BP has published 2018 edition of Energy Outlook, which considers the forces shaping the global energy transition out to 2040 and the major uncertainties surrounding that transition
The Outlook explores the energy transition from three different viewpoints such as fuels, sectors and regions.
“By 2040, oil, gas, coal and non-fossil fuels each account for around a quarter of the world’s energy. More than 40 per cent of the overall increase in energy demand is met by renewable energy,” explained Spencer Dale, group chief economist of BP.
Fuel Analysis
All the demand growth comes from emerging economies. The growth in supply is driven by the US tight oil in the early part of the Outlook, with OPEC taking over from the late 2020s as the Middle East producers adopt a strategy of growing market share. The transport sector continues to dominate global oil demand, accounting for more than half of the overall growth. Most of the growth in energy demand from transport, which flattens off towards the end of the Outlook, comes from non-road (largely air, marine, and rail) and trucks, with small increases from cars and motorbikes. After 2030, the main source of growth in the demand for oil is from non-combusted uses, particularly as a feedstock for petrochemicals.
Natural gas grows strongly over the period, supported by increasing levels of industrialisation and power demand in fast-growing emerging economies, continued coal-to-gas switching and the increasing availability of low-cost supplies in North America and the Middle East. By 2040, the US accounts for almost one quarter of global gas production, and global LNG supplies will more than double. The sustained growth in LNG supplies greatly increases the availability of gas around the world, with LNG volumes overtaking inter-regional pipeline shipments in the early 2020s.
Coal consumption flatlines over the Outlook period, with falls in China and the OECD offset by increasing demand in India and other emerging Asian economies. China remains the largest market for coal, accounting for 40 per cent of global coal demand to 2040.
Renewable energy grows over 400 per cent and accounts for more than 50 per cent of the increase in global power generation. This strong growth is enabled by the increasing competitiveness of wind and solar. Subsidies are gradually phased out by the mid-2020s, with renewable energy increasingly able to compete against other fuels. China is the largest source of growth, adding more renewable energy than the entire OECD combined, with India becoming the second largest source of growth by 2030.
Sector Analysis
Power accounts for about 70 per cent of the increase in primary energy demand. The mix of fuels used in power generation is set to shift materially, with renewable energy gaining share more quickly than any energy source in history, increasing from seven per cent to around a quarter by 2040.
Transport energy demand grows by only 25 per cent despite total demand for transportation more than doubling, reflecting accelerating gains in vehicle efficiency.
The Outlook argues that the penetration of electricity in the transport sector is measured by considering both the number of electric vehicles (EVs) and how intensively each vehicle is used. In the evolving transition scenario, the share of EVs in the global car parc reaches around 15 per cent by 2040 – more than 300mn cars in a car parc of almost two billion. However, the share of passenger car kilometres powered by electricity, which also takes account of the intensity with which electric cars are used, is over 30 per cent. The Outlook shows how the interaction of fully-autonomous cars with shared mobility has the potential to substantially boost the intensity with which electric cars are driven.
Regional Analysis
All the growth in energy consumption is in fast-growing developing economies, China and India accounting for half of the growth in global energy demand to 2040. Through the period China’s energy growth slows as it transitions to a more sustainable pattern of economic growth. India’s slowing in demand growth is less pronounced and by the early 2030s it overtakes China as the world’s fastest growing market for energy. In the latter stages of the Outlook, Africa also plays an increasingly important role in driving energy demand, contributing more to global demand growth from 2035 to 2040 than China.
Carbon Emissions
In the Outlook’s evolving transition scenario, carbon emissions rise by 10 per cent by 2040. While this is far slower than the rates seen in the past 25 years, it remains higher than the sharp decline thought to be necessary to achieve the Paris commitments.
Commenting on the outlook, Bob Dudley, group chief executive of BP, said, “BP’s strategy has to be resilient and adaptable to significant changes in the energy industry. This Outlook considers the possible implications of some of these changes and helps inform our long-term planning. 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.”
