Alternative energy programs may become so successful in the next three years that the demand for traditional fossil fuels could peak as early as 2020. The entire energy industry, particularly “big oil,” faces a radical change in demand for its products.
According to a new study from Carbon Tracker and the Grantham Institute at Imperial College London, solar power and electric vehicles will be the major factors that will force down the need for oil and coal as energy sources:
Although this study focuses on the decarbonisation of the global power and road transport sectors, which today account for only 51% of global CO2 emissions and fossil fuel demand approximately, this scenario sees:
– Coal demand peaking in 2020;– Oil demand peaking in 2020; and
– Gas demand growth curtailed.
Underlying the analysis are the assumptions that solar energy will supply 23% of power generation worldwide by 2040 and electric vehicle transportation will make up 35% of the “road transportation” market by 2035.
Among the most important findings of the survey is that the trend toward use of alternative energy sources could significantly slow global warming over the balance of this century:
Global average temperature rise is limited to between 2.4°C (50% probability) and 2.7°C (66% probability) by 2100 in this scenario – far below the BAU (Business As Usual) trajectory towards 4°C and beyond used by fossil fuel companies. If climate policy exceeds the pathway prescribed by NDCs (Nationally Determined Contribution), and overall energy demand is lower, cost reductions in solar PV and EVs can help limit global warming to between 2.1°C (50% probability) and 2.3°C (66% probability). Efforts must be made to align with this more carbon-constrained trajectory.
Nationally determined contributions were set as part of the Paris Agreement, an pact among nations about future limits to carbon emissions.
The authors of the study admit that there are a number of other scenarios that could change their forecast outcomes.
If the study is close to correct, the global industries that are based on exploration and production of oil could be disrupted extremely. Exploration costs tens of billions of dollars a year, and getting an oil or coal field into production can take the better part of a decade. In addition, the costs of refineries are in the billions of dollars as well. Traditional energy companies have capital expenditure budgets and revenue forecasts based largely on oil and coal demand that rises beyond the next four years.
If the forecast and the survey are close to accurate, the environment will be a long-term winner, and big energy will start to fade.
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