Electrification will be the lynchpin of tomorrow’s energy economy

By Frank Balas, Investment Director, Emerald

The ins and outs of the energy transition can largely be summed up in a single word: electrification. Nothing that climate hawks advocate for can be accomplished without it. Few of the methods of decarbonizing the global economy run through any other pathway—for comprehensive climate action, electrification is the only way to go.

The way electrification will unfold over the next few decades, however, is hardly preordained. As world-renowned Danish physicist Neils Bohr once said, “prediction is very difficult, especially if it’s about the future.”

This uncertainty pushes us to think systematically about electrification in order to identify the most promising technologies and innovations to pave the road ahead. Specifically, we must answer three key questions: 

  • Why electrify?
  • What to electrify?
  • How to electrify?


Why: Both a climate and an efficiency imperative

Start with the why. Greenhouse gas-producing fossil fuels currently represent 75% of primary energy consumed in the US and EU. This encompasses everything from fueling cars to heating industrial operations. Replacing the molecules burned to power such processes with zero-carbon alternatives will require procuring the energy instead from inputs that generate electricity without fossil combustion—largely wind and solar, but also nuclear and hydropower. In a net-zero world, where most primary energy springs from non-emitting sources, using that electricity to directly perform useful work is almost always the best way to get the most “bang for the buck” from a unit of energy.

Compare the amount of heat generated from a solar panel hooked up to a heat pump versus a furnace powered by electricity generated by coal. The solar panel-heat pump combo provides nine times more heat per unit of primary energy than the coal-electrical furnace solution. This example illustrates why direct electrification of as much of the global economy as possible will boost overall efficiency of the energy system—all while slashing greenhouse gas emissions.

What: Vehicles, heat, hydrogen

The parts of the economy that are relatively easy to electrify are already moving in this direction. Road transport is perhaps the largest prize in sight: it represents over a quarter of primary energy demand in the US (see chart) and uses its main source of fuel—petroleum—fairly inefficiently. The rapid spread of electric vehicles (EVs) will drive a surge in demand for power from non-emitting sources.

Industrial heat—of the low- and medium-temperature variety, at least—is also one of the low-hanging fruits of electrification. Comprising 9% of primary energy in the US and EU, it largely powers the chemicals sector and is an area where electrification could displace the fossil inputs like natural gas that currently drive the industry. There is a big opportunity now for startups that are developing higher-temperature heat pumps to address the massive industrial steam market.

Plenty of sectors that are not easily electrified—petrochemicals and fertilizer top among them—are currently powered by hydrogen produced by steam methane reforming, a highly polluting process. Other hard-to-abate sectors such as aviation, marine, steel production and seasonal energy storage represent opportunities for indirect electrification through the hydrogen pathway. In either case, the hydrogen must be generated via electrolysis from non-polluting inputs like wind and solar in order to support decarbonization.

How: Simple and not-so-simple

The answer to the third question—the “how”—is deceptively easy: expand renewable energy as quickly as possible. A number of government policies—alongside increasingly favorable market dynamics—are helping to do this.

Still, electrification cannot succeed without several changes to the energy system. The most important is storage: the world must figure out how to save surplus power generated when the sun is shining and the wind is blowing. Two options show promise: EV batteries and hydrogen. With the former, a personal car can plug into a socket and provide power to the grid or an individual building, providing many times the storage capacity of stationary batteries at a fraction of the cost. With hydrogen, energy can potentially remain ready to deploy for weeks to years, smoothing over seasonal variations in renewables generation.

Emerald’s focus on innovation

All the elements of electrification discussed above are ripe for innovations that can help increase efficiency, unclog bottlenecks and otherwise supercharge the global energy transition. Emerald is laser-focused on investing in startups that will move the needle on the most important aspect of our collective fight against climate change.