All signs point towards electricity

Global energy consumption is projected to increase by one-third by 2040. Consumption growth in the emerging countries will outweigh improvements in efficiency. Electricity usage will surge in particular, and if the trajectory remains the same as in the past, only 21 percent of the electricity will be produced from renewable sources. This in turn means that CO₂ emissions would continue to rise until 2040.

But as BP’s chief economist, Spencer Dale, pointed out at the presentation of the BP Energy Outlook 2018, anyone who tries to predict the future is bound to be wrong.

Energy demand and prosperity are mainly increasing in the emerging economies

In the study, the authors define scenarios with various economic and political developments, but with common basic assumptions: One of these is that the world’s population of 7.5 billion in 2016 will increase to 9.2 billion in 2040. In terms of global GDP growth, they base their calculations on an annual rate of around 3.25 percent, which is roughly on a par with the level seen over the last 25 years.

Over the forecast period, global GDP more than doubles, leading to a significant rise in prosperity – especially in the fast-growing emerging economies.

“The most diversified energy mix the world has ever seen”

The scenarios differ in terms of the speed of the energy transition and its specific form in certain sectors such as industry, mobility and energy generation. The authors’ main focus is on the ‘evolving transition’ scenario (ET for short).

In the ET scenario, Dale and his co-authors assume that global legislation, technological innovation and the behaviour of society will continue to develop as they have in the recent past. Coal would be the only primary energy source which does not experience higher demand in this case. Demand for oil, on the other hand, would only stagnate towards the end of the forecast horizon, while much higher demand would be registered for natural gas.

In 2040, these three energy sources – oil, natural gas and coal – and all of the non-fossil fuel sources together, i.e. nuclear, hydro, solar, wind, geothermal and biomass, would each account for a quarter of global energy consumption. “This is by far the most diversified energy mix that the world has ever seen,” said BP’s chief economist Spencer Dale.

The world is increasingly electric

Compared to the input side of primary energy, the output side of energy consumption on the global energy market will change even faster: In the conservative ET scenario, electricity consumption will increase by 69 percent by 2040, expanding at twice the rate of overall energy usage.

According to the report, electricity will account for almost all of the energy growth in the buildings sector. Air conditioning, smart homes and the increasing preponderance of electric appliances in the emerging economies will be the main drivers.

Electric vehicles will also gain ground in the future, but will not replace conventional drive systems over the forecast horizon. In the ET scenario, the total number of automobiles will double to around two billion by 2040. However, only around 16 percent of these will be electric vehicles, with a roughly even split between all-electric and hybrid drives. At 85 percent, oil will remain the most important fuel in passenger and freight transport.

Nevertheless, power generation from all energy sources, except for oil, will increase in absolute terms, but to widely varying degrees: By 2040, renewables will replace coal as the key energy source for power generation, with their share (including hydroelectric) increasing from 23 percent in 2016 to 38 percent in 2040.

Global policies for global climate targets

Despite the rapid growth in renewables, the share of fossil fuels in the primary energy mix will only fall from 85 percent to 75 percent in the ET scenario. This will not nearly be enough to hit the Paris climate targets. Instead of declining, by 2040 CO₂ emissions may actually increase by another ten percent compared to 2016.

Accordingly, one aspect that BP discusses is that additional measures would have to be taken in order to meet the climate goals. In particular, these would have to include global carbon pricing, as this would provide an incentive for all participants to contribute to reducing emissions, explained Bob Dudley, CEO of the BP Group, who said that “consumers would thus be pushed to use energy more efficiently and producers could concentrate on bringing lower-emissions energy sources to the market”.

In an additional scenario, called ‘Even Faster Transition’, BP explored what would have to be done to hit the agreed two-degree target. Measures would include a global ban on internal combustion engines. Nevertheless, in order to lower CO₂ emissions by 40 percent in 2040 compared to 2016, the biggest adjustments would have to happen in the power generation sector. This sector would have to decarbonise almost completely by 2040, in part through the accelerated development of technologies to capture carbon dioxide from power plant flue gases and the subsequent use or sequestration of this carbon dioxide.