Energy Outlook points to exponential electricity growth

Increasing levels of electrification and rising living standards globally will see an exponential growth in the demand for electricity, according to projections in BP’s Energy Outlook 2023.

All three scenarios it considers – Accelerated, Net Zero and New Momentum[i] – show final demand for electricity increasing by around 75 per cent by 2050.

BP’s Energy Outlook is updated and released annually. It provides useful insights into the energy transition globally. It describes the implications of policy decisions and projects the likely impacts of known and potential technologies.

BP three scenarios for each fuel source it examines are designed to consider the full range of potential outcomes out to 2050 and assess resulting carbon emissions from energy production and use. In its analysis, the Australian Energy Council (AEC) will note if it is referring to a specific scenario. If no scenario is noted, it can be assumed the AEC is providing analysis of the overall picture provided by BP’s data.

Here we take a look at projections for individual fuel sources, types of generation and the impacts decisions about their use by individuals and governments are expected to have on the energy transition.

Electricity

BP forecasts that 90 per cent of the growth in the exponential growth in global electricity demand will result from rising living standards around the world. For example, electricity demand in India alone is expected to grow by 250-280 per cent to 2050.

Electrification is also a significant factor in BP’s projections. For example, BP has factored in widespread adoption of heat pumps in its Accelerated and Net Zero scenarios. Additionally, the transport sector accounts for the largest share of increased consumption globally as it increasingly electrifies. We will look at the electrification of transport in greater detail in a future EnergyInsider.

Figure 1: Electricity as a share of total final consumption

Source: Energy Outlook 2023

Wind and solar are projected to enable rapid decarbonisation of electricity supply to meet growing demand. Wind and solar account for most of the growth BP projects in generation. By 2050, BP projects that wind and solar provide more than two thirds of the world’s electricity generation.

Coal generation declines more than any other fuel source across all three scenarios in BP’s report. Its share of global generation falls from 40 per cent in 2019 to 10 per cent in New Momentum and virtually zero in the Accelerated and Net Zero scenarios.

BP’s projections outline a strong move towards carbon capture and storage, with between 60 and 95 per cent of emissions from gas-fired generation being stored.

In its Accelerated scenario, BP projects an elimination of emissions from generation by 2050.

Natural Gas

In its report, BP asserts that the future of natural gas is entirely dependent on the pace of the energy transition. Key factors include:

• Increasing demand in emerging economies as they grow and industrialise
• A shift away from natural gas to lower-carbon energy led by the developed world

BP projects that the volume of LNG traded will continue to grow to 2030, as demand grows particularly across Asia excluding China (emerging economies). LNG imports across Asia ultimately account for 65-70 per cent of growth in BHP’s projections.

The United States and Middle East emerge as major players in the LNG market as the 2020s progress. This shift is largely attributable to Russia’s invasion of the Ukraine. The United States and Middle East are projected to provide half of LNG supplies globally by 2030, up from a third in 2023.

As a result of various and moving emissions reduction targets around the world, BP appears to be unable to provide a firm projection of LNG consumption after 2030. The most concrete statement among their comments on LNG is that LNG’s future will be dependent on the pace of the energy transition.

Figure 2: Change in natural gas demand & Change in natural gas demand by sector

Source: Energy Outlook 2023

Oil

BP tips Oil use to plateau over the next 10 years, before moving into a steeper decline. The report identifies two factors driving this change:

• Falling use of oil in road transport as vehicles become more efficient
• Vehicles increasingly being fueled by alternate energy sources, for example electric vehicles

BP predicts that more than half of the reduction in global demand in their accrual projection comes from a reduction in demand from road transport as a result of falling use and vehicles becoming more efficient to 2040.

Figure 3: Changes in oil demand

Source: Energy Outlook 2023

The switch to alternative energy sources for transport is, however, gathering momentum. By 2040, BP projects that alternative energy sources for transport’s impact on declining oil will equate with falling use of oil as vehicles become more efficient as a cause of the decline in oil consumption, and will have a greater impact by 2050. The primary alternate energy source described is electric vehicles.

In addition to personal motor vehicles, BP also identifies a switch away from reliance on diesel in medium and heavy duty trucks. The majority of switches are the result of electrification, however hydrogen is predicted to play a major role, particularly in heavy-duty and long-distance uses.

Renewables

Unsurprisingly, BP projects a rapid expansion of wind and solar power through to 2050 as the world transitions to net zero.

Under its most optimistic projection scenario, Net Zero, BP envisages 20,000 GW of installed solar and wind capacity. To support this projection, a fall in construction material costs through to 2035 and a timely end to current inflationary pressures is projected. Increased volume of production is also a factor attributed to cost reduction (economies of scale). The report also assumes critical materials availability and supply chain reliability.

Figure 4: Installed wind and solar capacity and Range of wind and solar capacity build rates in the three scenarios 2022-2035.

Source: Energy Outlook 2023

The report’s analysis shows that a strategic uplift in capacity to construct renewable generation is required to realise net zero globally. Construction of 450-600GW of renewables per year, or 1.9-2.5 times the world’s previous record for the pace of generation construction is the only way BP is able to project net zero as achievable by 2050.

Going hand in hand with traditional generation is the augmentation or expansion of transmission and distribution infrastructure. BP also identifies the expansion of regulatory frameworks globally as essential to allowing the energy transition to proceed at a rapid pace.

BP identifies modern bioenergy – soil biomass, biofuels & biomethane as a means of supporting hard to abate sectors to decarbonise.

In its Net Zero projection, the report tracks modern bioenergy more than doubling to reach 65 EJ by 2050, surpassing traditional biomass, and causing it to be phased out.

The aviation sector is also projected to strongly embrace biofuel. Bio-derived sustainable aviation fuel is projected to account for 45 per cent of total aviation demand in BP’s Net Zero projection, but only 30 per cent in their less ambitious Accelerated projection.

[i] The Accelerated and Net Zero scenarios consider how elements of the energy system might shift to achieve a substantial reduction in carbon emissions. The New Momentum scenario seeks to capture the current trajectory of the global energy system. A more detailed discussion of each scenario can be found in the Overview section of BP’s Energy Outlook 2023.