Gas will become the single biggest source of energy by 2050 even as rapid decarbonisation gives rise to renewables – DNV GL said in its inaugural Energy Transition Outlook.
“The world is approaching a watershed moment as energy demand is set to plateau from 2030, driven by greater efficiency with the wider application of electricity,” DNV said in a report that charts the world’s energy future.
“As a company, we are highly exposed to the radical changes that will come to every part of the energy value chain, and it is critical for our customers and ourselves that we understand the nature and pace of these changes,” said Remi Eriksen, group president and CEO of DNV GL.
“The profound change set out in our report has significant implications for both established and new energy companies. Ultimately, it will be a willingness to innovate and a capability to move at speed that will determine who is able to remain competitive in this dramatically altered energy landscape.”
DNV GL, a quality assurance and risk management company providing independent advisory services to the oil & gas industry, said that historically, energy demand and CO2 emissions have moved broadly in line with GDP and population growth, but that relationship will unravel.
Electrification, particularly with the uptake of renewables, will change the way in which energy is supplied and consumed. While the global economy and world population are set to grow modestly, energy demand will flatten out and CO2 emissions will drop sharply, according to the report.
DNV GL forecasts that renewables and fossil fuels will have an almost equal share of the energy mix by 2050. Wind power and solar photovoltaics (PV) will drive the continued expansion of renewable energy, whilst gas is on course to surpass oil in 2034 as the single biggest energy source. Oil is losing ground as a source of heat and power, and is set to flatten from 2020 through to 2028 and fall significantly from that point as the penetration of electric vehicles gains momentum. Coal use has already peaked.
The global energy transition will occur without a significant increase in overall annual energy expenditure and on a straight comparison, the world’s energy will cost less than 3 per cent of global GDP compared to the current level of 5 per cent, the report said.
Although the oil and gas industry has responded impressively to the present lower price environment, renewables will improve cost performance at a much faster rate, benefitting from the ‘learning curve’ effect. Electric vehicles will achieve cost parity with internal combustion vehicles in 2022 and, by 2033, half of new light vehicle sales globally will be electric.
Despite greater efficiency and reduced reliance on fossil fuels, the Energy Transition Outlook indicates that the planet is set to warm by 2.5˚C, failing to achieve the 2015 Paris Agreement target.
“Even with energy demand flattening and emissions halving, our model still points to a significant overshoot of the 2°C carbon budget. This should be a wake-up call to governments and decision-makers within the energy industry. The industry has taken bold steps before, but now needs to take even bigger strides,” said Eriksen.