The World Energy Council—a global energy body accredited by the United Nations and made up of over 3,000 member organizations in 90 countries—has released a report that may be alarming to long-term investors in the Oil and Gas industry. The report, entitled “World Energy Scenarios 2016 – The Grand Transition,” predicts that, in stark contrast to historical growth levels, world energy demand could peak by 2030.
The report is the product of three years of research and predicts that various trends of modern society—including declining population growth, rapid technological advancement, greater environmental challenges, and shifting economic and geopolitical power—will disrupt the historically robust Energy industry resulting in what the Council calls a “Grand Transition” in the economics of the Energy industry.
The report is the product of the Council’s analysis of three possible scenarios for development in the energy sector through the year 2060. Metaphorically entitled, the scenarios are referred to as “Modern Jazz,” “Unfinished Symphony,” and “Hard Rock.” Modern Jazz represents the most market-driven and technologically innovative scenario; Unfinished Symphony refers to a more carefully planned, sustainable economic growth model; and Hard Rock envisions the least sustainable, weakest economic growth model with the most inward-looking national policies.
From its analysis of these three scenarios, the Council reports seven key findings that underpin the predicted “Grand Transition.” This blog post presents and explores those seven findings.
- The World’s primary energy demand will slow and per capita energy demand will peak before 2030 due to unprecedented efficiencies created by new technologies and more stringent energy policies.
The report predicts that efficiency gains will be made with the development and deployment of more efficient technologies—e.g. smart grids and buildings, advanced manufacturing, telecommuting, etc.— with the resulting final energy consumption growth to 2060 ranging from 22% in the Unfinished Symphony scenario to 46% in the Hard Rock Scenario, and resulting corresponding primary energy demand growth ranging from 10% to 34%. The report predicts that as wind and solar generation sources are deployed moving forward, “substantial efficiencies will be gained,” and because conversion rates for renewable sources are higher than those for fossil fuel plants, less energy will be needed from each primary source.
- Demand for electricity will double in 2060. Meeting this demand with cleaner energy sources will require substantial infrastructure investments and systems integration to deliver benefits to all consumers.
The report attributes this sharp growth in demand for electricity to, among other things, rising incomes, a growing middle class, and expansion of electric-powered appliances. To meet this growing demand, the models predict the electricity consumption will reach between 25-29% of total production through 2060, requiring significant investment in energy infrastructure – between $35-43 trillion US dollars (based on a 2010 market exchange rate).
- The phenomenal rise of solar and wind energy continue at an unprecedented rate and creates both new opportunities and challenges for energy systems.
The report predicts that intermittent renewables – namely solar and wind energy, which accounted for 4% of power generation in 2014, will account for between 20% and 39% of total power generation, with the largest additions in China, India, Europe, and North America. Other non-fossil fuels, like hydro and nuclear, will continue to grow, though less pervasively or rapidly.
- Demand peaks for coal and oil have the potential to take the world from “Stranded Assets” to “Stranded Resources.”
The report predicts that the fossil fuel share of primary energy will fall from 81% in 2014 to anywhere between 70-50%, depending on the scenario. As a result of peak demands for coal and oil, the report warns that “[c]arefully weighed exit strategies spanning several decades need to come to the top of the political agenda, or the destruction of vast amounts of public and private shareholder value is unavoidable.”
- Transitioning Global Transport forms one of the hardest obstacles to overcome in an effort to decarbonise future energy systems.
The report predicts that oil’s share of transport fuels will drop from 92% in 2014 to anywhere between 60-78%, while biofuels will advance to account from anywhere between 10-20% of transport fuels in 2060. In conjunction with these trends, the report predicts investments in vehicle charging infrastructure and government support schemes through city planning and like methods.
- Limiting Global Warming to no more than a 2°C increase will require an exceptional and enduring effort, far beyond already pledged commitments, and with very high carbon prices.
The report predicts that carbon emissions will peak between 2020 and 2040, and that the world will come closest to meeting its climate targets in the Unfinished Symphony scenario, with strategic planning efforts pushing carbon emissions below 61% of the 2014 levels.
- Global cooperation, sustainable economic growth, and technology innovation are needed to balance the Energy Trilemma.
The report refers to energy security, energy equity, and environmental sustainability as the “Energy Trilemma,” and concludes that among the three examined scenarios, the Modern Jazz scenario will achieve the highest energy equity, the Unfinished Symphony scenario will achieve the highest environmental sustainability, and Hard Rock will achieve the highest level of energy security.
Finally, the Council’s report concludes by recommending that the world’s energy leaders (1) reassess capital allocations and strategies, (2) target geographies and new growth markets in Asia, MENA, and Sub-Saharan Africa, (3) implement new business models that expand the energy value chain and exploit the disruption, (4) Develop decarbonisation policies, and finally, (5) address socioeconomic implications of climate change policies.
 World Energy Council, World Energy Scenarios 2016 – The Grand Transition (2016), https://www.worldenergy.org/wp-content/uploads/2016/10/World-Energy-Scenarios-2016_Full-Report.pdf.
 Id. at 33-73.
 Id. at 8.
 Id. at 91-94.
 See World Energy Scenarios, supra note 2, at 19-29.
 Id. at 8.
 Id. at 94-96.
 Id. at 8.
 Id. at 94-96.
 Id. at 8.
 Id. at 96-99.
 See World Energy Scenarios, supra note 2, at 96-99.
 Id. at 8.
 Id. at 99-102.
 Id. at 8.
 Id. at 102-107.
 Id. at 12.