$50 trillion in new investment needed to match global energy demand in next 20 years: Rio Tinto director

Global energy markets will need around $50 trillion in new investment to fund expected growth in energy demand over the next two decades, according to one of Australia’s pre-eminent business and industry experts.

Such investment would be needed to fund an energy market expected to grow by 40% through until 2035 – with that higher consumption continuing to rely in part on baseload fossil fuels.

The forward energy estimates also come with a warning that the infrastructure underpinning electricity grids will have to fundamentally change.

Central planks to this “fundamental shift” will be developing new renewable energy storage technologies and embracing cutting-edge technologies “currently coming down the pipelines” – much of the latter being led by Australia.

The comments were made last night (Friday, 28 October) in a speech in Adelaide by Rio Tinto non-Executive Director and former CSIRO Chief Executive, Dr Megan Clark AC, delivering the Australasian Institute of Mining and Metallurgy’s (AusIMM) 42nd Essington Lewis Memorial Lecture.

$50 trillion in new investment needed to match global energy demand in next 20 years: Rio Tinto director

Dr. Megan Clark was the first female Chief Executive of the CSIRO from 2009 until 2014. That year, she was appointed a Companion of the Order of Australia and joined Rio Tinto as a Non-Executive Director.

In a speech titled “Science and the mining and resources industry – partners and helpers in building an exciting, equal and sustainable world,” Dr Clark said global energy sectors were poised for a revolution driven by the strong strategic forces of supply/demand, technological development, social expectations and geopolitics.

“The current global demand picture for energy is strong,” Dr Clark said.

“Primary energy demand accounts for 7% of global GDP. Emerging markets are expected to show growth in demand for coal and for oil, the latter being driven by rising incomes, urbanisation and more cars,” she said.

“The world energy demand till 2035 is set to grow 40% and needs around $50 trillion in energy investments to meet this demand. How this investment is made will write the script of our energy future.

“Technology has also rapidly progressed where genetics, robots and artificial intelligence are all happening now in the mining industry – and Australia is leading the way in many areas.

“Renewables now account for around 50% of all new power generation, and last year saw a record of 121GW of combined solar and wind power capacity installed. Wind and solar are now competitive without subsidies.”

Dr Clark said that against this backdrop, the geopolitics of oil remained complex, as Saudi Arabia and Iran pumped out record production, and the US became more sustainable through the use of oil sands and oil shale.

“There is considerable debate on whether we will see an uptick in oil prices or a long run of low prices and what I am watching is whether the costs of oil production continue to fall, particularly the impact of new drilling technology on costs,” she said.

“One of the key signposts to watch will be whether electric vehicles remain niche or whether they will have real impact and in this regard, all eyes will be on electric vehicle penetration in China. Its new five year plan targets a 40-45% reduction in carbon-based energy by 2020 – underpinned by aggressive new electric vehicle targets.”

Dr Clark said that in this mix of energy, transport matters. For example, in the US 28% of all energy used there is “to move people and things”.

While new electric car and battery storage are dominating much of the current energy debate, Dr Clark warned that investment is required to ensure stability of Australia’s current electricity systems.

“Electricity systems haven’t changed much since Edison’s first power station in 1882 and Australia’s system continues to largely use fossil fuels, generating power centrally when the customer needs it,” Dr Clark said.

“It’s a system comparable to sitting around a radio listening to the broadcast, versus the internet. The future will see a very different electricity system,” she said.

“It is a complex set of forces. The outcome is energy resources and electricity markets will be pulled and pushed by these opposing forces for the next 15-25 years before a new future arises.

“One of those forces is climate change and its impact…..and this at a time when the world has already experienced one degree of global warming and every decade, we are breaking the climate records of the past.

“In June this year, we passed 400ppm CO2 in the atmosphere at Cape Grim (the most north-western point of Tasmania), much higher than any level seen there in the past 400,000 years.”

Dr Clark said the decision by the UN Conference on climate change in Paris in December last year, setting a 2.0°C earth warming cut-off target, was welcome but would be a challenge to deliver.

“It will need the proportion of the world’s electric vehicles to increase from virtually zero per cent of passenger cars now to a quarter of passenger cars by 2030 – a target requiring significant change in consumer behaviour and buying patterns,” she said.

“Battery storage costs improved 20% last year – but we still need a major breakthrough in large-scale storage."

Dr Clark told AusIMM members and guests that the attention received by the release of the Tesla Model S battery – equivalent to 7000 lithium-ion computer batteries put together – was indicative of pent-up demand for newly developed functional large-scale batteries for renewable energy storage.

“But we are decades behind on batteries for renewable energy storage as it takes at least a decade to prove a battery is safe before it can be commercialised,” Dr Clark said.

She noted Samsung’s current anguish with its Galaxy 7 telephone batteries as an example of the lag time to deliver on new renewable battery successes.

Dr Clark said it was how the resources and energy industries worked in the future with their local and national communities that would be pivotal for not their “right to operate” nor their “licence to operate” but their “privilege to operate”.

“Australia’s mining industry has to ask itself what it needs to do to be partners and helpers in building a more equal and sustainable world. Among that will be the need for more collaboration the big problems like climate, water and supply chains that require global collaboration,” Dr Clark said.

“In places like Australia and the Gobi Desert in Mongolia, we know water is precious, which is why the industry supports the work by the Bureau of Meteorology and the CSIRO who worked together to relook at the structure of the Great Artesian Basin for the first time in 30 years.

“These basin-scale projects provide an important context for our miners for local water use.

“The mining industry must also continue to tackle water recycling with Rio’s Oyo Tolgoi copper-gold mine in Mongolia a good example, reaching a benchmark of 84% recycled water.”