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The coming energy system

In the Green Bond Report, November 2023 edition, our Head of Strategy SEB Research, Thomas Thygesen describes the new energy infrastructure that is needed for the future.

Thomas Thygesen, Head of Strategy SEB Research
Thomas Thygesen, Head of Strategy SEB Research

To understand the challenges involved in building a new energy infrastructure, we think it makes sense to start by looking at what it is we are trying to build.

The new energy system has three main components:

  • Energy supply
  • Energy transformation and distribution
  • Energy use

Energy supply

The supply stage, encompassing electricity generation via wind, solar, and nuclear, represents well established pathways of the green transition. Wind and solar contribute to electrolysis, harnessing renewable energy to produce hydrogen and oxygen. Simultaneously, nuclear, wind, and solar may feed directly into the electricity grid or into a utility scale battery, enhancing overall grid stability.

Energy transformation and distribution

The transformation taking place to effectively supply and distribute electricity adds layers of complexity. The intricacies of hydrogen production and the challenges of integrating renewable sources into the grid meet. The varied applications of hydrogen, along with the bidirectional energy flow of EVs, create a nuanced landscape that will require strategic balancing of the grid. Synthetic Fuel – CO2 + Hydrogen. Ultimately, we need to upgrade to smarter grids that allow for two-way traffic as in vehicle-to-grid (V2G) charging.

Energy use

Lastly, we have energy use, representing the real-world applications of generated energy, whether it be powering EVs to supporting industrial processes. The end use stage in the energy transition faces significant challenges, particularly in sectors like aviation, shipping, and steel production. Hydrogen powered aircrafts are still in the early stages of development, and green steel faces high costs and demanding infrastructure requirements. The challenges of end-use applications illustrate the need to shift our focus from energy production to energy usage costs in the overall energy transition. Considering broader economic implications apart from high initial production costs will encourage a more holistic perspective.

Key obstacles

As we transition towards this future energy landscape, numerous challenges must be addressed. First is the need for substantial infrastructure development to support the production, distribution, and storage of hydrogen, green ammonia, and synthetic fuels. This includes an extensive network of hydrogen production, pipelines, and storage facilities. There is also a need to further establish extensive charging infrastructure for electric vehicles, to meet the demands of both residential and commercial transportation.

The expanding role of solar energy as a major global industry is set to bring about substantial transformations in electricity markets. Considerable room for growth exists, and the need to boost the deployment of solar PV technology implies a significant increase in the generation capacity, necessitating an expansion and strengthening of grids.

Additionally, regulatory frameworks must evolve to accommodate the complexities of this interconnected system. Standardization of hydrogen production and transportation, grid integration protocols, and sustainable practices in fuel production are essential for fostering a cohesive and efficient energy ecosystem. Climate & Sustainable Finance Research 22 November 2023.

Contact SEB's Energy Team

Our Energy Team, including Energy Coverage and Project & Infrastructure Finance, consists of experienced energy bankers who understand the full scope of the energy transition and its challenges. We are organised by products and geographies to best meet the needs of our Large Corporate and Financial Institution clients. 

Reach out to our Energy Team via our local home market pages