iii) If the oil and gas industry doesn’t invest in cleaner technologies, this could change the way that transitions evolve

Average unit size (kW)

10000 000

1000 000

100000

10000

1000

100

10

1

0.1

0

Offshore wind turbines

EV batteries

Vehicle fuel cells

Heat pumps

Home fuel cells

Solar PV

Average number of units installed per year in the SDS (2018-40)

The technologies that are needed for the deep decarbonisation of the

SDS have very diverse characteristics. They range from the physical sizes of individual units and the types of owners or operators to the types of materials, engineering and financing involved.

A key vector for energy transitions thus far has been via technologies that have relatively small unit sizes and are capable of being massproduced, such as solar panels, EV batteries and heat pumps. Mass diffusion and deployment of these technologies is essential to the design of the SDS.

However, cost-effective transitions also involve a range of larger unitsize technologies that require associated infrastructure and generally involve a higher degree of investment risk. CCUS, hydrogen and advanced bio-refineries are in this category because of their costs and complexity. Offshore wind projects also tend towards inclusion in this group (although deployment is already bringing down costs and investment risks) because of their size and the specialised expertise that is required to implement them.

These types of technologies require more capital to be put at risk in an early stage of the innovation chain, and they often face regulatory uncertainties. If these technologies are to thrive, governments around the world will have to take on a significant proportion of the risks of early commercial projects, sometimes for well over a decade, and provide strong signals that they will be supported in the future.

From the industry side, some of these types of technologies are also a good match for the oil and gas industry from an R&D, technical and project management perspective, and also because they require players with strong balance sheets to get projects moving.

For the moment, even though there is evidence of diversified spending (as seen in Section I), the oil and gas companies do not account for a significant share of overall investment in any major clean energy investment category, with the exception of CCUS, where overall spending is still low.

The positioning of the oil and gas industry matters much less for the outlook for solar PV and wind, but it could make or break the outlook for some of these more capital-intensive technologies. And if low-carbon fuels are not available at scale, then – however difficult it is in practice

– it will be natural for policy makers and other stakeholders to seek to solve every transition problem with low-carbon electricity. The latter is an area where, with the exception of offshore wind and geothermal, there is little overlap with today’s industry strengths.