Why the Energy Transition Outlook is needed more than ever
At a time when we are trying to recover from the ongoing pandemic as individuals and as communities, we cannot afford to make costly mistakes. That is why I believe that the 2020 edition of our Outlook is needed now more than ever: to shine a light on a transition that represents the greatest source of risk, and opportunity, in our business environment.
For most of the current energy system we forecast a rapid energy transition between now and 2050 – effectively, within a generation. By mid-century we expect to see an energy mix split roughly equally between fossil and non-fossil sources, taking into account expected developments in policies, technologies and associated costs.
Our predictions are rooted in real-world experience with energy customers across the world spanning the full energy mix. Nevertheless, some of our readers may find our conclusions startling.
There is a massive, ongoing electrification of the global energy system; where electricity is less than 20% of the energy mix today, it will more than double its share by 2050. During that period, solar PV will grow 25-fold and wind 10-fold, and in roughly equal shares will together be responsible for over 60% of the electricity generated by 2050. The plunging costs and technological advances in renewables are remarkable, and nowhere more so than in fixed and floating offshore wind. Electricity powered by renewables is the main driver of accelerating efficiency gains in our global energy that will outpace both population and GDP growth, such that the world will reach peak primary energy supply in just over a decade from now.
The COVID-19 pandemic continues to exact a tragic toll on lives and livelihoods and will greatly impact global energy use in the near term. Energy demand will fall 8% this year, and with a slow recovery, our whole energy demand forecast is rebased downwards by 8% relative to our previous forecast through to 2050. The pandemic has also brought forward peak emissions and will lead to an earlier plateauing of oil use. But that is not doing much, unfortunately, to advance the pace of decarbonization. Solutions exist to meet the Paris Agreement, including hydrogen, CCS and further energy-efficiency improvements, but these need a significant policy push to scale.
The world will need to achieve the same percentage of emissions reduction seen in 2020 every year through to 2050 to succeed in reaching the ambitions of the Paris Agreement. So, we urgently need to find more sustainable and lasting ways to reduce emissions. Some subsectors are well underway, like wind, solar PV and EVs; but we must also urgently tackle those areas, like heavy industry and long-distance transport, where emissions are hard to abate.
Tough business and policy choices lie ahead, but also plentiful opportunities for those who master the wave of the energy transition. As ever, I welcome your feedback on our Outlook, and encourage you to access our forecast data which we make available on our open industry platform, Veracity.
- Remi Eriksen
Group President and CEO, DNV