The global energy system is fundamentally restructuring and becoming more diverse, driven by customer needs and increased competition between fuels, said the latest bp Energy Outlook 2020. The report highlights how global energy markets may evolve over the next thirty years and the key uncertainties that may shape them.

It highlights three scenarios- Rapid, Net zero, and Business-as-usual (BAU)- based on alternative assumptions about policies and societal preferences. These scenarios explore the range of possible outcomes over the next 30 years.

‘Rapid’ assumes policy measures, led by a significant increase in carbon prices, would result in carbon emissions falling by around 70% by 2050 from the 2018 level. It could limit the rise in global temperatures by 2100 to below 2°C above pre-industrial levels.

Net-zero assumes that policy measures under ‘Rapid’ would be reinforced by significant shifts in societal and consumer behavior and preferences. These include embracing circular and sharing economies and switching to low carbon energy sources. It will facilitate reduced carbon emissions by 2050 to over 95%. Net-zero could limit temperature rise to 1.5°C.

Business-as-usual (BAU) assumes that government policies, technologies, and societal preferences continue to evolve in a manner and speed seen in the recent past. In this scenario, carbon emissions from energy use peak in the mid-2020s but did not decline significantly, with emissions in 2050 less than 10% below the 2018 levels.

The report added that the scenarios are not predictions of what is likely to happen or what bp would like to happen. Instead, the scenarios help to illustrate the range of outcomes possible over the next thirty years. However, the uncertainty is substantial, and the scenarios do not provide a comprehensive description of all possible outcomes.

Rapid and Net-zero scenarios suggest a significant increase in carbon prices, reaching $250/ton of CO2 in developed nations and $175/ton in emerging economies by 2050. Meanwhile, in the Business-as-usual scenario, carbon prices get to only $65 and $35/ton on average in developed and emerging economies.

Global Energy Market

The report covered some critical themes playing out in the global energy market. The report states that the three scenarios will see oil demand plummet by 2050- under BAU by 10%, under Rapid by 55%, and Net-zero by a staggering 80%. However, in all three scenarios, the use of oil in transport peaks in the mid- to late-2020s.

These figures suggest that the level of oil demand in both Rapid and Net-zero might not fully recover from the sharp drop caused by COVID-19.

Between 2018 and 2050, net carbon emissions from energy use could decline by 10% in BAU, 72% in Rapid, and 96% in Net-zero.

Notably, coal consumption declines significantly in all three scenarios, particularly in Rapid and Net-zero, in which it falls by well over 80% by 2050. According to bp, the primary fuel to lose ground

would be coal, with the share of coal-fired power generation in global power falling from 38% in 2018 to less than 3% in 2050 in Rapid and Net-zero, and around 20% in BAU.

On average, renewable energy consumption would grow every year by 5.7% in BAU, 7.5% in Rapid, and 8.5% in Net-zero, due to falling costs of production and policies fostering a shift to lower-carbon energy sources.

Renewable energy – including wind, solar, geothermal, and bioenergy but excluding hydroelectricity  – could increase more than tenfold in both Rapid and Net-zero. Renewables’ share in energy would grow from around 5% in 2018 to 60% by 2050 under the Net-zero scenario, 45% in rapid, and 20% in BAU. Wind and solar power would dominate this growth, thanks to the continuing fall in development costs. Over the next 30 years, wind and solar costs could fall by around 30% and 65% in Rapid, respectively, and by 35% and 70% in Net zero.

Here, the report noted that a significant share of wind and solar energy is used to produce green hydrogen in Rapid and Net-zero, with this share increasing to around 20% of the total installed capacity by 2050 in Rapid and to about a third in Net zero.

The report added that the increasing importance of renewable energy comes at the expense of hydrocarbons, whose share of primary energy declines from close to 85% in 2018 to around 40% by 2050 in Rapid and 20% in Net zero.

The report underlined that the fast pace of growth would ease slightly from the late 2030s onwards as the costs of balancing the intermittency associated with adding increasing amounts of wind and solar. In all three scenarios, emerging economies account for the majority of the growth in renewable energy, driven by stronger growth in power generation and by the increasing share of renewables in power, especially at the expense of coal.

Solar and wind capacities across the world would spike significantly over the first half of the Outlook to 550 GW and 350 GW, respectively, compared to the annual average of around 60 GW since 2000.

The report added that the increasing importance of renewable energy comes at the expense of hydrocarbons, whose share of primary energy declines from close to 85% in 2018 to around 40% by 2050 in Rapid and 20% in Net zero.

The report underlined that the fast pace of growth would ease slightly from the late 2030s onwards as the costs of balancing the intermittency associated with adding increasing amounts of wind and solar. In all three scenarios, emerging economies account for the majority of the growth in renewable energy, driven by stronger growth in power generation and by the increasing share of renewables in power, especially at the expense of coal.

Solar and wind capacities across the world would spike significantly over the first half of the Outlook to 550 GW and 350 GW, respectively, compared to the annual average of around 60 GW since 2000.

India

Under all three scenarios, India’s primary energy consumption more-than doubles by 2050. The average growth per year is in the 2.5-3.0% range.

As a result of this strong growth, India accounts for 35% of the increase in global primary energy consumption in 2018-2050 in the BAU scenario. In Rapid and Net-zero, India absorbs 85% and 89% of the global rise in primary energy consumption, respectively.

The share of coal in total primary energy consumed would be largely stable around 2018-levels (56%) over the past 40 years. However, in all the scenarios, coal’s share declines between 5% and 40% by 2050.

In Rapid, Indian coal-fired power generation increases by around a third over the next ten years or so before subsequently declining. “This requires around 50 new coal-fired power stations to be built in the 2020s, with the likelihood that some of these power stations become uneconomical as coal generation subsequently declines. A similar near-term increase in coal generation, albeit less pronounced, is apparent in Net Zero,” the report stated.

Renewable energy growth in the three scenarios is in the range of 9-13% average growth per year. Renewable energy could be the largest source of primary energy in 2050 in Rapid and Net-zero, and the second-largest under BAU after coal. Renewable energy contribution in the total power mix could be 22-69% in 2050.

The report forecasts electrification and substantial build-out of new generating capacity. Power demand increases threefold in all scenarios by 2050.

Carbon emissions vary dramatically by scenario. In BAU, emissions increase by about 90% in 2050. In Rapid and Net-zero, emissions decrease by 90% and 99%, respectively.

The report ends on a dark note reminding that the world is walking on an unsustainable path. Delaying policy measures that will lead to a sustained rise in carbon prices along with other measures and societal shifts could add additional economic costs and disruption.