The global energy landscape is changing, and fast. But how rapidly and to what extent is still up for debate. Answers to these critical questions translate to hundreds of billions of dollars in investment decisions, city planning programs, and environmental costs. Beyond profits, millions of livelihoods are at stake.
The non-profit research institution Resources for the Future (RFF) attempts to address these questions in its flagship Global Energy Outlook (GEO) Report published July 1st. The GEO analysis does what others haven’t – amalgamating forecasts from companies, government bodies, and expert organizations such as the Energy Information Agency, BP, Exxon, the International Energy Agency, and others in a useful ‘apples to apples’ comparison of energy projections through 2040. This “study of studies” approach is typical in the social sciences and other academic disciplines.
Forecasts by the leading companies and organizations, outlined in the GEO, conclude that despite population growth, global primary energy consumption over the next 25 years will slow considerably relative to past decades. Between 1990 and 2015 global energy consumption rose by 190 quadrillion Btu (qBtu) to 550 qBtu. Forecasts suggest that the next 20 years will see growth of just 30 to 80 qBtu– and may even decline by 4 qBtu in Ambitious Climate Scenarios (ACS).
The study also suggests that oil will maintain its position as the world's most prolific single fuel source, even with aggressive fuel switching by 2040. Projections are split 50/50 over the fastest growing energy source in that timeframe, with half predicting natural gas and the other indicating renewables.
The biggest names in energy have varying perspectives on global primary energy consumption by 2040. For the purpose of this study, scenarios where no new global policies are introduced are known as “Reference Scenarios.” Forecasts also include “Evolving Scenarios,” where new policies and technologies develop according to recent trends, and “Ambitious Climate Scenarios,” which reflect policy/market shifts resulting in a global mean temperature rise to 2°C over the time period.
While the IEA’s Current Policies Scenario shows the highest consumption by 2040 at 767 qBtu, Evolving Policy Scenarios (IEA’s New Policies Scenario – 703 qBtu, ExxonMobil – 681 qBtu, Equinor’s Reform Scenario - 659 qBtu) as well as Ambitious Climate Scenarios (IEA Sustainable Development Scenario – 544 qBtu and Shell Sky – 534 qBtu) all display slower growth of energy consumption around the globe by 2040.
When looking at GEO’s analysis of projections in terms of shares of global primary energy consumption by fuel in 2040, certain predictions stand out. Coal loses market share across all projections, while renewables – particularly wind and solar – see growth under all projections. Under business as usual conditions, renewables increase from 14% of the mix in 2015 to between 16% and 17%. Under Ambitious Climate scenarios, they become the largest source of global primary energy, overtaking petroleum to reach as high as 31% in 2040. This is the energy transformation in action. However, most of the projections do not predict a true transition away from carbon-based fuels through the use of renewable energy by 2040.
Importantly, Fossil fuels, which made up 82% of global primary energy in 2015, dominate across Reference and Evolving Policies scenarios, ranging from 74% to 79% in 2040 (above). Under Ambitious Climate scenarios, fossil fuels decline to 60% to 62%. That is why most projections predict energy additions taking place -- rather than transitions.
In the graph above outlining the 2040 projections of the primary global energy consumption by fuel, coal consumption would increase or remain flat under half of the scenarios described here. Natural gas consumption will grow under every scenario, while liquids consumption will grow in all but 2 scenarios. The share of nuclear power is highest under Ambitious Climate scenarios. Renewable energy, led by wind and solar power, grow rapidly, though they primarily add to, rather than displace, fossil fuels unless more ambitious climate policies are put into place.
Emissions concerns, economic growth, demand, and trade, will mean difficult policy choices for national governments and energy majors. These decisions will come to define the globe's future energy landscape. The GEO provides a coherent compilation of these forecasts and offers us the best glimpse of that future so far.
Tahir Kazykhanov contributed to this article
