BP Foresees ‘Unprecedented’ Fall in Fossil Fuel Demand
Date: September 16th 2020
Author: Tanja Srnovršnik
The share of fossil fuels – coal, oil and natural gas – will fall from around 85% of primary energy in 2018 to between 65% and 20% by 2050 under the three scenarios presented in BP’s 2020 benchmark Energy Outlook. “This corresponds to a decline in the absolute demand for fossil fuels over the next 30 years and is entirely unprecedented,” noted BP’s chief economist, Spencer Dale. Meanwhile, growth in primary energy will be dominated by renewables, with their share increasing from 5% in 2018 to between 20 and 60% by 2050. This growth in renewables will be aided by the increasing role of electricity as the world continues to electrify.BP’s ‘rapid’, ‘net zero’ and ‘business as usual (BAU)’ scenarios all predict that oil demand will fall over the next 30 years: 10% lower by 2050 in the ‘BAU’ scenario, around 55% lower in the ‘rapid’ scenario, and 80% lower in the ‘net zero’ scenario.
While in the ‘BAU’ scenario demand plateaus in the early 2020s, in both the ‘rapid’ and ‘net zero’ scenarios oil demand never fully recovers from the fall caused by COVID-19, noted Dale.
Thus, after peaking in 2019, oil demand is expected to fall by 2050 to a little below 50Mb/d in the ‘rapid’ scenario and to around 25Mb/d in the ‘net zero’ scenario.
“The outlook for oil consumption is more resilient in the ‘BAU’ scenario, with demand recovering to around its pre-COVID levels, where it remains for the next 10-15 years, before edging gradually lower to around 90Mb/d by 2050,” explained Dale.
“The decline in oil demand is driven by the increasing efficiency and electrification of road transportation. In all three scenarios the use of oil in transport peaks in the mid- to late-2020s. The share of oil in meeting transport demand falls from over 90% in 2018 to around 80% by 2050 in the ‘BAU’ scenario, but to 40% in the ‘rapid’ and to just 20% in the ‘net zero’ scenarios,” said BP.
More resilient outlook for gas
Meanwhile, the outlook for natural gas is more resilient than for oil in all three scenarios, as it is “helped by broad-based demand and the increasing availability of global supplies,” said Dale.
However, global gas demand varies significantly across the scenarios. It peaks in the mid-2030s in the ‘rapid’ scenario and in the mid-2020s in the ‘net zero’ scenario, and in these two scenarios demand is broadly similar to 2018 and around a third lower respectively by 2050.
In the ‘BAU’ scenario, gas demand increases throughout the next 30 years to be around a third higher by 2050.
“Natural gas can potentially play two important roles in an accelerated transition to a low carbon energy system: supporting a shift away from coal in fast growing, developing economies where renewables and other non-fossil fuels may not be able to grow sufficiently quickly to replace coal; and combined with carbon capture, use and storage (CCUS) as a source of (near) zero-carbon power,” said BP.
Gas combined with CCUS accounts for between 8-10% of primary energy by 2050 in the ‘rapid’ and ‘net zero’ scenarios.
Significant acceleration of build out of renewables needed
Renewables are seen by BP as the fastest growing source of energy over the next 30 years in all the scenarios. The share of primary energy from renewables is set to grow from around 5% in 2018 to 60% by 2050 in the ‘net zero’ scenario, 45% in the ‘rapid’ scenario and 20% in the ‘BAU’ scenario.
According to BP, wind and solar power dominate this growth, underpinned by continuing falls in development costs, lower in 2050 by around 30% and 65% for wind and solar respectively in the ‘rapid’ scenario and by 35% and 70% in the ‘net zero’ scenario.
“The growth requires a significant acceleration in the build out of renewable capacity. In the ‘rapid’ and ‘net zero’ scenarios the average annual increase in wind and solar capacity over the first half of the outlook is around 350 GW and 550 GW respectively, compared to the annual average of around 60 GW since 2000,” said BP.
Move to greater electrification
“The strong growth in renewable energy goes hand-in-hand with the increasing electrification of the energy system,” said Dale.
Growth in electricity demand over the next 30 years is very similar in all three scenarios at around 80%.
By 2050 the share of electricity in total final consumption increases from a little over 20% in 2018 to 34% in the ‘BAU’ scenario, 45% in the ‘rapid’ scenario, and over 50% in the ‘net zero’ scenario.
“The shift to a lower carbon energy mix in the power sector is essential to decarbonising the energy system. A move to greater electrification – be it in transport, heating or industrial processes – is of little use if the energy used to generate that electricity is not decarbonised,” stressed Dale.
The carbon intensity of power generation by 2050 in the ‘rapid’ scenario falls by 90%, compared with just 50% in the ‘BAU’ scenario. “Indeed, the power sector remains the largest source of carbon emissions in 2050 in the ‘BAU’ scenario,” noted Dale.
In contrast, in the ‘net zero’ scenario, “the increasing use of bioenergy combined with CCUS means that carbon dioxide emissions from the power sector are net negative by 2050,” added Dale.
Increasing roles for hydrogen and bioenergy
As the energy system progressively decarbonises, there are increasing roles for both hydrogen and bioenergy, according to BP.
“Use of hydrogen increases in the second half of the outlook in the ‘rapid’ and ‘net zero’ scenarios, particularly in activities which are harder or more costly to electrify. By 2050, hydrogen accounts for around 7% of final energy consumption (excluding non-combusted) in the ‘rapid’ and 16% in the ‘net zero’ scenario,” said BP.
The production of hydrogen in both scenarios is dominated by so-called ‘green’ and ‘blue’ hydrogen. ‘Green’ hydrogen is made by electrolysis using zero-carbon power; while ‘blue’ hydrogen is mainly extracted from natural gas combined with CCUS.
The shift away from fossil fuels and towards a low carbon energy system in the ‘rapid’ and ‘net zero’ scenarios also leads to an increasing role for bioenergy, including liquid biofuels used largely in transport, biomethane which can substitute natural gas, and biomass used predominantly in the power sector.
By 2050, bioenergy accounts for around 7% of primary energy in the ‘rapid’ scenario and almost 10% in the ‘net zero’ scenario.
The world is currently ‘on an unsustainable path’
BP also warned that the world is currently on “an unsustainable path: the scenarios show that achieving a rapid and sustained fall in carbon emissions is likely to require a series of policy measures, led by a significant increase in carbon prices. These polices may need to be further reinforced by shifts in societal behaviours and preferences.”
“Delaying these policies measures and societal shifts may significantly increase the scale of the challenge and lead to significant additional economic costs and disruption,” stressed BP.
This article is available also in Slovene.