Atmospheric concentrations of CO2 continue to increase and this year hit the 400 ppm mark. Close to one-third of anthropogenic GHG emissions come from the power sector and as a result, the power sector is on the leading edge of climate initiatives around the world. But, power system transitions are likely to take longer than most people expect. As Dan Yergin points out in his Energy Transitions (originally appearing in The Wall Street Journal), "History demonstrates that these transitions are complex, as new energy sources overtake and overlay older ones and are a long time in the making."

California is trying to accelerate the transition of its electricity sector. In 2002, California set a renewable generation share target of 20% for 2010 but fell short of meeting the goal. California then set a new goal of 33% for 2020 and on 7 October 2015, Governor Jerry Brown redoubled the effort by signing into law Senate Bill 350 which includes a provision to increase the state's renewable portfolio standard (RPS) to 50% by 2030. Most California utilities are well positioned to reach the 33% target by 2020, thanks to the addition of 8 gigawatts (GW) of utility-scale solar PV capacity over the past 5 years, with another 3 GW to come in 2016. However, IHS research indicates that reaching 50% will be challenging, in part because most of the rapid growth of net-metered distributed solar PV does not count towards the 50% target. In addition, we expect California will confront operational challenges to keep demand and supply balanced in real time in a power system integrating so much renewable generation.

Across the Pacific, China appears to be betting that the future energy transition will involve new nuclear power supply. The country resumed its push for new nuclear power development following a four year pause since the 2011 Fukushima nuclear accident. China revamped its nuclear roadmap, now focusing on Generation III designs that offer improved safety. IHS sees good prospects for China to expand nuclear substantially and surpass all countries except the US in total nuclear capacity within a decade. China's nuclear ambitions go beyond domestic expansion. China's two main nuclear companies created a joint Generation III nuclear power plant design--Hualong One-that is slated for export markets.

India's transition involves modernization of its economy including its fuel production and its power generation. About 70% of India's power generation is coal-based. Yet coal-fired power plants sometimes lie idle due to lack of fuel. India faces the challenge of stagnant coal production, despite abundant coal deposits, that has led to reliance on more expensive imports. The government has set high coal production targets for state-owned and private mining companies to reduce reliance on imports. IHS research indicates, however, that structural and regulatory changes will take time to implement, and that many obstacles remain, making the coal production targets of 1,500 MMt by 2020 difficult to reach.

A prolonged drought (since 2011) is driving a transition in Brazil's power system to diversify its largely hydro-based power system. Hurdles to coal-fired generation and intermittency of renewables make gas-fired generation attractive to back up hydro in Brazil. But neither domestic gas production nor pipeline imports from Bolivia offer the supply flexibility needed for the variation required in a hydro-dominated power system. IHS research points to the possibility of a new wave of investment in LNG-to-wire. But investors need to manage the risks associated with midstream infrastructure and procurement of LNG cargos to solidify the commercial viability of their projects.

Dr. Lawrence Makovich
Vice President and Senior Advisor, IHS Energy

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.