Editorial comment
The last couple of months has seen the publication of two ‘Energy Transition Outlook’ reports; one from Wood Mackenzie1 and the other from DNV.2 Both reports provide a forecast to 2050, and both are downbeat about the prospect of hitting the Paris Agreement goal of limiting global warming to 1.5°C by mid-century. Wood Mackenzie believes that the world is currently on a 2.5°C warming trajectory by 2050, while DNV’s ‘most likely’ forecast translates to global warming of 2.2°C by the end of this century.
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Both reports stress that while achieving the 1.5°C target is now extremely difficult, it is still possible, and actions taken in the next decade will determine whether the world can be at, or very near, net zero by mid-century. For DNV, CO2 emissions would need to halve by 2030 in order to meet the 1.5°C target, but its current forecasts suggest that this will not even happen by 2050. According to Wood Mackenzie, a minimum investment of US$2.4 trillion/yr in renewables, infrastructure and energy transition technologies is required to achieve net zero by 2050.
The current geopolitical landscape has had a significant impact on both forecasts. “The pathway to net zero was always going to be challenging, but Russia’s invasion of Ukraine has made it more difficult especially in the near term. The conflict quickly curtailed the global supply of energy and metals [...] supply security fears increased around the world, and higher prices across energy and mining commodities have fuelled inflation,” explains Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie.
The Ukraine conflict has seen greater emphasis placed on energy security, with a ‘grab for gas’ and a reversion to coal in some regions. Prakash Sharma, Vice President, Scenarios and Technologies Research at Wood Mackenzie, notes that oil and gas have a role to play as part of a managed energy transition: “There will be a natural depletion as low and zero carbon options develop but supply still needs to be replenished as we move towards net zero.” Wood Mackenzie’s ‘base case’ (its most likely forecast) suggests that fossil fuels will account for 69% of end-use energy demand in 2023, falling to 53% by 2050. DNV expects fossil fuels to be 48% of the primary energy mix by mid-century, with gas maintaining a high share of the primary energy supply mix throughout the forecast period. DNV also notes that the use of fossil fuels for non-energy purposes (e.g. as a feedstock in plastics, petrochemicals, etc.) will grow over the forecast period.
Both reports also point to the importance of emerging technologies, such as hydrogen and CCUS projects, which are moving out of the pilot phase and becoming mainstream. In DNV’s forecast, hydrogen must account for approximately 15% of the world’s energy demand by 2050 in order to meet the Paris Agreement targets, while Wood Mackenzie has this figure at 11%. Both report that global adoption of hydrogen is likely to fall significantly below these figures, with DNV projecting that it will stand at 5% in 2050, and Wood Mackenzie’s base case estimating 4%. Despite this, DNV notes that hydrogen will spur industry transforming changes, and expects developments in hydrogen technology and infrastructure to be significant over the next three decades.
If you’re interested in keeping up-to-date with the latest developments in the hydrogen sector, please register for a free subscription to our sister publication, Global Hydrogen Review, by visiting: www.globalhydrogenreview.com/magazine.
- ‘2023 Energy Transition Outlook’, Wood Mackenzie, (September 2023).
- ‘Energy Transition Outlook 2023’, DNV, (October 2023).
