Electricity production is on a sustained charge
Renewable cost reductions and increasing storage availability will fuel exponential electricity growth
Electricity will more than double its share in global final energy demand by 2050, rising from 19pc today to 40pc in mid-century, according to our estimate of the most likely outcome of the ongoing energy transition. The forecast is based on our Energy Transition Outlook model that captures data and insights of hundreds of colleagues working on oil, gas, wind and solar power worldwide.
Using electricity rather than fossil fuels is more energy efficient in many applications, such as vehicle propulsion. Consequently, using more electricity typically reduces final energy demand. Moving from thermal to wind, solar and hydropower also improves the energy system efficiency, as thermal power plant heat losses are typically more than half. A rapid uptake of wind and solar power, which are close to 100pc efficient, will boost the average efficiency of electricity.
Our Outlook model sees world electricity demand comfortably more than doubling (+125pc) to 2050 (see Figure 1). Among key end uses, growth in electricity demand between 2017 and 2050 will be 87pc for manufacturing, 92pc for buildings, and a 30-fold increase for the transport sector. Buildings will still be the largest sectoral user, accounting for 39pc of global electricity demand in 2050 compared with 32pc for manufacturing. Electrification of road vehicles will see the transport sector’s share in world electricity demand rise from 1.3pc to 17pc over the same period.
The high uptake of solar and wind results from further significant cost declines in renewables (see Figure 2). We forecast a cost reduction of one third from now through to 2050 in real terms for renewable power generation. Note that we have already seen a cost decline of twice that since 2000. Fractional learning rates will continue at current levels; but, as new technologies mature, annual percentage cost reductions will slow as the doubling time for installed capacity lengthens. For investors, it is also clear that regional effects and cost dynamics will continue to differ within the same technology areas.
The historical cost learning rate for both offshore and onshore wind’s core technology has been around 16pc per doubling of installed global capacity, and we assume this to continue unaltered through to 2050. For unit operation-and-maintenance costs, we expect the learning rate for wind to remain at half the core technology learning rate; i.e. an 8pc decline for every doubling of accumulated capacity. In contrast, we estimate the learning rate at just 1pc for future labour costs associated with installing wind power (see Figure 3).
By 2050, solar photovoltaics (PV) will be the leading source of electricity, providing 33pc, with onshore wind following at 18pc. An additional 14pc will be provided by hydropower. The role of fossil fuels in power supply will still be central in some regions, such as North East Eurasia and the Middle East and North Africa, due to lack of financial support and infrastructure for renewables.
In developed regions, fossil fuels will become increasingly marginal in terms of their share in electricity supply. Their role will be mainly to provide flexibility and back-up to the power system when variable renewable energy sources are not available. This role will be met especially through low-capital expenditure, gas-fired power stations. Fossil fuels will generate 18pc of the power needed in 2050, and nuclear will provide 4pc. Nonetheless, dispatchable power will still be price-setting and hence continue to play a pivotal role in the power system. Therefore, we are still likely to see considerable attention being paid to fossil-fuel generation, despite its declining weight in electricity supply.
Solar and wind power is not dispatchable, and the power system needs to interact with various technologies and solutions to provide mechanisms to always balance demand and supply. Energy storage is foremost among such flexibility options.
Water reservoirs are currently the main global source of energy storage, and pumped hydroelectric energy storage (PHES) in particular will continue to play an important role. However, batteries will provide the main source of flexibility in the future as they become ever more attractive for this purpose. Their cost effectiveness will continue to improve amid steeply falling battery prices, increasing output volumes and intensive development efforts worldwide.
In developed regions, fossil fuels will become increasingly marginal in terms of their share in electricity supply
Increasing digitalisation will enable electricity demand shifting to periods when supply is plentiful. Almost 75pc of passenger vehicles will be electric in 2050, and 50pc of commercial ones. They will also serve as demand response, as they will more likely be charged when power prices are low. This will also contribute to the demand-supply electricity balance.
Until now, lithium-ion (Li-ion) batteries in consumer electronics have dwarfed both electric vehicle (EV) and bespoke Li-ion batteries for power system support. This dominance has been a major contributor to Li-ion cost reduction so far. The consumer-electronics battery category will continue to grow, but will soon be outstripped by EV batteries and, later, by bespoke grid batteries (both Li-ion and Redox Flow). By 2050, two-thirds of the power-sector’s electrical-storage needs will be met by EV batteries, and about a sixth by each of the two bespoke storage technologies. Only 0.5pc of storage requirements will come from consumer electronics. Total battery-based storage will still be only two-thirds the size of PHES.
Hydrogen (H2) can and will be produced when solar and wind power prices would otherwise be close to zero. It will then be used in buildings, transport, and industrial applications. When electricity is converted to hydrogen gas by electrolysers (power-to-H2), it may be stored, and even reconverted to electricity again. However, each conversion uses a significant amount of energy. It means that even with low electricity prices, with round-trip energy losses of more than 50pc, this storage option will remain marginal.
Professor Bent Erik Bakken, Senior Principal Scientist, DNV GL Energy Transition Research