Technological progress and strong policy support are fueling the fast growth of renewable energy, which BP (NYSE: BP) said could increase five-fold to account for about 14% of the world’s primary energy consumption mix by 2040.
Renewable energy, which was pegged as the fastest-growing fuel source, could also expand its share of the global power generation mix from 7% today to about a quarter during the same time frame, according to Evolving Transition (ET) scenario of BP’s Energy Outlook 2018. The ET scenario assumes the pace and nature of governmental policies, technologies and societal preferences will be similar in the future to those of the recent past.
“In the ET scenario renewables gain share in the power sector faster than any energy source in history, the closest parallel being the rapid buildup of nuclear power in the ‘70s and ‘80s,” BP group chief economist Spencer Dale said during a recent webcast on the company’s latest outlook. “But despite that, there must be a chance that renewables will continue to surprise on the upside.”
Renewables’ share of global primary energy consumption could skyrocket from 234 million tonnes of oil equivalent (MMtoe) in 2010 to 2,527 MMtoe in 2040. The anticipated growth is substantial, considering the figure was 2 MMtoe in 1970.
However, BP noted the continuing requirement for oil and natural gas in meeting future energy needs. Combined, oil and natural gas are expected to be the world’s top fuels of choice to consume, accounting for more than half of the world’s energy consumption at 4,836 MMtoe and 4,707 MMtoe, respectively. That puts consumption of gas up from 2,874 MMtoe and oil consumption up from 4,021 MMtoe in 2010.
Even coal, which has been the target of worldwide initiatives in areas seeking cleaner fuel sources, could still be consumed in great amounts—about 3,762 MMtoe in 2040, up from 3,636 MMtoe in 2010, according to the outlook. So it may come as no surprise that the outlook also indicates that carbon emissions continue to rise, “signaling the need for a comprehensive set of actions to achieve a decisive break from the past.”
By 2040 non-fossil fuels—which include renewables, nuclear and hydro would make up 26% of the world’s energy mix—the same percentage as natural gas but just below oil at 27% and above coal at 21%.
“We along with almost all other forecasters have been repeatedly surprised by the strength of renewables in recent years consistently increasing our outlook,” Dale said.
The outlook states that solar costs, for example, drop by about 24% with every doubling of cumulative capacity but gradually slows over the outlook.
“Some of that rapid declining cost stems directly from the pace of technological progress some also reflects the interaction with stronger policy support particularly in China and India, which account for more than half of the outlook revision enabling solar energy to move more quickly down the learning curve,” Dale said. “So have we learned our lesson? Renewable energy is certainly projected to grow rapidly.”
The expected growth comes even as subsidies are gradually phased out by the mid-2020s as renewable energy becomes more competitive with fossil fuels.
But Dale pointed out that if current policy support continues renewables growth could be higher and “surprise us to the upside.”
“In this alternative ‘renewables push’ scenario, renewables account for more than 90% of the growth in power demand over the outlook, with the share of renewables within power reaching over 40% by 2040, compared with 25% in the ET scenario. The stronger growth in renewables crowds out coal and gas to a broadly equal extent,” the outlook said. “This stronger policy push to renewables reduces the carbon intensity of power relative to the ET scenario, although the reduction in the carbon intensity of power is only around half of that achieved in the ‘even faster transition’ (EFT).”
Dale added that the EFT scenario also encouraged increased coal to gas switching and large-scale deployment of carbon capture and storage in addition to supporting renewables.
Still, “the outlook for renewables is unusually uncertain,” he said pointing to varying outlooks from others in the energy industry.
The uncertainty could be a reflection of different views on the pace of technological improvements and level of government support, BP said in the outlook.
The outlook does not predict the likelihood of what is to happen, the company said. Instead, the outlook explores the “possible implications of different judgments and assumptions.”
For BP, which produces renewable energy (wind and biofuels) in addition to fossil fuels, the outlook helps with long-term planning, according to Bob Dudley, group chief executive.
“We cannot predict where these changes will take us, but we can use this knowledge to get fit and ready to play our role in meeting the energy needs of tomorrow,” Dudley said.
Velda Addison can be reached at firstname.lastname@example.org.