Let’s go for a NET ZERO planet!
We like the Bloomberg NEF (New Energy Finance) reports so much that we have taken the trouble to translate and help actively disseminate the report on the Energy Agenda 2022 onwards, which outlines many of the keys to the energy transition in which we are participating:
1. Emissions
The energy transition in the power sector is well underway and global power sector emissions are likely to have peaked by 2022. To stay on track for the Net Zero scenario, emissions from all sectors must peak now and start declining rapidly.
2. Carbon budgets
Our models show that, although a trajectory that limits global temperature rise to 1.5 degrees Celsius by 2050 looks increasingly difficult to achieve, there are still plausible trajectories to stay within the 1.77 degrees Celsius of warming in our Net Zero Scenario. Even then, a revolution in the energy sector will be needed to increase momentum and accelerate emissions reductions.
Our models suggest that emissions need to be reduced by 30% by 2030 and 6% per year until 2040. If achieved, this orderly transition would reach zero emissions by 2050 and meet the Paris Agreement target of 1.77 degrees Celsius climate change by 2050, without exceeding or creating the need for negative net emissions after 2050. In contrast, emissions in our Economic Transition Scenario decline by an average of 0.9% each year, resulting in emissions consistent with a warming trajectory of 2.6 degrees Celsius by the end of the century.
3. Emissions reduction
The shift in power generation from fossil fuels to clean energy is the largest contributor to global emissions reductions in our Net Zero Scenario, accounting for half of all emissions reduced between 2022 and 2050. This includes replacing fossil fuels with no emissions reductions with wind, solar, other renewables and nuclear power. Electrification of transport and industrial processes, buildings and heating, using increasingly low-carbon electricity, is the next largest contributor, reducing around a quarter of total emissions over the period. Hydrogen is also a significant contributor in absolute terms, although significantly smaller in relative terms, accounting for about 6% of the reductions.
Carbon capture and storage (CCS) gains importance starting in the early 2030s, as hard-to-reduce sectors are addressed and technology is installed in fossil fuel plants without emissions reductions. CCS accounts for 11% of all emissions reduced in the scenario period.
4. Primary energy
In our Net Zero Scenario, oil, gas and coal consumption peak almost immediately, if they have not already peaked. Under this scenario, global coal demand peaks in 2022, gas demand peaks in 2021, and oil demand peaks in 2019, before the Covid-19 pandemic. For oil and gas, this is a significant change from the trajectories in our Economic Transition Scenario.
5. End-use sectors
Energy end-use in the Net Zero Scenario has very different profiles for each sector. This is due to several factors, but the first of these is the electrification of transportation, industrial processes and heat.
6. Electrification
Achieving net-zero emissions by mid-century requires a significant increase in global electricity generation. The Energy Transition Scenario requires 46,000 terawatt-hours of power generation in 2050, nearly double the current amount. However, the Net Zero Scenario requires more than 80,000 terawatt-hours of generation, more than three times the current amount.
Energy demand from hydrogen, which is negligible in the Economic Transition Scenario, approaches 23,000 TWh per year in the Net Zero Scenario by mid-century, as we assume that 88% of hydrogen production is achieved by grid-connected electrolyzers. This makes hydrogen the largest source of energy demand worldwide in 2050, equaling total global energy demand in 2020.
7. A low-carbon energy system
In addition to significantly increasing total power generation, the Net Zero Scenario requires a major change in the production mix. This is not an evolution of the Economic Transition Scenario, but is effectively a completely different energy system.
Achieving net zero will result in near-zero operation of fossil fuel power generation without carbon capture and storage; it will also require more nuclear power generation, and even more wind and solar power to be deployed. In the Net Zero Scenario, wind and solar account for more than 75% of total power generation.
8. CCS and Hydrogen
Carbon capture and storage and hydrogen are emerging as core technologies for deep decarbonization, with applications in industry, energy, buildings and transportation. We estimate that around 7 gigatons of carbon dioxide will need to be captured annually by 2050, equivalent to the power sector emissions of Europe, China and India combined. Hydrogen production will increase to 500 million metric tons annually by 2050, a five-fold increase over current levels.
9. The need for deep decarbonization
The transition to carbon neutrality is still in its infancy. Each of these key technologies is still at a fraction of the scale needed. Today, more than 40% of the nuclear power capacity needed by 2050 already exists, but less than 10% of the total needed wind and solar power has been installed, and virtually none of the needed heat pumps, hydrogen electrolyzers or CCS capacity.
That said, the required ramp-up rates for the four technologies that exist today – electric vehicles, wind power, solar power and nuclear power – are very different. Each of these technologies achieves peak annual deployment rates considerably higher than current levels. Electric vehicle sales will need to increase fivefold, from less than 11 million to 55 million per year, to meet carbon neutrality targets and meet the sector’s carbon budgets. Solar installations will need to more than triple and wind installations will need to increase sixfold.
10. Investments
Getting to net zero emissions is a multi-trillion dollar investment opportunity, but staying on track will require a shift away from fossil fuel investment. To stay on track in the Net Zero Emissions Scenario, this means that for every dollar invested in fossil energy supply, nearly five are invested in low-carbon supply through 2050.
