Fossil fuels will hit the skids, wind and solar power will experience unprecedented growth and the overall demand for energy will peak well before mid-century.
The result, according a major international report released this week,
is a radical reordering of the world’s energy infrastructure that will cause economists to talk not just about stranded assets but stranded resources.
The World Energy Council study is not good news for supporters of coal, since the report authors see the use of coal worldwide peaking and beginning to decline before 2020 in one of its scenarios. But the report does dovetail with many environmentalists' views on expansion of renewable energy generation and using natural gas as a “bridge” to a low-carbon future.
“Historically people have talked about peak oil, but now disruptive trends are leading energy experts to consider the implications of peak demand,” said Ged Davis, the council’s executive chairman of scenarios. “The underlying drivers will reshape the economics of energy. We are entering a world where the concern is no longer just about stranded assets but also about the impact of stranded resources on nations.”
If the report’s projections are correct, consumers will see a bold expansion of digital “smart” technology in their homes in order to squeeze out energy waste, even as electricity demands increase worldwide through 2060.
Observers in the United States, however, see flaws in the report and its emphasis on certain technologies over others and its bullish projections on energy efficiency and global cooperation.
“It’s an aggressive report in terms of how the energy complex transforms,” Erica Bowman, chief economist for the American Petroleum Institute, told AMI Newswire. “Relative to today and historical progress in those areas, it would be something unprecedented.”
While the council’s report sees the world’s demand for energy peaking around 2030 due to greater energy efficiencies and slower population growth, other forecasts envision a very different future. ExxonMobil’s 2016 outlook report sees a rising demand for energy worldwide continuing through 2040 – the equivalent of adding an entire North and South America to today’s energy landscape.
U.S. Energy Information Administration forecasts also show ramped-up growth in the nation’s production of oil and natural gas through 2040, with natural gas becoming the go-to source for electricity generation as the United States achieves a state of energy independence.
The World Energy Council report may be optimistic in terms of anticipated world cooperation on climate-change goals, collaborative approaches on trade and a free flow of technology transfers, Bowman said. Those hopes contrast sharply with today’s political realities, including the fallout from Britain’s exit from the European Union and the two major-party U.S. presidential hopefuls both coming out against the Trans-Pacific Partnership treaty, she said.
For the United States, the keys to both emissions reductions and technological advances in energy extraction have been free markets, openness to innovation and an emphasis on the free exchange of ideas, Bowman said. Such combinations are not seen in many other parts of the world, she said.
Many economic outlook reports, however, agree with the council’s conclusions about the decline of coal. A key driver for this is free-market pricing, which has led to a four-fold drop in the price of natural gas in the United States since 2008, said Bowman, who described natural gas as an affordable, reliable clean energy that complies with clean air regulations.
Even so, the council’s report says little about the possibility of clean-coal technology, which involves capturing carbon and reducing pollutants from coal-fired plants. A clean-coal plant in Mississippi will come online this fall, with the help of a $180 million federal grant, though critics call the effort an expensive white elephant.
Bowman also disagreed with assumptions outlined in a report summary that said, “Carefully weighed exit strategies spanning several decades need to come to the top of the political agenda, or the destruction of vast amounts of public and private shareholder value is unavoidable.”
Companies that now produce a wealth of fossil fuels are, in the final analysis, energy companies, with the capability of adapting their business models to new technologies, Bowman said. That, in turn, creates new jobs and feeds economic growth. New technologies might include algae-based biofuels or methods of molecular alterations that can produce clean fuels from common elements such as oxygen, hydrogen and carbon dioxide, she said.
A number of energy outlook reports do agree with the World Energy Council on the growth of renewable energies such as solar and wind, and the council’s report continues to see petroleum products dominating the transportation sector through 2060.