Ready for an oil demand peak in 2023?
Electrification and the rise of renewables are driving the transformation of the energy system, but not fast enough to reach the world 2030 agenda, according to the Energy Transition Outlook 2018. The world’s energy demand will decline from 2035 onwards. The historic change in our energy needs is largely down to rapid electrification and its inherent efficiency.
According to DNV GL Energy Transition Outlook 2018, the decarbonization of the energy mix will be reflected in investment trends with money spent on renewables set to triple by 2050.
Five key findings:
- Electrification and its inherent efficiency will contribute to humanity’s energy demand declining from the mid-2030s onwards
- Global expenditure on energy, as a percentage of GDP, will fall 44% by 2050
- Energy mix is rapidly decarbonizing; coal has peaked, oil will peak in 2023 and natural gas will become largest single source from 2026. Renewables and fossil fuels to equally share supply by mid-century.
- The rapid transition we forecast will not be fast enough to meet the sub-2 ⁰C climate goal.
- A strong combination of several measures is the only way for the world to meet the ambitions of the Paris Agreement.
Since the Industrial Age, economic growth and energy usage have grown hand in hand. That relationship is set to decouple definitively in 2035, when energy demand will start to drop and GDP continues to rise.
Rapid electrification of energy demand and the rise of energy from wind and solar sources will lead to massive growth of the world’s electricity transmission and distribution systems.
The new DNV GL study forecasts continuing rapid electrification, with electricity’s share of the total energy demand expected to more than double to 45% in 2050. This is driven by substantial electrification in the transport, buildings, and manufacturing sectors. For example in the transport sector, the uptake of private electric vehicles (EVs) will continue to escalate rapidly, with 50% of all new cars sold in 2027 in Europe expected to be EVs.
Surge in renewables
The surge in global electricity production will be powered by renewable sources accounting for an estimated 80% of global electricity production in 2050. As the costs for wind and solar continue to fall, those two energy sources are set to meet most of the electricity demand, with solar PV delivering 40% of electricity generation and wind energy 29%.
The rapid electrification will lead to major expansion of electricity transmission and distribution systems both in the length and capacity of transmission lines and total installed power line length and capacity will more than triple by 2050.
High fractions of solar and wind will create a need for increased use of market mechanisms and changes to the electricity market fundamentals in many countries. This requires major regulatory intervention. Market based price signals are crucial to incentivize innovation and develop economically efficient flexibility options.
Despite major expansion of high-capital-cost renewables and electricity networks, energy will become more affordable. The total cost of energy expenditure, as a share of global GDP, is predicted to fall from 5.5% to 3.1%, a drop by 44%. Absolute energy expenditure will still grow by 30% over the forecast period, to USD 6 trillion/yr. We foresees a shift in costs, from operational expenditure, principally fuel, to capital expenditure. From 2030, more capital expenditures will go into electricity grids and wind and solar than into fossil-fuel projects.
Is our Spaceship Earth on the right course?
Despite the positive outlook on the expansion of renewable energy and the electrification of key sectors, the predicted energy transition will not be fast enough to meet the world 2030 agenda.
DNV GL’s assessment in the Future of Spaceship Earth report explores the likelihood to reach the world 2030 agenda.
Five key findings:
- None of the Sustainable Development (SDGs) will be met in all regions of the World
- The world is making progress towards most of the global goals, but the progress is not fair enough
- The transition from fossil fuels to clean energy is not fast enough
- The energy demand will level off
- Lack of climate action is a showstopper to reach many of the 17 SDG’s
Nonetheless, the energy transition provides business sectors with many new opportunities to shape the society of tomorrow and accelerate the transformation to a safe and sustainable future. The current energy transition is far from fast enough and it is clearly time to step up our effort!
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