Key insights
The scenarios in this year’s Energy Outlook can be used to help inform some key insights about how the energy system may evolve over the next 25 years
The likelihood that either of the two scenarios used in this year’s Energy Outlook will materialise exactly as described is negligible. Even so, the scenarios can be used to help develop some key insights about how the energy system might evolve over the next 25 years or so.
Those trends and features of the energy system that are common across both scenarios may have an increased likelihood of also occurring in a broader range of pathways which lie ‘between’ the two scenarios.
In contrast, those aspects of the energy system which differ materially across the two scenarios can be viewed as being more dependent on the speed on the energy transition.
Trends common across both scenarios
Growth in global energy demand is driven by emerging economies, outside of China. This increasing demand for energy is underpinned by rising prosperity and living standards in these economies and, to a lesser extent, the increasing size of their populations.
Growth in energy demand depends on actions to accelerate improvements in energy efficiency. Even relatively short-lived fluctuations in energy efficiency can have an important bearing on energy demand and carbon emissions.
The structure of energy demand changes, with the role of fossil fuels diminishing, given the increasing electrification of the energy system and the growing importance of low carbon energy, led by solar and wind. Electricity demand doubles over the Outlook in both scenarios.
Oil demand declines over the outlook but continues to play a significant role in the global energy system over at least the next 10-15 years.
The outlook for oil demand is shaped by two, counteracting forces: the diminishing role of oil in road transport as vehicles become more efficient and are increasingly electrified; offset by the more persistent use of oil as a feedstock in the petrochemicals sector, predominantly for the production of plastics.
The changing level and composition of oil demand puts increasing pressure on the refining system. Falls in oil demand are borne disproportionately by non-OPEC+ producers causing the share of OPEC+ oil production to rise over time1.
Coal consumption falls, driven by declining use in power generation, especially in China.
Solar and wind grow rapidly, becoming the dominant source of power generation, supported by sustained competitiveness.
An increasing share of the global energy system shifts from the ‘energy addition’ phase of the energy transition, in which more of both low carbon energy and fossil fuels are used, to the ‘energy substitution’ phase, in which the rapid growth of low carbon energy crowds out the consumption of unabated fossil fuels.
Trends dependent on speed of energy transition
Whether the demand for natural gas – and LNG – increases or decreases over the next 25 years depends on the pace of the energy transition. Demand for both natural gas and imports of LNG increase in emerging economies as they grow and industrialise. But in accelerated transition pathways these increases are offset by shifts away from natural gas towards lower-carbon energy, led by developed economies.
The use of biofuels and biomethane grow over the next 25 years. But the scale of that expansion is dependent on the extent of government policies and mandates supporting their use.
Low carbon hydrogen and carbon capture, use and storage (CCUS) are used to decarbonize sectors and activities in which emissions are hard to abate. But their relatively high cost mean that they only reach significant scale in deeper decarbonization pathways. Even then, their growth is concentrated in the second half of the outlook.
