New governmental policies, including carbon pricing, as well as increased investments in renewables and technologies are essential for the world to meet emission reductions and climate goals outlined in the Paris Agreement on climate change, consultancy group Wood Mackenzie said in a new report.
To keep the rise in global temperatures to below 2 degrees Celsius, zero-carbon energy would need to account for 40% of the total energy mix by 2040, compared to a projected rate of 15% to 20%, the Wood Mackenzie analysts said in the first-ever "Energy Transition Outlook" released Aug. 1.
"We ascribe a very low degree of confidence that 2 degrees can be achieved due to the challenges across technology, policy, regulation and cost; intergovernmental constraints; trade and consumer choice; and what is built into the current energy systems of today," the report said.
As global energy demand increases, the world will continue to rely on fossil fuels for the next several decades. The analysts anticipate that coal, natural gas and oil will account for about 85% of the world's primary energy supply by 2040, compared to 90% at present.
"This is a real concern if we are to meet the 2C goal," David Brown, Wood Mackenzie head of markets and transitions, Americas, said.
The report noted that zero-carbon energy contributed just 10% to global demand in 2018. Of this figure, 8% was supplied by nuclear and hydropower while 2% was provided by solar and wind power.
While renewables are expected to be the fastest-growing source of energy supply in the coming years, there are practical limitations to the world reaching a fuel mix comprised of 50% or more of solar and wind. The report said that wind and solar energy are likely to contribute only 24% of power supply by 2040.
"We see growth in energy storage to almost 600 GW. But without long-duration storage, on a much higher scale, high solar and wind yields negative prices and grid shape, design and stability issues," the report said.
Investor underinvestment in the cleaner energy sector, the report said, could lead to supply shocks in the next 10 years. Wood Mackenzie believes carbon pricing, investments in carbon capture and storage and renewables-based hydrogen technologies are all needed to step up efforts to achieve the goals of the Paris Agreement.
"However, we also need governments to show the political will to craft effective legislation that incentivizes innovation. This is vital. It needs to be done, and done soon," Brown said.