Low-carbon boom to stall fossil fuel demand by 2020, say researchers
The demand for coal and oil will peak in 2020 as low-carbon technology prices continue to tumble, a new report which examines the energy sector has claimed.
Collaborative research from Carbon Tracker and the Grantham Institute explores how ongoing cost reductions in solar PVs and electric vehicles (EVs) could impact future fossil fuels demand and subsequent CO2 emissions.
The model put forward shows that solar PV could supply 29% of global power generation by 2050, entirely phasing out coal and leaving natural gas with a 1% market share. The report predicts EVs will account for more than two-thirds of the road transport by the mid-century – a growth trajectory that sees EVs displace approximately 25 million barrels of oil per day.
“Electric vehicles and solar power are game-changers that the fossil fuel industry consistently underestimates,” Carbon Tracker senior researcher Luke Sussams said. “Further innovation could make our scenarios look conservative in five years’ time, in which case the demand misread by companies will have been amplified even more.”
‘No more business-as-usual’
A low-carbon transition will be crucial in the power and road transport sectors, which account for approximately half of fossil fuel consumption. The current state of play means that global warming could be limited to 2.4C by 2100 if EV and solar PV deployment reach the levels under the proposed scenario.
The cost of solar PV has fallen 85% over the last seven years, according to the study, which predicts it will become “materially cheaper than alternative power options globally” between 2030 and 2040. Researchers note that EVs are currently growing 60% year-on-year and will likely become cheaper than conventional internal combustion engines (ICEs) by 2020.
The report warns that energy companies cannot afford to employ a business-as-usual approach which underestimates these low-carbon advances. Scenarios should now apply the latest cost reductions for solar PVs and EVs, along with the emissions commitments countries have made under the Paris Agreement, it says.
“There is no more business-as-usual in the energy sector – so it is time that scenario was discarded. There are a number of low-carbon technologies about to achieve critical mass decades before some companies expect,” Carbon Tracker head of research James Leaton said.
The study outlines a series of recommendations for the major actors in the energy sector. Companies are urged to move beyond business-as-usual strategies and articulate how they are adjusting to the low-carbon transition and publicly quantify the risks.
Policy makers must ensure that fundamental models such as demand and technology costs are up-to-date to accurately identify the best route, the report states, while investors should be granted full disclosure of company strategies and use them to better align investments with a low-carbon future.
The report further illustrates the potential for cost-leading, low-carbon power generation technologies to dramatically increase capacity in the near future. According to International Renewable Energy (IRENA), the share of global electricity generated by solar PV could increase from the current level of 2% to as much as 13% by 2030. The same organisation estimates that the average costs for electricity generated by solar and wind technologies could decrease by 59% by 2025.
Research group Climate Action Tracker (CAT) recently claimed that zero-emission vehicles will need to hold a dominant automotive market share by 2035 for the Paris Agreement's global warming target of 1.5C to be truly achievable. Electric vehicles are estimated to be worth £51bn to the UK economy if the Government decides to invest in the necessary infrastructure and upskilling the motor industry for the EV transition.