Navigating a challenging landscape – 1.5-degrees still within reach? In the first half of 2022, Covid-19 and the Russian invasion of Ukraine have collectively dealt a vicious blow to the global economy, precipitously raised geopolitical risks, exposed dependencies, and reshuffled the priorities of nations and industries. Given all these fundamental changes, is there still hope of limiting global warming to the 1.5-degree target? In Rystad Energy we believe there is – but achieving that goal will require an extraordinary effort by energy companies in all corners of the globe. Our latest research indicates that the roadmap to success starts with decarbonizing the all-important power sector. We expect that electricity’s share of the energy carrier segment will soar from 20% at present to 60% by 2050. To achieve this, the single most important requirement is that the annual deployment of new solar PV capacity climbs to about 1400 GW per year by 2035. Rapid growth of wind power, in-grid battery parks and hydrogen production are other requirements – and our supply chain analysis shows that this will be a tough challenge, but not an impossible one. Decarbonizing transport is yet another driver. For the slightly less ambitious 1.6-degree scenario, our model shows that more than 70% of car sales must be electric by 2030 – and the world is on presently on track with that trajectory. For the building sector, we see that decarbonization will be driven by the rapid growth of rooftop solar (PV and hot water) and heat pumps, and the current pace is promising. The planet also needs to achieve large scale decarbonization of the industrial sector. This will happen through a combination of electrification, hydrogen-switching, CCUS and reduced primary energy consumption through a shift towards secondary sourcing of raw materials. We see indications that the CCUS segment is finally taking off and could grow from a few million tonnes per year at present to 475 Mt by 2030, before accelerating to 3,600 Mt by 2040 and 7,800 Mt by 2050. In short, our analysis shows that net zero in carbon dioxide could be reached between 2055 and 2075 with technologies already identified, and with new innovations representing an upside. This would limit global warming to between 1.6 and 1.8 degrees, assuming status quo on other GHG emissions. However, we believe that significant reductions of methane and nitrous oxide also can be achieved. This, together with faster reduction of deforestation, represents an upside of between 0.2 and 0.3 degrees. In aggregate, therefore, we are still optimistic that the 1.5-degree target is within reach. Join us for the "Rystad Talks Energy" on June 30 as we share insights on these vital issues and reflect on what lies in store for energy markets in the short to medium term. We will also discuss energy geopolitics with Dr Kenneth Medlock, Senior Director of the Center for Energy Studies at Rice University's Baker Institute. |
