The Energy Transition Outlook is DNV’s best estimate of how the energy transition will unfold over the next 30 years, based on real-world expertise of thousands of DNV experts around the world.
The report clearly shows that the world needs vastly more green electricity, both direct and indirect, more biofuel, and more carbon capture and storage on a dramatically accelerated timescale. And it needs to happen now. Between floods, wildfires, heatwaves, and Arctic de-icing, we are already seeing the devastating consequences of global warming setting in.
Towards a 2.3℃ future
In DNV’s first Outlook, published back in 2017, we predicted that by 2050 the world’s energy system would be split 50% fossil and 50% non-fossil. In our 2021 report, we are making the same prediction. This means that the energy transition has not accelerated and that we most likely are headed towards a global warming of 2.3 degrees Celsius by the end of this century compared with pre-industrial levels.
Our Outlook shows that COVID recovery spending has been a lost opportunity for a green reset of economic activity. The almost-20 trillion dollars spent to stimulate the economic recovery over the past 20 months have mainly been directed towards building back the existing economic and industrial engine. There are exceptions to this, notably in EU. But on a worldwide basis the impact of COVID spending on the pace of the transition is marginal.
Encouragingly however, electricity is growing – and greening – very rapidly. In the space of just one generation, we are going to have more than double the electricity of today and it will become very green.
Moreover, efforts to increase energy efficiency will accelerate over the next 30 years. Energy efficiency is our biggest tool in tackling climate change. But it is often very difficult to invest in - because efficiency gains tend to be shared across value chains. What our Outlook shows, is that we need government incentives and regulations, and a lot more industry co-operation on global standards.
Tackling hard-to-abate sectors
But even if all this electricity was 100% renewable from this day forward, we would still not meet the ambitions of the Paris Agreement.
Indeed, the hard-to-abate sectors are sectors that cannot easily be electrified directly. They include high heat processes in manufacturing, aviation, shipping, and heavy-duty trucking, and they are slowing the transition and significantly impeding the achievement of the Paris Agreement.
Combined, these sectors currently account for around 35% of global energy-related emissions, and the challenge is that they cannot easily be electrified directly. Although some progress is being made, the overall picture is that these sectors reduce their emissions by only 33% by 2050, while all other sectors combined reduce emissions by 55%.
Hydrogen is seen as the main decarbonization alternative for the hard-to-abate sectors, with biofuels in a supporting role, mainly in aviation. But hydrogen will only start to scale from the late 2030s, reaching competitiveness in the 2040s, and meeting only 5% of global energy demand by 2050. The hard-to-abate sectors are therefore likely to require government intervention – incentive schemes, innovation funding, and mandates – to accelerate decarbonization.