The transition from the fossil fuel age to a low carbon environment is underway and gathering speed under the combined forces of increasingly stringent environmental regulations and technological innovations. In response, oil majors and countries are diversifying into gas as a bridging fuel and renewable energy. As early as the late 2020’s industry experts led by Professor Dieter Helm, New College Oxford, expect the onset of peak demand for oil and gas.
In parallel, the pattern of global energy demand is in transition, as increasing demand comes from developing countries, especially India, China, Africa and South East Asia.
Global energy mix transition
Despite the rapid growth in renewable energy in recent years, fossil fuels continue to dominate. Today’s global primary energy mix is made up of oil at 33 percent, coal at 28 percent, natural gas at 24 percent and nuclear power at 5 percent. Wind, solar, geothermal and biomass account for just over 3 percent but the addition of hydropower boosts renewables’ share to ten percent, reports BP Statistical Review 2017.
The BP Energy Outlook 2018 forecasts a rise in global energy consumption of a third by 2040. Industrial demand will account for half of the increase. In contrast, transport demand slows as electric cars become mass market products. Renewable energy could satisfy as much as 40 percent of the increase in primary energy demand by 2040. However, according to current global forecasts, natural gas will be the fastest-growing fossil fuel at 1.3 percent a year, while demand for coal will continue to flat-line due to tougher environmental regulations. In 2040, the world will have the most diversified fuel mix ever, with oil, gas, coal and non-fossil fuels are each projected to supply a quarter of the world’s energy.
Thirst for power
Almost 70 percent of the increase in primary energy will be used in power generation. Current US Energy Information Agency (EIA) forecasts suggest that electricity generation capacity will increase from 25 trillion kilowatt-hours (kWh) in 2016 to 34.0 trillion kWh in 2040 in response to rising population, urbanisation and increased prosperity. Africa, Latin America and Asia will be the main beneficiaries. In the developed world the trend is for an increase in the number of power grids connected to each other in order to create national and even international markets like the North American and European power grids.
The power sector is a major beneficiary of the transition towards wind, solar, hydro and biomass energy. Renewables share of total power generation is expected to rise at the expense of coal from 7 percent today to around 25 percent by 2040. Although coal’s share could decline from 40 percent today to 30 percent it will continue to dominate global power generation due to its widespread availability and price. The share of gas will stay at around 20 per cent according to BP and oil will contribute some 24 percent. In sum, fossil fuels will continue to dominate the power sector.
Read more BREAKBULK MAGAZINE Energy Issue 3 2018 https://issuu.com/breakbulk/docs/2018_issue_3-issuu/20 page 20 to 29.