That is the one of the many key findings in the most recent World Energy Scenarios report from the World Energy Council (WEC). Published in collaboration with Accenture Strategy and the Paul Scherrer Institute, the report suggests that a current “grand transition” will pave the way for three potential scenarios to emerge and shape how we interact and consume energy.
WEC’s executive chair of scenarios Ged Davis said: “It is clear that we are undergoing a grand transition, which will create a fundamentally new world for the energy industry. Historically people have talked about peak oil but now disruptive trends are leading energy experts to consider the implications of peak demand.
“Our research highlights seven key implications for the energy sector which will need to be carefully considered by leaders in boardrooms and staterooms. The underlying drivers will re-shape the economics of energy. We are entering a world where the concern is no longer just about stranded assets but also the impact of stranded resources on nations.”
The report highlights how varying policy drivers can deliver three different scenarios. A “hard rock” scenario would develop through low global cooperation, driven by inward looking policies. Through this scenario final energy demand would grow by 46 per cent by 2060, with the use of fossil fuels falling from 81 per cent to 70 per cent.
“Unfinished symphony” would occur if more “intelligent” economic growth models emerge to drive the low-carbon transition. In this model, final energy consumption would grow by 22 per cent by 2060 with fossil fuel use falling to 50 per cent. In comparison, a “Modern Jazz” model sees demand grow by 38 per cent and fossil fuel use drop to 63 per cent. Across all models, per capita primary energy demand peaks before 2030 with maximum annual usage per capita reaching 1.9 tonnes of oil equivalent (TOE).
Between a rock and a hard place
The report notes that the use of coal would likely peak before 2020 in the Modern Jazz and Unfinished Symphony scenarios, with the latter achieving a 724 million TOE reduction. The Hard Rock scenario would place and emphasis on national energy security, which would result in coal peaking by 2040.
The decline in coal across the scenarios would be coupled with a “phenomenal rise” of solar and wind energy. According to the report, the rise in renewable project deployments could generate cost reductions greater than 70 per cent – excluding the Hard Rock scenario. By 2060, the share that renewables have in the energy mix could jump from 4 per cent to between 20 per cent to 39 per cent.
With more than 70 experts across 25 countries used in quantifying the models listed in the report, the overall belief is that 2C pathway to limit global warming would require an “exceptional and enduring effort”, that goes beyond the pledged commitments of the recently-ratified Paris Agreement. The report noted that the efforts could be accelerated by “very high” carbon prices.
In order to mobilise climate movement, the report suggests that nations reassess capital allocations and target geographies with growing markets such as Asia and Sub-Saharan Africa. The implementation of new business models that can exploit energy value disruptions and new decarbonisation policies should also be considered.
Transport obstacles
The report notes that transforming global transport into a low-carbon sector acts as one of the “hardest obstacles to overcome” when considering these scenarios. Across the three scenarios, oil use in the sector is likely to fall from 92 per cent today to between 60 per cent to 78per cent. Advances in biofuel efficiency could lead to a 21 per cent share of the transport energy mix in the Unfinished Symphony scenario, while electric vehicles (EVs) could account for one-third of the light duty vehicle fleet by 2060. Hybrid petroleum vehicles reflect another 24 per cent to 31 per cent share of the fleet.
WEC’s outlook on EVs is slightly less optimistic than that of Bloomberg New Energy Finance, which suggests that sales of EVs look set to sky-rocket over the next 25 years, representing 35 per cent of all new car sales by 2040.
The World Energy Scenarios report follows on from WEC’s recent studies highlighting what key trends would need to be accounted for as part of a “road to resilience” series. According to these reports, new climate commitments would place “unprecedented strain” on energy markets, with nations having to develop “smarter, not just stronger” energy systems as a result.
WEC has also warned that an uptake in digitisation through devices such as smart metres may improve energy management, but it would also open new avenues for cyber-attacks that could damage communities and the economy.