Grids, Renewables to Take Lion's Share of Energy Spending: DNV GL

It will cost an eye-watering $30 trillion of investment over 30 years to develop the world's energy systems so that they keep up with growing demand, says DNV GL in its Energy Transition Outlook 2018. 

It will though be affordable: energy consumption per capita will fall sharply in more developed regions: if the average European now uses 137 gigajoules/yr, this will be 85 GJ by 2050. As a percentage of gross domestic product, spending on energy will be lower than today.

As the world's population grows and energy poverty is reduced, more of this $30 trillion will go on grid expansion and renewables after 2029, and less will go on fossil fuels: electricity provides 19% of global energy use today but this will rise to 45% by the middle of the century, said CEO Remi Erikson, launching the report September 10 in the former London power station, Bankside – now an art gallery. Of that 45%, solar photovoltaics and wind will provide over two thirds.

But new oilfields will still be needed to replace declining production until 2040, although oil demand will peak in the next ten years; gas demand will grow until 2034 and even by 2050 it will still be "the largest source of energy, by far."

Fossil fuels now account for four-fifths of global energy, but by that date they will account for half. And energy efficiency gains mean that by 2035 the final demand for energy will start to decline: energy intensity falls faster than the global economy will grow, he said. Transport is a key area for decarbonisation: electric vehicles are three times more efficient than the internal combustion engine.  Shipping too will become cleaner with LNG and even electricity, although there will be a big surge as more tankers carry LNG; coal transport by sea will however decline. At home, light-emitting diodes are 50 times more efficient than the equivalent kerosene lamp.

The bad news is that carbon capture and storage, which is the silver bullet that other planners and forecasters assume will be commercially attractive and widespread in the coming decade or so, remains low on the list of solutions. This is partly why DNV GL expects the average temperature of the world to rise by 2.6 C°, massively overshooting the United Nations' carbon budget.

According to DNV GL's bold forecast, the world will emit 390 gigatons more CO2 than allowed by 2050 under the 2°C aspiration of the Paris Agreement, and 990 gigatons to achieve the 1.5°C limit. Even doubling the carbon price from current estimates leads in its model to capturing just 7.6 gigatons of CO2 in 2050, instead of 0.3 gigatons.

Conceding there is a risk in putting such precise numbers in a long-term forecast about energy where unknown unknowns abound he said: "Scenarios have their place in an uncertain world but they confuse more than they clarify. This forecast is our best estimate of what lies ahead." 

The majors go green

DNV GL's project manager for oil & gas, Graham Bennett, told NGW that oil and gas companies were having to diversify and become greener again in order to fit with society's changing expectations. The challenge of the transition from brown to green was keeping the lights on affordably, he said: "Both kinds of energy are needed. Very few people can afford a Tesla."

Naming some European majors, he said they had not all made a success of renewables in their past forays, but they have returned to them with renewed interest. "You need organisations of that size, with strong balance sheets," he said. "We still need oil and gas for some decades, so they need to continue investing. The rate of depletion of fields is faster than the rate of transition."

Much of the future demand for gas depends on steady and rising north American output, where a number of pipelines face threats from environmental objectors to what are still called unconventional oil and gas developments: "The industry has not done a good job of explaining itself," he said. "There are hundreds of wells in the UK onshore that are hydraulically fractured, such as at Wytch Farm. There are some people who form a very strong lobby who oppose refineries and pipelines as they prolong oil and gas.

"But batteries pose risks too: they rely on the extraction of lithium, cobalt, rare earth metals: how are we to mitigate these risks? This is part of the education process for the oil and gas industry: they need to provide support for the battery industry.

"Companies like Shell and Equinor will become more like utility companies. Now they explore and develop oil and gas; in time they will become vertically integrated and sell electricity: they will wind down the one and invest in the other activity. The challenge is to find a balance without the lights going out," he said.