Energy Transition: Main trends and uncertainties

This year's bp Energy Outlook explores the main trends and uncertainties surrounding the energy transition to 2050.

The three scenarios considered in the Outlook (Net Zero, Accelerated, and New Momentum) have been updated to take into account two important developments events that occurred last year: the war between Russia and Ukraine and the approval of the Inflation Reduction Act in the United States.

These scenarios are designed to explore the range of possible outcomes for the global energy system over the next 30 years. Understanding this range of uncertainties helps bp design a robust strategy for the different speeds and ways in which the energy system transition can occur.

BP chief economist Spencer Dale said: "Global energy policies and discussions in recent years have been focused on the importance of decarbonizing the energy system and the transition to net zero. The events of the past year have served as a reminder to us all that this transition also needs to take account of the security and affordability of energy. Any successful and enduring energy transition needs to address all three elements of the trilemma: security, affordability, and sustainability".

Three scenarios:

Accelerated and Net Zero explore how different elements of the energy system might change in order to achieve a substantial reduction in carbon emissions by 2050, around 75% in Accelerated and more than 95% in Net Zero. Both scenarios are conditioned on the assumption that there is a significant tightening in climate policies. Net Zero also embodies a shift in societal behaviour and preferences, which further supports gains in energy efficiency and the adoption of low-carbon energy.

New Momentum is designed to capture the broad along which the global energy system is currently travelling. To do this, it takes into account the notable increase in governments' decarbonization ambitions and promises that has occurred in recent years. In this scenario, CO2 e emissions in New Momentum peak in the 2020s and by 2050 are around 30% below 2019 levels.

Key points of the Energy Outlook:

1. The carbon budget is running out. Despite the notable increase in governments' ambitions, CO2 emissions have increased every year since the Paris COP in 2015 (bar 2020). The longer decisive action to reduce GHG emissions on a sustained basis is delayed, the greater the resulting economic and social costs are likely to be.

2. Government support for the energy transition has increased in several countries, including the passage of the Inflation Reduction Act in the United States. But the scale of the decarbonization challenge suggests that greater support is needed, including policies that facilitate faster authorization and approval of low-carbon energy and infrastructure.

3. The disruption of global energy supplies and the resulting energy shortages caused by the war between Russia and Ukraine increase the importance of addressing the three elements of the energy trilemma: security, affordability and sustainability.

4. War has lasting effects on the global energy system. Increased attention to security of energy supply increases demand for domestically produced renewable energy and other non-fossil fuels, helping to accelerate the energy transition.

5. The structure of energy demand changes in the three scenarios, with a decreasing importance of fossil fuels, replaced by a growing share of renewable energies and increasing electrification. The transition to a low-carbon world requires other energy sources and technologies, such as low-carbon hydrogen, modern bioenergy, and carbon capture, utilization and storage.

6. Oil demand declines across the outlook, driven by lower use in road transportation as vehicle fleet efficiency improves and vehicle electrification accelerates. Still, oil will continue to play an important role in the global energy system over the next 15-20 years in all three scenarios.

7. The outlook for natural gas depends on the speed of the energy transition, as increased demand in emerging economies as they grow and industrialize is offset by the transition to lower-carbon energy sources led by by the developed world.

8. Recent energy shortages and rising prices highlight the importance of an orderly transition away from hydrocarbons, so that demand for hydrocarbons declines in line with available supply. The natural decline of existing production sources implies the need to continue investing in oil and natural gas over the next 30 years, including at Net Zero.

9. The global energy system is decarbonizing, led by the growing dominance of wind and solar energy. Wind and solar account for all or most of the growth in power generation, helped by continued cost competitiveness and a growing ability to integrate high concentrations of these variable energy sources into electrical systems. The growth of wind and solar energy requires a significant acceleration of financing and the construction of new capacity.

10. The use of modern biofuels (modern solid biomass, biofuels and biomethane) is growing rapidly, helping to decarbonize difficult-to-decarbonize sectors and processes.

11. Low-carbon hydrogen plays a fundamental role in the decarbonization of the energy system, especially in industrial and transport processes and activities that are difficult to decarbonize. Low-carbon hydrogen is dominated by green and blue hydrogen, and green hydrogen is gaining importance over time. Hydrogen trade is a mix of regional gas pipelines transporting pure hydrogen and global maritime trade in hydrogen derivatives.

12. Carbon capture, utilization and storage play a key role in rapid decarbonization trajectories: they capture emissions from industrial processes, act as a source of carbon dioxide removal and reduce emissions from the use of fossil fuels .

13. For the world to achieve deep and rapid decarbonization, various carbon dioxide removal techniques are needed, such as bioenergy combined with carbon capture and storage, natural climate solutions and direct airborne carbon capture with storage.

The future of global energy is dominated by four trends: declining role for hydrocarbons, rapid expansion in renewables, increasing electrification, and growing use of low-carbon hydrogen

Source: BP Energy