Schalk Cloete is creating his own 5-part independent Global Energy Forecast to 2050, to compare with the next IEA World Energy Outlook, due in November. To make his predictions he has created simulations of cost-optimal technology mixes and made his own assumptions over the drivers that will affect them: policy, technology, demand growth and behavioural change are all included. Cloete reminds us that fossil fuels did not reach their dominant position by chance. They are cheap and practical – easy to store, transport and deploy. So, with carbon emission targets in mind, stiffening climate policies and pollution controls will be used to increase their price, favouring clean alternatives particularly in power generation (though his modelling points at nuclear as the only way to displace almost all fossil fuels from the power system in a cost-optimal way). But even then they will be hard to displace from key categories like transport, industry and heating. And Asia’s growing energy demand and the essential need for poverty alleviation will see their widespread use there all the way through to 2050. Overall he predicts that the primary energy consumption of oil and coal will decline, and gas will rise (the easiest way to displace the dirtier coal). But in industry and heating all will see slow but steady growth.
You can read the author’s first article which introduced his methodology. The second covered wind and solar. The next and final two, published here in 2-3 week intervals, will cover nuclear, biomass and CCS; battery electric vehicles. After the IEA WEO 2019 is released he will compare his predictions with theirs. On his journey, Cloete welcomes comments and feedback from our readers.
Introduction
Fossil fuels have dominated the global energy system for a long time. As shown below, data from the BP Statistical Review indicates just how difficult it is to reduce the market share of fossil fuels. Nuclear made some inroads in the 1970’s and 1980’s and, recently, renewables have started making a meaningful impact. But there is a very long way to go…
Fossil fuels did not reach this dominant position by chance. The global energy system looks like it does today because oil, coal and natural gas are highly practical and abundant energy carriers conveniently packaged in liquid, solid and gaseous states. They can be easily stored, traded internationally, and deployed on demand over a wide range of applications.
Fossil fuels are also very cheap. For example, the projected breakeven oil costs in 2030 as determined by Wood Mackenzie are shown below. The average barrel of oil can be produced at about $30, which translates to about $18/MWh, and this cost will drop further when we eventually manage to start reducing fossil fuel demand. In comparison, the average global cost of onshore wind and solar PV in 2018 were $56/MWh and $85/MWh, respectively, according to IRENA.
As climate change policies and other pollution controls continue to improve, the cost of fossil fuels will increase. For example, with a $50/ton CO2 tax, the $18/MWh mentioned above will increase to about $30/MWh. But fossil fuels will remain highly competitive and highly practical for many energy applications.
The global fossil fuel addiction will therefore be difficult to shake. Despite these challenges though, I think the world will make good progress in diversifying away from fossil fuels over coming decades. Transitioning at the speed required by 1.5 °C climate targets is unfortunately not going to happen, and even 2 °C will be very difficult to reach. But the energy mix by 2050 will certainly be much more balanced and much cleaner.
The next sections give my view on how this will play out.
Oil
Being the most widely used and probably the most controversial fossil fuel, oil grabs plenty of headlines. I think, however, that oil’s reign will not last for much longer. My forecast suggests that the world will reach peak oil just before 2030 – around the time I hope that technology-neutral climate and energy policies will be implemented. This peak will then be followed by a relatively steep decline.
As a result, oil’s share of global primary energy will almost halve by 2050. As shown below, this decline is almost in line with the IEA Sustainable Development Scenario (SDS) and well below the central New Policies Scenario (NPS).
The main reason for oil’s decline will be falling demand from the transportation sector. Many factors are at play here. Battery electric vehicles are the most popular, but not the most important factor. Hydrogen fuel cells and biofuels will also play an important role. But continued efficiency increases of internal combustion engine drivetrains, mainly through hybridization, will continue outpacing the contributions from these new drivetrain options.
But my biggest reason for forecasting such a rapid decline in transportation oil consumption is behavioural change. The old model of highly economically inefficient single-person-in-car commutes to work or the mall is slowly going out of fashion. It will be replaced with much more efficient models involving telecommuting, small electric vehicles and virtual shopping in cities built for people instead of cars. Due to the long-lived infrastructure involved, this will not be a fast process, but I believe it will continue gathering momentum as the first couple of pilots demonstrate the vast superiority of this model, both in terms of economic efficiency and quality of life.
While oil demand declines in transportation, it will remain robust in other sectors such as industry and petrochemicals. I even see a bit of an uptick in oil use for power generation towards the end of the forecast period as lower demand reduces prices and the need for highly convenient energy storage increases to ensure the stability and affordability of systems with high shares of variable renewables.
Natural gas
Gas will be the big fossil fuel winner over the next three decades for a number of reasons: It has the lowest CO2 intensity of the three fossil fuels, offers the cleanest combustion, complements wind and solar, has seen considerable innovation in cost-effective production methods, and is increasing its international reach through LNG.
I therefore agree with the IEA that gas demand will continue to grow over the forecast period, taking oil’s throne as the world’s largest energy source shortly before 2040. As shown below, my forecast for gas as a share of primary energy is close to the IEA scenarios, but my electricity forecast is somewhat lower for two reasons: I forecast stronger electricity growth with more renewables than the IEA and, as a result of the higher renewable share, my forecast assumes lower gas power plant capacity factors.
Gas demand in industry will also see robust growth as climate policies increase the competitiveness of gas relative to coal. I also see an uptick in gas use in the transportation sector, both from direct natural gas vehicles and hydrogen production for fuel cell vehicles from steam methane reforming. A particularly promising prospect is flexible power and hydrogen production from natural gas with CO2 capture to simultaneously balance variable renewables and decarbonise sectors other than power.
Fugitive methane emissions will become an increasingly scrutinised issue as gas use continues to grow in magnitude and importance. However, even moderate policy incentives to reduce these emissions can lead to considerable reductions, so I believe this problem will not offer overly strong headwinds to a continued natural gas expansion.
Coal
Despite being the most carbon-intensive of the three fossil fuels, coal refuses to go away in my forecast. The reason for this is simple: Asia. This large continent, home to 60% of the world population and 75% of global coal consumption will secure robust coal demand for decades to come.
Three main causes can be identified. First, almost all of Asia is still developing. The already enormous Asian economy will have to quadruple just to reach Western standards of living, requiring tremendous amounts of cheap energy as well as cement and steel (both large coal consumers). Second, aside from Russia in the far north, Asia is poor in natural gas, the most practical and cost-effective coal substitute. And third, the very high population density of the most energy intensive Asian regions and the lack of natural gas will impose strong limits on the welfare-optimal wind and solar market share.
Coal will continue its terminal decline in the rest of the world (although Africa is a bit of a wild card), but, due to the sheer size of Asia, my coal demand outlook is not far from the central IEA scenario (NPS). Still, coal will be passed by natural gas around 2030 to fall to last place among fossil fuels. In the electricity sector, my forecast for coal market share is lower than the NPS, mainly due to higher electricity demand growth and competition from many cleaner alternatives.
So, despite putting in a strong bid for being the most hated commodity on Earth, I think that coal will stick around for a long time to come. But innovation will continue to make coal cleaner, driven by strong pollution standards on new plants and political pressure to retire old cheap & dirty plants. CCS will also have an important role to play after the belated advent of technology neutrality. Like natural gas, flexible power and hydrogen production from coal with CCS holds great promise.
Thus, in conclusion, coal will continue to frustrate green lobbies for the foreseeable future, but fortunately, its effects will be less severe than feared.
Some perspective on fossil fuel competitiveness
It is in the power sector where fossil fuels face the greatest competition, both from renewables and nuclear. That is why I think essentially all the very strong electricity growth over the next three decades will come from sources other than fossil fuels (see the first article in this series). However, fossil fuels will remain steady due to their central role in power system reliability.
The only technology that can displace almost all fossil fuels from the power system in a cost-optimal way is nuclear power. This is illustrated below using results from the same power system model described in the previous article.
The first two cases (see charts below) show that fossil fuels with conventional CCS retain a high generation share in a cost optimal power mix with a CO2 price of €100/ton when nuclear is not available, even without accounting for the grid-related costs of wind and solar. But the second two cases show the high nuclear share that emerges when nuclear is allowed into the power system. Nuclear takes almost all market share when natural gas is also not available or very expensive (i.e. several large Asian economies).
However, the political headwinds facing nuclear and the political favour enjoyed by wind and solar make the first two cases more likely. In addition, more efficient and flexible next generation CCS plants can significantly boost the competitiveness of gas and coal. For these reasons, fossil fuels are likely to retain a sizable share in the power sector over coming decades.
But the power sector accounts for only about a third of fossil fuels consumption today. These primitive fuels will be substantially harder to displace from other sectors such as transport, industry and heat, and other applications such as petrochemicals.
The figure below shows how I think the use of fossil fuels will change over the next three decades. Consumption in the power sector will decline moderately, with a pronounced coal to gas switch. In the transport sector, fossil fuel use will also slightly decline despite huge increases in the demand for mobility for the reasons outlined earlier in the discussion around oil. However, I think that oil’s decline will be partially offset by some hydrogen and other synfuel production from coal and gas with CCS.
In the remaining sectors (industry, heat, other), however, I think fossil fuel use will continue to see slow but steady growth. This is due to the lack of economically viable alternatives and the fact that most of the global economy is yet to be built. Hopefully, most developing countries would have reached a decent standard of living around 2050, allowing demand for heavy industry to start a natural decline. But before that happens, I’m afraid that industrial fossil fuel demand will remain strong.
So, what do you think? Will the world will find a way to detox from fossil fuels more rapidly than this forecast? How can this be done? I’d be interested to read your views in the comments section!
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Schalk Cloete is a Research Scientist at Sintef
Yunus Bay says
It is almost pure reality that OIL CAN NOT BE ELIMINATED FROIM HUMAN USE. IN fact the price will be cheaper and cheaper as the sustainable energy takes place more andmore. So the scientists must look how to minimise the carbon Emission and control so use oil will be harmless.
Luk says
Hi
Comparing crude oil extraction cost to electricity?
Not a very reasonable comparison.
Electricity from oil is rare so this indicates that something must be off. In this case the refinery costs of 5-10 $/barrel are missing (according to canadianfuels.ca), the cost of the powerplant of at least +25% on fuel price and the efficiency of around 40%. This gives us a price of around 70-80 $/MWh ignoring taxes and CO2 pricing.
Also you point out that oil will be cheaper in the future but not that renewables are getting cheaper as well. The cheapest solar comes at around 20 $/MWh el.
Given the current trends in battery and therefore EV costs it seems not very likely that 40 years from now petrol cars will still be competitive. One needs to considere the increased cost of these vehicles due to emissions rules and the possible increase in fuel prices from CO2 pricing.
There is also a clear contradiction between the forecast of hydrogen fuel cells but more oil consumption in power generation. Either there is so much cheap hydrogen fuel that it is wildely used – or oil is so cheap that it is used instead.
Considering the extremley low cost of solar today in very sunny ares it would be surprising if producing hydrogen from gas and coal with CCS would be price competitive. The fuel cost alone is around the same as the electricity needed for electrolysis. On top of that both technologies need a conversion facility. But coal and gas need a CCS plant on top (to-be-developed) or have to pay for CO2.
Nuclear also has a price issue on top of the political problems. At least in the west no company seems to be able to produce something like a gen IV plant on price and schedule. Also a 90% share in the no gas scenario is highly impractical given the inflexibility of nuclear power plants and the added cost due to lower capacity factors.
On the development side i fuess India would be interesting wo watch. As they seem to curb their ambitions in coal and nuclear for not only cheaper but faster renewables. Also the energy efficiency seems to be higher than anticipated and energy consumption does not grow as fast and as much as expected. As seen in china before where coal power capacity factors are well below profitable levels for the markes as a whole.
Schalk says
Thanks, that’s a good summary of the uncertainties in this forecast. Let me give some clarifications below.
About the simple price comparison, note that I’m talking here about value. Oil is extremely valuable because of it is so easily stored and traded over long distances. For that reason, it is responsible for almost all transportation. If we assume that long-range electric car costs fall to the level of gasoline hybrids, the electric cars will be about twice as efficient, but the added costs of electricity transport and distribution will greatly increase the effective cost at the plug. For example, if we assume that renewable electricity and oil end up at about the same global average cost of $30/MWh, we need to add about $10/MWh for oil refining and distribution, but $50-200/MWh (mostly depending on the charging speed) for electricity transmission and distribution. And this is not even taking into account the value decline and added grid costs of variable renewables. Thus, when all is tallied up, the gasoline hybrid remains highly competitive.
Yes, it will be very interesting to follow battery price developments over coming years. But keep in mind that cost is not the only factor. I’ve written several articles based on real-world data from the US and Norway showing that electric car share is low, even when subsidies bring effective battery costs to zero. You need massive incentives, bringing effective battery costs to around negative $300/kWh to reach high electric car market share (Norway). Also, when talking about efficient hybrid gasoline drivetrains, sensitivity to CO2 pricing is actually quite low. Local pollutant emissions are very low too.
Hydrogen is easier to store than electricity, but it is still a lot more difficult and expensive to store and distribute than oil. But more importantly, this is a global forecast. There will be huge regional differences in relative competitiveness between hydrogen and oil. In some regions hydrogen will be the obvious choice. In others, it will be too expensive and impractical relative to oil.
The challenge with hydrogen from wind and solar is that the electrolysers, as well as the hydrogen distribution, transmission and storage infrastructure will all be underutilized due to low wind/solar capacity factors. For steam reforming or coal gasification with CCS, on the other hand, all this infrastructure is used much more efficiently. This is the problem with high wind/solar integration – their low capacity factors are exported to a wide range of other capital-infrastructure, greatly increasing system-level levelized costs.
As I say in the article, I also believe the low-nuclear cases are more likely due to political factors. I also agree that nuclear in the West is very expensive. But the West does not really matter that much in global energy forecasts. Nuclear costs are much more reasonable in the developing world where the vast majority of energy expansion will take place.
I agree that India will be very interesting to watch. There are some interesting opposing trends involving industrialization, poverty alleviation, pollution, population density, and energy resource quality at play. My best guess is a relatively fast acceleration wind and, especially, solar deployment over the next decade or two, but an earlier than average deceleration due to grid integration and space availability constraints.
Peter Farley says
1. A hybrid is not half as efficient as a EV, 1/3rd is very optimistic. It is far more complicated and will have higher maintenance costs, so it will have a shorter life thus the ownership cost will still be higher. This can be seen with the BMW I3, In the early years the hybrid version dominated sales, after two technology driven battery upgrades have seen the REx version fall to a very low share
2. Demand response, geographical dispersion, some limited storage and designs for very high capacity factors, eg 130 m rotors and 140 m towers on 2.5 MW turbines will ensure that wind is still profitable well into 30-40% of total supply. The corollary of this is that investment in both generation and backup whether storage or thermal generation and the requirement for fossil fuels will fall faster than your projections.
3. While electrolytic hydrogen is expensive, the cost is falling and within 10 years steam reformation and the associated gas demand will almost disappear. Further I think the demand for gas of any sort as backup to renewables is vastly overstated. Recently in Australia a contract with a proposed pumped hydro plant fell over because the more diverse our wind and solar resources are the less backup seems to be required.
4. Even if you halve nuclear costs, a nuclear plant still delivers energy at 40-60% more than combined wind and solar, so unless there are some absolutely amazing breakthroughs in nuclear it will never exceed 15% of energy supply.
5. While what you say is true that the West’s influence being small, coal already appears to be close to maxing out in China and India and is already falling in Korea, Taiwan and Japan. Coal use across the world has probably already maxed out with dramatic falls in North America and the EU so far this year. Again its fall will be rapid, It will disappear like faxes
Bas Gresnigt says
“the second two cases show the high nuclear share that emerges when nuclear is allowed into the power system.”
That won’t occur for the simple reason that new nuclear is now far too expensive.
Even France concluded that it should reduce nuclear share in its electricity mix…
With the EU competition rules regarding electricity generation new nuclear has no chance in the EU, unless the state decides for high subsidies
as shown with Hinkley C.
Dan Lennon says
I liked your article. One may quibble about selected points, but it did put things into a realistic perspective. The one line that stood out to me was this: “Transitioning at the speed required by 1.5 °C climate targets is unfortunately not going to happen, and even 2 °C will be very difficult to reach.” I agree with this grim assessment. That’s why many minds have turned to adaptation planning, though it’s hard to see how we will be able to adapt to such disruptive global circumstances without serious loss of life and degradation of the quality of life. Just a sad picture.