Global energy industry faces a ‘grand transition’ from fossil fuels to electricity

Future energy demand growth is going to be ‘moderate’ relative to historic levels, due to gains in energy efficiency and the growth of smart and digital technologies – to the point where per capita energy demand will peak before 2030. So says the World Energy Council (WEC) in a new report that examines three exploratory scenarios for the future of global energy production and use.

This moderate growth is in stark contrast to historic growth levels, which have seen global demand for energy more than double since 1970, says WEC, adding that technological innovation, government policies and lower growth expectations will have a significant impact on the sector in the coming decades.

However, the report goes on to suggest that there will be a shift in the form of total final energy consumption, with demand for electricity doubling by 2060. Solar and wind, which currently account for approximately 4% of power generation, will see the largest increase so that by 2060 they will represent between 20% and 39% of power generation, says the World Energy Scenarios 2016 report. 

At the same time, fossil fuel usage could fall to as little as 50% of the primary energy mix in one of the scenarios, from today’s 80%, with coal and oil consumption peaks occurring in the next one to three decades. However, in all three scenarios, the global carbon budget is also likely to be broken within the next 30 to 40 years, says WEC. Oil will continue to play a significant role in the transportation sector, representing over 60% of the mix in all three scenarios to 2060. Gas usage will continue to rise. 

Launched at the 23rd World Energy Congress in Istanbul last month the scenarios, named: ‘Unfinished Symphony’, ‘Modern Jazz’ and ‘Hard Rock’, were developed in collaboration with Accenture Strategy and the Paul Scherrer Institute and present three distinct trajectories for the energy sector to 2060.

Speaking at the report launch Ged Davis, Executive Chair of Scenarios for WEC, said: ‘It is clear that we are undergoing a grand transition, which will create a fundamentally new world for the energy industry. Historically people have talked about peak oil but now disruptive trends are leading energy experts to consider the implications of peak demand.’

Davis pointed to the need for industry and governments to take note and begin planning for major changes: ‘Our research highlights seven key implications for the energy sector which will need to be carefully considered by leaders in boardrooms and staterooms.’

As well as a slowdown in demand growth; the need for investment to fuel increases in clean electricity generation; the predicted ‘phenomenal’ rise of solar and wind energy; and a falling role for fossil fuels, the report points to:

transitioning global transport away from oil as being one of the hardest obstacles to overcome in an effort to decarbonise future energy systems;

the exceptional and enduring efforts needed to limit global warming to no more than 2°C above pre-industrial levels – far beyond already pledged commitments and at very high carbon prices; and

the requirement for global cooperation, sustainable economic growth and technology innovation to balance the ‘energy trilemma’.