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Is the end of the global energy transition closer than we think?
WoodMac sees switch to ‘Age of Renewables’ by 2035
1 minute read
Wood Mackenzie today releases Thinking global energy transitions: The what, if, how and when, a report examining the forces shaping the global energy transition.
According to our research, the sustainability tipping point – when the world shifts from the age of oil and gas to the age of renewables – will arrive by 2035, less than 18 years away.
Prajit Ghosh, Wood Mackenzie’s head of global strategy, power & renewables, said: “The global energy transition is disrupting the status quo and influencing all aspects of the energy industry and related sectors.
“Government policies, new technologies and companies' shifts in strategies to adapt and thrive in this new energy reality are leading to structural changes in fossil fuel supply, demand, energy mix and prices.”
What's the timeframe for the transition?
The report notes the emergence of two drivers underpinning the pace of the global energy transition: renewables and the use of electric-based technologies in transportation.
By 2035, the convergence of the two will usher in the age of renewables. “Sustainability friendly” technologies – such as autonomous driving and the wider application of advanced grid-edge and machine learning applications – will effectively become the norm.
According to Wood Mackenzie’s research, close to 20% of global power needs will be met by solar or wind by 2035, displacing the equivalent of roughly 100 billion cubic feet per day of gas demand. Similarly, upwards of 20% of all miles travelled globally by cars, trucks, buses and bikes will use electric motors rather than gasoline or diesel. By 2040, oil demand displaced from electric vehicles (EVs) doubles to almost 6 million barrels per day.
After 2035, we see adoption rates for renewable generation and electrified transport increasing rapidly, becoming the default choice across many energy systems around the world. So much so that we believe half of all new power plants constructed globally will be either solar or wind, or a hybrid combination with storage. On top of this, half of all additional miles travelled by road will use an electric vehicle. The convergence of other technologies embedded within grid-edge applications – autonomous and shared driving, for instance – facilitate this rapid uptick.
Could the transition to renewables and electricity occur sooner than expected?
There are a range of factors that might further speed up this process, including increasing renewable cost-competitiveness and technological breakthroughs in batteries and storage.
“Accelerated technological advancements have created a bridge to futuristic goals of smart connected cities with autonomous systems and a large-scale commodity switch,” Mr Ghosh said. “The result is that the energy transition seems less the plot of a sci-fi movie and more of a feasible, albeit ambitious, plan.”
Since 2010, solar photovoltaic costs have fallen 80%, while at the same time more mature technologies, like onshore wind, have seen costs fall about 30%. As costs fall further, uptake will accelerate. Battery costs are now 80% lower than 2010 levels, making battery storage a more cost-effective solution to renewables’ reliability problems. As they become cheaper still, batteries should make deep inroads across the world.
In turn, improving battery storage technology is helping make EVs a viable solution for local air pollution concerns. Deeper decarbonisation efforts could require 40% to 60% of new car sales to be electric by 2035. If autonomous electric vehicles and ride-sharing really take off, achieving these higher levels becomes possible in a relatively short time.
“Whole ecosystems around EV charging are also being developed with original equipment manufacturers, utilities, software vendors and public-private partnerships,” Mr Ghosh said. “The global energy transition tipping point could arrive sooner than expected.”
There are still obstacles to overcome. Battery prices may not come down as fast as hoped, slowing the adoption of EVs. Consumer acceptance of EVs and the development of charging infrastructure are also factors to watch.
“The next 15 years of the transition will be critical to study, prepare and plan,” Mr Ghosh said. “To prosper in the new energy reality, companies and investors will need to understand the future opportunities across the rapidly changing energy landscape, while remaining in touch with the evolving oil, power and metals markets.”