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Dashboard of Energy Transition 2020 Edition Group Strategy Department For its 10th anniversary, A World of Energy is evolving and focuses on the energy transition Published in September 2020 Foreword his report on the state of energy transition in 2020 forms part of ENGIE’s strategy, The two fundamental components of lower GHG emissions are reduced energy consumption reaffirmed despite the health and economic crisis, to align all its operations on a trajec- and energy decarbonation. They can be achieved through a series of levers. tory for carbon neutrality during the first half of the century. T Energy efficiency has considerable potential and is capable of reducing global energy The climate challenges dictating this strategy extend far beyond the company’s scope and are consumption by over a third. Renewable energy, whether electricity or gas (biomethane, green a matter for the whole of humanity. In this report we offer a detailed update on energy tran- hydrogen), could result in virtually complete decarbonation in power generation and will sition and a description of what still needs to be done to meet environmental imperatives. tackle specific pockets of resistance, such as transport and intensive industry, while favouring short supply chains. We will also need to adopt other measures on a large scale, such as While environmental indicators continue to deteriorate at an alarming rate, the inertia that energy sobriety, undoubtedly the most efficient lever, but involving an indispensable change characterises the world’s energy system is making efforts to reverse the increase in CO 2 in mentalities and practices. The development of green finance should lead to a prioritisation emissions a real struggle. We acknowledge that important steps have been taken, especially of investments to accelerate the energy transition. on renewable energy. The ‘accidental’ pandemic-related drop in emissions in 2020 is likely to be temporary and may not mean any underlying change in investment and individual beha- Choices on priorities, technology and the pace of change will be subject to different approaches 3 viour. Green recovery plans are large enough to help transform the health crisis into an depending on geography, but long-term energy scenarios show that global ecosystem resi- opportunity, but the period we are going through highlights the magnitude of the effort lience can only be achieved by combining them. required to contain the rise in global temperatures to below 2°C. These observations drawn from the first edition of the Energy Transition Dashboard* show Given this situation, the energy sector – producers, suppliers and consumers alike – bears a that while there are several ways of achieving a successful transition, we all have to accelerate heavy burden of responsibility: 75% of greenhouse gases come from energy combustion. But their implementation. by the same token, the sector could provide a large proportion of the solutions. I hope this report contributes to a better understanding of the scale of our energy challenges Thanks to the commitment of the scientific community and an increasing number of socioe- and proves useful to you and your work. conomic players, including ENGIE, the steps that need to be taken are now clearly identified. We dedicate a large part of this document to them, describing their potential and current stage of development. Our analysis has benefited from research by the renowned centres of exper- tise that responded to our invitation to comment on energy transition. Anne-Laure de Chammard Director of Group Strategy, ENGIE *The Energy Transition Dashboard replaces “A World of Energy”. Our group is a ENGIE in brief global reference in low-carbon energy and ser- vices. Our purpose (“raison d’être”) is to act to accelerate the transition towards a carbon-neutral world, through reduced energy consumption and more environmentally-friendly solutions, reconciling economic performance with 171,000 9 GW employees throughout the world a positive impact on people and the of additional renewable capacity between 2019 and 2021 planet. We rely on our key businesses (gas, renewable energy, services) to offer competitive solutions to our cus- tomers. With our 171,000 employees, 4 in 2019 revenues drivers of growth: our customers, partners and stakehol- €60 billion 2 customer solutions (€21 billion in 2019 revenues) ders, we are a community of Imaginative Builders, committed every day to more and renewables (€3 billion in 2019 revenues) harmonious progress. Turnover in 2019: 60.1 billion euros. The €12 billion of investments planned Group is listed on the Paris and Brussels between now and 2021, including about €5 billion stock exchanges (ENGI) and is repre- in customer solutions, nearly €2.5 billion in renewable An investment fund of sented in the main financial indices €34 million to support energy access (ENGIE Rassembleurs d’Energies (CAC 40, DJ Euro Stoxx 50, Euronext 100, energies and close to €3 billion in gas and electricity fund) for beneficiaries. FTSE Eurotop 100, MSCI Europe) and networks 4 million non-financial indices (DJSI World, DJSI Europe and Euronext Vigeo Eiris - World 120, Eurozone 120, Europe 120, France IN 2019, WE INVEST FOR THE FUTURE: WE COMMIT TO GREEN FINANCING: 20, CAC 40 Governance). €189 million in research and development €182 million in innovative start-ups €3.4 billion green bonds emitted in 2019 ELECTRICITY & ELECTRICAL RENEWABLES NATURAL GAS & RENEWABLE GASES 96.8 GW of installed power-production capacity, of which Long-standing leader in gas distribution in France 5 26.9 GW in renewable energy (28% of the portfolio) Among the top gas sellers and importers in Europe 417 TWh of electricity generated in 2019 No. 1 gas infrastructure operator in Europe with a portfolio No. 2 electricity producer and supplier in France including transmission networks, distribution networks, storage, and LNG terminals No. 1 in solar and wind energy in France €800 million pledged within the next five years to develop purveyor of installed EV charging stations No. 2 renewable gases No. 1 demonstrator of green hydrogen injection in the French gas distribution network Contents 7 77 113 Post-Covid context Natural gas Appendix & Renewable gases Conversions .............. p.114 25 Glossary ................. p.116 6 95 CO2 & Climate Data sources Oil & Methodology ........... p.120 39 Geographical scope Decarbonization 103 of the sources ............ p.121 Coal Contacts ................. p.124 57 Electricity & Electrical renewables Post-Covid energy markets 2020 outlook and 2019 review ECONOMY By locking down 4 billion people, the Covid-19 pandemic plunged World economy ........................ 8 7 the world economy into its worst crisis since World War II Energy balance ......................... 13 ENERGY Energy investments ..................... 19 The energy sector has been particularly affected by the health Post-Covid green recovery plans .......... 22 crisis, with a much more severe impact on fossil fuels than on renewables POST-COVID CONTEXT POST-COVID CONTEXT World economy By locking down 4 billion people, the Covid-19 pandemic plunged the world economy into its worst crisis since World War II World GDP could well shrink by more than 3% in 2020, and perhaps by as much as This crisis may leave long-term scars on the world economy in the form of additional 8%, depending on the duration of restrictions, success in easing them, the occurrence of a protectionism, relocation, value chain restructuring, accelerating digitalisation, teleworking second wave of infections and national support measures. In individual countries, the depth and e-business development, heightened security and environmental concern and less urba- of recession will also reflect the pre-existing state of the economy (debt, unemployment rate, nisation. World GDP will start increasing again no earlier than the first half of 2021, and not etc.). All countries, emerging and developed alike, are under threat. before 2022 where a second wave to occur. Economists’ projections converge towards a U-shaped, rather than a V-shaped recovery. This means that the decline in activity in 2020 shortfall will not be overcome any time soon. Some The world economy was already showing signs of slowdown in 2019. GDP rose 3%, countries could even suffer an L-shaped recovery. The problem is that unlike during the 2008 compared with 3.6% the year before, reflecting protectionist policies and a trade war between financial crisis, the real economy has been badly damaged. Industrial production (22% of the two largest economic powers, the USA and China. The USA maintained dynamic growth world GDP) is set to contract by 5% in 2020, which will mean structural changes and adjust- at 2.3%, while China and the eurozone disappointed at 6.1% and 1.2%, respectively. ments across industry worldwide. The most affected sectors are transport, tourism, hospita- We recall that the USA started the trade war by introducing tariffs on aluminium and steal lity, oil and gas, real estate and non-essential goods and services. imports in March 2018. It went on to impose additional tariffs on other Chinese goods, and 8 Financial crisis need not follow. Governments and international organisations have introduced by end-2019 Chinese exports to the USA had plummeted 35% (Source: UN). China retaliated unprecedented fiscal, financial and socio-economic measures to keep national economies with tariffs on US exports, mainly of agricultural products. Against this backdrop, international afloat, notably tax reductions or deferrals, unemployment benefits and state guarantees for trade growth slowed from 3.8% in 2018 to 1% in 2019, and particularly affected European bank loans. In the meantime, central banks are focusing on lowering interest rate and purcha- and Asian capital goods. sing assets (quantitative easing). No previous health crisis has had so much impact on national Despite this situation, share prices climbed in 2019 (S&P 500 up 28.5%) and low-revenue economies; this explains why the current shock has much in common with wartime and post- countries reported stable growth rates amid continued investment in infrastructure and signi- war economics.

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