA energy balances. The
industry standard term is conventional aviation fuel.

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27

Energy Technology Perspectives 2020

Box 5.5

Chapter 5. Technology needs in long-distance transport

Who flies and how much?

The United States has by far the world’s largest aviation market, with over 1.2 trillion
revenue passenger-kilometres (rpk) flown on domestic flights in 2019, followed by
China with 820 billion domestic rpk in 2019 (both countries also command high sharesof international flights, as do the United Arab Emirates and United Kingdom). While air
travel is growing fastest in the emerging economies, the frequency with which people
there fly is much lower than in the advanced economies. In 2018, US citizens made on
average just over two trips – almost five-times more than the Chinese and 17-times
more than people in India (Airbus, 2019).
The distribution of flights is also unbalanced within countries: a small group of
travellers are responsible for most travel and, therefore, for the bulk of jet fuelconsumption and emissions. More than half of respondents to recent travel surveys in
the United Kingdom and United States had not flown in the previous year (Airlines for
America, 2018; Civil Aviation Authority, 2019), while the top 15% of air travellers madean average of five trips in the United Kingdom and nine trips in the United States. This
imbalance is even higher in emerging economies where income disparities are often
bigger.
The distribution of flights across countries is also unbalanced. Worldwide, 16% of the
global population living in the highest-income countries accounted for 62% of CO2
emissions from aviation, while the half living in low and lower-middle income countries
accounted for only 9% in 2018.
CO2 emissions by income quartile (left) and air trips by GDP per capita and region,
2018 (right)

90%
80%
70%
60%
50%
10% 25% 40% 55% 70% 85% 100%
Share of population by income group

100 000
GDP per capita (thousand USD)

Cumulative CO2 emission share

100%

EuropeAfricaAsia and
Pacific

10 000Latin America
and Carribean
Middle East

1 000

0

1

2
3
4
Air trips per capita

North America

IEA 2020. All rights reserved.
Notes: In the left-hand figure, the four data points are given, the curve is interpolated. In the right-hand figure,each point represents a country. All figures are in GDP PPP.

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Sources: Becken and Pant (2019) (left-hand figure). Airbus (2019) (right-hand figure).

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

In the Sustainable Development Scenario, air travel takes more than three years toreturn to 2019 activity levels in the wake of Covid-19, and then continues to expand
as household incomes rise, notably in developing countries, especially in Asia-Pacificand Africa. Nonetheless, a comprehensive set of stringent government policies,
including measures that increase the overall cost of air travel and hence dampen
activity demand, leads to aviation activity (measured by rpk) being about 12% lower
by 2040 in the Sustainable Development Scenario than in the Stated Policies
Scenario, a gap which remains at above 10% to 2070 (Figure 5.14). 28 Asia-Pacificexperiences the most growth of any region in both scenarios (about one-third), withnotable activity increases in China, India and Association of Southeast Asian Nations(ASEAN) member countries. Europe and North America each account for about onefifth of the activity growth. The fastest increase in activity is in Africa (with annual
average growth of around 6%).

Trillion rpk

Passenger aviation activity by region in the Sustainable Development Scenario,
2019-7035
Africa30

Latin America and Caribbean

25

Middle East

20

Europe15

North America

10Asia and Pacific

5
0
2000

STEPS
2010

2020

2030

2040

2050

2060

2070

IEA 2020. All rights reserved.
Notes: rpk = revenue passenger-kilometre; STEPS = Stated Policies Scenario. Not including unscheduled or private
flights. The projections were developed using the Aviation Integrated Model developed by University College
London Energy Institute (AIM, 2020).

Despite strong policy measures, including taxes that reduce overall demand, air passenger
traffic increases by about 350% through to 2070 in the Sustainable Development Scenario.

At 3.4%, the projected average annual growth in the Stated Policies Scenario for the period 2019-40, is lower theactivity growth over 20 years projected prior to the Covid-19 crisis by Airbus (4.3%), Boeing (4.6%) and the ICAO
(4.3%) (Airbus, 2019; Boeing, 2019; ICAO, 2018). The 3.4% growth, however, is in line with the pre-Covid-19 projectionsof the International Transport Forum (ITF, 2019).

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28

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Air cargo volumes have also been increasing, though not as rapidly as commercial
passenger aviation numbers. 29 The volumes of cargo carried on both dedicated andassociated (or “belly freight”) flights increased by 3.8% per year on average over
2013-19. Belly freight is projected to expand by 2.0% per year on average over the
projection period in the Sustainable Development Scenario. The practice of turning
passenger aircraft into dedicated freight aircraft at the end of their passenger
aviation service means that the energy efficiency improvements embodied in new
aircraft models take time to work through to freight aviation.
Direct CO2 emissions from jet kerosene combustion for aviation, which in 2019accounted for 2.8% of all energy sector CO2 emissions, are hard to abate because
aviation requires a fuel with a high energy density (Figure 5.17). Even with majoradvances in technology, electric batteries based on current designs are unlikely toever provide sufficient density to make electric planes viable for mid- and long-range
flights, which account for the majority of energy use. The use of biofuels continues
to be constrained by competition from other uses and the limited availability ofsustainable biomass. Other low-carbon fuels, such as synthetic fuels and hydrogen,while technically feasible, are currently much more expensive than conventional
kerosene (Figure 5.18). Long aircraft lifetimes and slow innovation cycles (typically
about 15 years between successive new generation aircraft designs) also constrain
how quickly net-zero aviation emissions can be achieved: the bulk of the fleet ofpassenger aircraft in operation today is made up of models that were introduced
before 2000, principally the Airbus A320 and Boeing 737 (DVB Bank, 2017).

Technology pathways towards net-zero emissions
In the Sustainable Development Scenario, CO2 emissions from aviation are reined inthrough a suite of rigorous and concerted government policies to support investmentin the production of alternative, sustainable aviation fuel pathways and fuel efficiency
technologies for airframes and engines (Figure 5.15). 30 Operational efficiency gains
and shifts to less energy-intensive modes of travel also reduce fuel use. In themedium term, technical and operational efficiency gains play a supporting role
alongside the faster deployment of sustainable aviation fuels. In the longer term,
synthetic fuels (kerosene derived from hydrogen and CO2) make an important
contribution to reducing upstream and operational CO2 emissions, 31 particularly after
2050.

Dedicated cargo freight is not explicitly modelled for Energy Technology Perspectives. Within passenger aviation,
the metric of revenue tonne-kilometres (rtk) is the sum of revenue passenger kilometres, assuming that eachpassenger plus luggage weighs on average 90-95 kilogrammes, and belly freight cargo expressed in metric tonnes
multiplied by the distance flown. These projections are taken into account in our modelling. In the Sustainable
Development Scenario, rtk on passenger aircraft (and not including dedicated cargo freight) grows by 1.4% per year
on average over the period 2020-70.
30
Sustainable aviation fuels are fuels that do not use crude oil as feedstock (e.g. biojet fuel and synthetic jet kerosene).
31
In the case of aviation, the climate impacts of CO2 are amplified by relatively short-lived non-CO2 climate forcing
mechanisms (such as contrails and contrail induced cirrus cloud formation, NOx emissions and others), themagnitudes of which are still very uncertain, but in the short term may double the climate impacts of flying.

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29

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Mtoe/yr

Global aviation fuel consumption in the Sustainable Development Scenario andtotal fuel use in the Stated Policies Scenario, 2019-70

800

STEPS

600

Synthetic fuels

400

Biofuels

2000Fossil jet kerosene

2020

2030

2040

2050

2060

2070
IEA 2020. All rights reserved.

Notes: STEPS = Stated Policies Scenario. Projections developed using the Aviation Integrated Model developed by
University College London Energy Institute (AIM, 2020).

Rigorous policies to promote the development and adoption of sustainable aviation fuels
play the leading role in reducing the climate impacts of aviation in the Sustainable
Development Scenario.

Sustainable aviation fuels play a pivotal role in reducing emissions from aviation in
the Sustainable Development Scenario, especially during the second half of the
projection period (Figure 5.16). However, they do not entirely displace jet kerosene
which continues to supply one-quarter of the market in 2070.



Biofuels destined for aviation (biojet fuels), blended into conventional petroleumbased jet fuel, currently account for only 0.01% of total aviation fuelconsumption, but that share rises to about one-quarter by 2040 and about 35%
by 2070. Around 4.4 mboe/d of biofuels are used in aviation in 2070, more thandouble the total biofuels produced in 2019 for road transport purposes (about 2
mboe/d).
Synthetic jet kerosene is produced from CO2 captured from concentrated
industrial sources, using biomass feedstocks, or via direct air capture (DAC) andlow-carbon hydrogen (see Chapter 3). It complements biojet fuel, the supply ofwhich is constrained by the limited availability of sustainable biomass and thedemand for biomass in other energy sectors. Synthetic jet fuel’s building blocks
are not limited in the same way as biomass, and synthetic methods can produce
a hydrocarbon fuel with characteristics identical to conventional jet kerosene,
allowing the fuel to be blended or entirely replace jet kerosene. Commercialscale synthetic jet kerosene production starts in the 2030s in the Sustainable

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Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Development Scenario, and the share of the jet fuel market taken by synthetic
production reaches more than 40% by 2070. In 2070, around 5.1 mboe/d ofsynthetic fuels are used in aviation, equivalent to about three-quarters of jet
kerosene consumption in 2019.
Global CO2 emissions in aviation by abatement measure (left) and technology
readiness level (right) in the Sustainable Development Scenario relative to theStated Policies Scenario

02.5

Gt CO2

5

Gt CO2/yr

CO2 reductions
by technology
CO2 reductions
by technology

Stated Policies Scenario
2.0

35
30

5

25

1.5
0
5

Cumulative CO2 emissions by
TRL category
40

20
1.0

15
10

0.5
0
2019

2030

0.0
2019

2040
2030

Avoided demand

Sustainable Development Scenario
2050
2060
2070
2040

2050

Technology performance

2060
Bioenergy

52070

Synthetic fuels0

MatureEarly adoption
Demonstration
Prototype

IEA 2020. All rights reserved.
Notes: The projections were developed using the Aviation Integrated Model developed by University College
London Energy Institute (AIM, 2020). TRL = technology readiness level. See Box 2.6 in Chapter 2 for the definition of
the maturity categories: large prototype, demonstration, early adoption and mature.

Rigorous polices that promote sustainable aviation fuels, efficiency and shifts to alternativetransport modes reduce emissions substantially in the Sustainable Development Scenario.

Energy efficiency is a key technological driver of emissions reductions throughout
the Sustainable Development Scenario. Despite the improvements driven by theimperative to cut fuel costs that have been made in the last few decades, there
remains considerable potential for further gains. The maximum potential for costeffective operational and technical fuel burn reductions for new aircraft by 2034 isestimated at 40% (ICCT, 2016). Most of this potential is exploited in the Sustainable
Development Scenario.
In contrast to the case of cars and trucks, where vehicle efficiency standards propelvehicle and powertrain efficiency technologies into the market (and simultaneously
save drivers and consumers money through reduced expenditure on fuel), efficiency
targets in the airline industry lag behind recent non-regulated rates of improvement.
Both the aspirational 2% annual average improvement rates in fuel efficiency targetedby ICAO on international flights (ICAO, 2013), and IATA’s 1.5% annual improvement

PAGE | 295

IEA. All rights reserved.

targets for 2009-20 for international and domestic flights combined (IATA, 2018) fall

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

short of the actual improvement rates demonstrated by the industry overall(domestic plus international) achieved in the 2009-19 period (2.9% on an rpk basis
and 2.4% on an rtk basis). As outlined in the overview section, aircraft retirements
and airline consolidation in the wake of Covid-19 are likely to give a substantial boost
to overall fleet efficiency, particularly in wide-body aircraft. Putting to one side theimpact of lower passenger occupancy rates, the retirement of one-quarter of thecurrent aircraft fleet constructed before 2001 would result in an overall reduction in
the fuel burn per available seat-kilometre of around 8%.
Projected gains in energy intensity of new aircraft average 2.2% per year (on anenergy per rpk basis) in the 2019-30 period. At a time of unprecedented growth in air
travel, where new aircraft that will operate for decades are being delivered to key
growth markets such as Asia-Pacific, these efficiency gains help to restrain growth indemand for aviation fuel, although they do not stop it. Efficiency improvements in
the Sustainable Development Scenario will need to be driven mainly by taxes on fuels
or pollutant emissions that encourage airlines to opt for more efficient aircraft, or byclean fuel standards that effectively lead to rapid uptake of sustainable aviation fuels(discussed in detail in the next section). The long operational lives of aircraft meansthat the improvements in new aircraft efficiency take nearly a decade to show up in
the Sustainable Development Scenario. The efficiency gains come from a
combination of technical and operational innovations.
Transport policies that encourage investment in more energy efficient modes, suchas high-speed rail, also reduce aviation demand in the Sustainable Development
Scenario. The range of flights for which high-speed rail can serve as a direct
substitute for air travel is essentially the same as the maximum range that electric
aircraft may one day be capable of achieving, and then only with breakthroughs inbattery technologies (IEA, 2019b), but electric aircraft may have a role on routes
where travel volumes are too low to justify building expensive rail infrastructure.
Other technologies that can play a role in limiting demand, such as videoconferencing and virtual reality teleconferencing as substitutes for business travel,
are likely to become more commonly used given their widespread adoption during
recent periods of lockdown and reduced travel with the Covid-19 crisis. The
forthcoming World Energy Outlook (IEA, forthcoming) will discuss the potential
impacts of such substitutes for business travel on energy demand.
Rapid and effective policy action is needed to put aviation onto the fuel andemissions trajectory set out in the Sustainable Development Scenario. Fiscal
measures and others that stimulate the market adoption of sustainable aviation fuels(such as offtake agreements and/or low-carbon fuel mandates [including
volumetric]) are assumed to play an increasingly important role, together withregulatory policies that mandate minimum fuel efficiency standards on aircraft andengines. However, such policies need to recognise and account for trade-offs

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between fuel efficiency, noise, safety and local pollution (Box 5.6).

Energy Technology Perspectives 2020

Box 5.6

Chapter 5. Technology needs in long-distance transport

Trade-offs in making aircraft more fuel efficient

The scope to make full use of the opportunities to boost the fuel efficiency of aircraft
is constrained by a number of commercial and practical trade-offs. These include:

Optimal range and speed: The right-sizing of aircraft based on their load factor
and optimum operational range can enable airlines to minimise fuel use per rpk.
But systematically matching an aircraft and a route is not necessarilystraightforward. Airlines may favour bulk purchases of a limited number ofaircraft models to obtain a better price and for the ease and cost savings thatcome from more uniform maintenance and pilot training needs across theiroperations. This leads to many aircraft being used on routes far shorter than theiroptimal range over their entire lifetime.



Stopovers: Take-off is the flight stage that burns the most fuel (per distancetravelled), followed by landing; cruising is far less fuel intensive. Minimising travelwith connecting flights may therefore lead to better trip fuel efficiency. However,flying longer distances means a need to carry more fuel, boosting fuelconsumption – the so-called “burning fuel to carry fuel” drawback. 32 At distancesof more than approximately 6 000 km, planes can save fuel by stopping mid-way
and refuelling if doing so does not cause them to deviate from the direct flightpath from the origin to destination airport.



Noise: Reducing aircraft noise, particularly in densely populated areas aroundairports, is a priority for policy-makers and the general public. Although highbypass ratio turbofans are both more fuel efficient and quieter than turbojets,
other measures that reduce noise actually incur fuel use penalties and increase
costs and emissions. Examples include adopting longer flight routes to avoid
populated areas and the use of steeper, and hence more fuel intensive, take-off
and landing manoeuvres. Efforts to reduce NOx emission face similar trade-offs,
as these can increase fuel burn.

Source: Filippone (2012).

For example, an A330 consumes 150 kg of fuel to carry each additional tonne of fuel on a typical route, i.e. a 15%
penalty (Airbus, 2012).

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32

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Readiness and competitiveness of emerging
technologies
Among the technologies that can reduce CO2 emissions in aviation, those that are
generally most ready to be deployed concern operational measures and technicalimprovements that result in aircraft fuel efficiency (Table 5.5). Operational measuresthat could be (and are) implemented with little barrier include single engine orelectric taxing, improved congestion management and optimised departures andapproaches at airports. Technical efficiency opportunities concern designing new
airframes and jet engines in ways that can lead to reduced fuel burn. New aircraftmodels are typically improved versions of previous generations of similar models,
and recent Airbus and Boeing aircraft offer fuel efficiency improvements of up to 25%
over previous versions of similar models. Efficiency gains can be achieved by
improvements to engines, airframes and powertrains. Improved engines havecontributed substantially recent efficiency gains, primarily through increasing air
bypass ratio – the ratio between the mass flow rate of the bypass stream and themass flow rate entering the core (the higher the ratio, the lower the fuel consumption
for the same thrust). More disruptive designs, such as the open rotor or ultra-highbypass-ratio (UHBR) engine, have the potential to further increase the ratio and to
produce fuel burn reductions of up to 30%. However, their large engine diameter
poses problems for existing aircraft designs. Futuristic concepts such as the notionof a blended-wing-body, being tested by Boeing and Airbus with small-scaled
prototypes, would radically change what aircraft look like, and could open the way
to use of UHBR or similar engines. Such designs could enable fuel savings of up to
20%. Risk-sharing mechanisms and public investments in R&D, perhaps financed
through CO2 taxes or fees on flights, are likely to be needed for manufacturers to bewilling to take on the high risks and huge development costs involved in bringing

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IEA. All rights reserved.

such disruptive airframe designs to market.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Status of the main emerging technologies in the aviation sector
CO2
reductionmechanism

Year available(Importancefor net-zeroemissions)Technology

TRL

Engines
UHBR engines

5

Fuel
efficiency

2030-35(High)

Ground tests of Rolls Royce’s UltraFan with a
25% fuel saving potential will start in 2021. The
manufacturer collaborates with Airbus under the
EU Clean Sky 2 programme and this UHBR
engine will be available towards 2030.

5

Fuelefficiency

2035 (High)

Demonstration of the GE36 open rotor engine
dates back to the 1980s. In 2017 SAFRAN
ground-tested a demonstration model with 30%
potential fuel savings that will be market readyin 2030.

3

Fuelefficiency

N/A (Medium)

Boeing together with NASA conducted testfights of a small-scale prototype until 2013 andAirbus in 2019. This concept is validated yetneither manufacturer has confirmed plans for alarge prototype.

Open rotor
engines

Deployment status

Airframes
Blended wingbody aircraft

Alternative powertrains
Hybrid electric
aircraft

4-5

Fuel switch

N/A (Medium)

Airbus together with Rolls Royce is developing a
prototype for a hybrid electric aircraft under the
E-Fan X programme. The aim is to launch a test
flight by 2021 with an aircraft with one electricmotor and three regular jet engines. WrightElectric aims to launch a 186-seat aircraft for
short-haul flights in 2030. Small aircraft (Cassio
and the Ecopulse) have performed flight tests.

All-electric
aircraft3

Fuel switch

N/A (Medium)

A nine-seater seaplane, retrofitted with a battery
and electric engine, had its inaugural flight in2019 in Canada, trailblazing the development ofsmall battery electric aircraft for very shortdistances (the aircraft has a range of about
160 km). Batteries with higher energy density
will be needed for longer distances.

Fuel cellelectric
aircraft3

Fuel switch

N/A (Medium)

DLR tested a fuel cell powered four-seater motor
glider (HY4) in 2016. Boeing tested a fuel cellelectric prototype in 2008. There are noannounced programmes for larger aircraft.

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Notes: UHBR = ultra-high bypass ratio. A broader list of technologies compatible with a low-carbon transition for theaviation sub-sector is presented in the technology mapping portion of The Covid-19 Crisis and Clean Energy
Progress (IEA, 2020b).

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

The uncertainty surrounding electric powertrains is even greater. RD&D programmes
for fuel cell electric and hybrid electric aircraft are at an early stage with the first
prototypes planned for the 2030s. The first battery electric flight took place in 2019,
but the gravimetric energy density of currently available batteries would have toincrease at least threefold to support short flights on regional jets. The projected
progress in battery technology in the Sustainable Development Scenario by 2070
(i.e. near doubling of cell level energy density) meets technology requirements ofbattery electric aircraft with a range that is sufficient for about 40% of all flights(Figure 5.17). However, electric aircraft look set to remain unviable for the mid-hauland long-haul flight segments that use most fuel, and the potential to substitute fueluse on those flight segments is limited to about 10%.
Breaking that range limit would depend on further developments in advanced battery
chemistries. Both potentially enabling chemistries (Lithium-sulphur and Lithium-air),are at very early stages of technology development (see chapter 6 for more details).
Hybrid electric and fuel cell electric aircraft use batteries only to moderate power
output, so battery weight is less of a constraint, but fuel cell electric aircraft facechallenges stemming from the low volumetric energy density of hydrogen.
Share of flights and fuel use in overall commercial passenger aviation, 2017

Fight and fuel shares

100%
90%

Flights

80%

Aviation fuel70%

Sustainable
Development
Scenario

60%

Li-sulphur or
Li-air batteries

50%
40%
30%
20%
10%
0%

0

2 000

4 000

6 000

8 000

10 000

12 000Flight distance (km)
IEA 2020. All rights reserved.
Note: The boxes show the share of aviation fuel use (solid) and flights (transparent) that could theoretically be offset
by battery electric aircraft entering the fleet in 2070 in the Sustainable Development Scenario, or by lithium-sulphur
batteries.
Source: IEA analysis based on OAG (2018); Schäfer et al. (2019).

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Batteries at demonstration or prototype stage enable electric aircraft with flight ranges
covering 10% of fuel use in 2070 in the Sustainable Development Scenario. Less mature
alternative batteries could raise this threshold up to 30% at most.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Available aircraft and engine technologies, including designs that are today only atthe early prototype level, could reduce energy needs and, therefore, emissions fromoil-based aviation fuels, but switching to clean fuels would be needed to achieve fulldecarbonisation during the second half of this century. 33 Currently, five biojet fuelproduction pathways 34 have been approved as compliant with the American Societyof Testing and Materials (ASTM) standard D7566, the fuel standard required forinternational flights. Only one – hydrogenated ester fatty acid (HEFA) jet – is so far
commercially available (TRL 9-10). All of the approved pathways except sugar-based
synthetic isoparaffins (SIP) are technically drop-in fuels, though current regulations
cap them at 10-50% blend rate with fossil-based jet kerosene. 35 There are a numberof measures already in place that support the deployment of sustainable aviation
fuels by providing certainty about future demand, including offtake agreements
between airlines, airports and biojet fuel producers. Oslo Airport led the way in 2016,
with United Airlines at Los Angeles Airport close behind (IATA 2019). Both use HEFA
jet, with Neste producing the fuel for Oslo Airport and World Energy for Los Angeles
Airport.
Commercially available HEFA will probably play a leading role in the early market
development of aviation biofuels. When waste cooking oil and animal fat feedstocks
are used, HEFA can offer deep decarbonisation (in the region of 80-90% versus fossil
jet kerosene). However, ultimately a broader set of sustainable aviation fuels will beneeded to deliver the volumes required by the Sustainable Development Scenario.
This is because large-scale HEFA production from crop feedstocks raises questions
regarding its potential impact on land use and food production, and because there
are upper limits on the availability of the lowest carbon feedstocks, althoughpractices such as sequential cropping and improvements in agricultural yields would
increase the sustainable feedstock base. In addition, HEFA jet faces competition forthe same feedstocks from hydrotreated vegetable oil (HVO) in road transport. A
facility that produces HEFA jet can also produce HVO, which not only requires fewer
chemical transformations (and is hence cheaper to produce), but can also be sold at
a higher price at present because it is underpinned by more widespread policy
support measures.

The correct attribution of GHG emissions to sustainable aviation fuels is critical to accurately estimate their potential
to displace fossil fuel use. For instance, the EU Renewable Energy Directive, Annex V, Section B lists default values foremissions savings from 40% to 95% for biofuels depending on the feedstock and pathway.
34
These are hydrogenated ester fatty acid (HEFA) jet fuel, Fischer-Tropsch (FT) jet fuel, alcohol-to-jet fuel using an
ethanol or isobutanol feedstock, hydroprocessed fermented sugar-synthetic isoparaffins and catalytichydrothermolysis jet fuel. The FT route must use gasified biomass (biomass-to-liquid) to qualify as a sustainableaviation fuel.
35
Sugars are fermented and converted into a long-chain hydrocarbon called farnesene, and then treated withhydrogen to produce farnesane. The molecular composition of this fuel is not exactly the same as the hydrocarbons
found in fossil jet fuel, limiting the extent to which they can be blended.

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33

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

Biomass-to-liquid (BTL) jet, the next closest technology to commercialisation (TRL 56), holds great potential given its ability to handle a wide variety of feedstocks that
do not face the same growth limitations as HEFA feedstocks. BTL can use woody
biomass, energy crops cultivated on marginal land, municipal solid waste andresidues from agriculture and forestry as feedstock. However, technical issues
remain with unwanted tar formation during gasification, casting doubt about exactly
when it could become commercially viable. While BTL is mainly in the demonstration
plant phase, two commercial-scale plants which aim to produce aviation biojet fuelare under construction in the United States (BP 2018; Velocys 2020). Other ASTMapproved technology pathways allow ethanol, ether from crop or cellulosic
feedstocks, to be converted into biojet fuels, therefore further amplifying thesustainable potential of biojet fuels to meet the demand projected in the Sustainable
Development Scenario. In the longer term, clean synthetic jet kerosene would also
be needed to meet jet fuel demand in order to achieve net-zero emissions in aviation(see Chapters 3 and 6 for more discussion on synthetic fuels).
The main barrier to large-scale deployment of biojet and synthetic fuels is that they
cost much more at present than fossil jet. Some feedstock costs alone are usuallyhigher than the market price of fossil jet, before even considering capital andoperational expenditures. For instance, at the end of 2019 soybean oil was priced at
USD 0.70 per litre (/L) while fossil jet kerosene was priced at USD 0.53/L (Bloomberg2020). Crude oil prices would need to be in the USD 90-310/barrel range to allow
biofuels to compete on equal terms with fossil jet kerosene today. The costcompetitiveness gap with synthetic jet kerosene is even bigger. As with biojet fuel,the cost of both electrolysers and DAC systems need to be reduced considerably tomake them commercially viable options, even with much higher carbon prices (seeChapter 3).
Bridging the gaps between the cost of producing biofuels and synthetic fuels on one
hand and the price of fossil jet on the other cannot be done without policy
intervention – at least initially and potentially for decades. With a high carbon price –USD 150/tonne in 2050 in the Sustainable Development Scenario – it currently looks
as though HEFA jet and BTL-based biojet (with CCUS) fuel could eventually competewith fossil jet kerosene, though future production costs and oil prices are extremely
uncertain (Figure 5.18). In the United States, the Low Carbon Fuel Standard (LCFS) in
California coupled with the national Renewable Fuel Standard (RFS) has already madeHEFA jet commercially viable, while the UK Renewable Transport Fuel Obligation alsooffers considerable financial support which could close the gap between HEFA andfossil jet fuel: much more would be needed to enable BTL-based biojet fuel and

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synthetic jet kerosene to also close the gap.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

USD/L

Levelised production costs of sustainable aviation fuels in 2050
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0

$50/bbl crude
HEFA

BTL

BTL w CCUS

Synthetic fuels frombiogenic CO₂ andelectrolysis

Synthetic fuels from DAC
CO₂ and electrolysis

Fossil jet kerosene

CAPEX

OPEX

Fossil fuel cost

Biofuels feedstock cost - low

Biofuel feedstock cost - highElectricity cost - low

Electricity cost - highCO₂ feedstock

CO₂ price impact USD 150/tCO₂

Effective diesel priceIEA 2020. All rights reserved.
Notes: HEFA = hydrogenated ester fatty acid; BTL = biomass-to-liquid; CCUS = carbon capture and utilisation; DAC =direct air capture; CAPEX = capital expenditure; OPEX = operational expenditure. Effective diesel price refers to thelevelised production cost with carbon prices included where shown. Levelised costs assume a discount rate of 8%.
Crude oil price of USD 50 USD/bbl are assumed. Biomass feedstock costs range USD 5-15 per gigajoule. Synthetic
fuel production here uses biogenic CO2 at a cost of USD 30/tCO2 and CO2 from DAC at a cost of USD 150/tCO2, andhydrogen from electrolysis powered by a dedicated renewable energy system. Electricity prices for hydrogenproduction and synthetic fuel production range USD 20-60 per megawatt-hour (MWh) across regions while anaverage electricity price of USD 40/MWh is assumed for biofuels and is included in the biofuel OPEX. For moredetails on synthetic fuel production costs, see Chapter 2.

With a carbon price of USD 150/tonne, sustainable aviation fuels begin to compete with oilbased jet kerosene, though policy support will need to account for the volatility anduncertainty of future feedstock costs and oil prices.

Despite the Covid-19 crisis, there are some signs that momentum may be starting topick up for sustainable aviation fuels. In the United States, production of sustainableaviation fuels rebounded in the second-quarter of 2020 to nearly double the output
from the second-quarter 2019. While most of the economic recovery packages inmany countries did not include any requirements for sustainability, the bailouts for
Air France-KLM call on these airlines to target 2% sustainable aviation fuels blending
shares in their operations by 2025. The bailout of Austrian Airlines requires that airline
to meet 2% sustainable aviation fuels blending shares on short- and medium-haul
flights by 2030. Amazon has secured the purchase of 6 million gallons (22.7 million
litres) of sustainable aviation fuels over the next year. If additional airline bailouts
were to be made contingent on a commitment to sustainable aviation fuel blending
targets, it would further boost production of those fuels. Public and shareholderpressure could also accelerate the adoption of sustainable aviation fuels.
A much stronger policy and regulatory push, together with support for technology
development to bring alternatives to HEFA biojet fuel production pathways closer tocommercialisation, is needed to reach the projected levels of sustainable aviation

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fuel production in the Sustainable Development Scenario. In addition to putting inEnergy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

place regulatory or fiscal mechanisms to promote their adoption, making national
bailouts contingent on airlines meeting efficiency improvements in their new aircraft
purchasing in excess of the current ICAO standards will be needed to limit thedemand growth for jet kerosene once aviation activity picks up. National policy
support for alternative fuels in domestic aviation could spur development ofsustainable aviation fuel technologies and supply chains. Support could take theform of financial de-risking measures for project investment, low-carbon fuelmandates, dedicated volumetric, blend-in or carbon-intensity reduction mandates(such as the US Renewable Fuel Standards or the EU’s Renewable Energy Directive
and Fuel Quality Directive), market-based carbon policies on transport fuels (such as
California's Low Carbon Fuel Standard) (IEA 2019c). If CORSIA ensures that bothoffsets and sustainable aviation fuels with robust lifecycle emission reductions are

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used for compliance, which could also make a real difference.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

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Chapter 5. Technology needs in long-distance transport

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recommendations on CORSIA eligible emissions units, www.icao.int/environmentalprotection/CORSIA/Documents/TAB/Excerpt_TAB_Report_Jan_2020_final.pdf.

Energy Technology Perspectives 2020

Chapter 5. Technology needs in long-distance transport

ICAO (2018), Forecasts of Scheduled Passenger and Freight Traffic,
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Chapter 5. Technology needs in long-distance transport

IEA (2019a), The Future of Hydrogen, IEA, Paris, www.iea.org/reports/the-future-of-hydrogen.
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Energy Technology Perspectives

Chapter 6. Clean energy innovation

Chapter 6. Clean energy innovation
Innovation is an uncertain and competitive process in which technologies eventually
pass through four stages: prototype, demonstration, early adoption and maturity.
Size, modularity and synergies with other technologies are all attributes that
determine the speed with which technologies pass through these stages.
Governments have a particularly central and wide-ranging role to play in this processthat goes far beyond the provision of funds for R&D.



Achieving net-zero emission targets depends on strong and targeted R&D andinnovation efforts in critical technologies. In the Sustainable Development Scenario,
almost 35% of the cumulative CO2 emissions reductions by 2070 compared with theStated Policies Scenario come from technologies that are currently at the prototype
or demonstration phase which will not become available at scale without further R&D.
About 40% of the cumulative emissions reductions rely on technologies that have notyet been commercially deployed in mass-market applications.



The Faster Innovation Case examines what would be needed in terms of even fasterprogress in clean energy technology innovation to deliver net-zero emissions globallyby 2050 rather than 2070. CO2 savings from technologies currently at the prototype
or demonstration stage would be around 75% higher in 2050 than in the Sustainable
Development Scenario, and about 45% of all emissions savings in 2050 would comefrom technologies that have not yet been commercially deployed, even on a very
limited basis.



A transition to net-zero emissions as in the Faster Innovation Case would further
amplify the required pace and scale of technological change. The power sector would
need to decarbonise sooner while generating additional electricity of nearly
20 000 TWh in 2050 relative to the Sustainable Development Scenario (a 35%
increase) to support higher electricity demand, including higher need for hydrogenand synthetic fuels. Average annual renewable capacity additions to 2050 would be
770 GW, almost 50% above the Sustainable Development Scenario. Additional
demand for alternative fuels would be almost 20% higher: hydrogen demand would
rise by more than 50%, requiring nearly 50 GW of additional electrolyser capacityeach year.
Most of the additional decarbonisation effort in the Faster Innovation Case comesfrom electrification (accounting for 35% of additional emission cuts in 2050), CCUS
(more than 25%) and bioenergy (more than 20%). In addition, the use of low-carbonhydrogen accounts for 30% of the additional emissions reduction from heavy
industry.

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Energy Technology Perspectives

Chapter 6. Clean energy innovation

Introduction
As discussed in the preceding chapters, a rapid shift to net-zero emissions ofgreenhouse gases (GHG) is needed if we are to meet the energy-related United
Nations Sustainable Development Goals. This requires the use of a wide range ofclean energy technologies. Some are well established; others are at an early stage ofdevelopment, or exist only as prototypes. Other technologies may emerge in due
course from current research work. These clean energy technologies may also offer
additional benefits including cleaner air and enhanced energy security as a result of,for example, improved electricity systems flexibility.
Success will not be easy or straightforward. It depends upon technologicalinnovation, and this takes time: it has taken decades for solar photovoltaics (PV) andbatteries to reach their current stage of development, for example. And not every
technology that is developed will be successful; the evolution of existing and newtechnologies is inherently uncertain. But these points merely serve to underline theimportance of finding ways to innovate that are successful in bringing about rapidchange.
This chapter analyses the role of innovation in the Sustainable Development Scenario
and highlights the need for an efficient innovation cycle to help countries reach netzero emissions in the most cost-effective manner. It also analyses a Faster Innovation
Case that explores just how much more clean energy technology innovation would
be needed to bring forward the time at which the Sustainable Development Scenario
reaches net-zero emissions from 2070 to 2050.
This chapter draws on the recent Energy Technology Perspectives Special Report on
Clean Energy Innovation 1 with the aim of informing policy makers about the criticalrole that innovation plays in creating a cleaner and more resilient energy sector with
net-zero emissions, and of setting out why the economic stimulus packages toaddress the impacts of the Covid-19 pandemic should include measures toaccelerate clean energy innovation, including through support to research anddevelopment (R&D), demonstration projects and market diffusion. At the time ofwriting in mid-2020, it is too early to tell with certainty how lockdowns, damage toeconomic activity, or changed attitudes towards risk and values will impact clean
energy innovation. However, some data are available for the first-half of 2020 whichsheds light on early trends.

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1
Energy Technology Perspectives Special Report on Clean Energy Innovation,(www.iea.org/reports/clean-energy-innovation).

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Clean energy innovation and the vital role ofgovernments
This report treats technology innovation as the process of generating ideas for new
products or production processes and guiding their development all the way fromthe lab to mainstream diffusion into the market (IEA, 2020a). Each stage of theprocess involves funding risks, technical risks and market risks that are influenced byvarious social and political factors. As a result, only a minority of products ever makeit all the way to mass market deployment.
The innovation journey of any given technology is evolutionary. Both radical andincremental advances can characterise the process of innovation. There are threemain ways in which a technology evolves with experience to become better adapted
to its environment, notably through improved cost and performance: learning-byresearching, learning-by-doing and achieving economies of scale. As the technology
improves, it is more likely to be supported by research and development (R&D)
funders and chosen by new users. This creates a virtuous cycle and so-called“increasing returns to adoption”. However, in the early stages, when costs are usuallyhigher than those of competitors, such feedback loops may be weak and it requires
concerted and risk-taking investment to access the first market opportunities.
Choices about technology are made in an environment that is constantly changing
as companies, consumers, policies, competing technologies, infrastructure andsocial norms change. Technologies can become more attractive to users for a varietyof reasons. These include changes in related technologies, consumer behaviour andpolicy, and sometimes they include a change in the information available to users.
Each of these variables can change in ways that cause a technology to be overlookedin favour of alternatives, or lead to a technology that was previously rejected finding
new market opportunities. Governments and private sector actors raise their chancesof successful innovation by simultaneously addressing the improvement oftechnology, for example through research, and of the selection environment, forexample though regulation, advertising or the development of new business models.
Successful innovation systems involve a wide range of actors with aligned interests
and a wide variety of functions, each of which can be enhanced by public policy(Gallagher et al., 2012). These functions can be grouped under four headings. An
innovation system will struggle to translate research into technological change
unless it is performing successfully under each.
Resource push: There must be a sustained flow of R&D funding, backed by askilled workforce and research infrastructure. These resources can come fromprivate, public or even charitable sources.

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Energy Technology Perspectives



Chapter 6. Clean energy innovation

Knowledge management: It must be possible for knowledge arising to beexchanged easily between researchers, academia, companies, policy makers andinternational partners.

Market pull: The expected market value of the new product or service must belarge enough to make the R&D risks worthwhile, which is often a function ofmarket rules and incentives established by legislation. If the market incentives
are high, then much of the risk of developing a new idea can be borne by theprivate sector.

Socio-political support: There needs to be broad socio-political support for the
new product or service, despite potential opposition from those whose interests
might be threatened.

Successful new ideas pass through four stages…
eventually
Innovation processes are rarely linear, and no technology passes all the way from
idea to market without being modified. Their trajectories are influenced by feedback
loops and spillover between technologies at different stages of maturity and indifferent applications, and often involve setbacks and redesign. It is neverthelessworth considering the four distinct stages through which all successful technologies
eventually pass because each stage has different characteristics and requirements(Figure 6.1). These stages are relevant to all the different level of technology definition– type, design, component – but are most applicable to technology designs.

Prototype: Following its initial definition, a new concept is developed into adesign and then a prototype for a new device, a new configuration of existing
devices or a new component to improve a product on the market. The probabilityof success at this stage is low, but the costs per project are also generally low.



Demonstration: The first examples of the new technology are introduced into agiven market at the size of a single full-scale commercial unit. Demonstration
involves more time, cost and risk than the prototype stage. This phase is often
referred to as the “valley of death”, especially for large-scale, tangible
technologies.
Early adoption: At this stage, there is still a high cost and performance gap
compared with existing technologies, but the technology is used by customers
who want to try it out or need it for a particular purpose. This period represents acontinuation of the valley of death and in many cases revenue from early nichemarkets does not cover costs. In cases where governments see a broader social,environmental or economic benefit from its wider diffusion, they may help, forexample through discretionary procurement or financial support. Operating in acommercial environment means however that more of the costs and risks can be

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Energy Technology Perspectives

Chapter 6. Clean energy innovation

borne by the private sector, with competition driving down costs andencouraging refinements. As the number of niches grows, the technology arrives
at a material share of 1% or more of the market it is seeking to address.



Maturity: As deployment progresses beyond materiality to maturity, the productmoves into the mainstream for new purchases and may even start to competewith the stock of existing assets. Incremental learning-by-doing continues during
this stage, as feedback from engineers and users stimulates new ideas for moreradical enhancements to be prototyped. A dominant design has become
accepted and the risks are generally familiar enough for private investors to bear.

Throughout the early adoption and maturity stages, innovation continues to improve
the technology. In some cases, significant discontinuous improvements occur longafter market deployment has started, as for example with lithium-ion (Li-ion) batteries
for electric vehicles. In other cases, technologies reach a point where only very
incremental changes are expected from continuous learning processes, as forexample with large hydropower plants.
Figure 6.1

Four stages of technology innovation, feedbacks and spillovers that improvesuccessive generations of designs

IEA 2020. All rights reserved.

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Successful technologies eventually pass through four stages of innovation, with R&D
contributing improvements and spurring ideas for novel prototypes at each stage.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

The role of governments and other actors in innovation
systems
At each stage of the energy innovation journey, a variety of public and private sector
actors, including not-for-profit research institutions and funders, play essential
roles. 2 For all actors, competition is a major driver of energy innovation. Firms of all
sizes have incentives to refresh their offerings to customers to increase market shareand to avoid losing out to competitors with cheaper or better performing products.
Countries also often compete to secure investment and market share for companies
and workers.
The role of governments is particularly crucial. It encompasses educating people,
funding R&D, providing network infrastructure, protecting intellectual property,
supporting exporters, buying new products, helping small and medium-size
enterprises, shaping public values, and setting the overall regulatory framework formarkets and finance (Hekkert et al., 2007; Bergek et al., 2008; Grubler et al., 2012;
Roberts and Geels, 2018; Kim and Wilson, 2019). The essential justification for public
intervention in innovation is that new ideas and technologies are undersupplied by
the market – a so-called public goods market failure that arises because companies
prioritise those activities and expenditure from which profits are most certain. In
particular, radical new concepts, or “disruptive” technologies, often arising frombasic scientific research, are rarely supplied by incumbent companies, which tend to
focus on incremental improvements to their existing technology portfolio (OECD,2015). Disruptive technologies can be of particular importance in relation to social orenvironmental outcomes that are desired by governments but have low market value.
Evidence suggests that the productivity of corporate research is increasingly
dependent on ideas arising from publicly funded R&D (Fleming et al., 2019). Publicfunding for energy R&D may well stimulate more private sector spending, not less
(Nemet and Kammen, 2007). A mechanistic description of how governments fill gaps
left by the private sector underplays their ability to make things happen. They havein the past used their powers to set incentives for, and work with, the private sector
to deliver desirable outcomes: examples include space exploration, vaccines andnuclear power. It is increasingly recognised that many of the biggest clean energy
technology challenges could benefit from a “mission-oriented” approach (Díaz
Anadón, 2012; Mazzucato, 2018). Support for industrial clusters, strategic use of
public procurement and investment in enabling infrastructure could all play a part insuch an approach, increasing the probability of innovation success.

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2
For more details, see the Energy Technology Perspectives Special Report on Clean Energy Innovation,(www.iea.org/reports/clean-energy-innovation).

Energy Technology Perspectives

Chapter 6. Clean energy innovation

History underlines the importance of R&D at the start of the innovation journey, andthe key role of governments around the world in helping major new technologies
achieve success.

Covid-19: A threat or an opportunity for clean energy
technology innovation?
The Covid-19 pandemic has delivered a brutal shock to countries around the world.
By mid-May 2020, around one-third of the global population was under full or partial
lockdown. Assuming that containment measures are gradually phased out during thesecond-half of the year, the global economy is expected to contract by around 6% in
2020; this would be the largest economic dip since the global depression of the
1930s (IEA, 2020b).
Technology innovation is a driver of structural change. New technologies
outcompete older ways of doing things and bring new services to society, attracting
investment at each stage. Evidence suggests that clean energy technology
innovation brings particular economic benefits, as well as being essential for thecreation of a more sustainable energy system (Aghion et al., 2016). While the macro
relationship between jobs and R&D expenditure is complicated, other studies
suggest that R&D that supports new high-tech products is correlated with increased
employment (Calvino and Virgillito, 2017).
Worldwide, some 300 million full-time jobs could be lost as a result of Covid-19, andnearly 450 million companies are facing the risk of serious disruption. Clean energy
innovation is labour intensive: we conservatively estimate that over 750 000 people
are currently employed in energy R&D around the world, representing 1.5% of theapproximately 40 million workers in the global energy system, with half of these jobs
being in China, France, Germany, Japan and United States. If these workers are lostto the sector, it will be hard to build up the expertise associated with them again: it
takes many years to acquire the specialist skills and experiences necessary to identify
technology needs, formulate improved concepts and build the teams to test them.
There are several ways in which clean energy innovation jobs and outputs are
threatened by the Covid-19 pandemic. These include pressures on public and privatebudgets, a riskier environment for clean energy venture capital and disrupted global
supply chains (see next section). Public R&D is expected to hold up better thanprivate R&D, and there is a reasonable chance that the governments of major
economies will seek to boost innovation funding in response to the crisis. Companies
face lower revenues and a lack of cash flow for capital investment to meet near-term
growth targets, but there is little sign of those who have made commitments to
reduce their emissions intensity and test new energy technologies seeking to backaway from those commitments. For a rapid assessment of the likely impacts of Covid-

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19 on their ability to support innovation towards longer term goals, we surveyed

Energy Technology Perspectives

Chapter 6. Clean energy innovationindustrial contacts in May 2020. Responses indicated no change in long-term
commitments and an expectation that R&D budgets would be resilient, but overallsentiment about the impact on the full range of innovation activities was gloomy. 3
The second-half of 2020 presents a unique opportunity to double down on clean
energy innovation. While near-term responses to the crisis have understandably
focused on mitigating health, employment and liquidity risks, attention is now turning
to the speed of the recovery, creation of new jobs and the future shape of theeconomy. New players with new ideas aiming to displace high-carbon producers andto scale-up quickly may find a supportive environment if they are able to enter themarket at the right moment. Economic stimulus plans now being proposed incountries around the world offer a once-in-a-generation opportunity to boost clean
energy technology innovation. Many of the sectors that are critical to achieving netzero emissions have investment cycles of many decades, so there is no time to lose.

Global status of clean energy innovation in
2020
A clean energy transition to net-zero emissions requires a radical change in both thedirection and scale of energy innovation. However, not all of the many characteristics
of a national innovation system that is designed to support net-zero emissions canbe tracked closely using data available today, and there are further indicators ofhealthy innovation systems that are even less quantifiable (IEA, 2020a). Despite this,a picture of the performance of clean energy innovation systems can be constructedusing information that is available across the four pillars described in the previous

section. At the more general level of the whole economy, this type of approach isfollowed for the Global Innovation Index, which aggregates 80 indicators (Cornell
University, INSEAD and WIPO, 2018).
The IEA has developed methodologies for tracking a number of key indicators of“resource push” factors and intermediate outputs for clean energy innovation on anannual basis. While it is important to remember that this set of indicators presents
only a partial view based on data available at the global level, it nevertheless offers
an important insight into the level of innovation effort around the world. There is
scope for it to be expanded in the future. 4

For more details on the results of this survey, see Energy Technology Perspectives Special Report on Clean Energy
Innovation, (www.iea.org/reports/clean-energy-innovation).
4
Better quality data on demonstration projects, technology-level corporate R&D, component-level import-export
trends, public sentiment and bilateral energy innovation collaborations would be valuable additions: so would muchneeded improvements to data quality for public energy R&D spending.

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Energy Technology Perspectives

Chapter 6. Clean energy innovation

There are benefits for policy makers and investors in such tracking activities. In theearly 1990s, few analysts attempted to assess the efforts dedicated to developing
solar PV and Li-ion batteries and their technical progress: better data might havehelped governments allocate resources more effectively and accelerated thedevelopment of these technologies. At a national or regional level, more granularanalysis is sometimes already possible (Wilson and Kim, 2019).

Government R&D funding
Worldwide government energy-related R&D spending in 2019 increased by 3% to
USD 30 billion, around 80% of which was directed to low-carbon energy
technologies. While the growth rate in 2019 was below that of the previous two years,
it remained above the annual average since 2014. In China, the low-carbon
component of energy R&D rose by 10% in 2019, with big increases in R&D for energy
efficiency and hydrogen in particular. In both Europe and the United States, spending
on public energy R&D rose by 7%, an increase that is above the recent annual trend.
Raising public energy R&D spending and aligning it more closely withdecarbonisation needs was behind the pledge made in 2015 by 24 leading countries
and the European Commission to double their public investment in clean energy R&D
over five years under the Mission Innovation initiative. 5 Governments of major
economies have been increasing energy research investments since then, with somecountries including India making clear links between their R&D activity and theirmembership of Mission Innovation.
The IEA has maintained a consistent dataset of national public budgets allocated toenergy R&D since the 1970s. 6 When adjusted for inflation, these data show thatspending on low-carbon energy R&D in IEA member countries almost doubled
between 2000 and 2012, but has been broadly stable since (Figure 6.2). However, itremains just below the levels observed in the early 1980s, when nuclear energy
research dominated the national budget in several countries. In absolute terms, R&D
spending on fossil fuels has remained roughly constant, though its share of totalenergy R&D has fallen with growth in total spending (except for 2009).

Definitions of clean energy and the precise types of spending to be doubled vary between countries.
Based on national data submissions, the dataset covers IEA member countries plus the European Union and is open
to any country wishing to participate. Its scope includes spending allocated to demonstration projects as well. In
general, countries report energy-specific research programme spending regardless of the sponsoring government
department, but differ in reporting budgets versus actual spending, and the extent to which they include basic
research on energy-related topics or demonstration project funds (IEA, 2020d). While basic energy research issometimes managed by funding institutions with oversight for energy technology, for example in the United States,
in many other countries this research is not isolated and reported as such. Given the outsized importance of publicly
funded R&D in the basic sciences, which leads directly to the breakthroughs that underpin new energy technologies
and start-ups, it is likely that reported data underestimate total spending. Tax exemptions, loans and general support
to innovative energy technology companies are not included (IEA, 2011).
5

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Energy Technology Perspectives

Chapter 6. Clean energy innovation

USD (2019) billion

Figure 6.2 Public energy technology R&D and demonstration spending by IEA member
governments by technology, 1977-2019
25 000

Cross-cutting,unallocated, other

20 000Electricity andstorage
Hydrogen, fuelcells and CCUS

15 000

Nuclear

10 000

Renewable energy

5 000
0

Fossil fuels
Energy efficiency

1977

1987

1997

2007

2017

IEA 2020. All rights reserved.
Notes: CCUS = carbon capture, utilisation and storage. Peak in 2009 was due to post 2007-08 financial crisis
stimulus funding, especially in the United States.
Source: IEA (2020d).

IEA member government R&D spending, which goes mostly to low-carbon technologies,
has been broadly flat since 2012 after having doubled over the previous decade or so.

The technology portfolio in public energy R&D is more balanced today than inprevious decades, with far more money going to energy efficiency and renewables. 7
Despite this, the portfolio remains strongly oriented towards supply-side
technologies rather than the types of end-use innovations needed for sectors thatcurrently have no commercially available and scalable options for achieving deep
emissions reductions. Furthermore, although energy R&D budgets are growing in theaggregate, including for developing low-carbon technologies, they are not growing
as a share, and they account for a shrinking share of total government R&D spending
in most cases.

Private sector R&D funding
Companies active in energy technology sectors have increased their total annual
energy R&D spending by around 40% over the last decade (IEA, 2020c); their totalenergy R&D spending reached around USD 9 billion in 2019. In 2019, growth was 3%,
lower than the 5% annual growth observed in the two periods 2010-13 and 2015-18,
which were preceded by the global financial crisis and divided by the economic
impact of the oil price collapse of 2014. That oil price collapse caused a 10% decline
in the R&D spending of oil and gas companies over two years, and it took four years
for spending to recover.

Precise comparisons are difficult due to the rising levels of spending that are not allocated to a particular technology
application or are allocated to cross-cutting projects, which include research that cannot be allocated to a specificcategory, such as systems analysis or joint research on the integration of energy sources into networks or end-uses.

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Chapter 6. Clean energy innovation

It is worth noting that companies active in renewable energy technologies haveincreased their R&D spending faster than other energy technology sector companies.
They increased their expenditure on R&D by 74% between 2010 and 2019, adding
over USD 2.5 billion to efforts to improve renewable energy technologies.
The automotive sector spends more on R&D than any other that relies heavily onenergy (Figure 6.3). 8 Companies have continued to increase their spending in recent
years, with government policies and competitive pressures leading them to focus
more on energy efficiency and electric vehicles: growth in energy-related R&D
seems, however, to have flattened between 2018 and 2019. New companies,
especially those making battery and fuel cell electric vehicles, meanwhile are starting
to enter the market and trying to dislodge the major manufacturers.
Figure 6.3 Global corporate R&D spending as a share of revenue in selected sectors,
2007-19
Aggregate reported R&D spending% of revenue spent on R&D

USD (2019) billion

5%
4%
3%

40

150

30

90

20

30

10

-30

2%
1%
0%
2007
Aviation

2009

Cement2011

2013

Iron & steel

2015

2017

Oil & gas

2019
Maritime

0-902007 2009 2011 2013 2015 2017 2019
Solar

Electric utilities

Biofuels

Automotive

IEA 2020. All rights reserved.
Notes: Includes companies reporting 50% or more of their revenue in these sectors, per Bloomberg Industrial
Classification System (BICS), and for which both reported R&D and revenue data are available in a given year. Total
R&D expenditure (not only energy-related R&D) is scaled by the company’s revenue share in the reported sector.
Automotive is shown on the right-hand axis in the chart of aggregate reported R&D spending. Like otherclassifications such as International Standard Industrial Classification (ISIC) and the classification of economic
activities issued by the European Commission. Acronym NACE comes from French (Nomenclature statistique desactivités économiques dans la Communauté européenne), BICS provides a structure for analysing data related todifferent economic activities. It is used here because of the high degree of disaggregation of firm-level data forenergy-related sectors.
Source: Bloomberg LLP (2020).

Some sectors for which new technologies will be critical to net-zero emissions typically
reinvest a small share of their revenue in R&D, while auto companies markedly outspend
other sectors.

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8
Information and communication technologies (ICT) are increasingly important to clean energy transitions, and arealso enabling productivity gains in fossil technologies, but this sector is not included here as its outputs are notenergy-specific.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Other sectors that are heavy users of energy – notably cement, biofuels, electricutilities, and iron and steel – invest much less in R&D as a proportion of their revenue.
Solar PV manufacturers, maritime and aviation sectors invest rather more than these,but still much less than the automotive sector. This may reflect a view that newtechnology-driven products are of less importance to their competitiveness than isthe case for automakers. Electric utilities and heavy industrial companies are
generally consumers of technology, typically engaging in technology development
via partnerships with suppliers. Nonetheless, it is striking that companies in sectors
for which new technologies will be critical to achieving net-zero emissions typicallyinvest relatively little in R&D. These sectors will need to test, modify and, in somecases, develop new processes and products for deep decarbonisation.

Venture capital
Total equity investment in energy technology start-ups by all investor types stood at
USD 16.5 billion in 2019. Of this, early-stage venture capital (VC) (seed, series A andseries B), which supports innovative firms through their highest risk stages, isestimated to account for USD 4 billion (Figure 6.4). These sums are lower than thosespent on energy-related R&D by governments and companies, but this private risk
capital plays an important role in helping the most market-ready technologies tocreate markets and scale-up. The total value of reported deals in 2019 was 7% lower
than in 2018, but the figure in both years was well above the average for the decade.

USD (2019) billion

Figure 6.4 Global early-stage venture capital deals for energy technology start-ups
600

5000
4500

500

4000

Low-carbon transport
Energy efficiency

3500

400

3000
2500

300

2000

200

1500

Energy storage,hydrogen, fuel cells
Other low-carbon
energyOther renewables
Bioenergy

1000

100

500
0

Conventional fuels

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

0

Solar
Number of deals (right)

IEA 2020. All rights reserved.
Notes: Transport includes alternative powertrains and their infrastructure, but does not include shared mobility,
logistics or autonomous vehicle technology. Bioenergy does not include biochemicals. Other low-carbon energy
includes CCUS and smart grids. Conventional fuels include fossil fuel extraction and use, and vehicle fuel economy.
Includes seed, series A and series B financing deals. Outlier deals of over USD 1 billion that distort the year-on-year
trend are excluded; they totalled USD 1.6 billion in 2016, zero in 2017, USD 2.1 billion in 2018 and zero in 2019.
Sources: IEA calculations based on Cleantech Group (2020).

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Venture capital investment remained robust in 2019, with investments spread more evenly
between sectors than in recent years. Storage and hydrogen saw the most growth.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Venture capital fulfils a valuable role by providing finance and imposing the disciplineof private capital in cases where its providers see a potential near-term market
opportunity and a longer term chance to capture significant market share. VC
investors provide risk capital to entrepreneurs in the expectation that the winners ina portfolio of technology and business ideas will scale-up rapidly and profitably
enough to pay back their investments in the whole portfolio at around 20% per year
over five years. In the energy sector, venture capital has typically been most effective
in supporting start-ups with digital technologies or service offerings that can bequickly prototyped and are not capital intensive (Gaddy, Sivaram and O’Sullivan,
2016; IEA, 2017). Hardware areas like electricity storage, electric vehicles andhydrogen production, however, have recently attracted more VC investment (IEA,
2020c).
To boost activity, some governments are exploring direct investment in clean energy
start-ups, for example by taking so-called “anchor” equity stakes in riskier start-ups.
Breakthrough Energy Ventures Europe, a USD 100 million fund established in 2019, isan example (Breakthrough Energy, 2020). Some governments provide targeted grantsupport to clean energy start-ups instead. Companies, too, are starting to include
venture capital in their energy innovation strategies. Faced with regulatory andtechnological uncertainty, especially in areas dominated by unfamiliar or digitalproducts, they are increasingly turning to corporate venture capital 9 and “openinnovation” rather than allocating corporate R&D budgets to developing them inhouse (Bennett, 2019).

Patenting
Following a decade of strong growth in the number of patents filed for low-carbon
energy technologies, there has been a marked decline since 2011 (Figure 6.5). Patents
provide an insight into the research activities that are generating new knowledge
with perceived commercial value: they capture some of the intermediate outputs of
R&D, a proportion of which will be translated into commercial products. They do notprovide a direct measure of all R&D outputs, not least because they over-represent
technologies and jurisdictions where patenting is more common: moreover in somefast-moving fields, the patenting process can take longer than the opportunity torecoup R&D costs from marketing the technology ahead of the competition, while

Corporate VC is a subset of venture capital involving equity investments in start-ups that are developing a newtechnology or services by companies whose primary business is not venture capital nor other equity investments. In
addition to playing the traditional role of a venture capital investor, corporate VC investors often provide support tothe start-ups via access to their customer base, R&D laboratories and other corporate resources. Corporate VC in theenergy sector has been around since the mid-20th century, when Exxon Enterprises invested in a variety oftechnologies, including solar, as part of a diversification strategy.

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Energy Technology Perspectives

Chapter 6. Clean energy innovation

many digital services based on software and apps are not patentable. Nonetheless,overall trends in patenting provide useful information about the extent and focus ofclean energy innovation.

Thousands

Figure 6.5 Issuance of patents for low-carbon energy technologies in selected
countries/regions
7

Hydrogenand CCUS

6

Nuclear

5
4

Smart grids
and buildings

32

Storage andelectric
vehicles

0

2000
2002
2004
2006
2008
2010
2012
2014
2016
2000
2002
2004
2006
2008
2010
2012
2014
2016
2000
2002
2004
2006
2008
2010
2012
2014
2016
2000
2002
2004
2006
2008
2010
2012
2014
2016

1

China

European UnionJapan

Renewables

United States

IEA 2020. All rights reserved.
Notes: CCUS = carbon capture, utilisation and storage.
Patent count refers to the number of granted international patent families that include at least two geographicaloffices. Counts are allocated to countries based on the country of the inventor.
Source: OECD (2020).

Following a decade of strong growth in patents for low-carbon energy technologies, there
has been an almost uninterrupted slowdown since 2011.

The decline in renewable energy patenting activity since around 2011 may in largepart reflect the maturity of some technologies. The dominance of existing solar PV,
ethanol and wind technologies may deter researchers from seeking to improve themand enter the market in Europe, Japan and the United States. Patenting activity forrenewable energy remains higher than at any time before around 2007 and patenting
for batteries, particularly Li-ion, is a growth area (EPO and IEA, 2020). However, it isstill a concern that the decline in patenting since 2011 has so far not been offset bypatents in advanced biofuels, novel PV, geothermal, ocean or other renewables.
The adoption of some low-carbon technologies relies on the development of othernon-energy technologies in the same value chain. However, patent trends indicatethat the level of attention to different technology applications in the same value chain

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is not consistent.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Potential impact of Covid-19 on clean energy innovation
Before the pandemic hit, 2020 was expected to be a critical year for several majorenergy innovation policy initiatives, with keen interest in the details of the European
Union’s Horizon Europe and Innovation Fund, for example, and in the energy R&D
elements of China’s 14th Five-Year Plan. These policies, and many others in
preparation around the world, are still of great interest, but the immediate focus has
shifted to managing revenue losses and economic recovery in most countries. At thesame time, many companies are facing severe pressures, and all are having to adjust
to a changed and uncertain economic outlook.
While the immediate task of protecting health and livelihoods understandably
occupied all parties in the first months of the Covid-19 pandemic, measures that
directly or indirectly address clean energy innovation have nevertheless alreadyfeatured in the policy responses of several governments. Details are still emerging,and other governments are considering their positions; even so, these policy signals
help to give at least an initial idea about how the environment for clean energy
technology might evolve between mid-2020 and 2025.
The overall picture that emerges from the policy announcements and the data
presented in this section is that of a seriously weakened innovation system, withdemonstration, market entry and learning-by-doing suffering most in the first
instance. Sectors that currently have few commercially available and scalable lowcarbon options could face even longer delays in making progress on clean energy
innovation. Although emerging economies have yet to publish economic stimulus
plans, many of them are likely to be facing particularly significant pressure on their
R&D budgets. The evidence so far suggests a systemic challenge: although the risks
to basic R&D and prototyping may be lower in the near term, their impact will bediminished if the system as a whole has less capacity to make good use of them.

Government R&D funding
While it is too early to determine the impact of the Covid-19 pandemic on publicenergy R&D, the outlook is an uncomfortable one. In many cases, the relevantbudgets may be fixed for the next couple of years, and the budgetary pressures may
be strongest in the period 2022-25. This seems to be what happened in the years
following the 2007-08 financial crisis. In Europe, for example, R&D budgets
significantly decreased in 2011-13, with the decreases beginning three years after thefinancial crisis, and being particularly significant in those countries with the deepest
recessions (Izsak et al., 2013). It is worth noting, however, that several major countries
turned to R&D policy as a way to reduce reliance on the financial sector after 200809 and introduced new types of innovation instruments, such as guarantees, loans

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and support for venture capital. This is consistent with policies in these countries toEnergy Technology Perspectives

Chapter 6. Clean energy innovation

pursue counter-cyclical R&D policy, but it is not an option that is available to all
governments (OECD, 2009; Pellens et al., 2018).
Emerging economies like Brazil and India, which have recently been raising theirambitions to develop indigenous clean energy technologies, may suffer setbacks
unless they can tap into additional budget resources. As emerging economies
represent most of the projected growth in energy demand in the coming decades,
what they decide has important implications for the clean energy transition as awhole. A prolonged downturn in any country would also carry the risk of the loss ofhighly skilled and highly mobile staff.

Private sector R&D funding
Corporate R&D is highly likely to be cut or to grow much more slowly in most energyrelated sectors as a result of lower revenues in 2020 and beyond. This impact isalready evident in company reports for the first-half 2020, with companies
representing a large share of global revenue in the automotive, aviation andchemicals areas spending less on R&D than in previous years. Reductions were seenin all sub-sectors, with some declines of around 8%. This matches the perceptions ofrespondents to our survey in May 2020, which anticipate pressure on corporate R&D
budgets for key net-zero emissions technology areas for the rest of 2020 and into
2021.
The financial crisis of 2007-08 and the oil price collapse of 2014 provide some insight
into the likely response of companies to the impacts of the Covid-19 pandemic. In
2009-10, the total R&D spending in major energy sectors held up well relative torevenues, with the exception of the automotive sector (Figure 6.6). However, inabsolute terms, the electricity supply and renewables sectors were the only energy
areas not to experience slower growth in R&D or cuts to R&D budgets in this period.
As in 2009, the outcome related to the Covid-19 crisis will be heavily influenced bygovernment policies: for example, tax incentives and R&D-specific loans being
proposed for inclusion in some stimulus packages should be helpful. It is also worth
noting that there is some evidence that recessions can create opportunities for

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companies to reorient to disruptive technologies (Archibugi et al., 2013).

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Figure 6.6 Growth rates for revenue and R&D for selected sectors, 2007-12
60%
50%

Revenue

40%
30%
20%

R&D

10%
0%
-10%
-20%

2007-08 2009-10 2011-12 2007-08 2009-10 2011-12 2007-08 2009-10 2011-12 2007-08 2009-10 2011-12
Automotive

Oil and gas

Combustion equipment

Electricity and renewables

IEA 2020. All rights reserved.
Note: Shows average annual growth rates per pairs of years for the top 20 R&D spenders per sector that reported
data in each year.
Source: IEA calculations based on Bloomberg LLP (2020).

Total R&D spending of key energy sectors grew more slowly in 2009-10 than before the
2007-08 financial crisis, with a decline in the automotive sector; electricity and renewables
were an exception.

Venture capital
Early-stage venture capital energy deals decreased by about 20% in the first-half of2020 relative to 2019 levels. Global declines are expected in the second-half of 2020
as a result of financial risks, travel, and other restrictions and policy uncertainty. If
growth equity is included, a global decline in the first-half of 2020 is also visible inthe data (Figure 6.7).
It is widely recognised that many start-ups and innovative will struggle to stay afloat
and will face cash flow and debt challenges, leading to lay-offs and losses of energy
technology experts. Other start-ups may have to sell shares in their companies at alow price. Young companies developing capital-intensive technologies, such as
those needed in many sectors that currently have limited commercially available andscalable low-carbon options, may be less attractive to VC investors if market
conditions reduce investor willingness to wait for financial returns. This could put abrake on financing for innovative entrepreneurs at a time when several major
governments are seeking to rely more heavily on VC financing to bring clean energy

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technologies to market.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

USD (2019) billion

Figure 6.7 Value and number of global energy-related venture capital deals (early and latestage) by semester and year
12

700

Conventional
fuels

10

600

Other lowcarbon

500

8
6
4
2
0

300

Energystorage andhydrogen
Energyefficiency

200

Renewables

100

Low-carbon
transport

400

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

0

Deal number(right)Notes: H1 = first-half of the year; H2 = second-half. Transport includes alternative powertrains and theirinfrastructure, but does not include shared mobility, logistics or autonomous vehicle technology. Renewables
includes bioenergy but not biochemicals. Other low-carbon includes CCUS and smart grids. Conventional fuels
includes fossil fuel extraction and use as well as vehicle fuel economy.
Includes seed, series A, series B, grants, growth equity, buyout and late-stage private equity, coin/token offeringand private investment in public equity financing deals. Deals reported in the last week of June 2020 are notcounted. Outlier deals of over USD 1 billion that distort the year-on-year trend are excluded; they totalled USD 2
billion in 2008, USD 1.9 billion in 2009, USD 1 billion in 2010, USD 3.5 billion in 2011, USD 4.8 billion in 2012,
USD 7.9 billion in 2013, USD 6.4 billion in 2014, USD 1.3 billion in 2015, USD 1.6 billion in 2016, USD 3.9 billion in 2017,
USD 9.4 billion in 2018, USD 1.3 billion in 2019 and USD 1.2 billion in 2020.
Sources: IEA calculations based on Cleantech Group (2020).

The first-half 2020 saw half as much energy-related venture capital activity (early and latestage) as in the same period in 2018-19; high-value later stage fundraising rounds wereaffected most.

Innovation needs in the Sustainable
Development Scenario
Technological change – the development and diffusion of technology to meetgrowing demand or displace existing energy assets – drives the clean energy
transition in the Sustainable Development Scenario. Most of the capital stock thatmakes up today’s energy system, from supply to end-use, will need to be adapted ortransformed to reach the goal of net-zero emissions. To reach net-zero emissions
globally in five decades, major reductions in cost and improvements in performance
will be needed in a wide range of technologies already in use or in the early stages ofdevelopment.
Developing a new technology and successfully bringing it to market is typically a longprocess. Technologies go through a journey in which they evolve from a concept toa prototype, are demonstrated at scale and, if successful, are adopted and

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commercialised more widely. Given that we cannot predict the emergence ofEnergy Technology Perspectives

Chapter 6. Clean energy innovation

technologies that are not known today or which ideas might prove successful, theportfolio of energy technologies in the Sustainable Development Scenario includes
those for which at least a large prototype is already proven today and the pathway tocommercial scaling-up is understood, which means that that basic information on
potential technology performance and costs is available. There are, nonetheless, avariety of factors that could delay or disrupt the clean energy transition in practice,including unexpected future events and the hard-to-predict responses of companies,
investors and governments to such events.
Almost 35% of the cumulative carbon dioxide (CO2) emissions reductions achievedby 2070 in the Sustainable Development Scenario compared with the Stated Policies
Scenario come from technologies that currently are at large prototype ordemonstration phase, and around 40% from technologies that have not yet beencommercially deployed on a large scale (Figure 6.8). The contribution oftechnologies at large prototype or demonstration stage to emissions reductions iseven higher in heavy industry and long-distance transport, where commerciallyavailable and scalable options for achieving deep emissions reductions are currently
limited.
Figure 6.8 Global energy sector CO2 emissions reductions by current technology maturity
category in the Sustainable Development Scenario relative to the Stated
Policies Scenario, 2019-70

GtCO2/yr

Emissions today
2019
0Net-zero emissions
2030

2040

2050

2060

2070
Mature (26%)

-5
- 10

Early adoption
(39%)

- 15
- 20

Demonstration
(18%)

- 25

Large
prototype
(18%)

- 30
- 35
- 40

IEA 2020. All rights reserved.
Notes: GtCO2 = gigatonnes of carbon dioxide. Percentages refer to cumulative emissions reductions by 2070
between the Sustainable Development Scenario and the Stated Policies Scenario enabled by technologies at a given
level of maturity. See Box 2.6 in Chapter 2 for the definition of the maturity categories: large prototype,demonstration, early adoption and mature.

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Technologies that are only at the large prototype or demonstration stage today contributealmost half of the emissions reductions in 2070 in the Sustainable Development Scenario.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

The share of emissions reductions in the Sustainable Development Scenario
attributable to each technology maturity category varies between sectors(Figure 6.9). In the transport sector, the bulk of the emissions reductions in 2070 in
the Sustainable Development Scenario result from technologies that have notreached markets today. This is because significant electrification of heavy-duty
vehicle fleets depends on advances in high-energy density batteries which go
beyond Li-ion chemistries and which are at an early stage of development today, andbecause reducing emissions in long-distance transport depends on deployment ofalternative fuels. In industry, the contribution to emissions savings from technologies
at large prototype, demonstration or early adoption stage today triples between
2040 and 2070 in the Sustainable Development Scenario as today’s long-lived
industrial assets come to the end of their lives during that period. These changes indemand sectors trigger innovations in energy supply, for instance in the provision ofalternative clean fuels at scale. Negative emissions technologies that are atdemonstration or prototype stage today also make significant contributions in thelong term to the achievement of net-zero emissions.
Figure 6.9 Global CO2 emissions reductions by current technology maturity category andsector in the Sustainable Development Scenario relative to the Stated Policies
Scenario, 2040 and 2070

IEA 2020. All rights reserved.
Notes: GtCO2 = gigatonnes of carbon dioxide. See Box 2.6 in Chapter 2 for the definition of the TRL categories large
prototype, demonstration, early adoption and mature.

Emissions reductions enabled by technologies that are at large prototype or demonstration
stage today increase more than threefold between 2040 and 2070 in the Sustainable
Development Scenario.

The critical role of innovation in the Sustainable Development Scenario highlights theneed for an efficient innovation cycle to reach net-zero emissions in the most costeffective manner. The speed at which energy-producing and energy-consuming

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equipment would have to be replaced and new technologies introduced in theEnergy Technology Perspectives

Chapter 6. Clean energy innovation

Sustainable Development Scenario is as fast as has ever been seen in the history ofenergy. For those technologies at an early stage of development today, diffusion time
would need to be reduced by several decades compared with historical averages.
This clearly indicates that clean energy innovation needs to be shielded from any
potential disruption from the Covid-19 crisis to increase the chances of achieving netzero emissions.

Box 6.1

Potential negative impacts of Covid-19 on clean energy innovation –Reduced Innovation Case

Clean energy innovation has the potential to play a major part in reshaping the futureenergy sector. However, the Covid-19 crisis could jeopardise progress if governments
respond to it by reducing R&D spending and financial support to demonstration
projects, and by being deflected from action to achieve long-term climate goals.
In the Reduced Innovation Case, we explore the impact that a slowdown in the paceof innovation could have on direct electrification, CCUS, and hydrogen and hydrogenderived fuels, which together account for about 40% of the cumulative emissions
reductions in the Sustainable Development Scenario until 2070 relative to the Stated
Policies Scenario.
The Reduced Innovation Case assesses the implications of two key assumptions:

For demonstration projects that are either underway or announced, we assume afive-year delay in their completion.



For technologies at early adoption phase, we assume a slowdown in the pace of
deployment of 50% through to 2025, 30% to 2030 and 15% to 2040.

It is uncertain what effect the Covid-19 crisis will have on adoption rates anddevelopment plans for electric technologies. Given the higher levels of risks
associated with the development plans of technologies at small prototype or below,
we focus our analysis of the impact of delayed progress on those technologies at theearly adoption stage, and in particular on heat pumps and electric road vehicles.
A slower uptake of heat pump designs that are already commercial combined with afive-year delay in the demonstration of innovative designs would result in in the
Reduced Innovation Case in around 3 gigatonnes of carbon dioxide (GtCO2) ofadditional direct emissions from fossil fuel boilers in the buildings sector cumulatively
by 2040 (roughly equivalent to all buildings-related direct emissions in 2019)
compared to the Sustainable Development Scenario. The installed output thermal
capacity of innovative heat pumps would be 60% lower in 2030 in the Reduced
Innovation Case than in the Sustainable Development Scenario. The products mostly
affected by delayed testing and demonstration would be those integrating storage

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solutions or next-generation components (e.g. advanced vapour-compression cycles)

Energy Technology Perspectives

Chapter 6. Clean energy innovationand non-vapour-compression systems (e.g. evaporative cooling). These jointly
account for around 60% of the decrease in thermal capacity in 2030 relative to the
Sustainable Development Scenario.
The Reduced Innovation Case could also result in a slowdown in the uptake of electricroad vehicles; this in turn would lead to around 2.5 GtCO2 of additional cumulativeemissions by 2040 compared to the Sustainable Development Scenario. This
slowdown would translate into a 20% decrease in cumulative battery production by
2040 compared to the Sustainable Development Scenario. The annual reduction inbattery manufacturing capacity in 2040 would be equivalent to 34 gigafactories 10 andwould imply a slowdown in learning-by-doing and other drivers of innovation, which
in turn would translate into an increase of 8% in average battery costs by 2025 relative
to the Sustainable Development Scenario.
In the Reduced Innovation Case, a delay in demonstration projects for pre-commercial
carbon capture, utilisation and storage technologies together with a slowdown in the
deployment of CCUS technologies at early adoption stage would bring about
reductions in captured CO2 emissions of 50% in 2030 and 35% in 2040 compared to
the Sustainable Development Scenario. As a result, CCUS deployment by 2040 would
be reduced by around 8 GtCO2 cumulatively, which is equivalent to the entire directemissions of the transport sector in 2019. CO2 captured from cement production andpower generation in particular would be affected over the next two decades, withthese two sectors accounting between them for almost 80% of the reduction in CCUS
deployment in that period in the Reduced Innovation Case relative to the Sustainable
Development Scenario.
In the Reduced Innovation Case, a delay in demonstration projects for pre-commercial
hydrogen technologies, together with a slowdown in the deployment of hydrogentechnologies at the early stage of adoption, would result in a reduction of 10% in 2030
and 11% in 2040 in annual hydrogen demand relative to the Sustainable Development
Scenario. This reduction would result in more than 1.5 Gt of additional CO2 emissions
cumulatively by 2040 compared to the Sustainable Development Scenario, or almost
twice the annual emissions related to hydrogen production today. A drop of almost
7.5 million tonnes per year (Mt/yr) cumulative production capacity of electrolytichydrogen by 2030 would result in an increase of almost 10% in the average capital
expenditure of water electrolysers in 2030 relative to the Sustainable Development
Scenario as a result of slower technology learning. This increase is barely noticeable
in the levelised cost of producing electrolytic hydrogen, which would increase only
marginally (up to USD 3.1 per kilogramme), 11 but it would put additional stress on
upfront investment financing for projects that are already highly capital intensive.

Battery gigafactory capacity considered at 35 gigawatt-hours per year.
Hydrogen levelised cost is based on 69% conversion efficiency, USD 50/MWh electricity price, 5 000 full-load hours
and a weighted average cost of capital of 8%.
10

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11

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Just because the technological transformation in the Sustainable Development
Scenario would be unprecedented does not make it impossible. Many of thetechnologies needed in the Sustainable Development Scenario rely on digitalisation,for example, making them unlike energy technologies of the past, and on rapid
adoption by consumers, who are operating in a world in which information spreads
faster than ever before. Other technologies require extensive new infrastructure(e.g. integrating carbon capture), but are backed by strong social and regulatory
pressure for change.

Timescales in taking technologies from the laboratory tomarketHistory shows that it can take between 20 and almost 70 years for new energy
technologies to go from first prototype to materiality (that is, to reach 1% of a national
market) (Gross, 2018; Bento, Wilson and Anadón, 2018). Even recent success stories
in clean energy technology development – such as solar photovoltaic (PV) and Li-ion
batteries to power electric vehicles – took around 30 years from their first prototype
to commercialisation. Having achieved market introduction, it took a further 25 years
for solar PV to achieve a 1% share of a national electricity supply market in Spain,
closely followed by Germany, while it took just six years for Li-ion battery-powered
electric vehicles to achieve the same national market first in Norway. Among leadingenergy technologies, light-emitting diode (LED) lighting for buildings achieved
materiality in the shortest amount of time, being introduced in the United Kingdom
just ten years after the initial prototype was developed. In each of these cases,
government intervention accelerated innovation.
In general, the Sustainable Development Scenario assumes somewhat shorter
development periods than those observed in the past, since policy support isassumed to be much stronger, and to lead to more efficient exchange of technicalknowledge and stronger exploitation of synergies between sectors. Factors that havein the past led to discontinuous learning, including a lack of financial resources, fossil
fuel price risks and political instability, are assumed not to affect innovation in the

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future.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Figure 6.10 Time to materiality for selected technologies in the Sustainable Development
Scenario
CCUS in cement production

2008-2024

2024-2026

Electrolytic hydrogen-based methanol 2013-2025
Enhanced smelt reduction steel with CCUS

2025-2035
2028-2035

2010-2028

Hydrogen fuel cell ships 2008-2021 2021-2038
Hydrogen-based direct reduced iron for steel

1996-2030

Battery electric heavy-duty trucks

1979-2011

Hydrogen fuel cell road light-duty vehicles

2030-2035
2011-2032

1966-2008

Ammonia-based ships

2008-2036

1965-2024

Gas direct reduced iron-based steel with CCUS

2024-2036

1939-2016
0

20

40

From protoype to market introduction

2016-2041
60

80

100

120 Years

Early adoption (up to 1% of market)

IEA 2020. All rights reserved.
Notes: Time period from market introduction to materiality relates to global deployment projections in the
Sustainable Development Scenario. Pace of deployment of a given technology depends not only on observed
historical patterns for analogous examples, but also on how competitive it is on cost and performance comparedwith alternative available low-carbon technologies delivering an equivalent service, as well as the effectiveness ofpolicies to stimulate uptake.
Sources: Matsunaga, Tatsuya and Kuniaki (2009); Zemships (2008), Molino et al. (2018); European Cement Research
Academy (2012); Brohi (2014); TATA Steel (2017); Kohl and Nielse (1997); Ballard (2019); Kraftwerk Forchung (2013),
Nuber, Eichberger and Rollinger (2006).

Bringing new clean energy technologies to market on a large scale after the first prototype
can take from 20 years to more than 80 years in the Sustainable Development Scenario.

For large, non-modular, site-tailored technologies at a pilot stage today, a six to eight
year period from first large prototype to full-scale demonstration is assumed in the
Sustainable Development Scenario, followed by a seven to ten year period to firstcommercial introduction under prevailing market conditions. In some cases, up to
five full-scale major demonstration projects operating for five to ten years incommercial environments around the world may be required to generate investor
and regulatory confidence, with knowledge transferred between them. On the other
hand, small and/or modular technologies like engines, batteries and electrolysers are
assumed to reach markets no later than 12-14 years from early prototype in the
Sustainable Development Scenario. 12 As a result, various technology designs that
become increasingly competitive take differing lengths of time to reach the early
adoption stage in the Sustainable Development Scenario (Figure 6.10 above).

This consideration applies only to the projected period, and excludes instances in which technologies may alreadyhave taken a longer period from first prototype to reach current status of development prior to 2020.

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12

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Moving down the learning curve
When learning-by-researching, learning-by-doing, standardisation, collaboration
across an industry and economies of scale collectively result in cost and pricereductions that continue over a decade or more, empirical “learning curves” (orexperience curves) can be constructed to inform future expectations for similar
technologies. The typical approach is to correlate the percentage cost reduction withthe time it takes to double the cumulative installed capacity, which is a proxy for thelevel of experience and scale acquired by the industry.
Solar PV and Li-ion batteries are good examples of learning curves. Each time thecumulative amount of capacity has doubled worldwide since the 1970s unit costs for
PV have fallen by 24%. In recent years, the fall in PV unit costs associated with eachdoubling of capacity (the learning rate) has increased to more than 30%. The
equivalent learning rate for Li-on has been around 20%. For both technologies, theselearning rates have led to an exponential decline in prices. Future cost declines are
expected as capacity expands further, although they are likely to require novel
technology configurations.
It is clear that not all technologies will follow the same journey, and learning rates in
the Sustainable Development Scenario are adjusted in line with those seen foranalogous technology scales and manufacturing methods. The learning rates
observed for solar PV and Li-ion batteries are applied as appropriate in the
Sustainable Development Scenario to other small, simple, modular and adaptable
designs. For example, electrolysers and fuel cells, which have been manufactured inonly limited volumes to date, see rapid adoption in the next decade that drives down
costs and spurs mainstream diffusion (Figure 6.11). In some cases, the learning rates
applied are lower, reflecting a more mature stage of development for a given
technology. For example, heat pumps, for which significant learning experience has

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already been gained, follow a slower cost reduction trajectory.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Index 100=2020 cost

Figure 6.11 Unit cost reductions for selected technologies in the Sustainable Development
Scenario, 2020-70
100
Heat
pumps

90
80
70

Fuel cells

60
50
40

Automotive
batteries

30
20
10
0
2020

2030

2040

2050

2060

2070
IEA 2020. All rights reserved.

Notes: Cost reductions are calculated as a function of cumulative installed capacity in 2018, projected capacity
additions from the model and component-specific learning rates. Learning rates for heat pumps, automotive battery
cells and fuel cells stacks are 10%. Learning rates for battery packaging and fuel cell balance of plant are 5%.

Technology costs decline in the Sustainable Development Scenario, though at different
rates reflecting specific scale and technology attributes.

Technology attributes for faster innovation
Understanding the innovation dynamics of different technology designs is vitally
important for governments and investors alike. Various types of technology haveattributes that benefit from different means of innovation support and attributes thatcan favour (or disfavour) rapid innovation cycles (Bennett, 2019). Knowing how these
attributes affect innovation can help governments determine whether they shouldtake a leading role at any given stage of the innovation value chain or whether theprivate sector might reasonably be expected to take on much of the innovation risk.
There are a number of attributes that influence the rates of learning and technology
adoption in the Sustainable Development Scenario (Table 6.1). They include small unit
size and modularity – both of which favoured mass production, standardisation andcontinuous learning as for PV and Li-ion – as well as spillover. These attributes cangive a better chance of success, but do not guarantee it: the history of energy islittered with examples of failed or stalled technological developments. In some cases,
resources were allocated to solve a problem, such as perceived oil shortages, that
did not persist and so the business case for the R&D strategy unravelled (Grubler and

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Wilson, 2013).

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Small units can be prototyped and tested quickly before
factories are built. As a result, global demand can support
many factories and industrial competition can lead to fasterturnover of products. New generations of thesetechnologies hit the market every few years, with associatedinnovative improvements. In some cases, mismatchedinvestment and consumption cycles can, however, lead tooversupply and intensive competition for market share.

Modularity confers many of the same benefits as small unit
size, but can also apply to larger units that cannot be mass
produced but can be readily standardised and added
sequentially to a facility. One of the main benefits is lower
capital requirements for each stepwise addition, reducing
the risks associated with scaling-up and enabling the paceof deployment to match that of other elements in the value
chain.

Technologies need to be first taken up in niche markets
where a small number of consumers are willing to pay a
premium for their specific benefits. End-users, especially
early adopters, will often pay a premium for a product thatoffers convenience, fun and reputational benefits. While
many low-carbon technologies offer limited performance or
economic advantages, low-carbon products could offer
reputational and other benefits that consumers want,
helping them to enter a virtuous cycle of adoption, learning,
network effects and expansion to new applications.

Shared between researchers and engineers from different
sectors, reducing the need for dedicated energy R&D. Thisis because the advances needed to make a technology
commercial in one application are simultaneously beneficial
in another unrelated application. Electric vehicles are an
example of a technology that was promoted for decades
without uptake until spillovers from consumer electronics
batteries, hybrid vehicles, lightweighting and motors helped
it to take off.

Modularity

Offersservicesvalued byconsumers

Spillovers(strongsynergies
withtechnology
advances
elsewhere)

Description

Smallenough unit
size to be
mass
produced

Attribute

•

•

•
•

•

Smart thermostats
LEDs
Micro-mobility
Smartphones (which
replace up to 18 otherdevices)••••

Combined-cycle gas
turbines (from jet turbines)
PV (from semiconductors)
Li-ion for EVs (from Li-ion for
consumer products)
LEDs for lighting (from LEDsfor electronics)
Offshore wind andgeothermal (from oil andgas)

Passenger cars•

PV
Aluminium smelting•

Batteries, fuel cells andelectrolysers (from each otherand other electrochemical
technologies)
Biofuels (from agriculture)
Smart, connected energy

•

•
•

•

CCUS (from oil and gas
exploration, chemical catalysis
and gas separation)

Electrochromic fenestration••

Building-integrated PV
Decentralised energy trading•

Connected appliancesStandardised building retrofits••

Small modular nuclear reactors•

Autonomous, connected, electricand shared vehicles

Electrolytic hydrogen routes forchemicals production••

Solid sorbent-based direct air
captureFuel cells

Heat pumps••

Li-ion batteries

•

•

•

PV

Examples in the Sustainable
Development Scenario•

Past examples

Energy Technology Perspectives
Chapter 6. Clean energy innovation

Energy technology attributes that can favour more rapid innovation cycles
or faster learning

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A new technology can be adopted more quickly if it requires
no changes to associated equipment or infrastructure. A“drop-in” replacement is a substitute that is fully compatible
with the dominant existing means of providing an energy
service. A “bolt-on” device is fully compatible with existingprocesses, but leaves them intact and adds an additional
function, such as emissions capture. CO2 capture has thepotential to be a “bolt-on” device, but usually requires
significant changes to associated infrastructure (e.g. CO2
storage).

Many recent energy sector innovations have replaced
manual or analogue processes with digital ones. Innovationin digital technologies requires limited capital and allows
continuous experimentation and cheap upgrading in situ. In
addition, many digital products generate data that havecommercial value, meaning that the risk of investment isshared between the energy-related and data-related value
streams.

For instance, the success of CO2 capture depends in largepart on simultaneous developments in CO2 transport,
utilisation and storage. Though it is less of a bottleneck thanfor CCUS, the same factor has affected variable renewable
power generation, which often relies on improvements to
the grid or storage solutions. These dependencies raise therisks of R&D in each coupled element of the value chain andcan significantly slow the pace of innovation.

Some technologies, such as batteries, may need to beadapted to local climatic conditions when they are deployed
in a new region. Temperature extremes, temperature swings
or frequent storms are examples of local conditions that candramatically change performance. Variations in fuel supply,
for example for biomass gasification, can also make itharder to standardise a technology for a global market. In
some cases, end-use products need to be adapted to local
consumer preferences, regulations and expectations.
Technologies that do not encounter these problems canReplaces
hardware orlabour withdigitalsolutions

Minimaldependenceon
improvemen
ts in othertechnologie
s in thevalue chain

Minimalneed foradaptation
to localconditions

Description

Can be used
as a drop-in
replacement
or bolt-on
device.

Attribute

Electric vehicles using existingroad and electricity infrastructure
Biojet fuel••Biomethane
Catalytic converter
Desulphurisation•••

Internal combustion
engines
Turbines•

LEDs
Coal gasification•••

Nuclear•Novel battery chemistries
Fuel cells•

Enhanced smelting reductionbased steel•

Renewables plus storage•••

3D printing•

Biomass power
generation

Digital twin O&M•

Power gridmanagement••

Passive demand response•

Seismic geological
exploration•

Autonomous, connected, electricand shared vehicles

Hydrogen-based synthetic fuels••

Examples in the Sustainable
Development Scenario

Certain biofuels, e.g.
hydrotreated vegetable
oil

Past examples

Energy Technology Perspectives
Chapter 6. Clean energy innovation

Note: EVs = electric vehicles; CCUS = carbon capture, utilisation and storage; O&M = operation and maintenance.

Energy Technology Perspectives

Box 6.2

Chapter 6. Clean energy innovation

Spillovers as an important attribute for faster innovation

The history of energy technology development is rich with examples of spillovers thatchanged the course of investment and industrial competition. Knowledge
accumulated in one technology area has been a powerful driver for innovation inother related technologies. This factor, often overlooked, is of vital importance totechnology policy because the benefits of spillovers can be harnessed at relatively
low cost and can avoid or reduce the need for additional R&D. In the Sustainable
Development Scenario, spillovers play a significant role in the transition towards
net-zero emissions. 13
Spillovers can refer to knowledge transferring across technology areas (knowledge
spillovers) or knowledge obtained by implementing a technology across different
applications (application spillovers), though the boundaries between the two aresometimes blurred. Knowledge spillovers across different domains can occur if two
technology designs share a common scientific base, similar manufacturing
techniques, or common installation and operation skills. Application spillovers canoccur when a technology design or technology component (such as an input
material) that is optimised for one application becomes suitable for a different
purpose. They are more likely to occur if the technology can be adapted to a large
number of uses. The most potent cases of application spillovers have been termed“general-purpose technologies”. Archetypal examples include steam engines,
electric power and information technology (Bresnahan and Trajtenberg, 1995; Ruttan,
2008).
The knowledge transferred via spillovers can be transmitted through researchers,
engineers, consultants and plant operators. Geographical proximity can enhance
spillovers, as can professional societies and conferences. An important part is playedby companies that provide services to different sectors, such as engineering,procurement, and construction contractors and technical consultancies (Hoppmann,2018).
Many critical spillovers that have benefited specific energy technologies have comefrom outside the energy sector. The development of combined-cycle gas turbines,
which now play an integral role in electricity generation systems, was initiated by theaerospace sector. The first gas turbine jet engine was developed in 1939 following
government-funded military R&D in the United Kingdom. Another example is provided
by the cost-competitive mass production of solar PV panels, which was enabled byknowledge spillovers from parallel developments in the production of silicon for

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13
For more a detailed analysis on the role of spillovers in the Sustainable Development Scenario, see the Energy
Technology Perspectives Special Report on Clean Energy Innovation,(www.iea.org/reports/clean-energy-innovation).

Energy Technology Perspectives

Chapter 6. Clean energy innovation

microprocessors. Adoption of semiconductor manufacturing processes by the PV
sector and sharing of silicon production between the two sectors were vital factors in
cutting PV costs. Likewise, the development of the carbon anode used in Li-ion
batteries benefited from knowledge and techniques developed by the petrochemical
sector: the first functioning carbon anode was developed by a petrochemicalcompany.

Clean energy innovation needs fasterprogress
The impact of the Covid-19 pandemic has greatly affected economic activity,
including in the energy sector. In response, governments are now increasingly
looking at economic stimulus packages: these offer an important opportunity foraction that helps to ensure continued security of energy supplies while supporting
clean energy transitions, including the needed technology innovation.
In this section, we complement the Sustainable Development Scenario by analysing
a Faster Innovation Case that explores just how much more clean energy technology
innovation would be needed to bring forward the time at which the Sustainable
Development Scenario reaches net-zero emissions from 2070 to 2050. This caseserves to underline the importance of governments grasping the opportunity
provided by stimulus packages to review their innovation portfolios and priorities,
and align them with their long-term clean energy transition objectives.

The Faster Innovation Case – just how far could
innovation take us?
The Sustainable Development Scenario reaches net-zero emissions from the energy
sector within five decades on the back of ambitious technological change andoptimised innovation systems comparable to the fastest and most successful clean
energy technology innovation success stories in history. The Faster Innovation Caseis a special case of the Sustainable Development Scenario that focuses on stretchingunderlying innovation drivers to bring forward net-zero emissions to 2050. This is amilestone year for clean energy transition efforts that has gained much prominence
through the public debate that followed the release of the Intergovernmental Panelon Climate Change’s Special Report on Global Warming of 1.5ºC (IPCC, 2018). The
Faster Innovation Case is not designed to be an ideal pathway to net-zero emissions

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by 2050; the complexity of this question goes well beyond technology innovation

Energy Technology Perspectives

Chapter 6. Clean energy innovation

alone, and is likely to require fundamental changes to current lifestyles. 14 Rather, it isdesigned to explore how much shorter development cycles would need to be thanin the Sustainable Development Scenario, and how much more rapid technology
diffusion rates would need to be in order to deliver net-zero emissions globally by
2050. There are three key changes that distinguish the Faster Innovation Case fromthe Sustainable Development Scenario:In the Sustainable Development Scenario, technologies that are still in thelaboratory or early prototype stage today are not considered because of the high
level

of

uncertainty

about

their

performanceandpossiblefuturecommercialisation. To explore their potential contribution to reach net-zeroemissions earlier, we include in the Faster Innovation Case those technologies atvery low maturity stage today that are modular and small enough to be mass
produced and that have the potential for high spillovers from and to other netzero emissions technologies. We also include those technologies that have a lotof potential to unlock supply constraints and shift the supply curve towards lower
cost resources.



For technologies currently at prototype stage, we assume a further significant
shortening of the period to market introduction, well below what has beenachieved in recent success stories of clean energy technology development. We
also assume that robust market deployment starts right after the completion of
only one commercial-scale demonstration, which is not common practice.



For new and emerging clean energy technologies, we boost adoption rates to alevel that risks additional market bottlenecks and resource constraints along the
supply chain if co-ordination fails in the face of rapid expansion.

There is little or no precedent for the required pace of innovation in the Faster
Innovation Case and it does not leave any room for delays or unexpected operational
problems during demonstration or at any other stage. These are, of course, bound tohappen in practice. Nonetheless, while it can take several decades for a technology
to move from the laboratory to mainstream diffusion, the projection horizon of thisreport is long enough to bring some surprises, some of which may be welcome ones.
Mission-oriented approaches that support clean energy innovation in technology
areas with attributes conducive to fast innovation cycles could speed up the pace ofprogress, particularly if they are coupled with a once-in-a-generation investment
opportunity as a result of Covid-related recovery plans. Some technologies currently
in the laboratory or at the level of small prototype that are outside the scope of the
Sustainable Development Scenario might progress fast enough to be able tocontribute to the transition to net-zero emissions in the timeframe. While the true

See the World Energy Outlook-2019 for a discussion of changes required for a 1.5 degree Celsius (°C) pathway (IEA,
2019).

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14

Energy Technology Perspectives

Chapter 6. Clean energy innovation

potential rate of scale-up for technologies at such early stages of maturity is highly
uncertain, it is reasonable to consider what the impact might be if R&D is successful
in bringing some of them to market within that period. This is the objective of theFaster Innovation Case.
In the Faster Innovation Case, enhanced clean energy technology innovation would
need to lead to almost 10 GtCO2 of additional net emissions savings compared to the
Sustainable Development Scenario in 2050, which is the equivalent of almost 30% of
today’s energy sector emissions (Figure 6.12). The result is that emissions in end-use
sectors would be significantly lower by 2050 in the Faster Innovation Case. By 2050,
remaining transport-related emissions would be down to 1.1 Gt (mainly in heavy-duty
trucking, aviation and shipping), in industry, they would be down to almost 0.9 Gt(mainly steel, cement and chemicals production); and in buildings, down to almost
0.3 GtCO2. To put this into perspective, the additional emissions reductions reachedin the Faster Innovation Case through innovative technologies in passenger
transport, for instance, are equivalent to a drop of almost 60% in the level ofpassenger activity across different modes of transport in the Sustainable
Development Scenario in 2050. Similarly, materials production from heavy industrial
sectors would need to drop on average to around a quarter of the level reached in
the Sustainable Development Scenario in 2050 to reach the level of emissions
reductions in the Faster Innovation Case.

GtCO2/yr

Figure 6.12 Global energy sector CO2 emissions by sector, 2019 and 2050
40

Other
transformation

35

Power

30

Industry25
20

Transport

15
10

Buildings

5Agriculture

0
-5

Total
2019

Sustainable Development
Scenario - 2050

Faster Innovation Case 2050

IEA 2020. All rights reserved.
Notes: Emissions include those from fossil fuel combustion and those released in industrial processes from carbon
contained in the raw materials used.

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Despite the additional innovation push to reduce CO2 emissions in the Faster Innovation
Case, CO2 emissions would persist in 2050, which would need to be offset by negativeemissions.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Innovation needs in the Faster Innovation Case
Achieving such a transformation of the energy landscape globally in just three
decades would require innovation cycles much faster than those achieved in recent
success stories of clean energy technology development. Key clean energy
technologies at demonstration or large prototype stage today, such as hydrogenbased steel production, electrolytic hydrogen-based ammonia to fuel vessels or
carbon capture in cement production, among others, are assumed to reach markets
in six years from now at the latest. This is about twice as fast as in the Sustainable
Development Scenario, which assumes that deployment starts after several
demonstrations have been successfully completed, in line with normal innovation
practice (Figure 6.13). Technologies at laboratory or small prototype stage arecommercialised in the next ten years on average in the Faster Innovation Case, whichis the minimum time required from the first prototype to market introduction
observed across all technologies explored for this report: the only case for which
there is historical evidence of such rapid progress is that of LEDs, which are smallenough to be mass produced and to require a relatively low level of capital
expenditure during the prototyping and demonstration phase.

Large size

Components canbe mass produced

Figure 6.13 Period from first prototype to market introduction for selected technologies,
including the quickest examples in recent developments
Current maturity level
LED lights
Solid-state cooling

Small prototype (not in SDS)

Iron ore electrolysis for steelmaking

Small prototype (not in SDS)
Demonstration

Electrolytic hydrogen-based methanolWind electricity
Hydrogen based direct reduced iron for steel

Large prototype

CCUS in cement production

Demonstration
Demonstration

Enhanced smelting reduction steel with CCUS
-60

1960

-50

1970

-40

1980

-30

1990

Past development

-20

-10

2000 20100

10

2020 2030

Faster Innovation CaseSDS

IEA 2020. All rights reserved.
Notes: SDS = Sustainable Development Scenario; CCUS = carbon capture, utilisation and storage. The classification
between large process technologies and those dependent on components able to be mass produced is based on
the characteristics of the equipment or process steps within the technologies analysed that are not commerciallyavailable today.
Sources: Historic year from different technologies based on Gross (2018), European Cement Research Academy(2012); Brohi (2014); TATA Steel (2017) and Nuber, Eichberger and Rollinger (2006).

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The time to market introduction for pre-commercial technologies would be reduced byalmost 40% on average in the Faster Innovation Case compared to the Sustainable
Development Scenario, on the basis that a single commercial demonstration would beenough to allow a move to vigorous market deployment.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

In the Faster Innovation Case, the pace of adoption of new technologies following
their commercialisation increases by about twofold on average compared to the
Sustainable Development Scenario, and up to almost threefold for technologies thatcan be mass produced and that have strong synergies with technology advances
elsewhere. In 2050, the share of CO2 emissions reductions achieved by deploying
technologies that have not reached markets today would be more than 60% higher
in the Faster Innovation Case than in the Sustainable Development Scenario(equivalent to 17 GtCO2 or the combined energy-related emissions of China, UnitedStates and European Union in 2018) (Figure 6.14). Technologies now at prototype
stage would enable the largest increase in emissions reductions, partly as a result of
assumed actions to stimulate technologies in the laboratory and at small prototype
stage that go beyond the scope of the Sustainable Development Scenario. Both the
Sustainable Development Scenario and the Faster Innovation Case see a major role
for technologies that are not commercially available today.
Figure 6.14 Contribution to global energy sector annual CO2 emissions reductions in 2050
by current technology maturity category

100%

Relative increase in CO2 emissions savings, Faster Innovation
Case VS Sustainable Development Scenario

Share of emissions reduction by
maturity category
100%

80%

80%

60%

60%

40%

40%

20%

20%

0

0%
MatureEarly
adoption

Demonstration

Large
prototype

Small
prototype/lab

Sustainable
Development
Scenario

FasterInnovation
Case

IEA 2020. All rights reserved.
Notes: In the right graph, emissions reductions are relative to the Stated Policies Scenario. The Sustainable
Development Scenario does not include technologies that are at small prototype stage or in the laboratory today.

Annual emissions reductions from technologies at the prototype stage today would be
more than 70% higher in 2050 in the Faster Innovation Case than in the Sustainable
Development Scenario.

Technology needs in the Faster Innovation Case
A transition to net-zero emissions by 2050 as depicted in the Faster Innovation Casewould further amplify the scale of change required across all parts of the energy
sector and across all technologies. The contribution of fossil fuels to total primaryenergy demand in the Faster Innovation Case would be reduced by almost 40% in

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2050 compared with the Sustainable Development Scenario. Oil use would be mostEnergy Technology Perspectives

Chapter 6. Clean energy innovation

affected with a 40% decline in 2050, mostly driven by a radical transformation of thetransport sector on the back of advanced battery chemistries and expandedhydrogen use. Bioenergy demand would increase by 15% by 2050, enabled byinnovative technologies and strategies to unlock additional sustainable bioenergy
resources. Demand for other renewables would be almost 50% higher than in the
Faster Innovation Case in 2050 driven by increased use in power generation to
support almost 25% growth in electricity demand.
A transition to net-zero emissions as in the Faster Innovation Case would indeed
require very rapid transformation in the way energy is supplied. For instance, thepower sector would need to decarbonise at an even faster pace whileaccommodating additional electricity generation of nearly 20 000 terawatt-hours(TWh) by 2050 relative to the Sustainable Development Scenario to contribute todeep emission cuts in end-use sectors (a 35% increase in electricity generation isroughly equivalent to the combined electricity generation of China and India in 2050
in the Sustainable Development Scenario). The surge in low-carbon electricity
demand would support emissions reductions in end-uses (particularly transport andindustry) in two ways: through direct electrification and supporting higher suppliesof electrolytic hydrogen and electrolytic hydrogen-based fuels. This would require afurther step change in low-carbon investments such as for renewables: annual
renewables capacity installations would need to rise to 770 gigawatts (GW) per yearby 2050, almost 50% higher than in the Sustainable Development Scenario and aboutfour-times the record high in 2019 (Figure 6.15). Similarly, there would also be ahigher call on alternative low-carbon fuels. Compared to the Sustainable
Development Scenario, demand for alternative fuels such as hydrogen, ammonia,
hydrocarbon synthetic fuels and biofuels would grow by around 20% in 2050 in the
Faster Innovation Case to offset a decline in fossil fuel use by 40%. A more robust
push in technology innovation would see the transport sector consume 40% of total
final demand of alternative fuels in 2050 in the Faster Innovation Case, while

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industrial processes would absorb about a third.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

700

84

600

400
300

0

Renewables

16%

8

14%

7

56

250

5

42

200

4

150

3

100

2

4%

50

1

2%

0
Hydrogen demand00Electrolyser

Additional in Faster
Innovation Case

12%

6

14

100

9

300

28

200

400
350

70

500

450

GtCO2/yr

Annual average capacity additions(2019-2050)
98
800

MtH2/yr

GW/yr

Figure 6.15 Selected decarbonisation indicators by scenario in 2050

10%

Sustainable
Development
Scenario

8%
6%

CO2
captureCO2 capture

2019

0%
Bioenergy in TFC

IEA 2020. All rights reserved.
Notes: GW/yr = gigawatts per year; MtH2/yr = million tonnes of hydrogen per year; TFC = total final energy
consumption. Renewables exclude bioenergy-based power generation equipped with carbon capture. CO2 capture
includes captured emissions for storage and use.

Transitioning to net-zero emissions by 2050 in the Faster Innovation Case significantly
amplifies the scale of change required across all technologies.

The main emissions abatement strategies in the Faster Innovation Case are notradically different from those in the Sustainable Development Scenario: new andemerging technologies would target the displacement of fossil fuels by electricity oralternative clean energy fuels such as hydrogen, hydrogen-derived fuels andbioenergy, or they would target the capture of CO2 emissions for use and storage
from fossil or bioenergy-based combustion. What varies is the step change in speedof innovation assumed in the Faster Innovation Case in all these technology areas.
Electrification, CCUS, bioenergy and hydrogen would account for almost 90% of theadditional emissions reductions in the Faster Innovation Case in 2050 compared with
the Sustainable Development Scenario (Figure 6.16). The boost in electrification andbioenergy would enable almost 60% of the additional emissions reductions, with alarger contribution from electrification. These contributions would stem partly fromthe widening of the technology portfolio in the Faster Innovation Case to include
technologies that are today at small prototype stage or in laboratories and that havehigh potential for speeding up innovation cycles for advanced high-energy density
batteries or conversion routes to exploit algae and aquatic biomass for the
production of biofuels and biochemical, among others (Box 6.3). Additionalemissions savings come from further shortening the period to market introduction oftechnologies that are at large prototype and demonstration stages today, as well as

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from accelerating market adoption rates of new and emerging technologies.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Stronger innovation efforts in CCUS would enable around 25% of the additionalemissions reductions in the Faster Innovation Case in 2050 relative to the Sustainable
Development Scenario. The bulk of the increase in captured emissions would comefrom carbon removal technologies either through bioenergy carbon capture andstorage or direct air capture (DAC). The joint capture volume of these twotechnologies would increase by nearly 50% in 2050 reaching more than 2.5 GtCO2
and this would help to offset residual emissions, which by 2050 would come mainly
from long-distance travel and heavy industry.
Hydrogen-related technologies would enable the remaining additional emissions
reductions in the Faster Innovation Case compared to the Sustainable Development
Scenario in 2050. Demand for hydrogen, including for hydrogen-derived fuels, wouldgrow by around 55% in the Faster Innovation Case in 2050 up to 150 Mt. For instance,compared to the Sustainable Development Scenario, the demand of hydrogen for
low-carbon hydrogen-based processes in industry would increase a further 35% by
2050 in the Faster Innovation Case, and the demand for ammonia to power ships
would increase almost 70% more.

40

GtCO2/yr

GtCO2/yr

Figure 6.16 Global energy sector annual CO2 emissions reductions by type of abatement
measure and total primary energy demand, 2050

35

40

Avoided demand

35

30

30

Technology
performanceElectrification

25

25

Hydrogen

20

20

Bioenergy

15

15

Other renewables

10

10

Other fuel shifts

5

5

0

STEPS
2050

Emissions
reduction

SDS
2050

0

CCUS
STEPS
2050

Emissions
reduction

FIC
2050

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario; SDS= Sustainable Development Scenario; FIC = Faster Innovation Case.
Hydrogen includes hydrogen and hydrogen-derived fuels such as ammonia and synthetic hydrocarbon fuels.
Nuclear is included in other fuel shifts.

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Electrification, CCUS, bioenergy and hydrogen account for around 90% of additionalemissions reductions in the Faster Innovation Case in 2050 compared to the Sustainable
Development Scenario.

Energy Technology Perspectives

Box 6.3

Chapter 6. Clean energy innovation

Key opportunities among technologies at laboratory or small
prototype stage

Policy makers seeking to support technologies currently at laboratory or small
prototype stage that will have maximum impact as part of economic stimulus packages
should consider, two kinds of technology that are likely to be particularly relevant. First
are technologies that are modular and small enough to be mass produced and havepotential for high spillovers from and to other net-zero emissions technologies. Second
are technologies with significant potential to unlock supply constraints (e.g. thoseaffecting bioenergy and rare or increasingly in demand materials) and that can shift
the supply curve towards lower cost resources. Several such technologies are
particularly important in the Faster Innovation Case: advanced battery chemistries andbattery recycling techniques; innovative practices to boost biomass resources; directelectrification of primary steelmaking and advanced refrigerant-free cooling.
Advanced battery chemistries and recycling techniques. Despite a near doublingof the gravimetric energy density at cell level of batteries in the Sustainable
Development Scenario by 2070 compared with current levels, the use of batteries
for transport remains largely confined to road vehicles, and short-distanceshipping and aviation routes. An all-electric passenger commercial aircraft capableof operating over ranges of 750-1 100 kilometres, for instance, would require
battery cells with densities of 800 watt-hours per kilogramme (Wh/kg), more than
three-times the current performance of Li-ion batteries (Schafer et al., 2019). There
are at least two alternative battery chemistries that theoretically could reach thenecessary density: lithium-sulphur and lithium-air, which are at small prototype
and concept stage today (Thackeray, Wolverton and Isaacs, 2012). Reaching theperformance goal of 800 Wh/kg (cell level) by 2050 as assumed in the Faster
Innovation Case (a level 60% higher than in the Sustainable Development
Scenario) would boost the share of electricity in heavy-duty road freight from 15%
in the Sustainable Development Scenario to almost 70% by that year, with battery
electric trucks dominating the electric vehicle fleet. It would also enable a 50%
increase in the coverage of aviation fuel use that electric aircraft built in 2050
would be capable of covering, as compared to the Sustainable Development
Scenario.
The demand-pull from the large-scale deployment of lithium-based batteries in the
Sustainable Development Scenario increases lithium production in the Sustainable
Development Scenario by thirty-fold by 2070 compared to current levels, withbatteries taking 90% of total supply. In the Faster Innovation Case, the same level
would be reached by 2040. Measures such as recycling that can prevent potential
supply chain bottlenecks for lithium are important in this context. Battery recycling
technologies today are mainly focused on high-value metals like cobalt and nickel:

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Energy Technology Perspectives

Chapter 6. Clean energy innovation

lithium is rarely recycled. This changes in the Sustainable Development Scenario:
lithium recycling reaches 35% of all lithium demand in 2070, based on recycling
technologies either available now or already at the demonstration phase. The
Faster Innovation Case assumes that innovative battery recycling at earlier stagesof development would be commercialised over the next decade, reducing demandfor primary lithium and accelerating the electrification of the transport sector bylowering costs (IEA, 2020a).
Global share of vehicle activity electrified by mode in the Faster Innovation Case
relative to the Sustainable Development Scenario, 2050
100%

Two/threewheelers
Rail

80%

Light-duty
vehicles
Buses

60%

Trucks40%

Shipping
20%
0%

Aviation
SDS

Faster Innovation

IEA 2020. All rights reserved.

Innovative techniques to expand sustainable biomass supply. An increase andacceleration of bioenergy consumption in the Faster Innovation Case compared to
the Sustainable Development Scenario is made sustainable by a set of innovativetechnologies and practices: using crops with higher yields, which allows the
production of additional energy without a requirement for more land; developing
new biomass resources such as algae and aquatic biomass for the production of
biofuels and biochemicals; maximising the potential for agricultural land with theuse of double cropping on a more widespread basis and developing advanced
waste management systems on a much larger scale (IEA, 2020a).
Enhancing the availability of sustainable biomass resources results in the share of
bioenergy in final energy demand in the Faster Innovation Case being 25% higher
than in the Sustainable Development Scenario by 2050. In industry, larger amountsof bioenergy would be directed towards medium- and high-temperature heating
applications that do not require significant equipment retrofits, such as cementkilns. Biomass alternatives to energy-dense fossil liquids are particularly critical inshipping and aviation, where electrification is technically challenging and forwhich the total biofuel consumption combined would increase by about 18% in the
Faster Innovation Case relative to the Sustainable Development Scenario in 2050.

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Energy Technology Perspectives



Chapter 6. Clean energy innovation

Direct electrification of primary steelmaking. There are no economic andscalable technologies available today to make primary steel using non-fossil
energy. One promising low-carbon technology – direct electrification of primary
steelmaking (known as iron ore electrolysis) – is technically feasible, but the twomost advanced processes (low-temperature alkaline electrolysis and hightemperature molten oxide electrolysis) have so far only been tested at small scale(IEA, 2020a). In the Faster Innovation Case, four factors would combine to makeit possible to speed the deployment of iron ore electrolysis compared with otherlow-carbon processes for making primary steel in the Sustainable Development
Scenario: relatively low risk in scale-up; spillovers from other electrolysis
technologies; standardised and repetitive manufacturing; and compatibility withelectricity grid needs. About 10% of global primary liquid steel production would
be produced from iron ore electrolysis in the Faster Innovation Case in 2050,
increasing electricity demand for steelmaking by 60% relative to the Sustainable
Development Scenario.
Advanced refrigerant-free cooling. Today many of the refrigerants usedvapour-compression cycles, the standard technology for air conditioners, arepowerful greenhouse gases. Hydrofluorocarbons are the most common
refrigerant. Under the Kigali Amendment of the Montreal Protocol, more than 195
countries have committed to reducing the use of hydrofluorocarbon refrigerants
by more than 80% in the next three decades. In the Faster Innovation Case,
refrigerant-free cooling technologies, which are currently in the prototype phase,would be progressively adopted ten years from now. Among these are advanced
evaporative cooling, advanced desiccants and solid-state cooling technologies.
In the Faster Innovation Case, advanced space cooling technologies would
account for more than 30% of global cooling capacity in 2050, allowing the
average energy efficiency rating of the buildings stock to more than double to 9
by 2050, up from around 4 in 2019. Coupled with other measures to makebuildings more energy efficient, refrigerant-free cooling technologies would leadto energy savings from 2030 to 2050 relative to the Sustainable Development
Scenario equivalent to more than the current final energy consumption of thebuildings sector, with two-thirds of these savings concentrated in the residential
sector. In turn, spillovers from the faster growing demand for advanced coolingtechnologies could benefit technology development for heating services.

Electrification
As in the Sustainable Development Scenario, electrification is a key strategy in the
Faster Innovation Case, which would see the share of electricity in total final energy
demand grow by around one-quarter relative to the Sustainable Development
Scenario and reach about half of total final energy in 2050 compared to nearly 20%

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Energy Technology Perspectives

Chapter 6. Clean energy innovation

today. 15 Transport and industry would be responsible for 95% of the additional
electricity demand in the Faster Innovation Case with the electrification of roadtransport accounting for more than 30% of the total increase. Faster learning inbattery manufacturing and in smart charging infrastructure is central to the Faster
Innovation Case: so is the development and demonstration of advanced battery
chemistries, particularly for heavy-duty vehicles. Without advances in alternative
chemistries to Li-ion, it will be difficult for the use of batteries for transport to movebeyond road vehicles and very short-distance shipping and aviation routes. In the
Faster Innovation Case, the gravimetric energy densities (at cell level) would nearly
triple from current levels in 2050 compared to a (still very rapid) growth of 70% it the
Sustainable Development Scenario. At least two alternative battery chemistries –
lithium-sulphur (Li-S) and lithium-air (Li-air) – have the potential to provide such
advances: they are at small prototype and concept stage today. These developments
would lead to more rapid uptake of electric vehicles: almost 90% of both light-duty
and heavy-duty vehicles on the roads in 2050 would be battery electric in the Faster
Innovation Case. In the case of heavy-duty vehicles, nearly seven-times more battery
electric vehicles would be deployed than in the Sustainable Development Scenario.
To satisfy demand for electric vehicles in the Faster Innovation Case, about 17 TWhof battery manufacturing capacity would be required by 2050, meaning that morethan one battery manufacturing plant of the size of the Tesla gigafactory would needto come online each month from today to 2050. The Faster Innovation Case would
also require the rapid deployment of infrastructure for vehicle charging, particularly
fast-charging stations capable of charging high battery capacities for electric trucks
and buses through conductive or inductive dynamic charging on road and highways:
such fast-charging stations are today at prototype stage. In the Faster Innovation
Case, the number of fast chargers for electric heavy-duty vehicles would reach
19 million globally in 2050, more than twice the number in the Sustainable
Development Scenario.
While the rapid battery developments envisioned in the Faster Innovation Case would
transform road transport, and especially long-distance heavy-duty road operations,
their impacts would be more muted in shipping and aviation. Due to the requirements
for high-energy density fuels in shipping and aviation, battery electric powertrains
only substitute for very short-range operations – the total weight of the battery
restricts the range due to mass-compounding effects. Even by 2050, battery electric
powertrains would account for only around 3% of freight movements in shipping andof passenger activity in aviation.
About 60% of the additional electricity demand in the Faster Innovation Case in 2050
compared to the Sustainable Development Scenario would come from industry.
Large-scale electric heating would penetrate far more deeply into the industrial
sector in the Faster Innovation Case than in the Sustainable Development Scenario.
Rapid advances in the demonstration of large-scale high-temperature electric

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IEA. All rights reserved.

15
Electricity demand reported here refers to direct use of electricity only and excludes indirect uses such as for the
production of electrolytic hydrogen.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

heating 16 for industrial processes that do not involve electricity-conducive materials
would be required to enable such sizeable deployment levels in the Faster Innovation
Case. Most of these technologies (e.g. electromagnetic) are at the concept validation
stage today, but they would reach markets by no later than ten years from now in the
Faster Innovation Case.
The commercialisation of the direct electrification of energy-intensive industrial
processes such as primary steelmaking through iron ore electrolysis (currently at
small prototype stage and thus outside the scope of the Sustainable Development
Scenario) would also open new avenues for electrification in the Faster Innovation
Case. This is based on the assumption that the time from small prototype to market
for iron ore electrolysis is completed in record time (just below ten years), and that
average deployment rises to 1 Mt (equivalent to half the capacity of a conventional
steel mill) installed every two months in the period through to 2050, In the buildings
sector, around 30 GW thermal capacity from integrated heat pump systems forheating and cooling (including storage systems) are installed every month on
average in the period to 2050 in the Faster Innovation Case compared to just over
15 GW per month on average in the Sustainable Development Scenario.

Hydrogen
Demand for hydrogen, including for hydrogen-derived synthetic fuels such as
ammonia, would increase by around 55% in the Faster Innovation Case in 2050,
relative to the Sustainable Development Scenario, with around 60% of the demand
from the transport and industry sectors. More than 95% of the hydrogen productionin the Faster Innovation Case in 2050 would either be electrolytic or would be linked
to CCUS, almost 10% larger share than the Sustainable Development Scenario in
2050. Electrolyser capacity would reach around 2 600 GW in 2050 in the Faster
Innovation Case (120% more than in the Sustainable Development Scenario) andwould absorb 45% of the additional electricity demand in that year (equivalent to onethird of today’s consumption).
In industry, this increase would translate, for instance, into more than two new 1 Mt
steel plants based on full hydrogen reduction being installed every month on averagethrough to 2050 in the Faster Innovation Case, a pace of adoption that is more than
twice as fast as in the Sustainable Development Scenario. Adoption at such a rapid
pace necessarily means radical changes to the existing stock of steelmaking
capacity; without such changes, more than a third of current global primary
steelmaking assets would still be in operation in 2050. In shipping, more than 50
ammonia-fuelled large vessels would be put into service every month on average
until 2050 in the Faster Innovation Case, almost twice the deployment rate in the
Sustainable Development Scenario, in the context of a projected monthly market
requirement of just over 80 large new vessels a month.

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16
High-temperature heating refers to heat delivered at 450°C or above, with some of the specific applications targeted
requiring a temperature above 1 000°C.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Figure 6.17 Global share of hydrogen and electricity in final energy demand by end-use
sector (left) and selected adoption metrics of hydrogen technologies (right),
2019 and 2050

IEA 2020. All rights reserved.
Notes: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario. Battery gigafactory capacity is
assumed 35 GWh/yr. Final energy demand includes energy use for blast furnaces and coke ovens. Hydrogen
includes direct demand of hydrogen and hydrogen-derived fuels for transport and buildings, and final energy
demand required to produce hydrogen on-site for industrial processes. Typical size of steel plant considered is 1 Mt
crude steel per year capacity. Typical maximum capacity for a large vessel considered is 50 kilotonnes of deadweight tonnage. Adoption rates show area average values for the period to 2050.

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Electricity, hydrogen and other renewables see the highest growth in final energy demand,at the expense of fossil fuels, in the Faster Innovation Case relative to the Sustainable
Development Scenario in 2050.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

Bioenergy
The share of bioenergy in total final energy demand would increase by around 20%
in 2050 in the Faster Innovation Case relative to the Sustainable Development
Scenario, mainly driven by industrial and transport-related applications. Such anincrease would not present a technical challenge on the demand side, as biofuels aredrop-in fuels for most applications, but it would put additional stress on biomass
supply chains. Rapid innovation developments in biofuel conversion technologies
and agricultural practices would be essential to unlock additional biomass sourcesand open new conversion routes to ensure the sustainability of supplies. Algae-based
biofuels, which are currently only at small prototype stage today for most conversion
routes, would be deployed at scale by 2050 in the Faster Innovation Case, but are
not deployed in the Sustainable Development Scenario. The Faster Innovation Casewould also require the rapid demonstration at scale of advanced biofuel production
technologies such as biodiesel and biojet fuel through gasification and FischerTropsch process, the aggregated production capacity of which would increase at an
average rate around 40% faster than in the Sustainable Development Scenario
through to 2050.

Carbon capture, utilisation and storage
The overall level of captured CO2 emissions is almost 50% higher in the Faster
Innovation Case in 2050 than in the Sustainable Development Scenario, at over
8 GtCO2 per year, with the amount of CO2 stored several hundred times larger than
today (Figure 6.18). Negative emissions technologies, such as DAC and bioenergy
carbon capture and storage, would account for the bulk of this. Both technologies
would become even more critical in offsetting residual emissions from long-distancetransport and heavy industry than in the Sustainable Development Scenario:
emissions captured through these techniques in 2050 would almost triple relative to
the Sustainable Development Scenario. Almost 16 DAC facilities of 1 Mt capture
capacity would need to be commissioned every year on average from today throughto 2050 in the Faster Innovation Case compared with around five such facilities per
year in the Sustainable Development Scenario. The largest DAC plant currently being
designed is 1 Mt capture capacity; only pilot-scale units of 0.4% that size have been
operated so far. For bioenergy carbon capture and storage, almost 90 plants of 1 Mt
capture capacity would be needed each year, almost three- times as much as thecapacity projected in the Sustainable Development Scenario. 17 Accelerated
innovation in CCUS would also enable direct emissions reduction in heavy industry.
For example, the Faster Innovation Case would see more than five carbon capture

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17
1 Mt capture capacity is equivalent to the largest biofuel plant with CO2 capture in operation today, which wascommissioned in 2017 in the United States to produce ethanol.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

facilities of 1 Mt capacity built each month in the cement sub-sector through to 2050,
compared to around four in the Sustainable Development Scenario.

GtCO2/yr

Figure 6.18 Global captured CO2 emissions by source, 2050
98Direct air
capture7
6

Biomass

5
4
3

Fossil fuels andindustrial
processes

2
1
0

STEPS

SDS

Faster Innovation Case

IEA 2020. All rights reserved.
Notes: SDS = Sustainable Development Scenario; STEPS = Stated Policies Scenario. Captured emissions are fromfuel combustion and emissions released in industrial processes from carbon contained in the raw materials used.

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Total CO2 capture volumes would be almost 50% higher in 2050 in the Faster Innovation
Case driven by almost a tripling in negative emissions technologies deployment relative to
the Sustainable Development Scenario.

Energy Technology Perspectives

Chapter 6. Clean energy innovation

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Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

Chapter 7. Making the transition toclean energyMore than 125 governments have formally discussed net-zero emissions targets, andover a dozen of countries and the European Union, accounting for around 10% of
global energy-related CO2 emissions, have formulated these ambitions in law or
proposed legislation. Many companies have also announced carbon-neutral targets.
Achieving net-zero emissions depends critically on accelerating clean energy
technology development and deployment.



Making a path to net-zero emissions requires governments to establish a long-term
vision for their energy sector to guide future expectations and build investor
confidence, and to support the strategy by tracking progress, re-prioritising asnecessary, and communicating expectations and progress effectively.

Long-term visions need to be supported by clean energy transition strategies andactions tailored to local infrastructure and technology needs. Effective policy toolkits
must be built around five core areas:
1.

Tackle emissions from existing assets. Much of the existing capital stock willremain in operation decades into the future, but there is scope to retire someassets early or re-purpose them, taking advantage of investment cycle timetables.

2. Strengthen markets for technologies at an early stage of adoption. It is forgovernments to set the framework for markets; they can maximise thecontribution from private capital with appropriate instruments and incentives.
3. Develop and upgrade infrastructure that enables technology deployment.
Careful strategic planning is necessary to avoid bottlenecks in the deployment ofclean energy technologies.
4. Boost support for research, development and demonstration. Achieving net-zeroemissions requires rapid progress in developing new early stage technologies.
Options range from increased public R&D funding to support for large-scaledemonstrators.
5. Expand international technology collaboration. The scale and urgency of thechallenges mean that there is a strong case for international co-operation which
can make use of existing multilateral forums.
Economic stimulus measures and recovery plans in response to the Covid-19
pandemic offer an opportunity to take action that would boost the economy while
supporting clean energy and climate goals, including action in these five areas.

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Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

Introduction
The global energy system today relies heavily on the unabated use of fossil fuels that
emit around 35 gigatonnes of carbon dioxide (GtCO2) each year. Today the challenge
we face is to transform this system within half a century to one that delivers ample
energy services to a growing number of people without emitting any CO2 on a net
basis. This is an unprecedented challenge, but the severity of the threat posed by theclimate crisis means that success is essential.
The preceding chapters of this Energy Technology Perspectives (ETP) demonstratethat many clean energy technologies already are available and that they are often
able to compete on costs in markets. Others need to progress from thedemonstration stage to full commercialisation and down the learning curve for costs
to fall, performance to improve and to be economically viable. Technology alone
cannot resolve the climate crisis, but it is clear that it has a vital role to play: without
the further development and deployment of new and emerging clean energy
technologies on a massive scale, it will not be possible to meet the goals of an energy
sector with net-zero emissions while underpinning economic development andproviding access to modern energy services for all.
Past experience suggests that the energy sector can rise to the challenge, provided
that the right framework is put in place (see Chapter 1). The highly capital-intensive
and long-term nature of energy investment brings with it a great deal of risk,
particularly for investment in technologies that are at an early stage ofcommercialisation. Companies of all sizes and across all sectors need visibility about
governments’ commitments and timelines if they are to calibrate their businessstrategies to the needs of a net-zero emissions pathway. Investors and consumers
also need a clear vision of the strategy and framework if they are to effectively
participate.
The Covid-19 pandemic makes the role of governments more important than ever. As
the Covid crisis took hold in early 2020, the state of play for the clean energy
transition was that the pace of adoption of clean energy technologies and investment
in research and development (R&D) was not sufficient to meet the scale of thechallenges, especially in sectors that currently have limited opportunities incommercial and scalable low-carbon options. As governments and stakeholders aredesigning and implementing response and economic recovery packages, there is afortuitous window to accelerate the deployment of clean energy technologies,
systems and infrastructure that will boost economic recovery, job creation,affordable energy services and other benefits while at the same time advancing thepathway to net-zero emissions from the energy sector to strive towards climate and

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sustainable development goals.

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

This chapter reviews emerging plans and targets by governments to achieve net-zeroemissions in the long term. It also sets out some guiding principles for the future
deployment of clean energy technologies for policy makers: these principles draw
on the analysis and findings in this report. The aim is to assist governments indeveloping and delivering clean energy technology strategies for net-zero emissions.

Government targets for net-zero emissions
Most energy producing and consuming assets have long lifetimes and require largescale investment. This makes long-term planning very important in the energy sector.
Governments have long been active in setting frameworks, regulations and targets
for the energy sector to ensure security of supply and to support goals such as
emissions reduction, affordability, access to modern energy services, andenvironmental protection. Such long-term planning has taken on more significancesince the Paris Agreement in 2015. It has a vital role to play in establishingexpectations about future policy action to deliver the commitments in theAgreement, and in shaping the direction and development of investment in energy
innovation in that context.
By August 2020, 14 countries and the European Union had adopted formal net-zeroemission targets 1 in national law or proposed legislation to that effect, with a target
date in 2030, 2045, 2050 or beyond (Table 7.1). Most of these commitments are very
recent: the targets set by France, United Kingdom and New Zealand were adopted
during the second half of 2019, while the targets proposed in Chile and Hungary were
set out in legislative plans in January and June 2020 respectively. Together, thecountries adopting or proposing these targets represent around 10% of current
energy-related global CO2 emissions. Nineteen other countries, responsible for an
additional 10% of global emissions, have also set net-zero emission targets in policy
documents. Similar targets are under discussion in about 100 other countries with a
combined emissions share of around 5%.

This section tracks net-zero energy-related CO2 emissions targets, excluding emissions related to internationaltransportation and trade. Therefore, country commitments may be broader, and may, for example, include all
greenhouse gases.

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1

Energy Technology Perspectives

Figure 7.1

Chapter 7. Making the transition to clean energy

Share of energy-related CO2 emissions covered by national and supra-national
public net-zero emissions targets today
Carbon or climate

10

80%

8

60%

6

40%

4

20%

2

In policy
document

0%0

Proposedlegislation

GtCO2/yr100%

No target
Under
discussion

In law
Total emissions(right axis)

IEA 2020. All rights reserved.
Notes: The emissions coverage by national and supra-national targets excludes sub-national commitments (e.g.
commitments from Australian or US states, Chinese provinces, cities). Following the European Union Climate Law,
EU member states are classified in the category “proposed legislation” unless the country has a target already indomestic law (Denmark, France and Sweden). The category “in policy document” includes targets that have notbeen proposed as legislation, but that have been described in policy documents such as long-term strategies
submitted to the United Nations Framework Convention on Climate Change. A number of countries have climate
neutrality targets (net-zero greenhouse gas emissions), which are stronger than carbon-neutral commitments (netzero CO2 emissions).

Countries responsible for around one-fifth of global energy-related CO2 emissions haveformulated net-zero emissions ambitions in laws, legislation or policy documents.

How these targets are intended to be met varies across countries, notably withrespect to the use of international carbon credits. Sweden, Norway, Chile andSwitzerland plan to make use of international carbon offsets to meet their targets,
while France, Fiji and Costa Rica do not. The rules on using international carbon
markets to reduce emissions have yet to be finalised in UN Climate Change
Conference (COP) discussions. Quantifying the need for these international markets
would help to avoid both a potential lack of supply and a delay in national decision

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making about decarbonisation (Falduto et al., 2020).

Energy Technology Perspectives

Table 7.1

Chapter 7. Making the transition to clean energy

Government carbon or climate neutral targets by legal status

Legal
statusYear
Already achieved

In law

National and supra-national
entities
Bhutan, Suriname

2030

Norway2045

Sweden2050

Denmark, France,
Netherlands, 2 New Zealand,
United Kingdom, Hungary

Proposedlegislation

2050

In policy
document

2030

Chile, European Union, Fiji,
Spain, Slovenia, Ireland,
Luxembourg
Uruguay2035

Finland2040

Iceland, Austria

2050

Canada, Costa Rica, Cyprus, 3
Germany, Latvia, Liberia,
Marshall Islands, Papua New
Guinea, Portugal, Slovakia,
Switzerland
Ukraine2070“As early as possible inthe second half of the
century”
2100

Selected sub-national entities(non-exhaustive)

California, Hawaii, Australian
Capital Territory, Scotland
New York State, Tasmania,
South Australia, Queensland,Victoria, Melbourne, Sydney,
New South Wales, Catalonia,
Galicia, Basque Country
Washington State,
Massachusetts, Catalonia, etc.

NevadaJapan, Singapore

Russian Federation

Note: European Union countries are mentioned explicitly when their commitment is more advanced or more
ambitious than that of the European Union, for example in terms of legal status, implementation plans or definitions.

Among the countries that have adopted or are considering net-zero emissions
targets, several have announced their intention to submit an enhanced climate action
plan and/or a long-term strategy by the end of 2020. They include the members of
the Climate Ambition Alliance (Annex II) and the signatories of the Carbon Neutrality
Coalition, both of which bring together a group of countries, cities and organisations
that have committed to take concrete and ambitious action to achieve the aims of
the Paris Agreement. The members of these two groups together account for around

The Climate Act sets a target of 95% greenhouse gas emissions reduction in 2050, compared with a 1990 baseline.
(www.iea.org/policies/8632-climate-act).
3Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of theIsland. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey
recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within thecontext of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus isrecognised by all members of the United Nations with the exception of Turkey. The information in this document
relates to the area under the effective control of the Government of the Republic of Cyprus.

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Chapter 7. Making the transition to clean energy

20% of current global CO2 emissions. More recently, the Covid-19 crisis has led togovernment spending pledges in support of economic recovery, and these could
spur additional commitments to net-zero targets and action plans (Box 7.1).

Box 7.1

Covid-19 government recovery packages in support of net-zeroemissions targets

The European Commission has proposed a Covid-19 recovery plan focused on areinforced long-term EU budget and on “Next Generation EU”, a EUR 750 billion
recovery instrument. To make it consistent with its 2050 net-zero emissions ambition(Figure 7.1), the EU budget is currently organised around the European Green Deal
work programme and its key pillars (building a circular economy, rolling out clean
energy technologies, green mobility and alleviating socio-economic impacts for themost affected workers and communities). Next Generation EU could become thelargest decarbonisation package so far, provided that agreement on the details canbe reached between the European Parliament and the 27 member states. The
program is also designed to attract at least hundreds of billions of euros of additional
public and private investment in the coming years, as EUR 1.5 trillion will be neededin 2020-21 to achieve Europe’s green and digital transition (EC, 2020).
Examples of decarbonisation measures part of EU’s proposed recovery plans
EU green deal pillar
Circular economy
Clean energy
technologies
Green mobility
Alleviate socioeconomic impacts

Examples of concrete targets
Doubling annual renovation rates ofexisting buildings.
6 GW of renewable hydrogenelectrolysers by 2024, 40 GW by
2030.
Installing 1 million electric vehicle
charging points.
Support re-skilling, create newopportunities (EUR 40 billion Just
Transition Fund).

Targets in the Sustainable
Development Scenario
A third of the existing buildings
stock renovated by 2050.
Around 40 GW of renewablehydrogen electrolysers by2030.
6 million electric vehicle
charging points by 2030.
Decline of coal, oil and gas use
by 40% by 2050, while
renewable use jumps 60%.

Note: This list is illustrative, not exhaustive, of the European Union’s commitment to make concrete progress todecarbonise its economy in the wake of the Covid-19 pandemic. EU targets and supporting programmes stillneed to be approved by its decision making bodies (including the European Parliament).

Other countries are also considering emissions reductions as part of their economic
recovery packages. For instance, Canada has announced several funds to support theoil and gas industry in order to reduce methane emissions and clean inactive wells(Government of Canada, 2020). Japan is considering “adaptive recovery” in thecontext of ensuring that infrastructure is resilient to natural disasters (UNDRR, 2020).
In most countries, climate-friendly measures proposed so far as part of recovery

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packages nonetheless fall short of addressing the net-zero emissions challenge.

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

In addition to net-zero emissions targets set at national level, regional or state targets
have been set in Australia, Brazil, Spain and United States. California and New South
Wales in Australia have adopted net-zero emission targets, for example. A number ofcities are also planning targets for emissions reductions or climate neutrality,
including some members of C40’s 4 “Deadline 2020” initiative and members of the
Global Neutral Cities Alliance. Commitment to achieving net-zero emissions is also
rising in private companies, utilities and other businesses, (Box 7.2) while the Climate
Ambition Alliance (Annex II), an initiative launched by Chile in 2019, brings together
cities, companies, organisations and investors to push for a co-ordinateddecarbonisation effort across various sectors of the economy.

Box 7.2

Corporate net-zero emission targets

Some companies have embarked on efforts to decarbonise their operations. Somehave announced carbon-neutral targets, generally for their own operations by 2050.
A few companies have set targets that extend up and down the value chain, covering
the use of the commodity being sold. For example, Toyota, Volkswagen and Mercedes
aim to decarbonise their passenger vehicle fleet. ThyssenKrupp’s climate neutrality
target includes the use of its elevator and steel and cement plant technology. BP and
Repsol intend to include emissions from the final combustion of the fuels they sell. A
few companies, such as DHL Express, have set targets that extend to theircontractors. Arrangements for accounting for these emissions will be important,although the scope of the emissions taken into account varies from company tocompany.
Decarbonisation strategies take a variety of forms. They can broadly be categorised
into three main areas:Fuel switching using commercially available technologies. A number of vehicle
manufacturers (e.g. Toyota, Volkswagen and Groupe PSA), air conditioner
manufacturers (e.g. Daikin and BROAD Group) and rail operators (e.g. Deutsche
Bahn, SNCF and Indian Railways) have announced intentions to switch to CO2free electricity for their operations. Others, including Bosch, aim to increase their
on-site renewables-based power production. Many car manufacturers also plan
to increase the share of electric and hydrogen-powered models in their sales, forexample, Daimler AG aims to produce only zero emission passenger cars by
2039. SSAB, a Swedish-Finnish steel company, aims to demonstrate fossil fuelfree steel production using electrolytic hydrogen by 2025. Other steel companies

C40 is a network of the world’s megacities committed to addressing climate change.

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Chapter 7. Making the transition to clean energy

such as ArcelorMittal Europe, Liberty Steel and Tata Steel Europe are considering
their approach. These corporate commitments depend on the availability ofdecarbonised electricity sufficient to meet company needs. The RE100 initiative,
which brings together more than 200 influential businesses committed to 100%
renewable electricity through on-site production or market purchases, aims
among other things to highlight and address policy and market barriers tocorporate sourcing of renewable electricity.


Developing innovative clean technologies. This is the main strategy whereemissions are particularly challenging to reduce, including shipping, aviation andheavy industry sectors. It implies a strong commitment to invest in R&D. For
instance, Maersk, the world’s largest container ship and supply vessel operator,
aims to adopt carbon-neutral vessels by 2030 (Maersk, 2019). The International
Airlines Group, born from a merger agreement between British Airways andIberia, plans to invest USD 400 million over the next 20 years in developing
sustainable aviation fuels and infrastructure development (IAG, 2020). Dalmia
Cement is aiming for new blends using less limestone and, like Heidelberg
Cement, is also developing on-site carbon capture, utilisation and storage(CCUS) projects.



Buying carbon offsets. This approach is being used by some companies as a wayof offsetting their emissions and is under consideration by others. For instance,
Google has claimed carbon neutrality in its operations since 2007 mainly on thestrength of agricultural methane capture, landfill gas capture and forestry
projects. Air France and British Airways have announced carbon-neutral
domestic flights from 2020 5 on the back of offsets coming mostly from projects
related to forest protection and reforestation or cook stoves. CO2 removal isbeing considered by companies including Microsoft, which aims to becomecarbon negative by 2030 and to remove its historical emissions by 2050: thismay help to drive investment in relevant technologies (Carbon Engineering,2019). However, the use of carbon offsets does raise issues concerning theirverifiability and additionality, especially when they are pursued in place ofpotential emissions reduction measures within a company. Concerns have been
expressed, for instance, that the impact of 73% of the Certified Emission
Reduction supply issued by the UNFCCC Clean Development Mechanism could
be overestimated (EC, 2016).

These two companies do not show in the figure below as they are not listed among the top ten companies in termsof scheduled passengers–kilometres flown in 2018.

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Chapter 7. Making the transition to clean energy

Share of activity covered by corporate carbon-neutral targets among the largest*
corporate players
100%

No net-zeroemissionstarget80%
60%

Target by
2050

40%
20%

Target by
2030

Manufacturing

Energygeneration andtransformation

Transport

Technology

Construction

Shipping

Rail

Passenger
airlines

Air freight

Oil and gas

Power

AircraftRoad
vehiclesSteel

CementChemicals0%Services

IEA 2020. All rights reserved.
* Each sector combines information on the 10 to 25 largest contributors to sectoral activity. Together, theseplayers represent from 30% (for steel and power) to 76% (for car manufacturers) of the activity of their sectors.
Notes: Sectoral activity was assessed based on output production for steel and road vehicle manufacturers;
output capacity for power generation, aluminium and cement; market revenues for chemicals, aircraft
manufacturers, construction, rail operators and technology; scheduled passenger-kilometres flown forpassenger airlines; freight tonne-kilometres flown for freight air operators, and cargo carrying capacity formaritime operators. The technology sector includes computer hardware, software, electronics, semiconductor,
internet, telecom equipment, e-commerce and computer services. The targets encompass carbon and climate
neutrality targets on operations or wider scopes by 2030, 2050 or in few cases earlier.

These targets are of vital importance given the central role that all types of businesses
will have to play to achieve net-zero emissions in the energy sector. Corporate players
have a key role in driving innovation and deployment of clean energy technologies
both in their commercial activity and along the underlying supply chains.
Commitments from consumer product companies could help to distribute potential
extra costs across the value chain, drive markets for more sustainable raw materials
and justify significant investment in upstream production.

Implementing strategies towards net-zeroemissions
An energy transition to net-zero emissions begins with a peak in CO2 emissions.
Recent trends have been promising. CO2 emissions remained at the same level overthree consecutive years (2014-16), and although emissions rose again in 2017 and

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2018, energy-related CO2 emissions in 2019 were at the level of 2018.

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

It is clear that the Covid-19 pandemic will result in a dramatic decline in CO2emissions: IEA analysis suggests that 2020 could see a drop in global energy-related
CO2 emissions of almost 8%, or around 3 Gt. This would be the largest reduction ever
over the course of a year, more than six-times the size of the previous record
reduction of 0.4 Gt in 2009 following the financial crisis. However, in 2020 this entire
decline is due to curtailment in economic activity rather than structural changes in
the way the world produces and consumes energy. This means that emissions arevery likely to rebound as economies recover. The forthcoming 2020 edition of theWorld Energy Outlook will provide a deep dive into the projected course of the energy
sector over the next ten years.
The good news is that there is no shortage of technologies or policy tools to bringabout a structural peak in energy- and industry-related CO2 emissions in the nearterm and a steep decline thereafter. It clearly makes sense to maximise the scope foruse of commercially available low-carbon technologies, in particular energy
efficiency and renewables. As this report makes clear, however, a transition to netzero emissions will require more than existing technologies alone can deliver(Figure 7.2). In the Sustainable Development Scenario, the bulk of the precommercial technologies that are widely deployed to reach net-zero emissions by
2070 are projected to be commercialised over the next ten years. In the Faster
Innovation Case, technologies at demonstration and large prototype stage need tomake it to market in about half that time and then to be deployed very rapidly in orderto bring forward the year when net-zero emissions are achieved to 2050. The next

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decade is crucial for energy technology innovation in both cases.

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

Figure 7.2 Global CO2 emissions savings by current technology readiness category in the
Faster Innovation Case relative to the Sustainable Development Scenario in
2050

GtCO2/yr

40
Mature35
30

Early adoption

25
20

Demonstration

15
Prototype

105

Small prototype/lab

0

STEPS
2050

Emissions
reduction

SDS
2050

Emissions
reduction

FIC
2050
IEA 2020. All rights reserved.

Notes: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario; FIC = Faster Innovation Case.
See Box 2.6 in Chapter 2 for the definition of the TRL categories large prototype, demonstration, early adoption andmature.

Reaching net-zero emissions requires a very rapid uptake of technologies currently at thedemonstration or prototype stage: such technologies account for almost 70% of emissions
reductions in 2050 in the Faster Innovation Case relative to the Sustainable Development
Scenario.

The transformation of the energy system that is needed to develop and deploy abroad portfolio of technologies will not happen at the scale or speed required without
clearly formulated long-term government strategies, integrated into energy policy
and system planning, to guide and reduce the risks of investment decisions. Suchlong-term strategies need to integrate near-term priorities and track progress against
medium-term milestones to make them credible and to secure buy-in frombusinesses and investors. They also need to take account of other policy objectives
including energy security and affordability and, in countries where relevant,achieving universal access to modern energy services.
Effective strategies will include a multitude of elements, yet three are of particularimportance (Figure 7.3).
1.

Establish a vision of the future through road-mapping 6 processes. High-leveltargets for carbon emission reductions in the energy sector as a whole should be

Good roadmaps describe the journey and the destination in qualitative as well as quantitative terms. They also lookat how the activities of the people and companies involved might change over time, so as to provide a foundation for
a conversation about opportunities and trade-offs between relevant stakeholders.

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Chapter 7. Making the transition to clean energy

at the heart of the process, underpinned by the identification of realistic target
markets for the deployment and development of particular technologies, and by
long-term targets and interim milestones, developed in co-operation withtechnology experts, civil society and market analysts. There is not one recipe forsuccess: plans will have to be designed in the context of the particular
circumstances of individual countries. Given the challenges of decarbonisingsome end-use applications, there are strong arguments in favour of developing
plans on a sectoral or application-specific basis that recognise what has to beprovided to enable specific sectors to reach net-zero emissions (e.g. the supplyof low-carbon steel or heat in buildings) and not just plans at the level oftechnology type (e.g. biofuels, wind power or heat pumps). As a result of thisprocess, governments should develop a detailed view on:Technology and infrastructure needs and identification of innovation
gaps. There is scope to map clean energy visions onto the existing technology
landscape to identify where improvements in cost and performance areneeded, and where there are cross-sectoral interactions. Tools such as theEnergy Technology Perspectives Clean Energy Technology Guide 7 can be
helpful in this process (see Chapter 2).



Priority technology areas and strategies for net-zero emissions. Selecting
the areas to prioritise is a difficult but essential exercise. There is scope forgovernments to share good practice in this area. Expertise, capacity,
comparative industrial advantage and potential for spillovers are all importantin this context. Analysis done for the Sustainable Development Scenario
highlights the importance of considering cross-sectoral spillovers.

2. Track progress towards stated policy goals, evaluate the impact of policies andestablish processes for regular review of priorities (Box 7.3). Committing to netzero emissions means taking a long-term view and embracing uncertainty, butthat does not diminish the importance of regular assessments of progress, andof adjusting priorities and policies as necessary in the light of these assessments.
There is considerable potential for better data to help governments assess how
their clean energy policies are performing, including by ensuring that the
information needed for ex post evaluation is gathered along the way.
3. Communicate the vision and progress to the public and build socio-politicalsupport. The roll-out of enabling infrastructure, the adaptation and turnover ofexisting assets, and the development and deployment of new clean energy
technologies are more likely to be successful if there is widespread public
understanding of and support for what is being done. This requires transparency
about the process, and early identification of possible areas of public concern
and enthusiasm.

For more information visit: www.iea.org/articles/etp-clean-energy-technology-guide.

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Chapter 7. Making the transition to clean energy

Figure 7.3 Governing process for a strategy towards net-zero emissions

IEA 2020. All rights reserved.

After establishing a vision of the future, governments need to continuously track progress
and assess the impact of the adopted measures to deliver net-zero emissions, and to
re-prioritise efforts as necessary along the way.

While multi-year priority setting is well established in places including the People’s
Republic of China (“China” hereafter), European Union and Japan, there is lessexperience with complementary processes to ensure flexibility and to evaluate
outcomes with policy objectives.

Box 7.3

Tracking progress: A key element of net-zero emissions strategies

Tracking progress is vital to the success of net-zero emissions strategies. It helps toensure that action is effective and that results are delivered, and it enables everyone
to see what progress is being made. It also helps to identify technology areas that are
struggling to keep up with requirements and enable timely adjustments to policies as
and when needed.
Tracking overall progress in achieving clean energy policy goals needs to go wellbeyond traditional indicators such as the level of low-carbon technology investment
and the emissions intensity per unit of energy demand and per unit of economic
growth. Policy makers need to continuously monitor progress in all steps of criticalvalue chains to avoid bottlenecks and to ensure that the innovation pipeline keeps
producing new ideas and improved designs.
Tracking metrics need to be tailored to the level of maturity of each targeted
technology. For technologies that have not reached markets yet, tracking efforts

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should focus on monitoring the pace at which such technologies go through theEnergy Technology Perspectives

Chapter 7. Making the transition to clean energy

different development phases. The technology readiness level is a useful metric touse for this (see Chapter 2). For technologies already in the market place, tracking
efforts should focus not just on the extent of their deployment but also on identifying
other technologies with synergies and the extent of their deployment. Monitoring the
expansion of manufacturing capacity for clean energy technologies and the progressof relevant infrastructure projects should also be part of the tracking exercise with aview to preventing technology deployment bottlenecks.
Global selected milestones of the transition to net-zero emissions in the Sustainable
Development Scenario

IEA 2020. All rights reserved.

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Notes: CCUS = carbon capture, utilization and storage. Commercialisation refers to the year when a given
technology reaches markets. For technology families, the year of market introduction refers to the earliest year
when a given technology design within that family is commercialised. For renewable power and fuels
productions, market share refers to the share of generated electricity and produced fuels of total electricity
generation and fuels production. For heat pumps, market share is the share of installed heating equipment incapital stock. For vehicles, market share is the share of vehicle sales. For industrial processes, market sharerefers to the share of production. For CCUS in power generation, market share refers to the electricity
generation equipped with CCUS over that from thermal power plants (coal, gas, oil, and biomass).

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

The IEA’s Tracking Clean Energy Progress portal tracks global deployment progress
at a technology-by-technology level. 8 The ETP Clean Energy Technology Guide maps
the current level of maturity of more than 400 technologies for net-zero emissions
across sectors. Both serve as means of calibrating progress against requirements forlong-term pathways to net-zero emissions. The level of ambition at a technology-bytechnology level will differ from country to country, but the collection and analysis ofdata will be important in all cases to track progress towards net-zero emissions. The
IEA stands ready to assist all countries in that endeavour.

Figure 7.4 Core target areas for policy instruments to advance a net-zero emissions
strategy by technology maturity level

IEA 2020. All rights reserved.

Governments need to design policies for technologies with various levels of maturity when
they develop strategies to achieve net-zero emissions.

Whatever the emissions reduction target each country sets and the interim
milestones in their accompanying roadmaps, achieving these depend on the policies
and measures they adopt and the effectiveness of implementation. To be effective,
policy measures need to be applied appropriately to a portfolio of technologies

For details see: www.iea.org/topics/tracking-clean-energy-progress.

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Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

which are likely to be at various levels of maturity. Five core target areas for policy
action can be defined that mirror the phases required to bring technologies from thelaboratory to wider market deployment (Figure 7.4).

Tackle emissions from existing assets
For policy makers, the point of departure for drawing up a technology strategy forthe clean energy transition should be an assessment of existing energy assets. To theextent that the existing capital stock and those assets currently under construction
are expected to remain in operation decades into the future, the associated CO2
emissions are often considered to be “locked in”.

GtCO2/yr

Figure 7.5 Global CO2 emissions locked in by existing energy-related assets by sector
measured against the CO2 emissions trajectory of the Sustainable Development
Scenario, 2019-70
40
35
30

Other

25

Buildings
Transport

20

Industry

15

Power
SDS

10
5
0

2019

2030

2040

2050

2060

2070
IEA 2020. All rights reserved.

Notes: SDS = Sustainable Development Scenario. The sectors include assets under construction in 2019, the baseyear of this analysis. Analysis includes industrial process emissions which are accounted on a direct basis. Annual
operating hours over the remaining lifetime remain as in 2019.

CO2 emissions from the existing capital stock, including assets currently underconstruction, account for the majority of the remaining CO2 budget for sustainability goals
to be met.

The pace of the reduction in energy sector CO2 emissions required by the Sustainable
Development Scenario leaves very little room for adding new infrastructure thatgenerates CO2 emissions. This is because much of the existing energy capital stock

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– heating systems in homes, vehicles, airplanes, buildings, transport infrastructure

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

and industrial equipment – will remain in use for decades, unless it is retired early or
measures are taken to reduce emissions from those assets. We estimate that the
global cumulative emissions that will arise from existing assets and those currently
under construction until they stop operating amounts to nearly 750 Gt, equivalent tomore than 90% of the cumulative CO2 emissions in the Sustainable Development
Scenario for reaching net-zero emissions by 2070 and above the emissions of apathway that would make it possible for the energy sector to reach net-zeroemissions by 2050 (Figure 7.5). Either way, virtually all new energy stock added in the
coming decades will need to be carbon neutral, even after accounting for efficiency
gains and CCUS.
However, there are several actions that can be taken and technologies that can be
deployed to help unlock emissions from existing infrastructure:

Early retirement or repurposing of assets, either because of a change in market
conditions that makes them uneconomic or because of laws and regulations thatforce early closures or partial operation. Repurposing coal and gas power plants
to provide balancing services or reserve capacity, rather than base load, is aninterim strategy.



Refurbishment and retrofitting, for example by insulating existing buildings,
upgrading energy efficiency and applying emissions reduction technologies
such as CCUS to the existing industrial and power infrastructure.



Fuel switching and incremental blending, sometimes combined with somedegree of retrofit, to allow the use of lower carbon fuels. Drop-in fuels (i.e.
synthetic substitutes for conventional hydrocarbon fuels) for various transportmodes and blending shares of waste and bioenergy into cement kilns are key
examples that can be implemented with little modification to existing equipment.
With only minor additional investments, biomass can be co-fired in existing coal
power plants at levels up to 15-20%. For industrial processes and natural gas
grids, there is scope to blend in small amounts of hydrogen or biomethane to
reduce emissions intensity incrementally, ahead of more fundamental upgradesin coming years.

Modification to existing energy capital stock, even with readily available
technologies, requires careful transition planning, in particular in the power andindustry sectors, which are responsible for nearly 80% of all CO2 emissions emitted
by existing assets to 2070.
The scope for unlocking emissions differs significantly across regions, reflecting thelandscape and age of their energy systems and existing infrastructure.
In general in advanced economies there is much more potential for early retirementof energy systems assets than in emerging economies: power stations and industrial

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plants are generally older, so the economic losses from early retirement would beEnergy Technology Perspectives

Chapter 7. Making the transition to clean energy

lower. Planning would require careful consideration to ensure that energy security
and international competitiveness are not compromised. Clear government signals
would be needed to guide investment decisions towards low-carbon clean energy
technologies so as to accelerate the decarbonisation of the industry concerned.
Where the necessary clean energy technologies do not yet exist at the required scale,clear government signals indicating a commitment to address the emissions of therespective assets would help to facilitate innovation.
In emerging economies with more recently developed energy-related assets, theemphasis is likely to be more on retrofitting with more energy-efficient and lesscarbon-intensive technologies where it is economic to do so. In most cases,
decarbonisation of such assets is likely to involve exploring technology opportunities
for retrofit with CCUS or for repurposing them fully or partially to function withcleaner fuels and feedstocks. For instance, it may be possible to retrofit coalgasification chemical or power plants and turn them into biomass-gasification assets
in regions where sustainable biomass resources are available, once the relevant
technology reaches successful demonstration.
The world’s energy system cannot be transformed overnight, not least because lowcarbon alternatives are simply not available at the scale required for this to happen.
For example, even if all new car buyers today decided to opt for electric vehicles,
there would not be enough supply to satisfy that demand, or enough charging
stations to meet demand for recharging outside the home. Retooling factories toadapt to shifting demand and building new infrastructure will take time. Given thisbackground, government strategies need to identify and promote opportunities foradapting existing assets over time through the effective deployment of clean energy
technologies. Policies could, for example, support more widespread uptake of dropin alternative low-carbon transport fuels that do not require the modification or
scrapping of existing vehicles or fuel distribution systems, and could specify
sustainability criteria to ensure that higher uptake yields real emissions reductions.
Policies could also support the blending of low-carbon hydrogen into natural gas
distribution pipelines so as to reduce emissions 9 while providing a base source ofdemand for hydrogen that could help bring down the cost of production.
In sectors where readily available alternatives for dramatic reductions in emissions
intensity are lacking (i.e. those where emissions are hard to abate such as aviation or
cement), decisions about whether or not to partially renew existing infrastructure areimportant (See Chapters 4 and 5). Incentivising early retirement or delaying
investment could help avoid a new investment cycle occurring at the wrong time
(Box 7.4).

Arrangements would need to be made to ensure that pure natural gas continued to be supplied to chemical plants
and other production processes that require it.

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Energy Technology Perspectives

Box 7.4

Chapter 7. Making the transition to clean energy

Opportunities to unlock emissions from existing infrastructure

There is scope in a number of industrial sectors to reduce emissions at different
stages of an asset’s lifetime. In the steel sector, for example, the internal lining of ablast furnace typically needs to be replaced after 25 years. Doing so extends the lifeof the unit – and often the entire plant – by a further 25 years. For cement kilns thestory is similar, while chemical plants tend to have more frequent cycles of major
maintenance and more continuous expenditure. Investment cycles of this kind canbe repeated multiple times, but the typical lifetimes of existing plants (30 years forchemicals, 40 years for steel and cement plants) suggests that 1-2 cycles is mostcommon. Deciding not to invest at the end of the next investment cycle, and to retireor re-purpose plants at that stage, could reduce future emissions significantly: a
reduction of 5-15 years in the operational period of assets in the steel, cement andchemicals sectors would bring a 40% reduction – nearly 60 GtCO2 - in cumulativeemissions from these sectors.

GtCO2/yr

Unlocking CO2 at the next investment cycle in key industrial sectors
7

7

6

6

5

5

4

4
̴ 60 GtCO2

3
2

2

1

1

0

2019

2030

Asia PacificMiddle East
EuropeNorth America

2040

̴ 60 GtCO2

3

2050

2060

0

2019

Eurasia
AfricaCentral & South America
Typical lifetime

2030

2040

2050

2060

Steel
CementChemicals
25 year investment cycle
Typical lifetime

IEA 2020. All rights reserved.
Notes: Typical lifetimes for steel, cement and chemicals assets are 40 years, 40 years and 30 years respectively.
In the 25 year investment cycle case considered here, all assets are decommissioned after 25 years.

Intervening at the end of the next 25 year investment cycle could unlock around
60 GtCO2 or around 40% of projected emissions from existing equipment in thesteel, cement and chemical industries.
A parallel priority must be to avoid adding to the emissions trajectory in the coming
years. With each new investment in a fossil fuel-based power plant, industrial boiler

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or conventional car or truck, an additional layer is added to the existing infrastructure

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

emissions curve that stretches into the future, making it ever harder to keep
cumulative emissions down to a level that is compatible with Paris Agreement climate
goals.

Strengthen markets for technologies at an early stage ofadoption
Effective government intervention is needed to accelerate the uptake of clean energy
technologies at the early adoption stage. The key is to reduce their cost andperformance gap relative to existing technologies by incentivising their deployment(see Chapter 6). Governments have a major role to play in making this happen,
maximising the contribution from private capital through appropriate policies andmeasures and ensuring all links in clean energy technology value chains are
addressed. Small, modular, mass-manufactured technology designs with highspillover potential offer valuable rapid learning dynamics and could have aparticularly important role to play. Solar photovoltaics (PV) and lithium-ion (Li-ion)batteries are examples of how technology design has led to dramatic progress in the
past: electrolysers, fuel cells, heat pumps and smart-home technologies all have thepotential to do the same (IEA, 2020).
The two main types of instruments that governments can employ to create andnurture markets for clean energy technologies at an early stage of adoption are:

Market-pull instruments for clean energy technologies. Stimulating demandfor clean technologies, products and services facilitates their market uptake.
Market deployment boosts economies of scale and learning-by-doing, whichhelps to improve the performance and reduce the cost of technologies. Different
technologies will need various deployment incentive measures depending onvalue chain complexity and value for customers, among other factors (Table 7.2).

Continued R&D support after market introduction. Supporting an evolving
portfolio of competing designs at different stages of maturity for each priority
area improves the chances of success: so does favouring options with rapid
innovation potential. Historical evidence suggests that ongoing R&D is vital evenafter commercialisation to stimulate the further development of new designs andcomponents and to bring down costs and improve performance. Diversity andcompetition help to spur progress and leave space for unexpected developments(IEA, 2020).

How market-pull instruments are applied, of course, will differ between technologies

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and technology categories. Though a general distinctions can be drawn between

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Chapter 7. Making the transition to clean energy

measures that will affect individual personal consumer choice, and those that will
impact relevant decisions made by businesses and institutions, whether they beenterprises that provide energy services or operate manufacturing plants, orbusinesses and institutions that purchase technologies and energy services. Whilesome policies can be aimed at both groups, policy formulation for the two groups
may differ somewhat given differences in the priorities of the actor (businesses
focused primarily on economics, personal consumers consider personal preferences
and convenience), the nature of the actor (fewer number of corporates that can bedirectly regulated compared to large number of diffuse consumers), and the stage ofthe supply chain (businesses have more influence on the design of and inputs to
products, consumers focus on service provision and must choose from available
options).
For personal consumers, subsidies such as tax exemptions or rebates or directpurchase incentives can help to reduce an initial price premium for a new loweremission technology or product, making it more affordable. Bans and phase outs ofparticularly high-energy consuming or CO2 emitting technologies can steer
consumers away from those technologies and open space for cleaner technologies
to compete. CO2 taxes at an appropriate level, which increases the cost of using
carbon emitting technologies or the cost of products whose production is fossil fuelintensive, can also influence consumer choice towards more efficient and clean
technologies. Efforts to raise awareness about energy consumption and emission
levels such as energy efficiency labelling have also proven to be effective in pulling
emerging technologies into the market.
Examples of market-pull policy instruments by targeted group

Targeted group
Personal consumers

Policy instruments

ExamplesPurchase incentives and tax
exemptions

Tax rebates for household heat pumpinstallations, purchase rebates for low or zero
emission vehicle purchases.

CO2 pricing

CO2 taxes, fuel taxes.

Dynamic pricing

Time-of-use electricity pricing.

Phase out inefficient and highemission technologies

Bans on incandescent light-bulbs, phase outof fossil fuel internal combustion engine
vehicles.
Green building codes, vehicle fuel economy
performance standards.
Energy efficiency labelling of household
appliances, green building certification.
Public information campaigns about thebenefits and ease of electric vehicles, heatpumps and other technologies.

Standards and codes
Energy and sustainability labellingand certification
Awareness raising and providing
relevant information to influence
choice for clean energy
technologies

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Table 7.2

Energy Technology Perspectives

Targeted group
Businesses, industry,
and institutions

Chapter 7. Making the transition to clean energy

Policy instruments

ExamplesAverage CO2 performancestandards (by technology type or
sector)Electricity and vehicle CO2 intensity
standards, industry sectoral CO2
performance standards, CO2 performancerequirements in building codes.
Near-zero emission vehicle mandates,
requirements for an average minimum shareof near-zero emissions steel sales orpurchases achieved through tradeable
compliance certificates.
CO2 taxes, emissions trading systems.

Flexible minimum market sharerequirements

CO2 pricing
Subsidies

Phase out inefficient and highemission technologies
Public procurement of clean
technologies
Sustainability labelling andcertification
Financing for clean technology
projects

Feed-in tariffs or feed-in premiums for lowcarbon power, contracts-for- differences for
low-carbon materials, industry tax credits fordevelopment of CCUS.
Phase out of coal-fired power plants without
CCUS.
Purchase electric vehicles for government
use, legislated requirements for low emission
materials in publicly funded projects.
Green steel or cement certification labelling.
Low interest and concessional loans, blended
finance, sustainable finance taxonomies.

IEA 2020. All rights reserved.

For the businesses and industry, mandatory policies applied to energy providers,material producers, product and equipment manufacturers, and construction
companies can be used to accelerate the deployment of new and emerging clean
energy technologies. For example, CO2 performance standards for a sector or
technology area can be set which require a declining average CO2 performance ofsales or production, or minimum market share regulations can be adopted that
require an increasing share of low-emissions sales or production. Designing thesepolicies with flexibility in mind, for example by allowing the trading of compliancecertificates, can further incentivise innovation efforts and reduce the overall costs ofachieving the policy objective.
Businesses may be able to pass on any additional costs to consumers in many cases,
for example through cross-subsidisation in vehicle markets or through slightly higher
electricity prices. Where cost-pass through is more difficult, particularly incompetitive international markets, other policies such as contracts-for-differences
may help overcome competitiveness challenges. For example, a government could
issue a tender for near-zero emission materials (e.g. steel, cement) and fund the costdifference for production relative to conventional high-emitting production for aguaranteed volume of materials; this is similar to a feed-in tariff for renewables
generation thus offsetting additional cost of innovative technologies for low-carbon
materials production.

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Other forms of enterprise-focused incentives can be used, including green materials
labelling targeted at product manufacturers and construction companies, and public

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

financing for clean technology projects. Public procurement can also play animportant role, in that the government directly creates a market for clean
technologies via demand from public institutions and enterprises. Broader policies
like CO2 taxes could also help pull producers towards low-carbon technologies, but
may not suffice on their own, especially at the early stages of adoption or if the tax is
set at a low level.
It is often difficult to draw analogies between various technologies in terms ofaccelerating market uptake as many have quite specific characteristics. Nonetheless,a considerable body of experience is available that draws from market deployment
policies for specific clean energy technologies. A careful assessment of theseexperiences provides useful lessons for developing policy support for emerging
clean energy technologies.
At the early adoption phase, the fundamental challenge is to move beyond initial
applications to a point where market forces increasingly lead to cost reductions andgenerate a dynamic environment for the technology to thrive in the market and nolonger need support. Early stages of adoption are also the ones where rewards arehighest: the technology learning curve is steepest at this point, so that each doublingof new installations can bring significant cost reductions, building confidence inindustry and investors about the future competitiveness of the technology. A focusedand concerted drive now to adopt clean energy technology market-pull policies
could help make the 2020s the decade of falling clean energy technology costs
across the board (Figure 7.6).
Figure 7.6 Capital cost reductions of selected clean energy technologies at early stages ofadoption in the Sustainable Development Scenario, 2019-30

Fuel cells(PEM)

Batteries

Heat pumps

0%

10%

20%

30%

40%

50%

60%

70%

Cost reduction from 2019 (%)

IEA 2020. All rights reserved.
Notes: Fuel cells refer to proton-exchange membrane fuel cell types. Heat pumps here do not include geothermal
applications.

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Market-pull instruments for technologies at early stages of adoption can yield rapid cost
reductions and build investor confidence in the prospect of them becoming competitive.

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

Even after a new technology has overcome the barriers of early deployment andreached relative market maturity, a cost differential between low emission
technologies and incumbent technologies may remain. Governments may wish tomodify the policy approach at this stage, for example by phasing out subsidies.
However, policy support is likely to need to be sustained over the long term, which
may include through CO2 taxes to reduce the price advantage of higher emitting
technologies, technology phase-out policies for the highest emitting technologies(e.g. unabated coal-fired power phase out), and the provision of access to finance,
among other options.

Develop and upgrade infrastructure that enables
technology deployment
Achieving net-zero emissions requires significant investment in new infrastructure or
upgrades to existing networks so as to provide smart electricity grids, alternative fueldistribution, CO2 transport and storage, and communications networks forconnected appliances and vehicles.

Electric grids need to be upgraded and expanded to facilitate the integration oflarger amounts of variable renewables in power generation, which will require
more flexibility to deal with intermittent fluctuations in supply (see Chapter 3); to
maintain necessary ancillary services; and to handle increased electricity
demand arising from the electrification of road transport and other end-uses. The
impending surge in electric vehicles, in particular, will create additional needs forrecharging infrastructure (including fast-charging facilities) and catenary(overhead) lines on highways for electric trucks or ground-based feed rails fortrucks, buses and cars.



The adoption of alternative fuels in sectors where emissions are otherwise hard
to abate requires the adaptation of existing infrastructure and the developmentof new infrastructure for their production and distribution. Each sub-sector has
specific fuel requirements and each country its specific resource and technology
opportunities. Potential alternative fuels include advanced biofuels, hydrogen,ammonia and other hydrogen-related synthetic fuels. International trade in thesefuels would create a need for new ships and terminals.
The large-scale deployment of CCUS depends on the construction of
infrastructure to either permanently store or use CO2 as feedstock for fuel orchemical products. Optimal initial locations for CCUS infrastructure are likely to
be in or close to places where major emission sources coincide geographicallywith sites that are suitable for long-term storage or facilities that could use CO2
in their operations. Industrial hubs, in particular around ports, could offer the best
locations, enabling the CO2 captured from multiple sources (such as hydrogen

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Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

production in refineries or petrochemical facilities) to be transported throughshared pipelines and stored in shared facilities, lowering costs for all parties. In
the longer term, the development of direct air capture (DAC) would bringsignificant low-carbon energy supply infrastructure needs, and DAC facilities
should ideally be located close to CO2 storage sites to minimise CO2 transport
infrastructure requirements.



District heating networks would have to convert from the traditional hightemperature operation mode to more efficient low-temperature operations andintegrate low-carbon energy sources into the supply mix including intermittent
ones, for which storage capacity would be needed to sustain a continuous heat
supply.

Such infrastructure investments have strong public good elements by virtue of being
natural monopolies and having large returns to adoption, meaning that later adoptersoften face lower costs and obtain higher benefits. Once infrastructure is in place, it
can be a platform for innovation, encouraging new ideas for how to make best use ofit, especially if third-party access is guaranteed. The need for new infrastructure
however can be a major barrier to adoption if project promoters bear the risks ofputting it in place while also bearing the risks of developing other elements of thevalue chain. There is therefore a strong case for governments to ensure that enabling
infrastructure is put in place in line with demand for clean energy technologies. The
timelines involved in developing new enabling infrastructure as well as the difficulties
that often come with large-scale infrastructure projects mean that strategic and early
development planning will be essential to ensure economies of scale and to maximise
utilisation. The key requirements are to:Incentivise network owners and operators to adapt and enhance existingenabling infrastructure by integrating clean energy technologies into existing
grids, pipelines and communication systems. Clear signals from governments
about their commitment to reduce emissions could stimulate private investmentin this area, which could be supplemented by direct financial support. Existing
infrastructure could also be used to test new clean energy technologies and help
accelerate their development. Regulated network operators are usually obliged
to minimise risk, which reduces their capacity to incorporate new technologies
into existing infrastructure, but new regulatory models are emerging to provide
more scope for experimentation.
Mitigate investment risk in new enabling infrastructure projects that present
a high-cost barrier by providing some or all of the initial investment needed forenabling infrastructure projects that are essential for the achievement of net-zeroemissions. Projects of this kind tend to have very high costs and risks: subsequent
entrants are able to benefit from the infrastructure that these projects develop.
This provides a rationale for direct government investment in the initial phase, in

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Chapter 7. Making the transition to clean energy

tandem with action to promote the use of the assets, for instance by establishing
incentives for users during the first years of operation. Such projects are typicallyhighly capital-intensive – together they require more than USD 100 trillion of
cumulative investment worldwide through to 2070 in the Sustainable
Development Scenario, about 90% of which relates to electrification, of which
about 30% is needed by 2040 (Figure 7.7).
Infrastructure planning is critical to put in place targeted de-risking mechanisms at
the right time to benefit from investment opportunity windows and prevent
technology deployment bottlenecks. This can take many forms, but leveraging thecurrent phase of the low cost of capital financing for the appropriate infrastructuredevelopment for new technologies can be an attractive opportunity forgovernments. Key industrial suppliers will need to ensure that their energy strategies
are aligned with the innovation strategies of governments (and vice versa), and takedue account of public acceptance.

USD trillion (2019)

Figure 7.7

Global cumulative investment in selected energy infrastructure in the
Sustainable Development Scenario

4.8

4.8

66

4.0

4.0

55

3.2

3.2

44

2.4

2.4

33

1.6

1.6

22

0.8

0.8

11

0.0

Hydrogen and related fuels
Import and export
Synthetic HC production
Refuelling stations
Production

0.0

CO2
Transport and storage
Carbon Capture02019 - 2040
2041- 2070

Electricity
EV charging stations
T&D
Generation and storage

IEA 2020. All rights reserved.
Notes: EV = electric vehicles; HC = hydrocarbons; T&D = transmission and distribution. Investments are
undiscounted.

Electricity-related infrastructure dominates cumulative capital expenditure on energy
infrastructure needed in the Sustainable Development Scenario.

Boost support for research, development anddemonstration
The policies discussed to incentivise investment in clean energy technologies andsupporting infrastructure would not only drive progress in technologies that are
currently at an early stage of adoption, but also stimulate innovation by encouraging
market competition and by providing a spur for the generation of new ideas on the

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part of researchers working on early-stage innovation. These policies, however, areEnergy Technology Perspectives

Chapter 7. Making the transition to clean energy

not sufficient on their own to meet the challenges of achieving net-zero emissions:they need to be complemented by resources devoted to clean energy R&D anddemonstration by both the public and private sectors (IEA, 2020).
While it is not possible to specify the precise amount that should be spent on R&D for
clean energy technology or who is best placed to spend it in each country, theinnovation system needs sufficient funding to generate a steady pipeline of new
ideas in line with sectoral net-zero emissions visions. The proponents of these ideas
need to be able to access funding to reach prototype and large-scale demonstration
stage. The key requirements are to:Support R&D activities for an evolving portfolio of competing designs at
different stages of maturity for each priority, favouring options with rapid
innovation potential such as small, modular, mass-manufactured technology
designs with high spillover potential (see Chapter 6).

Ensure that knowledge arising from publicly funded R&D is rapidly andopenly shared with the research community, and that taxpayer value ismaximised. This is good practice for knowledge sharing purposes, for example,
open access publishing is a condition of receiving EU R&D grants. Suchtransparency may also increase public support for R&D initiatives.



Mitigate the investment risks of key large-scale demonstrations for new clean
energy technologies. These may include CCUS for industrial facilities, fossil fuelfree iron and steel processes, new nuclear designs and floating offshore wind
power – all of which face high capital costs for the first commercial projects.
Public funding for such projects could be focused in particular on sectors thatare hard to decarbonise, and could be conditional on the lessons learned fromthe projects being widely shared. Results-oriented public-private partnerships,
international demonstration testbeds and conditional finance for international
consortia from multilateral finance institutions are all worth exploring.

Given the critical importance of action during the next ten years and the time that it
typically takes for emerging technologies to get from the laboratory to market,
governments cannot afford to wait for market incentives to deliver the level ofchange required. The private sector is unlikely to have the ability to take these
innovation risks on their own or to act with the urgency that is required.
Public R&D is expected to hold up better than private R&D in the wake of the Covid-19
pandemic. Governments of major economies may seek to boost innovation funding
in response to the crisis. Companies face lower revenue and a lack of cash flow for
R&D and capital investment to meet near-term growth targets, but there is little signat this point of backing off from those who have made commitments to reduce theiremissions intensity and test new energy technologies. For a rapid assessment of the

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likely impacts of Covid-19 crisis on their ability to support innovation towards longer

Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

term goals, we surveyed industrial contacts in May 2020. Responses indicated nochange in long-term commitments, but they did indicate doubts among experts
about whether companies would be able to keep their innovation pipelines flowing
over the next couple of years (IEA, 2020).
Early-stage energy venture capital (VC) deals decreased by about 30% relative to
2018-19 levels in the first half of 2020. Declines are expected around the world in thesecond half of 2020 as a result of the financial risks, travel and other restrictions andpolicy uncertainty during the Covid-19 pandemic. This could put a brake on financing
for innovative entrepreneurs at a time when several major governments are seeking
to rely heavily on VC financing to bring clean energy technologies to market. It could
also stimulate a policy discussion about the clean energy technology types that are
best suited to VC financing and about potential models for bringing other types oftechnologies to market. With the exception of consumer products, for example,
hardware often struggles to attract early-stage VC because it typically involves longdevelopment timescales and entails regulatory risks.
At a global level, successful energy innovation policies aim for a heterogeneous
portfolio of technology designs and to facilitate competition between various options
in real-world conditions. Successful energy innovation policies also differentiate
between the types of support needed by various technology designs – in terms of
their scale, manufacturing, value chains and spillover attributes – and at different
stages of development. Successful government innovation programmes are clear
about the part of the technology value chain they are targeting and realistic about
what can be achieved at the national level given the size of their economies and their
institutional capacity (IEA, 2020).

Expand international technology collaboration
The climate challenge is a global one, and technological progress to meet thechallenge will be most efficient if countries are able to share some of the burden andopportunities internationally. Multilateral platforms for co-operation between
governments already exist and are useful in this regard. As well, they can bestrengthened to hasten the pace and wide disbursement of clean energy
technologies. The key requirements are to:
Exchange good policy practice experience among relevant policy makers.
Several of the recommendations in this chapter concern actions that would havepositive impacts but where there is not yet consensus on how best to implement
them. It can include best practice lessons in how to prioritise clean energy policy
approaches, how to tailor funding instruments and how to assess the impact of
those measures and make course corrections where needed. Governments differ
in their approaches reflecting their specific circumstances and cultures, some of

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Chapter 7. Making the transition to clean energy

which may not be directly transferable, yet there is plenty of scope for policy
makers to adapt successful practice from elsewhere. For example, Japan has
processes that lead to well documented prioritisation and road-mapping andprovide clear guidance for R&D spending. China has a highly centralised multiyear planning framework that provides clear indications of national innovation
priorities. Korea and Japan stand out for successfully exploiting synergies in theirpromotion of electrochemical technologies across different sectors frombatteries to fuel cells. Some US programmes provide examples of good practicein embedding evaluation in innovation policy objectives in policy design (Pless,
Hepburn and Farrell, 2020).

Harmonise performance standards and codes across countries. Co-operation
to strengthen existing energy performance standards and foster international
applicability, as well as to develop new standards and codes for emerging clean
energy technologies, can accelerate cost reductions in manufacturing andinstallation, and thus market deployment. Clear and transparent internationallabelling standards for sustainable materials and fuels including auditing
protocols can facilitate market adoption of these commodities. There is potential
to build on the wealth of existing international energy standards (e.g. ISO 50001
for energy management systems) and on experience at national level indeveloping and applying standards. There is also potential to strengthen andexpand existing international platforms such as the International Partnership for
Hydrogen and Fuel Cells in the Economy, and regional ones such as theInternational Platform on Sustainable Finance in the European Union.
Co-ordinate action among countries and research institutions to ensure that no
essential technology areas lag because of risks that are too big to be borne by
one country. The risks of developing a new clean energy technology cansometimes be too high for one country if the market players are multinational,
the outlook uncertain and the support particularly costly. Different economies
have various approaches to creating markets that support early-stage
commercialisation of clean energy technologies for public policy purposes, butthere are some similarities between the approaches taken that could help coordination. For example, targets for renewable electricity, biofuels and electricvehicles are common in many major economies. Public procurement also plays arole in creating niche markets in some countries. In India, it is used to create
dependable local markets for products, such as light-emitting diodes (LEDs),
appliances and electric vehicles. Norway’s approach to decarbonisation ofmaritime transport links R&D and public procurement (DNV-GL, 2019). In manycases co-ordination may mean a variety of countries providing support for thesame technology but in different ways. The European Union has the highest
explicit carbon price and also the most numerous deployment targets for clean

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Chapter 7. Making the transition to clean energy

energy technologies. China’s combination of rapid prototyping, public
procurement, low-cost finance for manufacturing and internal market
deployment has effective for improving mass-produced products. In Japan,
strong standards in energy efficiency and other areas drive market-led
innovation, while well-designed requirements for evaluating R&D projects,
programmes and planning help to improve them.

Support networks that facilitate the rapid exchange of knowledge between
manufacturers, networks operators and researchers in overlapping fields andthat promote cross-fertilisation between sectors. The benefits of knowledge
sharing are getting increasing attention across the world. The European
Commission now requires recipients of funding to publish results with open
access. Technology programmes co-ordinated by the US Department of Energy
regularly publish their findings in detail. There is a similar requirement for CCUS
projects in Alberta (Canada). In China, the creation of specific zones for thedevelopment and deployment of certain technologies, including electric vehicles
and hydrogen production, facilitates knowledge exchange. The benefits ofknowledge and application spillovers can be maximised by exploiting synergies
internationally, while international networks for knowledge exchange, including
public-private partnerships and cross-sectoral coalitions, can help avoid
duplication of effort and identify gaps not yet addressed. Existing multilateralplatforms for co-operation provide a sound basis for deepening collaboration.
They include the Clean Energy Ministerial and Mission Innovation. A notable
example is the IEA Technology Collaboration Programme 10 which supports thework of independent, international groups of experts in 38 technology areas thatenable governments and industries from around the world to lead programmes
and projects on a wide range of energy technologies and related issues. The
experts in these collaborations work to advance the research, development andcommercialisation of energy technologies.

www.iea.org/areas-of-work/technology-collaboration.

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10Energy Technology Perspectives

Chapter 7. Making the transition to clean energy

References
Carbon Engineering (2019), CE expanding capacity of commercial Direct Air Capture plant,(press release), Carbon Engineering, https://carbonengineering.com/newsupdates/expanding-dac-plant/ (accessed 20 February 2020).
DNV-GL (2019), Someone has to go first (webpage), https://www.dnvgl.com/expertstory/maritime-impact/Someone-has-to-go-first.html.
EC (European Commission) (2020), The EU budget powering – The recovery plan for Europe,
https://ec.europa.eu/info/sites/info/files/factsheet_1_en.pdf.
EC (2016), How additional is the Clean Development Mechanism? Oko Institute for European
Commission, Directorate-General Climate Action,
https://ec.europa.eu/clima/sites/clima/files/ets/docs/clean_dev_mechanism_en.pdf.
Government of Canada (2020), Canada’s Covid-19 Economic Response Plan,
https://www.canada.ca/en/department-finance/economic-response-plan.html.
Falduto, C. and M. Rocha (2020), Aligning short-term climate action with long-term climate
goals: Opportunities and options for enhancing alignment between NDCs and longterm strategies, OECD/IEA Climate Change Expert Group Papers, No. 2020/02, OECD
Publishing, Paris, https://doi.org/10.1787/7c980fce-en.
IAG (International Airlines Group) (2020), IAG Sustainability (webpage),https://www.iairgroup.com/en/sustainability (accessed July 2020).
IEA (International Energy Agency) (2020), Energy Technology Perspectives Special Report on
Clean Energy Innovation, IEA, Paris, https://www.iea.org/reports/clean-energyinnovation.
Maersk (2019), Towards a zero-carbon future, (news article),https://www.maersk.com/news/articles/2019/06/26/towards-a-zero-carbon-future,(accessed 20 February 2020).
Pless, J., C. Hepburn and N. Farrell (2020), Bringing rigour to energy innovation policy
evaluation, Nature Energy, Vol. 5, pp 284–290, https://doi.org/10.1038/s41560-0200557-1.

PAGE | 389

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UNDRR (United Nations Office for Disaster Risk Reduction) (2020), Japan calls for “adaptive
recovery” in response to climate crisis, UNDRR - Office in Japan and Regional Office for
Asia and Pacific, (webpage), https://www.undrr.org/news/japan-calls-adaptiverecovery-response-climate-crisis.

Energy Technology Perspectives

Annexes

Annexes
Regional and country groupings
Advanced economies: OECD regional grouping and Bulgaria, Croatia, Cyprus,1,2Malta and Romania.
Africa: Algeria, Angola, Benin, Botswana, Cameroon, Republic of the Congo (Congo),
Côte d’Ivoire, Democratic Republic of the Congo, Egypt, Eritrea, Ethiopia, Gabon,
Ghana, Kenya, Libya, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria,
Senegal, South Africa, South Sudan, Sudan, United Republic of Tanzania (Tanzania),
Togo, Tunisia Zambia, Zimbabwe and other African countries and territories.6
Americas: North America and Central and South America regional groupings.
Asia Pacific: Southeast Asia regional grouping and Australia, Bangladesh, China,
India, Japan, Korea, Democratic People’s Republic of Korea, Mongolia, Nepal, New
Zealand, Pakistan, Sri Lanka, Chinese Taipei, and other Asia Pacific countries andterritories.3 Caspian: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan,
Tajikistan, Turkmenistan and Uzbekistan.
Central and South America: Argentina, Plurinational State of Bolivia (Bolivia), Brazil,
Chile, Colombia, Costa Rica, Cuba, Curaçao, Dominican Republic, Ecuador, El
Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua, Panama, Paraguay, Peru,
Suriname, Trinidad and Tobago, Uruguay, Bolivarian Republic of Venezuela(Venezuela), and other Central and South American countries and territories.4
China: Includes the (People's Republic of) China and Hong Kong, China.
Emerging economies: All other countries not included in the “advanced economies”
regional grouping.
Eurasia: Caspian regional grouping and the Russian Federation (Russia).
Europe: European Union regional grouping and Albania, Belarus, Bosnia andHerzegovina, North Macedonia, Gibraltar, Iceland, Israel,5 Kosovo, Montenegro,
Norway, Serbia, Switzerland, Republic of Moldova, Turkey and Ukraine.
European Union: Austria, Belgium, Bulgaria, Croatia, Cyprus,1,2 Czech Republic,

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Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,

Energy Technology Perspectives

Annexes

Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak
Republic, Slovenia, Spain, Sweden and United Kingdom.
IEA (International Energy Agency): OECD regional grouping excluding Chile, Iceland,Israel,5 Latvia, Lithuania and Slovenia.
Middle East: Bahrain, Islamic Republic of Iran (Iran), Iraq, Jordan, Kuwait, Lebanon,
Oman, Qatar, Saudi Arabia, Syrian Arab Republic (Syria), United Arab Emirates andYemen.
Non-OECD: All other countries not included in the OECD regional grouping.
North America: Canada, Mexico and United States.
OECD (Organisation for Economic Co-operation and Development): Australia,
Austria, Belgium, Canada, Chile, Colombia, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan,
Korea, Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway,
Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey,
United Kingdom and United States.
Southeast Asia: Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic
Republic (Lao PDR), Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet
Nam. These countries are all members of the Association of Southeast Asian Nations(ASEAN).

Country notes
1

Note by Turkey: The information in this document with reference to “Cyprus” relates

to the southern part of the Island. There is no single authority representing both
Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish
Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is foundwithin the context of the United Nations, Turkey shall preserve its position concerning
the “Cyprus issue”.
2

Note by all the European Union Member States of the OECD and the European

Union: The Republic of Cyprus is recognised by all members of the United Nations
with the exception of Turkey. The information in this document relates to the area
under the effective control of the Government of the Republic of Cyprus.
3

Individual data are not available and are estimated in aggregate for: Afghanistan,

Bhutan, Cook Islands, Fiji, French Polynesia, Kiribati, Lao People’s Democratic
Republic (Lao PDR), Macau (China), Maldives, New Caledonia, Palau, Papua New

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Guinea, Samoa, Solomon Islands, Timor-Leste and Tonga and Vanuatu.

Energy Technology Perspectives

4

Annexes

Individual data are not available and are estimated in aggregate for: Anguilla,

Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, Bonaire, British
Virgin Islands, Cayman Islands, Dominica, Falkland Islands (Malvinas), French Guiana,
Grenada, Guadeloupe, Guyana, Martinique, Montserrat, Saba, Saint Eustatius, Saint
Kitts and Nevis, Saint Lucia, Saint Pierre and Miquelon, Saint Vincent and Grenadines,
Saint Maarten, Turks and Caicos Islands.
5

The statistical data for Israel are supplied by and under the responsibility of therelevant Israeli authorities. The use of such data by the OECD and/or the IEA is without
prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlementsin the West Bank under the terms of international law.
6

Individual data are not available and are estimated in aggregate for: Burkina Faso,

Burundi, Cabo Verde, Central African Republic, Chad, Comoros, Djibouti, Equatorial
Guinea, Kingdom of Eswatini, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia,
Madagascar, Malawi, Mali, Mauritania, Réunion, Rwanda, Sao Tome and Principe,

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Seychelles, Sierra Leone, Somalia and Uganda.

Energy Technology Perspectives

Annexes

3D

3-dimensionalAC

alternate current

AIM

Aviation Integrated Model

ASEAN

Association of Southeast Asian Nations

ASTM

American Society of Testing and Materials

BECCS

bioenergy with carbon capture and storage

BEVbattery electric vehicle

BF

blast furnace

BFO

biofuel oil

BOF

basic oxygen furnace

BTLbiomass-to-liquidBTX

benzene, toluene and mixed xylenes

BWB

blended wing-body

CAAA

Clean Air Act Amendments

CAPEX

capital expenditure

CCGT

combined-cycle gas turbine

CCUS

carbon capture, utilisation and storage

CCS

carbon capture and storage

CCU

carbon capture and utilisation

CFSF

cold-formed steel framing

CNG

compressed natural gas

CNR

catalytic naphtha reformingCOcarbon monoxideCO2carbon dioxide

COP

Conference of Parties

COP

coefficient of performance

CORSIA

Carbon Offsetting and Reduction Scheme for International Aviation

DAC

direct air capture

DACS

direct air capture and storage

DCS

data collection system

DRI

direct reduced iron

EAFelectric arc furnace

EC

European Commission

ECA

emission control area

EEDI

energy efficiency design index

EORenhanced oil recovery

EPC

engineering, procurement and construction

ERS

electric road system

ETP

Energy Technology Perspectives

ETS

Emission Trading Scheme

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Acronyms and abbreviations

Annexes

EU

European Union

EV

electric vehicle

FAME

fatty acid methyl estersFC

fuel cell

FCEV

fuel cell electric vehicle

FIC

Faster Innovation Case

FLH

full load hours

FT

Fischer-TropschGDPgross domestic product

GFEI

Global Fuel Economy Initiative

GHG

greenhouse gas

GVWgross vehicle weightH2hydrogen

HDT

heavy-duty truck

HEFA

hydroprocessed esters and fatty acids

HEVhybrid electric vehicle

HFO

heavy fuel oil

HFTheavy-freight truck

HPCCV

high-power charging for commercial vehicles

HRS

hydrogen refuelling station

HVC

high-value chemical

HVDC

high-voltage direct current

HVOhydrotreated vegetable oil

IATAInternational Air Transport Association

ICAO

International Civil Aviation Organisation

ICE

internal combustion engine

IEA

International Energy Outlook

IGCC

integrated gasification combined cycle

IMO

International Maritime Organisation

IPCC

Intergovernmental Panel on Climate Change

LCSF

Low Carbon Fuel Standard

LCVlight commercial vehicle

LDV

light-duty vehicleLED

light-emitting diodeLHV

lower heating value

LMDI

Logarithmic-Mean-Divisia-Index

LNG

liquefied natural gas

LPG

liquefied petroleum gas

Lilithium

MEPC

Marine Environment Protection Committee

MFT

medium-freight trucks

MRV

monitoring, reporting and verification

NASA

National Aeronautics and Space Administration

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Annexes

NDC

nationally determined contribution

NGL

natural gas liquid

NH3ammoniaNOxnitrogen oxides

NZEB

near-zero energy buildingOEM

original equipment manufacturer

OPEX

operating expenditure

PEM

polymer electrolyte membrane

PHEV

plug-in hybrid electric vehicle

PPP

purchasing power parity

PM

particulate matter

PM2.5

particulate matter with a diameter less than 2.5 micrometres

PNG

piped natural gas

PSA

pressure swing adsorptionPVphotovoltaic

R&D

research and development

R&DD

research, development and demonstration

RFS

Renewable Fuel StandardSsulphurSAF

sustainable aviation fuelSDG

Sustainable Development Goal

SDS

Sustainable Development Scenario

SEEMP

ship energy efficiency management plan

SIP

synthetic isoparaffin

SMR

small modular reactor

SMR

steam methane reforming

SO2

sulphur dioxide

STE

solar thermal electricity

STEPS

Stated Policies Scenario

SUV

sport utility vehicle

T&D

transmission and distribution

TFC

total final consumption

TRL

technology readiness level

UHBR

ultra-high-bypass-ratio

US

United States

USD

United States dollar

VC

venture capital

VLSFO

very low sulphur fuel oil

VREvariable renewables

WEO

World Energy Outlook

ZEV

zero-emission vehicle

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Energy Technology Perspectives

Annexes

Units of measure°C

degree Celsius

bcm

billion cubic metre

EJ

exajoule

gCO2/kWhgramme CO2 per kilowatt hour

GJ

gigajouleGJ/tgigajoule per tonne

GJ/yrgigajoule per year

Gt

gigatonneGt/yrgigatonne per year

GtCO2/yrgigatonne of carbon dioxide per year

Gtoe/yrgigatonne of oil equivalent per year

GW

gigawatt

GW/yr

gigawatt per year

h

hour

kg

kilogramme

kgH2

kilogramme of hydrogenkm

kilometresquare kilometrektkilotonne

kt/yrkilotonne per year

ktCO2/yrkilotonne of carbon dioxide per year

kWkilowattkWekilowatt electrickWH2kilowatt hydrogenkWhkilowatt-hour

L

litre

L/100 kmlitre per 100 kilometres

Ldelitre of diesel equivalentmsquare metre

2

mb/d

million barrels per day

mboe/dmillion barrels of oil equivalent per day

MBtu

million British thermal unit

MJ

megajoulemm

millimetre

Mtmillion tonnes

Mt/yrmillion tonnes per year

Mtce

million tonnes of coal equivalent

MtCO2

million tonnes of carbon dioxide

MtCO2/yr

million tonnes of carbon dioxide per year

MtH2

million tonnes of hydrogen

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km2

Annexes

MtH2/yr

million tonnes of hydrogen per year

Mtoe

million tonnes of oil equivalent

Mtoe/yr

million tonnes of oil equivalent per year

MWmegawattMWhmegawatt-hourppm

parts per million

rpk

revenue passenger-kilometrest/day

tonne per dayt/yeartonne per year

tce

tonne of coal equivalenttCO2

tonne of carbon dioxide

tCO2/cap

tonne of carbon dioxide per capita

tCO2/ttonne of carbon dioxide per tonne

tkm

tonne-kilometres

toetonne of oil equivalentTWhterawatt-hour

TWh/yrterawatt-hour per year

USD/bblUnited States dollar per barrel

USD/kgH2

United States dollar per kilogramme of hydrogen

USD/kmUnited States dollar per kilometre

USD/MWh

United States dollar per megawatt-hour

USD/t

United States dollar per tonne

vkm

vehicle kilometres

Wh/kg

watt-hour per kilogramme

PAGE | 397

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Energy Technology Perspectives

This publication reﬂects the views of the IEA Secretariat but does not necessarily reﬂect those of individual IEA member
countries. The IEA makes no representation or warranty, express or implied, in respect of the publication’s contents(including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication.
Unless otherwise indicated, all material presented in figures and tables is derived from IEA data and analysis.
This publication and any map included herein are without prejudice to the status of or sovereignty over any territory,
to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

Revised version, February 2021. Information noticefound at: www.iea.org/corrections

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