Article
Article
Why failing to accurately track emissions is the biggest threat to decarbonisation
Author
Candice Wilson
Partner - Strategy and Transformation
The intersection between digital and decarbonisation is presenting opportunities for achieving the world’s ambitious carbon reduction goals - like the UK’s target of an almost 80% cut in emissions by 2035.
The deployment of digital technologies and the creation of integrated digital ecosystems in operational assets can significantly increase efficiency and accelerate the transition to low-carbon energy systems. For instance, leveraging artificial intelligence to optimise energy consumption or employing smart grids to integrate renewable sources can reduce global emissions by up to 20% in hard-to-abate sectors. Moreover, the strategic use of digital tools can assist in achieving Scope 3 emissions reduction, a crucial but incredibly challenging step for companies committed to net-zero targets. While advanced analytics and smart grids can optimise energy consumption and reduce emissions, digital advisory services provide companies - at the earliest stage - the strategic guidance to map and prioritise initiatives that address the complexities of decarbonisation. As we move towards a more sustainable future, we need digital strategies that can be implemented effectively to ensure long-term impact and return.
The path to commercial viability for new energy technologies
While there is no shortage of new operational and digital technologies emerging in the energy sector, commercial viability remains a significant hurdle. This is particularly true for hydrogen production, which has garnered considerable interest due to its potential as a clean energy source.
The challenge lies in making hydrogen production safe and competitive in cost. The integration of hydrogen into our energy systems also hinges on the development of infrastructure and the ability to scale production. The path forward lies in embracing innovation, fostering collaboration across sectors, and developing robust frameworks that assess both technical and commercial maturity. By doing so, we can unlock sustainable energy production and pave the way for a greener future. One of the primary challenges that companies face is the high initial capital investment required to develop and deploy new technologies. Coupled with long payback periods, this can deter investors who are wary of the risks associated with unproven solutions. Additionally, regulatory uncertainty can stifle innovation, as companies hesitate to commit resources without clear policy direction.
At Wood, we integrate systems to enable informed decision-making and optimisation, implement the right solutions and create a sustainable digital ecosystem to drive efficient, safe and profitable assets. We have generated $500 million in value for an energy client through a digital strategy and implementation roadmap. we have also identified 16 opportunities for a new chemical processing plant, potentially resulting in a 690 ktCO2e emissions reduction, a $270 million CAPEX decrease, and a $110 million production revenue increase annually.
How can we fund the transition?
Transitioning to low-carbon operations often requires significant investment in new technologies and processes, which may not yield immediate financial returns. This is where incentives become crucial. They bridge the gap between current practices and the ideal, sustainable practices of the future. By providing financial support or tax benefits, incentives lower the risk and increase the attractiveness of investing in green technologies.
In the quest for a greener future, the US government's incentives for decarbonisation are a beacon of progress. The announcement earlier this year of $4 billion in tax credits for clean energy projects underlines a strong commitment to reducing greenhouse gas emissions and fostering sustainable growth. An additional $6 billion is allocated to 33 projects across 20 states. The Department of Energy (DOE) is also funding programs to advance carbon capture demonstration projects and expand regional pipeline networks for permanent geologic storage or usage.
While these incentives capture attention, it is the sum of smaller, less-publicised incentives that can truly tip the scales for businesses. By stacking these incentives, companies can unlock significant cost savings, making sustainability projects not just environmentally sound but also financially savvy. For example, our advisory services have helped clean energy clients maximise the effectiveness of their capital investment by meeting requirements for clean energy, carbon reduction, and innovation incentives.
Make it happen, make it now
The future of the energy sector is digitally driven and enabled, and the time to embrace it is now! Digital solutions will be key to tackling the energy trilemma: accelerating the advancement needed in security, equity, and sustainability. Wood’s advisory services provide critical insights into market trends, regulatory changes, and emerging technologies. We create a digital strategy to tackle decarbonisation challenges, reduce emissions, and boost profitability.
