Energy transition brings both challenges, opportunities

CLEVELAND—The world is facing a moral dilemma.

Global population has grown exponentially since the mid-20th century, from 2.5 billion in 1950 to 8 billion at the end of 2022. And it's projected to reach nearly 10 billion in 2050, despite a "precipitous" decline in birth rates, Neil Mendes, CEO of Alpine Polytech, said during the ACS Rubber Division's International Elastomer Conference.

Meanwhile, global energy consumption has grown about the same.

"It just mirrors the world population drive," Mendes said. "Population growth means we're going to need more energy. Plain and simple."

Currently, about 1 billion people (roughly 13 percent of the world population) are without energy, and about 2 billion (25 percent) are in energy poverty, meaning they lack access to sustainable, modern energy services and products, Mendes said.

And where there's energy poverty, there are lower life expectancies, he added, comparing North Korea to South Korea.

North Korea trails behind South Korea in life expectancy, he said, and far fewer residents in North Korea have access to electricity compared to South Korea.

According to the World Bank, about 52 percent of the population in North Korea had access to electricity in 2020, whereas 100 percent of residents in South Korea had access to electricity—with access defined as having an electricity source that provides basic lighting and can charge a phone or power a radio for four hours per day.

Based on the World Bank's 2020 figures, the average life expectancy in North Korea was 73 years. For South Korea it was 83 years.

And the moral dilemma, he said, is that while energy growth is necessary for quality of life, this growth also will impact climate change.

"Climate change is real, there's a lot of things that are going to be affected. Some places might be winners, most places probably not. There's going to be a lot of expense and a lot of things going on," he said. "And developing infrastructure in order to build out energy systems appropriately is going to be a major task. It's going to be an industrial revolution all over again."

But this isn't about climate vs. the growth of energy consumption, he said. "This is about how we drive more energy—as pollution-free as humanly possible—and get it to the right places, because it's going to save a lot of people's lives," Mendes said.

Mendes' presentation, "Global Energy Transition: Market Overview and Demands on Non-Metallics," looked at how the energy industry is transitioning to be more renewable in the face of this growing demand and what challenges and opportunities lie in this change.

As of 2021, hydropower stood at No. 1 among sources of renewable energy, followed by wind, then solar, "then all the other renewables," with hydrogen making up a "small piece," Mendes said.

And these renewables are all promising, but not without their own challenges in scaling up to the production needed "to really take a bite out of the overall infrastructure."

But Mendes said he is optimistic about hydrogen as a renewable energy source. His main reason: Warren Buffett.

Buffett, chairman and CEO of Berkshire Hathaway, owns a nearly 25-percent share of Occidental Petroleum Corp.—or Oxy, a major investor in carbon capture. Because he, too, is optimistic about the profitability of hydrogen through carbon capture and storage, Mendes said.

"(Oxy has) a great revenue stream and also they have great technology," Mendes said. "(Buffett) believes in that. He's been investing every chance he gets. … He's investing his money, and he usually wins. So that tells me it's a good spot."

Hydrogen's opportunity also lies in the multiple methods of obtaining or producing it, he added, noting that it is naturally occurring and can be derived from nuclear power, coal gasification, fossil fuels, hydrolysis, carbon capture and methane pyrolysis.

And the U.S. is heavily funding this opportunity, he said.

On Oct. 13, the U.S. Department of Energy announced the Regional Clean Hydrogen Hubs Program (H2Hubs), which granted up to $7 billion in funding for hydrogen hubs across the country.

H2Hubs, part of the Bipartisan Infrastructure Law, "will create networks of hydrogen producers, consumers and local connective infrastructure to accelerate the use of hydrogen as a clean energy carrier that can deliver or store tremendous amounts of energy," according to the DOE.

Houston, Mendes said, has received $1.2 billion of this funding, and ExxonMobil is building a carbon capture plant near the Gulf Coast in Baytown, Texas.

One of the challenges that hydrogen power faces, however, is that not all methods of producing it are financially sustainable, he said.

Naturally occurring hydrogen, for example, is difficult to transport due to its small spatial density, costing about four times as much as transporting natural gas via cargo ship. To transport en masse, the material must be converted to ammonia.

"I just don't see how we're going to be able to financially hold onto that," he said.

Then there's the cost of hydrogen power itself.

"In the U.S., a really good system is still going to be somewhere in the $16 to $20 range vs. natural gas at $2 to $4. People are not going to be able to afford that in the U.S."

Hydrogen will be more robust in Europe, where natural gas already is expensive, he said, adding that the industry is seeing this as the European government funds the infrastructure changes and power plants for this.

While those same investments are happening in the U.S., they're likely to take more time.

"There's definitely going to be business there for us. Whether hydrogen's going to be 10 percent of the energy mix, we'll have to see about that. But it's still a great opportunity."

As for solar, Mendes said it provides a "spectacular" opportunity for the right areas, particularly for developing countries that don't have a lot of infrastructure built out.

"Solar growth is extremely important. It really raises people's standard of living," he said, adding that one of the benefits of the energy source is that "you can put it anywhere."

The challenges with solar power, however, is that the panels degrade over time, the manufacture of the panels requires greenhouse gas emission, and for the panels to be fully reliable, they require a lot of sun.

"In order to make a lot of this stuff, we're going to probably be burning fossil fuels along the way," Mendes said, adding that in the Northeast U.S., solar panels aren't as likely to be as reliable as they would be in the south. "Solar can be spectacular in places with that infrastructure, where the sun's shining, but can be misleading in other areas."

And for wind power, he said, while windmills generate a lot of energy, they are difficult to scale. This is in part due to residents' pushback over having the structures "in their backyards," but more so for the windmills' intensive need for copper.

The average offshore windmill, Mendes said, uses about 30,000 pounds of the material, and "there just isn't enough copper out in the world."

The increased mining, however, could present opportunities for companies in the conveyance industry, he added.

"If any of your businesses are mixed up in that, that's good for you. (That) one-step adjacency could be an excellent opportunity."

Mendes said there are several risks to consider as the industry makes the transition to more renewable sources of energy, but at the top is inflation squeeze due to the rising costs of materials.

"We've gone from spending 4 percent of (global) GDP on energy to 14 percent," he said. While the increased spending on energy could also lead to GDP growth by creating more jobs, he said the cost of capital must be considered.

"We need to make sure that capital is put in places that actually generate productivity. Swing and miss, and you do something for a political agenda … and you spend all that money, that money is lost," he said.

"It's not generating jobs, it's not generating wealth, and people start running out of money. Countries start running out of money."

Another risk, he said, is how this energy transition will be "the world's biggest construction project," which will require the investment of about 7 percent of the world's energy to build out renewable sources of energy.

"There's going to be more consumption of energy during the energy transition," he said.

Finally, he said, the industry must not let perfect become "the enemy of good."

"There are things that are going to need work," he said. "We have to be smart about (renewable energy), where we're using it, how we're using it—putting it in the right places to get the most bang for our buck."