The world is on an “unsustainable path” in its energy consumption. This is the core thesis that is driving bp, the world’s fifth largest oil company, to radically shrink its carbon footprint to net zero by 2050 and increase its production of low and no carbon energy. In its 2020 Energy Outlook, bp examines three different global energy market scenarios and all of them suggest a decline in oil demand over the next 30 years.
Setting the scene ahead of Reuters Events Future of Renewables Virtual (Dec 8-10), bp’s group chief economist, Spencer Dale outlined some of the challenges raised in the company’s latest annual energy review that are being faced by world business leaders. Dale who joined a recent Reuters Events webinar talked through these possible scenarios and stressed that “all of these would be wrong” rather their value was in “better understanding of the range of uncertainty we face as the energy system transitions.”
bp’s scenarios suggest that the share of renewables — wind, solar, geothermal and bio-thermal — in the energy mix will rise from 5% today to between 20-60% by 2050, depending on which scenario prevails. Underpinning this, says Dale, is increasing electrification. Even in the business-as-usual scenario, 25% of road transport could be electrified by 2050 against today’s mere 1%.
In all three scenarios, he says, demand for electricity grows by 80% in the next 30 years – “driven largely by rising living standards in the developing world.”
The first scenario, Rapid, assumes that by 2050 carbon emissions fall dramatically to just 70% of the levels seen in 2018, with oil demand dropping to 50% of current levels, as higher carbon taxes and other government measures accelerate the switch to renewables. This fall in emissions is consistent with limiting the rise in global temperatures by 2100 to well below 2°C over pre-industrial levels.
The second, Net Zero, in which oil demand falls 80% by 2050, predicates that consumers and business will reinforce government measures by rapidly switching to low carbon energy sources, resulting in an acceleration in the reduction in carbon emissions to 95% lower than in 2018. This is broadly consistent with limiting temperature rises to 1.5°C.
The third scenario, BAU, assumes that the present pace of dealing with climate change will continue and oil demand will fall only slightly. Carbon emissions peak globally in the mid-2020s, but by 2050 are still only 10% lower than 2018 levels.
In the first two scenarios, carbon prices, he suggests, reach $250 per metric ton in the developed world by 2050 and $175 per metric ton in emerging economies. The figures for the BAU scenario are for carbon prices to reach $65 and $35 per metric ton by 2050 on average in developed and emerging economies, respectively.
The unprecedented wide diversity of energy sources would, he says, require a more integrated energy system, one which is much more localized, as some forms of energy are inefficient to transport. Oil, natural gas, renewables and other non-fossil fuels will all occupy significant shares in global energy, a key topic for discussion at the upcoming conference.
Consumers should have more bargaining power under all scenarios because they would have more energy sources from which to choose. There would also be diminution of the power of ‘upstream’ energy producers, such as bp and the other oil majors, hence their ongoing diversification into renewables.
A fourth scenario, he outlined, was Delayed and Disorderly, under which the world moves initially along the BAU scenario before moving to the Rapid scenario in the mid-2030s. This was based on the view that that the longer the world delayed making changes, the more costly and disruptive that transition would have to be later.
Join Reuters Events Future of Renewables Virtual (Dec 8-10) to hear more from 60+ C-Level executives at organizations that are major forces in the energy fields, and manufacturers whose products are evolving in response to energy diversification.
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