The 2020 edition of bp’s Energy Outlook explores possible paths for the global energy transition, how global energy markets may evolve over the next 30 years and the key uncertainties that may shape them.
The Outlook shows how global energy demand continues to grow, for at least part of the period to 2050. It also reveals that, over this time, the structure of energy demand fundamentally shifts, with a declining role for fossil fuels offset by an increasing share for renewable energy and a growing role for electricity.
Looking out to 2050 – a decade further than in previous editions – the Outlook is focused around three different scenarios:
Three things are consistent over the different scenarios, Rapid, Net Zero and BAU.
The graphs below show the changing structure of global energy demand between 2018 and 2050.
The ultimate impact of the virus on the economy and energy system is still preliminary and highly uncertain. All three main scenarios show economic activity partially recovers over the next few years as the virus is brought under control and restrictions are eased, but that some effects persist.
The pandemic is assumed to reduce the level of global GDP by around 2.5% in 2025, increasing to 3.5% in 2050. These economic impacts fall disproportionately hard on emerging economies, the most exposed to the economic ramifications of the virus.
This mainly stems from the weaker economic environment, but there is also an assumed impact from the behavioural changes triggered by the pandemic as people travel less, switch from public transport to alternative modes of travel, and work from home more frequently.
Many of these behavioural changes are projected to dissipate over time, but some, particularly increased remote working, are expected to persist. But if that were the case, the impact of COVID-19 on the future energy system could be very material.
The demand for oil falls over in all three scenarios. This decline is most pronounced in Rapid and Net Zero ̶ after peaking in 2019, oil demand falls by 2050 to a little below 50Mb/d in Rapid and to around 25Mb/d in Net Zero.
The outlook for oil consumption is more resilient in BAU, with demand recovering to around its pre-COVID levels, where it remains for the next 10-15 years, before edging gradually lower to around 90Mb/d by 2050.
The scale and pace of these falls stem primarily from the increasing efficiency and electrification of road transportation, with the declining use of oil within the sector accounting for between 50 and 60% of the reduction in oil demand by 2050 in Rapid and Net Zero, and an even greater proportion in BAU.
The outlook for natural gas is more resilient than for oil in all three scenarios.
In Rapid, it continues to grow for the next 15 years or so, followed by a subsequent decline, but only back to close to its current level by 2050.
This is due to the role natural gas plays both in supporting a shift away from coal in fast-growing, developing economies, particularly over the next 15 years, and, when combined with carbon capture, use and storage (CCUS), as a source of near zero-carbon energy as the world increasingly decarbonizes.
Renewable energy increases sharply in all three scenarios, led by wind and solar power.
This is underpinned by continuing pronounced falls in the cost of wind and solar energy, with those of solar falling by close to 60% or more in all three scenarios over the next 30 years. And backed up by a significant acceleration in the pace at which new wind and solar capacity is built and developed.
The strong growth in renewable energy goes hand-in-hand with the increasing electrification of the energy system.
Growth in electricity demand over the next 30 years is very similar in all three scenarios, around 80%.
The shift to a lower carbon energy mix in the power sector is essential to decarbonizing the energy system. A move to greater electrification – be it in transport, heating or industrial processes – is of little use if the energy used to generate that electricity is not decarbonized.
The carbon intensity of power generation by 2050 in Rapid falls by 90%, compared with just 50% in BAU. Indeed, the power sector remains the largest source of carbon emissions in 2050 in BAU.
In contrast, in Net Zero, the increasing use of bioenergy combined with CCUS – so-called BECCS – means that carbon dioxide emissions from the power sector are net negative by 2050.
The use of hydrogen as an energy carrier increases significantly from 2035 in both Rapid and Net Zero. By 2050, hydrogen accounts for around 6% of total final energy consumption in Rapid and more than 15% in Net Zero.
It complements the increasing electrification of the energy system by providing energy to activities that are difficult or costly to electrify, including high-temperature processes in industry and long-distance transportation, particularly heavy-duty trucks.
The production of hydrogen in both scenarios is dominated by so-called ‘green’ and ‘blue’ hydrogen. Green hydrogen is made by electrolysis using zero-carbon power; while blue hydrogen is mainly extracted from natural gas combined with CCUS.
The shift away from fossil fuels and towards a low carbon energy system in Rapid and Net Zero also leads to an increasing role for bioenergy, which accounts for around 7% of primary energy in Rapid and 10% in Net Zero by 2050.
We explore an alternative Delayed and Disorderly scenario, in which the global energy system is assumed to move in line with BAU until 2030, after which things change up a gear to Rapid, with sufficient policies and actions undertaken to limit cumulative carbon emissions.
The significance of this shows real costs to delay. If the required reductions in carbon emissions cannot be achieved through energy efficiency or fuel switching, the only alternative in this scenario would be the use of widespread energy rationing.
That is policies that stop or restrict energy-using outputs or activities, which would impose significant economic costs and disruption.
In reality, rather than outright rationing, other options may be possible, such as various negative emissions technologies.
But the general point is that the existence of a finite carbon budget means that the longer the world continues on an unsustainable path and decisive action is delayed, the more costly and disruptive the eventual pathway is likely to be.