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Three scenarios
The long-term forecast is based on three scenarios: “Everything Unchanged”, i.e., the no change scenario; “Net Zero”, which envisages the achievement of carbon neutrality in the global energy industry by 2050; and “Rational Technological Choice”, which involves the introduction of low-carbon technologies as they become cheaper.
Under the no change scenario, global consumption of primary energy sources will grow by 37% by 2050 (to 18.6 billion tons of oil equivalent, toe), while “Net Zero” says it will drop by 9% (to 12.4 billion toe). Between these extremes is “Rational Technological Choice”, according to which the increase in demand for primary energy will reach 15% (up to 15.7 billion toe) by 2050. The latter of the three scenarios is in fact the baseline one.
Gas: favoured by hydrocarbon market
Natural gas will become favoured by the hydrocarbon market: by 2050, primary demand for liquid hydrocarbons will go down by 40% (to 2.6 billion toe) while demand for natural gas will rise by 26% (to 3.7 billion toe). Among the growth drivers will be the transition from coal to gas in the power industry, which is already underway in a number of developed countries. For instance, the 2000–2022 period saw the United States decommission 149.1 gigawatts (GW) of coal-fired TPPs and connect 181.8 GW of gas-fired power plants to the grid. As a result, the share of gas in the country’s energy mix grew from 16% in 2000 to 39% in 2022, with the share of coal shrinking from 52% to 19%.
An important driver in the gas market will continue to be rising demand for mineral fertilisers, without which one cannot achieve productivity growth in agriculture, especially considering the urbanisation in developing countries and the flow of labour into industry and the service sector. According to the International Fertilizer Association (IFA), global consumption of nitrogen fertilisers (urea, ammonia, etc.) produced with natural gas rose by 33% between 2000 and 2021, reaching 109.2 million tons. In absolute terms, the increase in demand during this period amounted to 27.1 million tons, of which 8.5 million tons were produced in India, whose population grew by more than 300 million people during this period.
Coal: counting on steel
India will also play an important role in the market of coking coal, i.e., raw material used in steel production. While the share of the urban population in China was 64% by 2022, it was only at 36% in India: efforts to close this gap will spur demand for steel used in the automotive industry, construction and transport. As a result, global industrial demand for coal will be above the 2022 level by 2050.
Meanwhile, demand for coal in the housing and utilities sector and in the power industry will decline, including due to the phasing out of coal in developed countries. Global Energy Monitor estimates that 296.7 GW of coal-fired TPPs will get decommissioned worldwide by 2040, which exceeds the capacity of all operating coal-fired TPPs in India (237.1 GW). Therefore, the global share of coal generation, which reached 35.6% in 2022, will decline. Moreover, China, the world leader in terms of coal use in the power industry, ranks first in the rates of construction of wind, solar and nuclear power plants.
Growing interest towards reducing emissions will spur a boom in the use of low-carbon sources. According to the REA’s baseline forecast, the share of renewable energy sources in primary energy consumption will reach 31% by 2050, including due to cheaper technologies. For instance, the average cost of bringing solar panels into operation in the United States dropped by more than half in the period from 2013 to 2021 (from $3,705 to $1,561 per kilowatt of capacity), while onshore wind generators got cheaper by 25% (from $1,895 to $1,428 per kilowatt), according to the U.S. Energy Information Administration (EIA).
Boom of renewables and nuclear renaissance
The need to reduce emissions will also stimulate the older low-carbon energy sectors – nuclear and hydroelectric power plants, whose output by 2050 will increase by 56% and 136%, respectively (under the baseline scenario). It should be noted that the deregulation of the nuclear industry will affect a number of consumer countries, including Japan, whose Cabinet adopted a policy document last year to allow for the construction of next-generation reactors to replace old power units.
The possibility of balancing the energy system with pumped storage power plants (PSPPs), which are usually equipped with two reservoirs with an elevation difference, will also play a role. Excess electricity from wind generators can be used to pump water from the lower reservoir to the upper one, from which the water is discharged into the lower one during the hours of high demand. It is no coincidence that last year saw the global capacity of newly-launched PSPPs hit an all-time high (10.7 GW, according to Global Energy Monitor).
The low-carbon energy boom will help reduce emissions. According to the REA baseline scenario, global CO2 and methane emissions from the use and production of energy resources will decline by 34% (to 21.9 billion tons of CO2 equivalent) by 2050.
