Driven by growing electrification and the proliferation of projects harnessing renewable energy, the relationship between energy demand and global economic growth are set to "decouple definitively" in 2035 reflecting a decline in the energy intensity of the global economy, according to a report released Sept. 10 by Norwegian risk management and advisory services firm DNV GL.
"The attention of boardrooms and cabinets should be fixed on the dramatic energy transition that is unfolding. As money and policy increasingly favour gas and renewables, the rapidly electrifying energy system will deliver efficiency gains that outpace GDP and population growth," President and CEO of DNV Remi Eriksen said. "This will result in a world needing less energy within half a generation from now."
The report projects that overall energy expenditures will fall from 5.5% of global GDP today to 3.1% in 2050 as spending shifts from fossil fuel production to renewables and investments in the power grid.
By 2050, DNV expects global annual spending on fossil fuels will fall by a third from current levels to $2.1 trillion, while spending on renewables and the power grid each triple to $2.4 trillion and $1.5 trillion, respectively.
"The nature of the spending will also alter with wind and solar projects typically requiring greater upfront CAPEX and then less operating expenditure, the opposite to oil and gas," DNV said.
DNV expects fossil fuels will satisfy half of global energy demand by 2050, down from about 80% today, with natural gas meeting about a quarter of the world's mid-century energy needs.
The report projects global coal demand will continue to decline, having already peaked, while global oil and natural gas demand will peak in 2023 and 2026, respectively.
Meanwhile, DNV expects solar photovoltaic and wind capacity will grow to supply a respective 16% and 12% of global energy demand.
As global energy demand falls, a shift toward battery-electric vehicles, or BEVs, will drive the transportation sector's share of global energy demand from 27% today to 20% by 2050.
DNV expects BEVs to account for half of new vehicle sales in Europe by 2027, and projects the same will hold true in India, China and North America in 2032.