DNV Group President and CEO Remi Eriksen delivered good news regarding peak fossil fuel emissions and sobering news about the likelihood of achieving net zero by 2050 during the launch of DNV’s “Energy Transition Outlook 2024: A Global and Regional Forecast to 2050.”
Coal, oil, and gas emissions are expected to peak this year, indicating the energy transition is progressing, although the world is unlikely to reach net zero by 2050, according to a report by DNV.
As DNV launched its “Energy Transition Outlook 2024: A Global and Regional Forecast to 2050” report in London on 9 October, DNV Group President and CEO Remi Eriksen said the outlook shows the most likely outcome is a 50/50 split of fossil fuels versus non-fossil fuels in the 2050 energy mix (Fig. 1) and an associated 2.2°C of warming by 2100. Currently, fossil fuels supply about 80% of the energy mix.
“We’ve decided not to issue a pathway to net zero report this year. We believe that achieving net zero by 2050 is, for all practical purposes, out of reach,” he said. “However, that does not mean the target is irrelevant, because every effort must still be made to keep global warming as far below 2 degrees as possible.”
The forecast flags 2024 as the likely year of peak oil, gas, and coal emissions (Fig. 2).
“Our forecast does show that, from next year onwards, emissions are likely to start declining. Sadly, that decline is too slow for net zero by 2050, and our forecast is that we are heading for 2.2 degrees Celsius of global warming by the end of this century,” he said. “The world has, in fact, already been at 1.6 degrees above the preindustrial average for the past 12 months.”
In the current outlook, Eriksen wrote that, in 2023, “the global energy transition had not truly started. Clean energy had not started replacing fossil energy in absolute terms. Now, one year later, we have reached that point. 2024 is the year that the global energy transition has begun; it is also the year that emissions are likely to peak.”
He said that, compared with the 2023 outlook, China’s competitive clean technology is speeding the path to decarbonization more rapidly than projected and that uptake on solar is rising, partly because of falling prices for solar and batteries. On the other hand, he said, the more-expensive hydrogen and carbon capture projects are struggling.
Renewables Projections
According to the report, solar power has seen “remarkable” growth over the past 20 years. In 2004, annual solar installations were 1 GW, while 2019 saw 100 GW of solar installations.
“Even amidst disruptions in 2021 caused by the COVID-19 pandemic and geopolitical tensions in northeast Eurasia, solar PV [photovoltaic] added 150 GW. In 2023, installations reached nearly 400 GW. The future looks promising, with our projections indicating global installations will rise to about 540 GW annually by 2040,” the report says.
While wind provided 7% of grid-connected electricity generated in 2023, the report forecasts global wind electricity will contribute 28% of global electricity generation by mid-century. By 2050, the outlook forecasts total global wind power capacity at 6.3 TW, up from 1.0 TW in 2023. Offshore wind has not expanded as rapidly as was expected, largely because of supply chain issues and cost inflation, according to the report.
The report forecasts hydropower generation to expand by about 50% by 2050, although the expanded contribution of solar and wind over the same period will keep hydropower’s contribution to global grid electricity generation to below 11% in 2050 (Fig. 3).
Nuclear energy output is expected to grow 2% year-on-year from today’s levels for the next decade, according to the report. The report forecasts that most added capacity through 2030 will be based on site-built, large-scale reactors that are already in the pipeline and that, in the following years, additional capacity will likely be a mix of site-built and factory-manufactured small modular reactor power plants. The report forecasts nuclear energy output peak at 3,400 TW-h/yr by 2050, which is 30% higher than current levels.
According to the report, bioenergy will remain an important part of the energy supply, contributing 12% of primary energy in 2050.
The report sees solar thermal, concentrated solar power, geothermal, nuclear fusion, and ocean energy as likely to provide marginal contributions to the global energy mix by 2050 (Fig. 4).
Fossil Fuels Projections
Overall, fossil fuels account for 80% of the global primary energy supply and have contributed this percentage for several decades. The outlook forecasts “a dramatic change as renewable energy rapidly grows to take its place,” such that the contribution of coal, oil, and natural gas to the energy mix will shrink to 50% by mid-century (Fig. 5).
According to the report, annual global coal demand reached a peak of 8.7 Gt in 2023 but coal use is expected to fall to about one-third of its current level by 2050.
Oil, which in 1964 surpassed coal as the largest contributor to the energy supply, has provided about 30% of the energy mix over the past decade. In 2023, global oil demand was 89 million BOPD. The report forecasts oil to continue to do so through 2027, after which its contribution is projected to gradually decline to 18% in 2050.
The report forecasts natural gas will surpass oil’s contribution to the energy mix by the mid-2030s to become the world’s leading energy source. According to the report, annual natural gas demand in 2023 was 4,920 Bcm, and it’s expected to peak around 5,200 Bcm before gradually declining to 4,420 Bcm, or 22% of the energy mix, by 2050.
Hydrogen and CCS
Eriksen said the least progress is being made with hydrogen and carbon capture and storage (CCS) technologies, which are critical for decarbonizing hard-to-electrify sectors.
“Many of the first commercial hydrogen energy projects that have been trying to get off the ground have stalled due to cost overruns and, in some cases, have been abandoned due to market uncertainty,” he said.
According to the report, hydrogen and its derivatives need to supply 15% of the world’s energy by 2050 to meet Paris Agreement goals, but projections indicate falling well short of that. The outlook forecasts hydrogen and its derivatives to compose only 0.25% of the global energy mix by 2030 and 4% by 2050. The report attributes this forecast partially to spiraling costs for the first hydrogen-for-energy projects as well as the lack of policies that can subsidize hydrogen at the level required for a fast ramp-up.
“The chicken and egg problem is that, to get to the more viable $2 per kilogram level that we project in our report for the 2040s, hydrogen needs to progress to a learning curve that only can come from mass installations,” Eriksen said. “The same scaling costs challenge applies for carbon capture and storage as well.”
Sarah Kimpton, DNV’s low carbon lead, said during the launch event, “We can’t reach net zero without hydrogen. We’re not going to get to the 2050 targets without hydrogen. We absolutely need it.”
She said regulations that allow for international collaboration on regulations and standards will be important.
“We also need to think very carefully about permitting and planning, because … NIMBYism, people not wanting the new pylons or the new pipes or stuff near to where they live, but they want the energy transition to happen,” Kimpton said.
Further, she said permitting, planning, and trading standards would help create confidence for investment in hydrogen projects.
Storegga Executive Chairman Nick Cooper said during the launch event that there are three main factors to progressing hydrogen and carbon capture projects.
“Point 1 is you need patient capital, private sector capital,” he said, noting that, while there is a lot of capital available for such projects, there have been some frustrations. “It’s getting exasperated by some policy changes in some of the leading countries.”
The second point is some form of carbon price, proxy, or carbon incentive, he said.
“You need $8,250 a ton for these hard-to-abate industries to really start to move as a herd and start to be incentivized to decarbonize,” he said.
Finally, Cooper said, stable and consistent policy is necessary for investors and companies alike to believe a business model exists and is there to stay.
“You need consistent policy and policy rollout. Ironically, we’re seeing better conditions at the moment in countries that started later but which are more centrally planned economies, because they have got their nationally defined contributions, and they are taking the 15-year view. And they may have started from a later, lower point, but they are more consistent and more reliable as partners,” he said.
Emmanuel Lagarrigue, partner and global co-head of climate at KKR, said during the launch event that he thinks of the technologies needed for global decarbonization as though they are on a conveyor belt moving toward technology maturity.
“Over the next 10 to 15 years, all those technologies will come to maturity and will be more and more investable by, first, venture capitalists and then people at a later stage and then early-stage investors,” he said. “What’s happening in solar today—solar and batteries—may well happen in hydrogen or in CCS in 10 to 15 years from now. We just have to be a bit patient.”
He said factors include regulations, policies, and building supply chains contribute to shifting away from a fossil fuel-based economy toward a renewable-based economy.
“We’re talking about a lot of capital and a lot of things that need to change, so it’s going to take a bit of time, but it’s happening,” Lagarrigue said.
Duncan Clark, head of UK and Ireland for Ørsted, said during the launch event that, even though hydrogen projects are facing challenges to move forward, it’s critical that they do so.
“It’s very important that we get started with as many real projects as possible. We’ve got to get on that maturity curve,” he said. “We’ve got to start learning by doing.”
Learning by doing requires investments, however.
“You won’t be able to secure decent investment if unrealistic risks of demand or maybe some of the supporting infrastructure for transport and storage, if those things are not there, then let’s not expect the money to flow quickly,” Clark said. “We need to move from exploratory projects to really major deployment of capital.”
Additionally, regulatory frameworks are needed to create an attractive environment for the projects, he said.
“I think we’ll see exactly the same exploration and corrections in the regulatory frameworks as we will with the technical solutions. There will be deployments which are very successful. There will be others which turn out to be dead ends, and the same will happen with the regulation,” Clark said.
Conflict, Policy, Economics
Eriksen said one challenge is that nations are “kicking the hard-to-electrify can down the road.”
One reason is that countries are diverting more of their budgets to military spending away from energy transition investments, he said. Additionally, “extreme weather events are draining budgets.”
Inflation and the high cost of borrowing also have had an effect on investments, he noted.
“It’s not simply a question of funding. Governments at all levels must do a much better job of tackling NIMBYism and permitting delays, because those challenges are making renewal projects less profitable in several regions,” he said.
Geopolitics, including ongoing conflict in the Middle East and Russia’s war with Ukraine, can influence countries to focus more on energy security and back renewable energy efforts.
“You have a more conflict-ridden world but, on the positive side, one where energy security concerns mainly align with decarbonization,” Eriksen said.
With these year-over-year changes, the report projects a similar pace of progress as in the previous report.
Beyond factors such as geopolitics and economic priorities that come into play when working toward the energy transition is the unexpected, David Cairns, Equinor’s vice president of political and public affairs, said during the outlook launch.
“In the last year, we would not have expected there to be a war in the Middle East. Three years ago, we would not have expected Russia to invade Ukraine. Five years ago, we would not have expected COVID,” he said. “So, if we look ahead for 5 years, there is going to be stuff that happens that we are not anticipating now, and we will have to adjust and react to that.”
Sverre Alvik, DNV’s outlook project director, said technology, economy, policy, and behaviors can all affect how the energy transition unfolds. The report shows a most likely future, he said, but it could move either direction.
“We could see geopolicy not make it 2.2, but 2.3, or 2.4. We could see policies, because you vote your preferences, move it in the wrong direction. But that’s not what we can afford. We need to move it in the right direction,” he said. “We need to see technology say, ‘I can offer you … 0.1 degree.’ ”
Further, he said, “We need to see economies say that ‘We can offer you 0.1 degree.’ We need to see policy say, ‘We can offer you another 0.1’ and behavior, another 0.1. And then, suddenly, did I hear a 1.9? Did I hear 1.8?”
