Energy Transition Outlook 2020
DNV GL has launched its fourth Energy Transition Outlook. The report provides an independent and model-based forecast to the world´s most likely energy future through to 2050. Understanding this energy transition is critical for businesses, investors, and regulators.
According to this year’s edition, energy-related CO2 emissions peaked in 2019, brought forward by five years due to Covid-19. The pandemic has also reduced the global energy demand by 8% this year, and although energy demand will pick up again from 2021, it is expected that the annual global energy demand will be between 6% and 8% lower than the pre-pandemic forecast. This is related to the behavioral shifts causes by the pandemic, like remote working and less commuting.
However, even though the energy demand is decreasing and the amount of renewable energy sources are rising, we are not progressing anywhere near fast enough to deliver on the COP 21 Paris Agreement, which seeks to keep global warming to well below 2°C and to limit the increase to 1.5°C. To be able to reach the 1,5 °C goal , we need to repeat this year's 8% emission reduction every year through to 2050, and this is not economically sustainable.
Solar and wind power will dominate
Solar PV and wind will be the leading sources of the world’s electricity, generating 24% of the world's electricity in 2030, and 62% in 2050. Solar PV is expected to grow 25-fold and wind energy 10-fold.
Fixed and floating offshore wind are among the fastest growing renewable technologies, and during this decade floating wind will progress to full-scale demonstration projects and on to commercial-scale deployments. DNV GL predicts that floating offshore wind projects will have 255 GW of installed capacity by 2050, 3,000 times the size of Equinor's Hywind Tampen foating wind power project. The levelized costs for fixed and floating offshore wind will decrease by 56% and 69% respectively. Close to 500 of these are expected in Europe.
Natural gas will take over as the largest energy source this decade
Natural gas will surpass crude oil as the largest energy source in 2026, and will then peak in 2035 before tapering off gently to 2050. Oil demand likely peaked in 2019, and is not expected to increase further. The transport sector accounted for two thirds of oil demand in 2018, and in 2050 it is expected that the oil demand in the road-transport sector will have reduced by 56% compared with 2018. In maritime transport, oil demand could drop to only 6% of its current demand.
Both the EU and Germany have recently launched hydrogen strategies, which both prioritize green hydrogen produced from renewable energy. However, DNV GL does not believe that green hydrogen will take the lead, and estimates that blue hydrogen will still account for half of the production in 2050. Blue hydrogen will dominate in the next decade reaching 2.3 EJ/yr in 2035, three times higher than hydrogen from electrolysis. In 2050, only 13% of natural gas will be decarbonized.
For a successful energy transition, the report suggest several policy measures, including:
- Support technology
- Restrict the use of inefficient or polluting products/ technologies
- Provide economic signals such as price incentives to reduce carbon-intensive behaviours.
Download the full report here.
Image © DNV GL