'Bold' Forecast by DNV GL Sees Waning Coal, Oil, Rising Gas

Coal demand has been in global decline since 2013 and oil demand will be next to go down, but gas has a strong future and will be the single largest primary energy source by 2050, according to a forecast published September 4 by Norwegian energy advisory and certification group DNV GL. 

Unlike many other outlooks such as those by the International Energy Agency, which consider what energy demand will do, depending on political and other events beyond the range of most analysts, the inaugural issue of Energy Transition Outlook, which was discussed in London by a panel of energy industry experts, takes a single view based on what is happening now in ten world regions, and the already visible trends. These are inherently unpredictable, such as what will be the actual take up of electric vehicles – one of the unknowables impacting oil demand, which DNV GL sees falling by just 1mn barrels/day over 2020-2028 before accelerating.

One of the panellists was John Knight of Statoil's global strategy division, whose company also publishes annual outlooks with a range of scenarios. He pointed out the wrong assumptions that had led to major government mistakes, such as the UK justifying subsidies for renewables on the ground that gas was only going to become more expensive. "We need a flexible approach so that shareholders receive returns over a range of scenarios," he said.

Renewables and fossil fuels will each account for half the world's primary energy supply, according to the forecast, but the huge range of uncertainties make it necessary to take the assumptions with a pinch of salt. However, as one of the panellists, Nina Skorupska of the Renewable Energy Association observed, forecasts are necessary if change is to happen.

The report was criticised by some panellists for neglecting to mention carbon capture and storage – generally recognised as a vital piece of the jigsaw if the world is to meet its carbon budget.

Panellists also commented on the need for much more co-operation between markets and government to develop the kind of business models that banks would feel comfortable investing in. For example, admitting a relatively small amount of renewable generation to the grid is manageable but will become less so as more and more consumers also produce their own energy, or sell it to another consumer. The upheavals on the way will require managing for financial and safety reasons.

DNV GL contradicts some authorities, taking a less bullish view on population growth than the United Nations, for example, and it has an optimistic view on energy efficiency gains. Historically running at 1.4%/yr for the past 20 years, this reduction in demand per unit of GDP is to double now to 2.5%/yr for the next 35 years.

Yet despite those bearish features, DNV GL said there was no wishful thinking included in the report; and even if what panellists described as "heroic assumptions" come to pass, the world will still be more than 0.5 degrees centigrade warmer than the 2 degrees centigrade limit that the United Nations says is advisable. The notional carbon budget will all be gone by 2041, it says.

Secure though the future of gas is, it will still become greener as biomethane, hydrogen and syngas make inroads into its markets, but the infrastructure will remain useful for years to come. "Europe's gas infrastructure is unlikely to be obsolete soon, but there will be changes," said group CEO Remi Eriksen.

William Powell