Aug-2024

The energy transition: Progressing or stagnating?

The need to transition to a cleaner energy system is widely accepted, but with the 2.0ºC carbon budget hanging by a thread by 2050, has global progress stagnated?

Hari Vamadevan
DNV

Article Summary

If ‘energy transition’ means clean energy replaces fossil energy in absolute terms, then the transition has not truly begun. The transition has started in some regions and for many communities and individuals, but globally, record emissions from fossil energy are on course to move even higher this year. Currently, renewables have only met some, but not all, of the world’s additional energy demand.

Global carbon dioxide (CO₂) emissions have risen steadily every year, with the only exception being 2020 when the COVID-19 pandemic gripped the world. The energy transition needs to accelerate and expand beyond its current scope to reach a net zero energy system by 2050. Global emissions will fall, but not fast or far enough.

DNV’s Energy Transition Outlook (ETO), an annual forecast towards 2050 based on our independent model of the world’s energy system, highlights that global emissions will only be 4% lower in 2030 than they are now and drop to 46% by 2050 (see Figure 1) (DNV, 2024). However, time is running out to make a significant difference in curbing carbon emissions – the 2.0ºC carbon budget is in a very precarious state!

Achieving net zero by mid-century would mean halving global emissions by 2030, but that is an ambition that DNV forecasts is at risk. Unfortunately, DNV predicts that limiting global warming to 1.5ºC is less likely than ever before. The slow speed of change means that the world is looking at 2.2ºC of global warming above pre-industrial levels by the end of this century.

The road ahead is challenging, but DNV highlights that reaching net zero is achievable. As agreed at COP28 in Dubai last November, the world needs more expansive policies promoting renewable electricity and other zero-carbon solutions, not just in the high-income world but globally. We have the means to keep the world on track to be at, or very near, net zero by mid-century. It will take an enormous effort and collaboration from citizens, industry, and governments. However, we need to look further than just energy systems and consumption; we must also look at the myriad of different sectors that are consuming energy. Decarbonising the fossil fuel sector is just as vital as decarbonising hard-to-abate sectors – steel, iron, cement, maritime, and buildings – and ensuring those industrial and transportation industries also transition.

Making energy sustainable
The global electricity landscape is on the brink of monumental change. World electricity demand has been growing by about 3% per year since the 1980s, in line with economic growth. By 2050, we anticipate a surge in global electricity demand, more than doubling from 29.5 petawatt-hours (29.5 x1015 Wh) in 2022 to 60.8 PWh in 2050 (see Figure 2).

Large-scale electrification using renewable electricity sits at the heart of the energy transition in many countries. The declining costs of solar and wind technologies will see renewables’ share of electricity generation increase to 69% of total share.

Economics is playing a pivotal role in this shift towards renewables. The levelised cost of solar is dwindling and will command a 39% share in the 2050 global power mix. Wind is also expected to grow in popularity across all regions and is anticipated to be 30% of the power supply in 2050: 21% of wind energy will come from onshore wind, 7.3% from bottom-fixed offshore wind, and 1.6% from floating offshore wind (see Figure 3).

Greening electricity supply through progressive policies is key to the adoption of renewable technologies and has seen some success. Take the UK for example; using Contracts for Difference (CfD) frameworks and competitive strike prices, the country has been able to champion a strong build-out of wind and solar capacity, reaching an impressive total of 45 GW today, 45% of the total installed UK generation capacity. The UK also boasts one of the most impressive offshore wind markets around the world. However, while the UK’s early ambition and action to champion the energy transition allowed the nation to make good progress, that progress now seems to be stalling.

Grids: Often under-appreciated
With increasing electrification forecast in almost all world regions, a stronger and smarter grid is essential for delivering power, especially with rising electricity and power demand and greater use of Variable Renewable Energy Technologies (VRES).

Global grid, transmission, and distribution combined will double in length from 100 million circuit-km (c-km) in 2022 to 205 million c-km in 2050 to facilitate the fast and efficient transfer of electricity (see Figure 4).

As the share of VRES in the electricity supply grows significantly, integration of renewables and grid modernisation must work together to achieve grid reliability. Modernisation of the grid will involve grid-enhancing technologies, such as dynamic power line rating, power flow controllers, digital twin and/or real-time monitoring, and advanced grid features, to name a few. However, flexibility remains key to the major shift in the global energy landscape. As VRES capacity surges by a factor of seven, the global need for flexibility will almost double. Li-ion batteries will emerge as the primary source of flexibility worldwide and will either be integrated with renewables or operate as standalone systems.

Decarbonising fossil fuels
Today, fossil fuels currently cover 80% of the global primary energy supply. However, with VRES growing, that percentage will shift by the end of this decade as DNV predicts that fossil fuel will still represent around 48% of the global energy mix by 2050. The role of oil and gas in a just transition is multifaceted. However, it will continue to act as an important contributor to the ambitions at the heart of the UN Sustainable Development Goals, providing the energy needed to support fair growth and improved living conditions for all.

DNV predicts oil will make up 17% of primary energy by 2050. Natural gas will surpass oil as the world’s largest primary energy source in the mid-2030s. However, gas will be replaced by renewable sources in the power mix, with natural gas usage peaking in the mid-2030s and then gradually declining in 2050 to a level only slightly higher than today’s usage. Oil and gas will still have a pivotal part to play in the energy transition, and as one of the world’s biggest emitters, the sector must decarbonise. What can be done?

- Decarbonise Scope 1 and 2 emissions in production methods, such as reducing fugitive emissions, flares, and venting, improve energy efficiency, and support electrification.

- Adopt new technologies, such as CCUS and hydrogen. These technologies have a vital role in reducing Scope 3 emissions. Scaling deployment and providing supportive roadmaps for these new technologies will help to decarbonise hard-to-abate sectors or capture emissions at facilities that cannot be easily decarbonised.

- Create adaption plans that provide certainty within the industry of how legacy frameworks fit with new energy systems or opportunities to diversify, by promoting renewable energy and decarbonisation of existing infrastructure.