The global energy system is ‎restructuring, says BP

As the world moves towards lower carbon, the global energy system fundamentally ‎restructures, becoming more diverse, driven by customer needs, with increased ‎competition between fuels, BP says.

The 2020 edition of the BPEnergy Outlook explores possible paths for the global energy ‎transition, how global energy markets may evolve over the next thirty years and the key ‎uncertainties that may shape them. Looking out to 2050 – a decade further than in previous ‎editions – the Outlook is focused around three main scenarios.‎

In the main scenarios it considers, global energy demand continues to grow for at least part of ‎the period to 2050. However, over this time, the structure of energy demand fundamentally ‎shifts, with a declining role for fossil fuels offset by an increasing share for renewable energy ‎and a growing role for electricity. ‎

BP’s chief economist, Spencer Dale, will present the Outlook today at the start of this week’s ‎series of capital markets presentations in which CEO Bernard Looney and BP’s leadership ‎team will provide greater detail on the new strategy that BPintroduced last month. ‎

Bernard Looney commented: “The BP Energy Outlook is invaluable in helping us better ‎understand the changing energy landscape and it was instrumental in helping us develop our ‎new strategy. This year the Outlook reaches out a decade further than before, to 2050 – the ‎year by which we intend to deliver our net zero ambition.

‎“Even as the pandemic has dramatically reduced global carbon emissions, the world remains ‎on an unsustainable path. However, the analysis in the Outlook shows that, with decisive ‎policy measures and more low carbon choices from both companies and consumers, the ‎energy transition still can be delivered. ‎

‎“It is one of the reasons I remain optimistic about the future and I hope readers will find the ‎report helpful as we all try to make a difference.”‎

Three scenarios

The 2020 Outlook explores the energy transition to 2050 using three main scenarios. These ‎are not predictions but, based on alternative assumptions about policies and societal ‎preferences, are designed to help explore the range of outcomes possible over the next 30 ‎years.

Rapid assumes the introduction of policy measures, led by a significant increase in carbon ‎prices, that result in carbon emissions from energy use falling by around 70 per cent by 2050 from ‎‎2018 levels. Rapid is broadly in line with scenarios that are consistent with limiting the rise in ‎global temperatures by 2100 to well below 2°C above pre-industrial levels.‎

Net Zero assumes the policy measures of Rapid are reinforced by significant shifts in societal ‎and consumer behaviour and preferences – such as greater adoption of circular and sharing ‎economies and switching to low carbon energy sources. This increases the reduction in ‎carbon emissions by 2050 to over 95 per cent. Net Zero is broadly in line with a range of scenarios ‎consistent with limiting temperature rises to 1.5°C. ‎

Business-as-usual (BAU) assumes that government policies, technologies and societal ‎preferences continue to evolve in a manner and speed seen in the recent past. In BAU, carbon ‎emissions from energy use peak in the mid-2020s but do not decline significantly, with ‎emissions in 2050 less than 10% below 2018 levels.‎

Both the Rapid and Net Zero scenarios assume a significant increase in carbon prices, ‎reaching $250/tonne of CO2 in the developed world by 2050 and $175/tonne in emerging ‎economies. This is much lower in the BAU scenario, with carbon prices reaching only $65 and ‎‎$35/tonne CO2 by 2050 on average in developed and emerging economies respectively.  ‎

Spencer Dale said: “The role of the Energy Outlook is not to predict or forecast how the ‎energy system is likely to change over time. We can’t predict the future; all the scenarios ‎discussed in this year’s Outlook will be wrong. Rather, the Outlook uses these different ‎scenarios to help better understand the range of uncertainty we face as the energy system ‎transitions to a lower carbon world. Improving our understanding of this uncertainty is an ‎important input into designing a strategy that is robust and resilient to the range of outcomes ‎we may face.”‎