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EXECUTIVE
SUMMARY
A global and regional forecast
of the energy transition to 2050
ACKNOWLEDGEMENTS
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executive summary
ETO.DNVGL.COM
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dnv gl energy transition outlook executive summary
FOREWORD
Scenarios of our possible energy future are coming thick and fast
from many quarters, but, in my view, they are not anchored to a
base or central case, and that is the aim of this present exercise,
which is a forecast, not a scenario. As a world-leading provider
of third party and technical advisory services, our customers rely
on DNV GL to take an independent view. We also have an equal
footing in the fossil and renewable worlds, which we believe helps
in striking a balanced perspective when regarding the outlook.
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executive summary
A large number of external experts have been kind enough decreases while the global economy and population continue to
to review our work, and some, in the politest way possible, have grow. A world where energy costs are expected to be relatively
remarked that we give insufficient primacy to x energy source low, with available supply exceeding demand.
(where x could be fossil, renewable or a potential source of
disruption like geothermal or hydrogen). In a sense, that In these pages, we explain why world primary energy supply is
indicates that we are on the right track. But it is you, dear reader, likely to peak before 2030; this will surely be a watershed moment
who will judge whether we have succeeded in our mission. in human history, where collectively we will need less energy to
We welcome your feedback, as we prepare our next (2018) satisfy our energy demand.
Energy Transition Outlook.
The consequences of the decarbonization of the energy mix and
One would think that a central case outlook would, per definition, of the flattening out of energy demand are substantial, and the
be boring. But the sheer scale of the changes that await the implication of this transition, and associated sub-transitions, are
world on the energy front are such that even a middle-of-the- highlighted in our industry-focused supplements that accompany
road forecast is anything but boring. The human ingenuity on this main report.
display will be awesome as the world pursues UN Sustainable
Development Goal #7, to ensure access to affordable, reliable, We forecast that by mid-century, primary energy supply will be
sustainable and modern energy for all. Underpinning that goal is a split roughly equally between fossil and renewable sources.
major shift toward decarbonization, which itself is linked to another That presupposes a very substantial growth path for renewable
great megatrend: energy efficiency. energy, but not enough, we calculate, to bring humanity on track
to reduce climate emissions in line with the climate goal agreed in
Advances in both energy storage and renewables will create Paris in 2015. That should be a wake-up call to all stakeholders in
a highly competitive clean-tech coupling that will drive energy the energy system. The industry that we know and serve has taken
costs downwards, while accelerating energy efficiency. And that bold steps in the past; even bigger strides are required into the
will produce a very different world in short order one where future. I hope our 2017 report makes for stimulating reading and
energy decouples from carbon and where the worlds energy use provides food for thought and action.
remi eriksen
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dnv gl energy transition outlook executive summary
WORLD PRIMARY
ENERGY SUPPLY IS
LIKELY TO PEAK
BEFORE 2030:
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executive summary
250%
GDP
200%
150%
Population
100%
Energy supply
Energy-related
50% CO2 emissions
0%
forecasted decoupling of energy supply from emissions, gdp and population trends
World energy growth has historically gone hand- This is linked to accelerating energy efficiency on
in-hand with population and economic growth. Not a global scale, driven in the main by the growing
only will energy decouple from carbon in the coming share of electricity in the energy mix, with losses
decades, but, in our view, global energy supply will reduced through the steady uptake of efficient
peak and slowly decline in the context of continued renewable sources.
(but slowing) population and economic growth.
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dnv gl energy transition outlook executive summary
The world will undoubtedly Coal use has already peaked, oil will
experience a rapid energy transition, peak within the next 10 years and
driven by electrification, boosted gas in 20 years, but gas remains the
by a strong growth of wind and biggest single source of energy for
solar power generation, and further the world through to 2050
decarbonization of the energy
system, including the decline in coal,
oil, and gas, in that order.
The world will manage the shift to a Primary energy supply will peak in
renewable future without increasing 2025, as electricity grows its share
energy expenditures; the future of the energy mix and losses are
energy system will require a smaller reduced through the accelerated
share of Gross World Product (GWP) uptake of efficient renewable sources
than at present.
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executive summary
Energy demand will plateau after 2030, Renewable energy notably wind and
mainly owing to efficiencies in the solar PV holds the most potential for
generation and use of energy even as cost-competitiveness. Even so, fossil
the world makes steady progress with UN fuel will still comprise around half of
Sustainable Development Goal (SDG) #7 the total energy supply in 2050
(ensuring access to affordable, reliable,
sustainable and modern energy for all)
Electric vehicle take-up will be The energy transition will be Total energy-related CO2
rapid and extensive by 2033 experienced unevenly across the emissions in 2050 will be
half of new passenger cars sold world. Regional energy transitions around half of todays level
globally will be zero emission look very different: e.g. India joining
China as a renewable superpower;
fossil-fuel dominant regions like the
Middle East and Russia experiencing
relatively slow transition.
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dnv gl energy transition outlook executive summary
EXECUTIVE SUMMARY
Over the next three decades the worlds energy system will
decarbonize and change in many other ways. Understanding the
energy future is critical for us in DNV GL, and for our stakeholders.
a strategy tool
This outlook, based on our own, independent model
of the worlds energy system, was undertaken to aid
analysts and decision-makers at our customers firms,
and other stakeholders in the global energy supply
chain. It will also support our own business strategy.
__ Maritime; and
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executive summary
an equal footing
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dnv gl energy transition outlook executive summary
a central case
Our intention, from the outset, has been to and power, are reflected in more detail than the sectors
construct what we in DNV GL see as a most likely where we have little exposure, like coal. However,
future for energy through to 2050. This contrasts sectors critical to the energy transition, such as road
with scenario-based approaches. Typically, scenarios transport, are treated more thoroughly than more
are set up to contrast possible futures, for example marginal sectors.
varying the speed of the transition from the current
energy mix to one dominated by renewables. As an It is important to state what we have not reflected in
organization with equal exposure to both the fossil and our model. We have no explicit energy markets with
renewable energy worlds, our aim has been to produce separate demand and supply determining prices;
a objective, balanced view of the future. our approach concentrates on energy costs, with
the assumption that, in the long run, prices will follow
DNV GL was founded a little over 150 years ago with costs. We also do not incorporate political instability
the purpose of safeguarding life property and the or disruptive actions that may revolutionize energy
environment. We have a vision to have global impact demand or supply, accepting that what constitutes
for a safe and sustainable future. As such, DNV GL disruption is subjective. For example, we assume that
strongly supports the Paris Agreement, and the the share of electric vehicles (EV) in new light vehicle
efforts of almost all the worlds countries to limit global sales will increase from below 10% to above 90% in
warming from pre-industrial levels to well below 2C. a period of less than 10 years in many regions, from
varying starting dates. Some industry players are likely
As we explain below, and in more detail in the to experience this as disruptive, but our main focus is
main report, our outlook does not see the world on the impact on the energy system, and not so much the
track to meet the Paris Agreement climate goal. We impact on its players. While we model both energy
very much wish that this outlook pointed to a future demand and supply as mostly endogenously driven,
where the risks and impacts of climate change will the main exogenous drivers of energy demand in our
be significantly reduced, and where dangerous model are population and productivity.
anthropogenic interference with the climate system is
avoided. But our stated aim in building this outlook is to
be fact based and to avoid wishful thinking.
model-based
DNV GL has independently designed a model
of the worlds energy system, depicting globally
interconnected demand and supply of energy, within
ten regions, and the transport of energy between those
regions. The core of this is a system dynamics feedback
model, implemented in Stella software. The model
breakthrough technologies?
incorporates the entire energy system from source to
end-use and simulates how its components interact.
It includes all the main consumers of energy (buildings, Over the course of the next 33 years, we may see
industry and transportation) and all the sources breakthrough technologies like nuclear fusion,
supplying the energy. superconductivity, and synthetic fuels significantly
influencing our energy future. While these are not covered
By design, the level of detail throughout the model by our forecast, we do discuss and consider developments
is not uniform. Sectors where DNV GL has strong in hydrogen as part of our outlook.
expertise and large business exposure, like oil & gas
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executive summary
demand
maritime non-energy
rail
policy
exchange supply
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dnv gl energy transition outlook executive summary
Region
regional outlooks
We found it meaningful to produce not just a global
On a global scale, the energy
outlook, but also to explore regional energy transitions,
transition will be dramatic, but it will
including inter-regional energy relationships. This
be experienced unevenly across the
provides essential insight for any company which,
worlds regions
like our own, operates internationally.
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executive summary
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dnv gl energy transition outlook executive summary
The oil and gas industry normally presents of electricity needed to power a single watt LED-
its energy figures in millions of tonnes of oil bulb for 1 second (1 Ws). In other words, a joule
equivalents (Mtoe), while the power industry is a very small energy unit, and when talking
uses terawatt-hours (TWh), to describe large about global energy we use EJ, being 1018 J,
amounts of electrical energy. The SI systems or a billion billion joules.
main unit for energy, however, is joules, or
In this outlook, we will use J or EJ as the main unit
rather exajoules (EJ) when it comes to national
of energy. The conversion factors we use are:
or global energy statistics, which is also the
unit we have chosen in this outlook.
1 EJ = 23.88 Mtoe
So what is a joule? Practically one could think
of a joule as the energy needed to lift a 100g 1 EJ = 277.8 TWh
smartphone 1 metre vertically; or the amount
1,000,000,000,000,000,000 J
learning curve effects capabilities will be crucial. We account for this in our
The premise behind the notion of learning curves forecast by adding storage costs to the renewables
is that the cost of a technology decreases by a installations as they begin to dominate, which happens
constant fraction with every doubling of installed towards 2050 in several regions.
capacity, owing to the growth in experience, expertise
and industrial efficiencies associated with market There are critical learning curves at play also beyond
deployment and ongoing R&D. renewables. These include electric vehicles (EVs)
a sector with potential to keep doubling output
Wind and solar photovoltaics (PV) have shown in coming years, such that by 2022 we expect strict
significant cost reductions and market growth in recent vehicle price/performance parity between internal
years. For wind, the historical cost learning rate is combustion engine vehicles (ICEVs) and battery
18%, and we expect this to decline slightly to 16%. In electric vehicles (BEVs) while incentives for EV
addition, we factor in significant, but regionally uneven, infrastructure, and for wind and PV generation will
public sector subsidies of new capacity at least through continue albeit at steadily reducing levels for a
the next decade. For PV, the rate is 18% historically decade or two.
and we expect this to continue and to drive down the
cost of new installations, accepting that as installed After a decade or two, depending on the region, we
capacity mushrooms, the rate of doubling as a function see the energy transition gaining a self-reinforcing
of time will slow along with cost reductions. Notably, momentum. This will be the main consequence of
for systems dominated by variable renewables, which interacting cost and technology dynamics that enable
will be the case for several regions after 2040, storage low-carbon solutions to stand on their own feet.
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executive summary
demand
We estimate total final energy demand by mid-century
at 430 exajoules (EJ), up from 400 EJ in 2015. All of
the increase will take place in the years prior to 2030,
following which demand flattens. This, relatively
modest, 7% increase contrasts with the 35% rise in
global energy demand that has occurred over the last
15 years. The slow-down in demand growth is related
to decelerating population and productivity growth,
to faster improvements in energy efficiency, and to
electrification, e.g. in heating and transport.
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dnv gl energy transition outlook executive summary
0
1980 1990 2000 2010 2020 2030 2040 2050
At first glance, the final energy demand chart (Figure From the perspective of where the energy is sourced,
2) looks deceptively stable across major categories the demand picture is more dramatic. Although total
of demand. Transport shows initial growth, but then energy demand is almost flat, there are big changes
declines as electrification of the road sub-sector in its composition. In 2015, electricity represented
materializes. Our analysis indicates that uptake of EVs 18% of the worlds final energy demand: by 2050, its
will follow an S-shaped curve, resembling the fast share will be 40%, growing from 73 EJ/yr to 170 EJ/yr.
transition seen, for example, with digital cameras. Electricity replaces both coal and oil in the final energy
demand mix, and the trend of electrification is clear in
The point where half of all new cars sold are EVs all regions.
will be reached just after 2025 for Europe, 2030 for
North America, OECD Pacific, China and Indian
Subcontinent, and 2035 for the rest of the world.
The buildings and industry/manufacturing sectors We estimate total final energy
both retain a stable share of about 30% of demand demand by mid-century at 430 EJ,
through the forecast period. The remaining 12% is split up from 400 EJ in 2015. All of this
between agriculture, forestry, other smaller categories increase will take place in the years
and the non-energy use of fossil fuels (e.g. as feedstock prior to 2030, following which
for lubricants, asphalt, and petrochemicals). demand flattens.
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executive summary
100% IND
CHN
80% NAM
OPA
60% NEE
LAM
40% SEA
MEA
EUR
20%
SSA
World
0
2010 2020 2030 2040 2050
200
100
0
1980 1990 2000 2010 2020 2030 2040 2050
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dnv gl energy transition outlook executive summary
60 Geothermal
Offshore wind
50 Onshore wind
Solar thermal
40 Solar PV
Biomass-fired CHP
30 Biomass-fired
Hydro
20 Nuclear
Oil-fired
10 Gas-fired CHP
Gas-fired
0 Coal-fired CHP*
1980 1990 2000 2010 2020 2030 2040 2050 Coal-fired
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executive summary
100
0
1980 1990 2000 2010 2020 2030 2040 2050
uncertainties
Our forecast combines past data with our best
judgment to provide expected values for variables, Significant capacity additions are
without quantifying uncertainties. We do, however, still needed for oil and gas, to satisfy
present sensitivity analyses, which highlight issues that forecast demand
are both uncertain and important. We also analyse
uncertainties associated with assumptions that place The most dramatic changes in energy use come
our outlook at odds with other forecasts. from improvements in energy efficiency.
The largest changes in the energy mix come from
For example, should the UN medium case for improved cost learning rates for renewables.
population growth prove correct, then the global Behavioural changes affecting, for example, the rate
population will be 6.5% higher in 2050 than we have of uptake of electric vehicles and the electrification
assumed. Our model suggests that energy demand of buildings, are also important and can shift the
will consequently rise by slightly less (6%) than pace of transition considerably.
population growth, split fairly evenly between all
energy sources, though oil and biomass benefit more None of the sensitivities discussed, however, alter
than others. We find a similar sensitivity to productivity the main conclusion that the world will undoubtedly
assumptions, where higher or lower growth rates do experience a rapid energy transition, driven by
not produce considerable changes in the pace of electrification boosted by a strong growth of wind
transition or in the energy mix. Likewise, changes to and solar power generation, and also further
carbon prices cause only moderate changes in energy decarbonization of the energy system, including the
outcomes, but significant changes in emissions. decline in coal, oil, and gas, in that order.
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dnv gl energy transition outlook executive summary
The future we forecast is one where We forecast that the third target in UN
humanitys energy demand flattens after Sustainable Development Goal No.7 to
2030. We foresee this happening even as double the rate of improvement in energy
the world makes steady positive progress efficiency by 2030 will be met. More
with SDG #7, addressing the energy specifically, we see energy efficiency
poverty that afflicts more than one billion doubling from an average of 1.3%/yr over
people today. Energy demand flattens the period 2000-2015 to 2.7%/yr in 2015-
mainly because the energy intensity of 2030.
economic activity is decelerating. Less
energy is required per person.
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executive summary
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dnv gl energy transition outlook executive summary
energy financing In dollar terms, global opex will decline from about
Given the scale of change, there may be concerns that USD2,000 billion/yr in 2015 to USD1,500 billion/yr in
the energy transition will place an unbearable financial 2050. Conversely, capital expenditure increases from
burden on society. USD1,800 billion/yr in 2015 to USD2,600 billion/yr in
2050. The energy transition can be undertaken without
Looking at overall energy financing needs, we calculate a significant increase in overall energy expenditures,
investment in fossil fuels by considering upstream and which will stay approximately constant over time. With
power-related investments for oil, gas and coal. We Gross World Product (GWP) increasing by 130% over
estimate that, globally, expenditures for fossil fuels the next 33 years, total energy expenditure is forecast
will drop by more than half from around USD3,400 to fall to less than half of its current share of GWP from
billion/yr today to USD1,500 billion/yr in 2050, while 5% to a little over 2% of GWP.
non-fossil energy expenditures show the reverse trend,
increasing fivefold from around USD500 billion/yr The energy transition may still be challenging from
today to USD2,700 billion/yr in 2050. a financial perspective, given the heavier capex
load from renewables. Yet the forecasted transition
Shifting to renewables, where capital expenditure is unlikely to prove financially disruptive, and if
(capex) is mostly upfront, implies a shift from an energy we maintain the fraction of GWP going to energy
system with a 60/40 split between opex and capex to expenditure, there is ample scope to accelerate
one with the inverse split of 40/60. the pace of change.
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executive summary
Units: Percentages
6%
Additional, necessary
expenditure on grids and
5% energy efficiency are not
shown here
4%
3%
2%
1%
0%
climate implications
This outlook is one of the few we know of that predicts carbon budget depletion
that humanity will collectively start using less energy
in the coming decades. Even so, the emissions The carbon budget is an expression of how much
associated with our forecast will not bring the planet carbon can be emitted to the atmosphere while
within the so-called 2 C target the maximum level staying within a certain temperature threshold.
of warming above pre-industrial levels agreed upon in With climate emissions calculated from our
Paris, 2015. forecast, the 2 C carbon budget will be emptied
by 2041. The 1.5C carbon budget will be
CO2 will continue to be emitted to the atmosphere depleted in only 4 years from now, by 2021.
long after 2050. Simple extrapolation suggests that
the first emission free year will only occur in 2090. It must be stressed, as we explain more fully in our
This produces an overshoot, beyond the so-called outlook, that there are considerable uncertainties
2 C carbon budget (see fact box), of some 700 Gt involved in estimating carbon budgets. Our
CO2. Inevitably, with an overshoot of such magnitude, estimated remaining carbon budget for a 2 C
the question arises: what level of global warming is warming future 850 Gt CO2 is an average value
associated with our forecast? for which there also is significant uncertainty.
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dnv gl energy transition outlook executive summary
40 Uncertainty in 2 C budget
Agriculture,
Forestry and
35 Other Land Use
(AFOLU)
30 Industrial
Processes
25 Energy-related
(net of CCS)
20
1.5 C carbon budget
2 C carbon budget
Overshoot by 2050
15
10
Additional overshoot
by the end of the century
5
citing a definitive warming figure because there are However, our main conclusion is that closing the gap
considerable uncertainties associated with such will require a mix of extraordinary measures working in
calculations, both energy-related uncertainties synchrony. This is very much in line with the conclusion
(including the inherent uncertainties in our forecast) of the flagship report by the Energy Transitions
and non-energy related. Issues such as future Commission, (ETC, 2017) setting out an achievable
agriculture, forestry and other land use (AFOLU) pathway to limit global warming to well below 2 C.
emissions, unknown climate tipping points and other
non-linear earth system reactions, e.g. methane stored
in permafrost, are beyond the scope of this outlook.
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executive summary
__ Gas will be the largest energy source by 2034, and elements in the power system. This will optimize
the design, planning and operations of assets in
will hold this position through to 2050, even though
wind, solar, transmission, distribution and the use
its share of the energy mix will start to decline from
of electricity in society.
2040 onwards. There are large opportunities for
gas to co-develop with other energy sources and to
add flexibility to the expanding electricity system.
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dnv gl energy transition outlook executive summary
analysis
2017 Energy Transition Outlook 201
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NOTES
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