Coal's share of energy supply will drop to its "lowest level since the Industrial Revolution" by 2040 as fast-rising renewables drive a transition to "the most diversified fuel mix the world as ever seen," according to BP Plc's latest global energy outlook.
That "evolving transition" scenario — the main focus of BP's 2018 energy outlook and one of six potential futures detailed in the report, as outlined by Spencer Dale, the oil giant's chief economist, in a Feb. 20 presentation to investment analysts — envisions oil, natural gas, coal and non-fossil fuel resources each providing roughly a quarter of the world's energy by 2040. Based on policies, technologies and consumer behavior that "continue to evolve in a manner and speed seen over the recent past," the scenario foresees that oil will drop to 27% of the world's primary energy consumption by 2040, from 33% in 2016, as gas grows to 26% from 24% and coal "effectively flatlines," Dale said, declining to 21% from 28% of the overall demand picture.
As gas outpaces peaking oil and crumbling coal, renewables will rise faster than any other energy source through 2040, growing 7% per year and accounting for over 40% of the projected increase in energy supplies. Overall, renewables jump to 14% of global energy demand by 2040, from just 4% in 2016. Including hydropower and nuclear energy, non-fossil resources will catch up with gas at 26%, up from 15% in 2016.
The outlook largely aligns with the London-based oil major's recent investments in renewables, which include a return to solar power after the company exited the sector in 2011.
In the United States, renewables and gas will largely displace oil and coal for primary energy consumption by 2040 amid overall stagnant demand, in BP's view. Renewables will hit 16.7% of U.S. energy demand by 2040, compared with 5.3% in 2016, while non-fossil resources will total about 25%, from roughly 16% in 2016. Natural gas will dominate, with a 40% share in the U.S. by 2040, up from 31.5% in 2016, while oil drops to 29.5% from 36% and coal tumbles below 5% from nearly 16% over the same time frame.
Changes, uncertainties
In contrast to prior forecasts, BP's latest outlook no longer includes a base-case scenario, which its evolving transition view largely replaces. In comparing its new evolving transition with last year's base case, several significant changes stand out. The most striking is global demand for renewables, which will be 15% higher by 2035 in this year's report. Moreover, the latest forecast sees 190 million electric cars on the road by 2035, nearly double the figure in last year's base case.
Numerous uncertainties, however, underlie all of the scenarios in BP's forecasts. Another scenario, for instance, envisions an even-faster energy transition than the one BP sees unfolding based on past policy, technology and social developments. "The probability of any single scenario materializing is negligible," Dale said. "That's always been the case, but I fear not always fully understood."
Rather than precisely pinpointing the future energy mix, however, the value of the forecasts, the chief economist stressed, "is to understand better the nature of the uncertainty we face and the key judgments and issues which really shape that uncertainty."