TODAY’S STUDY: NEW ENERGY AND THE WORLD ENERGY MIX TO 2050

World Energy Scenarios; Composing energy futures to 2050 October 2013 (World Energy Council and Paul Scherrer Institute)

The WEC’s approach

Scenarios are alternative views of the future which can be used to explore the implications of different sets of assumptions and to determine the degree of robustness of possible future developments. While most widely known scenarios are normative, the WEC has adopted a different, exploratory approach. ‘Normative’ in this context means that the scenarios are being used to drive the world towards a specific objective such as a particular atmospheric CO2 level. In contrast, the WEC with its exploratory scenarios Jazz and Symphony, attempts to provide decision makers with a neutral fact-based tool that they will be able to use to measure the potential impact of their choices in the future.

Rather than telling policymakers and senior energy leaders what to do, in order to achieve a specific policy goal, the WEC’s World Energy Scenarios to 2050 will allow them to test the key assumptions that they decide to make to shape the energy of tomorrow. Investors can use this tool to assess which are likely to be the most dynamic areas and real game-changers of tomorrow.

These scenarios are therefore likely to change the way energy decision makers consider the choices they make in understanding the real impact of their actions in the long term. This approach can only be done successfully by a network like the WEC’s with its impartial and inclusive membership structure. Over 60 experts from more than 28 countries have contributed to the WEC’s scenario building process over a period of three years.

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Assessing the energy trilemma

These scenarios are designed to help a range of stakeholders address the ‘energy trilemma’ of achieving environmental sustainability, energy security, and energy equity and hence putting forward different policy options. Clearly, each policy option has some cost associated with it. The cost of one scenario versus the other must not only be considered in terms of necessary capital investments and the impact on and of gross domestic product (GDP) growth; the overall environmental benefits and avoided climate change adaptation costs also need to be taken into account. This means that one scenario is not necessarily better than the other and should not be judged as such. Instead, a wider view needs to be adopted when assessing the overall implications of each of the scenarios.

Composing Energy Futures to 2050

The WEC has built two scenarios typified by characteristics, which, each from their own perspective, may comprehensively describe large parts of the world in 2050. In this scenario exercise, the elements of the two scenarios are generalised as being applicable to the (albeit imaginary) whole world: the more consumer-driven Jazz scenario and the more voter-driven Symphony scenario. While the scenarios are ‘music based’, they are completely different in nature.

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Energy landscape in 2050

The energy landscape we expect to see in 2050 will be quite different from how it looks today. Meeting future energy demand will be a key challenge. The world’s population will increase from approximately 7 billion in 2013 to approximately 8.7 billion in the Jazz scenario and approximately 9.4 billion in the Symphony scenario in 2050, which is equal to a 26% increase (36% respectively). The GDP per capita will also increase from slightly more than 9,000 US$2010 on average globally (US$2010 MER) in 2010 to approximately 23,000 US$2010 in Jazz and about 18,000 US$2010 in Symphony in 2050. This represents an increase by 153% and 100%, respectively. Mobility will also increase, with car ownership in terms of cars per 1000 people increasing from 124 in 2010 to 244 in 2050 in Jazz and 193 in Symphony. This equates to an increase by 98% and 57% respectively. Total primary energy supply +61% in the Jazz scenario in 2050 +27% in the Symphony scenario in 2050

Estimated increase globally of total primary energy supply (equal to consumption)

The WEC estimates that total primary energy supply (equal to consumption) will increase globally from 546 EJ (152 PWh) in 2010 to 879 EJ (144 PWh) in the Jazz scenario and 696 EJ (193 PWh) in the Symphony scenario in 2050. This corresponds to an increase of 61% in Jazz and 27% in Symphony. Just to compare: from 1990 to 2010 – which is roughly half the time span covered in this scenario study – total global primary energy consumption rose by approximately 45%. It is expected that global primary energy consumption will continue to rise, but at a much lower rate than in previous decades. Meeting both global and regional energy demand will be a challenge. There is no one global solution to the energy supply issue. Instead, each of the individual parts of the challenge must be worked out to reach the global goal of sustainable, affordable and secure energy supply for all.

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Energy efficiency

Energy efficiency will increase significantly in both scenarios: primary energy intensity as measured in energy use per unit of GDP created will decrease by 50% and 53% in Jazz and Symphony respectively by 2050. Hence when comparing primary energy consumption to GDP produced, only half the amount of energy is needed until 2050 to produce the same output. This is true for both scenarios although primary energy consumption is higher in 2050 in the Jazz scenario than it is in the Symphony scenario. WEC World Energy Scenarios to 2050 show that energy efficiency and energy conservation are absolutely crucial in dealing with demand outstripping supply – both require a change in consumer priorities and have cost implications across industries – and hence capital is required to finance energy-efficiency measures in terms of an initial investment before it can pay off.

Future primary energy mix

The future primary energy mix in 2050 shows that growth rates will be highest for renewable energy sources. In absolute terms, fossil fuels (coal, oil, gas) will remain dominant, up to and including 2050. The share of fossil fuels will be 77% in the Jazz scenario and 59% in the Symphony scenario – compared to 79% in 2010. The share of renewable energy sources will increase from around 15% in 2010 to almost 20% in Jazz in 2050 and almost 30% in Symphony in 2050. Nuclear energy will contribute approximately 4% of total primary energy supply in Jazz in 2050 and 11% in Symphony globally – compared to 6% in 2010.

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Global electricity generation

Global electricity generation will increase between now and 2050: In 2010, global electricity production was 21.5 billion MWh globally. In Jazz, this is expected to increase by 150% to 53.6 billion MWh by 2050. In Symphony, the increase is about 123% to 47.9 billion MWh by 2050. Simply due to the sheer increase in electricity production that is needed to meet future demand, the future electricity generation mix will be subject to tremendous changes up to 2050.

Future investment needs in electricity generation

Huge investment in electricity generation is needed to meet future electricity demand. The WEC estimates that total investment needed will range from US$19 trillion in Jazz to US$26 trillion in Symphony (in 2010 terms) – in terms of cumulative investment in electricity generation in both scenarios (2010–2050, undiscounted). Depending on each scenario, a share of 46% in Jazz and almost 70% in Symphony of this is to be invested in renewable electricity generation. Major investment requirements are in solar PV, hydro and wind electricity generation capacity. The WEC’s work clearly highlights that the availability of funds for investment is one of the key clusters in scenario building terms that will shape the energy landscape until 2050.

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Access to Energy

The degree of electrification measured in terms of the share of electric energy on the final energy mix, increases up to 2050 significantly. In Jazz, the degree of electrification will be almost 30% in 2050, in Symphony this will even be slightly more than 30% in 2050 – as compared to 17% in 2010.

Electricity consumption per capita increases globally by 111% in Jazz and 78% in Symphony in 2050. Electricity access, measured as the share of population connected to the electricity grid will increase in both scenarios: energy access will hence improve. While in 2010, 1.267 billion people were without access to electricity globally, this reduces to 319 million in Jazz and 530 million in the Symphony scenario in 2050.

Regional developments

Future economic growth shifts from developed countries to developing and transition economies, in particular in Asia. Of all the eight regions considered in this scenario study, Asia will be characterised by highest economic growth both in relative and absolute terms. By 2050, nearly half of all economic growth (measured in terms of production of GDP) will happen in Asia and its three sub-regions: Central and South Asia, East Asia and Southeast Asia and Pacific both for Jazz and Symphony. This means that the share of Asia on total primary energy consumption will increase from 40% in 2010 to 48% in Jazz and 45% in Symphony. To compare: by 2050, Europe and North America (including Mexico) will make up for about 30% of total global primary energy consumption in Jazz and 31% in Symphony (2010: 44%). Africa, including the middle East will account for 15% (Jazz) and 16% in Symphony (2010: 11%) and Latin America and The Caribbean 8% in Jazz and 7% in Symphony (2010: 5%).

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Implications for climate

The WEC has analysed where the Jazz and Symphony scenarios might lead in terms of climate change. The WEC has also assessed the potential impact of Jazz and Symphony scenarios on the climate with reference to the work of the Intergovernmental Panel on Climate Change (IPCC).

Jazz scenario

In Jazz, an assumption is made that the negotiations on climate change and emissions targets are not finalised. In the absence of international agreed commitments, regions, countries, states and municipalities take their own sustainable development initiatives and pathways. An international carbon market grows slowly from the bottom up based on regional, national and local initiatives, which coalesce to achieve greater market efficiencies and liquidity. Commercially viable innovative low-carbon technologies (solar, wind, and city gas/waste to energy) experience growth, major reductions in CO2 emissions come from growth in natural gas, in preference to oil and coal for purely economic reasons.

Symphony scenario

In Symphony, countries pass through the Doha Gateway and successfully negotiate a global treaty because all countries are prepared to accept commitments and concessions. Climate change has more focus along with international initiatives on climate change. Low-carbon technologies are promoted despite lacking commercial viability at initial stages. The carbon market is top-down based on an international agreement, with commitments and allocations. In the early part of the scenario period, national initiatives to meet treaty obligations to reduce emissions emerge (developed and developing countries).

These national initiatives are linked to form regional markets with exchange of Clean Development Mechanism (CDM) and other emission units. The final part of the scenario period sees global action on climate change with the market instrument emission trading as the leading mechanism for meeting CO2 emission obligations.

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The WEC’s scenarios and climate implications

The above chart shows the potential implications of the emissions trajectories for Jazz and Symphony for atmospheric GHG concentrations (and hence climate) based on the IPCC’s 4th Assessment Report:

Although Jazz includes a stronger emphasis on adaptation and Symphony mitigation, in both scenarios additional action is expected over the longer term (beyond 2050), further reducing the impact on climate. The implications of these changes to atmospheric GHG concentrations for surface temperature change, sea-level rise, changes in precipitation, incidence of extreme events and other impacts remain uncertain. Pressure for climate action will change over the period, the WEC recognises that the climate forcing of CO2 is considered now to be lower in some of the scientific literature in 2013. There is also increasing awareness of severe weather events that could be linked to climate forcing.

Carbon capture utilisation and storage

Carbon capture utilisation and storage (CC(U)S) technologies are widely employed in Symphony and hence subject to higher growth rates in the Symphony scenario than in the Jazz scenario. Half of the total electricity generated based on fossil fuels will be in conjunction with CC(U)S in 2050 in Symphony. Combining nuclear and CC(U)S for gas, coal and biomass, more than 80% of all electricity generated in 2050 will be from low-carbon sources in the Symphony scenario, compared to 40% in the Jazz scenario. To compare: In 2010, only one-third of global electricity generation was CO2 from low-carbon sources.

The WEC believes that CC(U)S technology, solar energy and energy storage are the key uncertainties moving forward up to 2050. For CC(U)S to work, clear legislative frameworks are needed – combined with infrastructure investment and the right incentives. A low-carbon future is not only linked to renewables: CC(U)S is important and consumer behaviour needs changing. Changes in consumption habits can be an effective way to decarbonise the energy system. Voters need to balance local and global issues.

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The WEC’s World Energy Scenarios to 2050: Key signal messages for policymakers and energy leaders from Jazz and Symphony

Signal 1

Energy system complexity will increase by 2050

The energy landscape we expect to see in 2050 will be quite different from how it looks today. Meeting energy supply and demand will gain complexity. Energy systems will remain complex – there are substantial system integration costs especially when a large proportion of renewables are involved due to increased network expansion costs in both transmission and distribution systems (especially in the Symphony scenario). To better understand and ultimately cope better with this increasing complexity, integrated system modelling will deserve more attention in the future to provide a more holistic view and lead to a better understanding of complex energy systems.

Signal 2

Energy efficiency is crucial in dealing with demand outstripping supply

The WEC’s World Energy Scenarios to 2050 show that energy efficiency and energy conservation are absolutely crucial in dealing with demand outstripping supply – both require a change in consumer priorities and have cost implications across industries – and hence capital is required to finance energy-efficiency measures in terms of an initial investment before it can pay off. Both in the Jazz and Symphony scenarios, electric mobility comes later than originally expected – at the earliest after 2030. Policymakers and industry need to undertake even greater effort to promote the share of renewables in electricity production which is not increasing enough to ensure environmental sustainability in the long run up to 2050 and beyond.

Signal 3

The energy mix in 2050 will mainly be fossil based

The WEC’s World Energy Scenarios to 2050 show that, in 2050, fossil fuels will still play a crucial role for both power generation and transport, this is particularly so in Jazz. Coal is going to play an important role in the long run, especially for power generation in China and India, the two most rapidly growing demand centres up to 2050. Natural gas, especially from unconventional sources, will play an increasing role and gain more importance in the energy share. An example is the transport sector where heavy transport will depend on fossil fuels for decades to come.

Oil will continue to remain dominant for transport, an increase in importance of unconventional sources – in particular oil sands, and oil shale – is expected. No renaissance of nuclear energy is anticipated. Nuclear energy is not a game-changer – with limited impact also because of restrictions in economics. In the Symphony scenario, the WEC anticipates a large increase in the share of renewables – mainly in solar PV, hydro and wind globally.

Signal 4

Regional priorities differ: there is no ‘one-size-fits-all’ solution to the energy trilemma

There is no global solution to the energy supply issue. Instead, reaching a solution relies on solving each of the individual parts to reach the global goal of sustainable, affordable and secure energy supply for all. Critical uncertainties remain, especially with regard to CC(U)S and the future development of energy storage technologies that are scalable in economic terms.

In this complex world, governments play a crucial role in determining and establishing frameworks for markets to function in both scenarios. Industries and markets need to provide efficient solutions. Up to 2050, the reality will lie somewhere between the Jazz and Symphony scenarios in terms of energy supply, energy demand increases, and GDP growth – or it might even go beyond the levels indicated here.

Signal 5

The global economy will be challenged to meet the 450ppm target without unacceptable carbon prices

World Energy Scenarios to 2050 underline that a reduction of greenhouse gas (GHG) emissions is possible in the second half of the scenario period if it comes to global agreements and the implementation of cost-efficient market instruments like emissions trading within a cap and trade system (assumed in Symphony). Carbon capture and storage (CC(U)S) as a cost-efficient CO2 mitigation option can play an important role after 2030 – dependent on the assumed CO2 price. Such a price for CO2 has to be high enough to create right signals to provide an adequate incentive for CO2 reduction.

The WEC’s World Energy Scenarios to 2050 indicate that these large reductions in CO2 are possible when governments are acting and industry players and markets are given right incentives to provide suitable technological solutions to achieve this. However, current signals indicate that the global economy is not on track to meet the 450ppm target (in terms of the emission pathway) without unacceptable carbon prices. In the Symphony scenario, CO2 emissions begin to drop from 2030, but fall short of the 450ppm target. In the Jazz Scenario, lower carbon prices emissions do not plateau until around 2050.

Signal 6

A low-carbon future is not only linked to renewables: CC(U)S is important and consumer behaviour needs changing

Carbon capture, use and storage (CC(U)S) is a suitable technology (In addition to renewable electricity generation) to reduce CO2 emissions. Given a CO2 price signal CC(U)S can play an important role after 2030 as a cost efficient CO2 mitigation option. Such a price for CO2 has to be high enough to create the right signals to provide an adequate incentive for CO2 reduction. Issues remain such as technical feasibility at a large scale, public resistance and the upfront infrastructure cost. These are addressed more in Symphony where CC(U)S and solar contribute equally to the decarbonisation of energy systems by 2050.

For the decarbonisation to be more effective, citizens play a crucial role, as consumers in Jazz, and voters in Symphony. Changes in consumption habits can be an effective way to decarbonise the energy system. Voters need to balance local and global issues. CC(U)S technology, solar energy and energy storage are the key uncertainties moving forward up to 2050

Signal 7

The WEC believes that CC(U)S technology, solar energy and energy storage are the key uncertainties moving forward up to 2050.

CC(U)S technology is already available and is potentially one of the lower-cost, deep decarbonisation options, but it will always be an added cost and will require major pipeline and other infrastructures. For CC(U)S to work, clear legislative frameworks are needed – combined with infrastructure investment and the right incentives.

The WEC assumes that solar technologies, in particular solar PV, will take off promoted by feed-in electricity tariffs, subsidies and net pricing in Europe, and solar technology prices tumbling. The technologies then make major inroads, and used in India, Africa and other countries to bring power to rural and off-grid communities. Subsidies are needed for solar to be economic and to create an incentive for investment to happen. Subsidies for solar are higher in Symphony than they are in Jazz, which leads to a higher trajectory of uptake of solar PV in Symphony.

As far as energy-storage technologies are concerned, pump storage is a well-developed and widely applied technology, its use is limited. Other new and emerging energy storage technologies, batteries, hydrogen, power to gas (hydrogen or methane), still need more research and development (R&D) before they become commercially viable. Investment in R&D is therefore needed to promote these technologies which could play a key role up to 2050 especially to overcome the problem of intermittency of high levels of renewables in Symphony.

Signal 8

Balancing the energy trilemma means making difficult choices

Citizens face a choice between affordable energy with higher economic growth in Jazz, or more expensive energy prices and less impact on the environment in Symphony. This underlines that a holistic long-term view on the energy sector is required to address these energy trilemma issues up to 2050 and beyond.

For politicians, the time of short-termism is over: clear and stable legislative frameworks are needed to ensure financial predictability, for markets to develop and for industry to provide solutions to rising global energy needs.

Signal 9

Functioning energy markets require investments and regional integration to deliver benefits to all consumers

The availability of funds for investment is one of the key clusters in scenario building terms that will shape the energy landscape until 2050. The WEC has assessed the investment implications for electricity generation both for the Jazz and the Symphony scenarios at the global and regional level. Long-term investment decisions are needed to meet future energy demand.

The investment costs for electricity generation associated with each scenario are in the region of approximately US$265 trillion (US$2010) in the Jazz scenario and approximately US$19 trillion (US$2010) in the Symphony scenario for electricity-generating capacity only.

For an investment in this region to be taken, clear signals are needed, together with high financial predictability, stable regulatory frameworks with low regulatory risk and functioning markets to ensure that energy can be delivered to all consumers who need it and to the greater benefit all.

Signal 10

Energy policy should ensure that energy and carbon markets deliver

The WEC firmly believes that energy policy should ensure that energy and carbon markets deliver investments, promote regional integration and hence provide benefits to consumers. In Symphony, an agreed 2030 decarbonisation target could provide the right signals to investors of incentivising investment in different technologies.

In Symphony, governments should be aware that promoting new technologies through subsidies such as feed-in tariffs can also lead to ‘energy market bubbles’. In the Jazz scenario, governments can facilitate the growth of national and regional markets by cutting the red tape, and the promotion of regional integration and greater cooperation. This will lead to better market integration and the creation of regional markets with greater benefits for all consumers.

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