In early 2023, BP issued its new Energy Outlook considering the recent disruption to global energy supplies and associated impacts on global prices, and exploring how this could affect the energy transition out to 2050.
ccording to the report, the following trends help shape our core beliefs about how the energy system may evolve over the next 30 years.
#1 The carbon budget is running out: Despite the marked increase in government ambitions, CO2 emissions have increased every year since the Paris COP in 2015 (bar 2020). The longer the delay in taking decisive action to reduce emissions on a sustained basis, the greater are the likely resulting economic and social costs.
#2 Government support for the energy transition has increased in a number of countries, including the passing of the Inflation Reduction Act in the US. But the scale of the decarbonization challenge suggests greater support is required globally, including policies to facilitate quicker permitting and approval of low-carbon energy and infrastructure.
#3 The disruption to global energy supplies and associated energy shortages caused by the Russia-Ukraine war increases the importance attached to addressing all three elements of the energy trilemma: security, affordability, and sustainability.
#4 The war has long-lasting effects on the global energy system: The heightened focus on energy security increases demand for domestically produced renewables and other non-fossil fuels, helping to accelerate the energy transition.
#5 The structure of energy demand changes: The importance of fossil fuels declining, replaced by a growing share of renewable energy and by increasing electrification. The transition to a low-carbon world requires a range of other energy sources and technologies, including low-carbon hydrogen, modern bioenergy, and carbon capture, use and storage.
#6 Oil demand declines over the outlook, driven by falling use in road transport as the efficiency of the vehicle fleet improves and the electrification of road vehicles accelerates. Even so, oil continues to play a major role in the global energy system for the next 15-20 years.
#7 The prospects for natural gas depend on the speed of the energy transition: With increasing demand in emerging economies as they grow and industrialize offset by the transition to lower carbon energy sources, led by the developed world.
#8 The recent energy shortages and price spikes highlight the importance of the transition away from hydrocarbons being orderly: Such that the demand for hydrocarbons falls in line with available supplies. Natural declines in existing production sources mean there needs to be continuing upstream investment in oil and natural gas over the next 30 years.
#9 The global power system decarbonizes: Led by the increasing dominance of wind and solar power. Wind and solar account for all or most of the growth in power generation, aided by continuing cost competitiveness and an increasing ability to integrate high proportions of these variable power sources into power systems. The growth in wind and solar requires a significant acceleration in the financing and building of new capacity.
#10 The use of modern bioenergy – modern solid biomass, biofuels and biomethane – grows rapidly: Helping to decarbonize hard-to-abate sectors and processes.
#11 Low-carbon hydrogen plays a critical role in decarbonizing the energy system: Especially in hard-to-abate processes and activities in industry and transport. Low-carbon hydrogen is dominated by green and blue hydrogen, with green hydrogen growing in importance over time. Hydrogen trade is a mix of regional pipelines transporting pure hydrogen and global seaborne trade in hydrogen derivatives.
#12 Carbon capture, use and storage plays a central role in enabling rapid decarbonization trajectories: Capturing industrial process emissions, acting as a source of carbon dioxide removal, and abating emissions from the use of fossil fuels.
#13 A range of methods for carbon dioxide removals: Including bioenergy combined with carbon capture and storage, natural climate solutions, and direct air carbon capture with storage – will be needed for the world to achieve a deep and rapid decarbonization.
The use of low-carbon hydrogen grows as the world transitions to a more sustainable energy system, helping to decarbonize hard-to-abate processes and activities in industry and transport.
- The growth of low-carbon hydrogen during the first decade or so of the outlook is relatively slow, reflecting both the long lead times to establish low-carbon hydrogen projects and the need for considerable policy support to incentivize its use in place of lower-cost alternatives. The demand for low-carbon hydrogen by 2030 is between 30-50 Mtpa in Accelerated and Net Zero, the majority of which is used as a lower carbon alternative to the existing unabated gas- and coal-based hydrogen used as an industrial feedstock in refining and the production of ammonia and methanol.
- The pace of growth accelerates in the 2030s and 2040s as falling costs of production and tightening carbon emissions policies allow low-carbon hydrogen to compete against incumbent fuels in hard-to-abate processes and activities, especially within industry and transport. Demand for low-carbon hydrogen rises by a factor of 10 between 2030 and 2050 in Accelerated and Net Zero, reaching close to 300 and 460 Mtpa (35-55 EJ) respectively.
- The use of low-carbon hydrogen in iron and steel production accounts for around 40% of total industrial hydrogen demand by 2050 in Accelerated and Net Zero, where it acts as an alternative to coal and natural gas as both a reducing agent and a source of energy. The remaining industrial use of hydrogen is in other parts of heavy industry, such as chemicals and cement production, which also require high-temperature heat processes. By 2050, low-carbon hydrogen accounts for around 5-10% of total final energy used in industry in Accelerated and Net Zero.
- The use of hydrogen within transport is heavily concentrated in the production of hydrogen-derived fuels used to decarbonize long-distance ransportation in marine (in the form of ammonia, methanol, and synthetic diesel) and in aviation. These hydrogen-derived fuels account for between 10-30% of final aviation energy demand by 2050 and 30-55% of final energy use in the marine sector in Accelerated and Net Zero. Most of the remainder is used directly in heavy duty road transport. By 2050, low-carbon hydrogen and hydrogen-derived fuels account for between 10-20% of total final energy used by the transport sector in Accelerated and Net Zero.
- The production of some hydrogen derived fuels requires sources of carbonneutral feedstocks. These can be derived from either biogenic sources or from direct air capture.