Only a few years ago, talking about energy essentially meant discussing the price of oil. Today, oil is still in the discussion, but the topic is rather how fast the use of it will decline. After years of hype and false starts, the shift to energy sources such as wind and sun has begun to accelerate at a pace that has taken even the most experienced experts by surprise.
Even as the global appetite for power continues to increase, solar and wind are set to become two important power sources over the next few decades. Between 2000 and 2015 global energy demand grew by 2 percent per year, and while the pace will slow to 0.7 percent per year through to 2050, a lot more energy will be needed, according to the report Energy 2050: Insights from the Ground up by global consulting firm McKinsey.
A new industrial revolution awaits.
Isabelle Kocher, CEO, Engie
Energy efficiency will make great strides in the coming years, the report says, but as the global population continues to grow – albeit at a slower pace than before – and standards of living increase worldwide, demand for electricity will continue to grow. According to a recent report from Bloomberg New Energy Finance, electricity demand worldwide is expected to grow 58 percent by 2040, which will be met by a doubling of installed capacity to 14 TW by 2040.
Another important factor for power demand is the ongoing electrification of transport. The investment bank Goldman Sachs predicts that between now and 2025 more than 20 million electric cars will be sold globally and that traditional combustion engine cars will reach their peak in 2020 and then start to decline.
But the future will be less energy intensive than today. McKinsey predicts that by 2050 the amount of energy needed to produce one unit of GDP will be half what it was in 2013. One will get more for less. One explanation is that services are taking a larger slice of the global economy, and they are typically less energy demanding than manufactured goods. A haircut requires a lot less energy than producing a new suitcase, for example, even though the price and hence the value may roughly be the same. In India, the services share of the economy is expected to climb to 64 percent in 2035, up from 54 percent today.
New technologies and a digitized and automated economy boost energy efficiency and moderate demand even as populations and economies grow. In 2017, LED lighting for the first time overtook traditional incandescent and fluorescent lighting in sales. Goldman Sachs believes that by 2050 the electricity used in the United States for lighting will be cut by 62 percent through the expanded use of LEDs.
Digitalization speeds up the growth of services and turns tangible goods such as CDs and books into digital services. It makes the whole economy more efficient, and through technologies such as big data, smart metering, autonomous cars and decentralized power grids, it is a major force in energy efficiency.