New market analysis finds energy incumbents are talking up future demand. Rapid advances in technology, increasingly cheap renewable energy, slower economic growth and lower than expected population rise could all dampen fossil fuel demand significantly by 2040, a new study published today by the London-based Carbon Tracker Initiative finds.
The analysis challenges nine business as usual (BAU) assumptions made by the big energy companies when calculating that fossil use will continue to grow for the next few decades. Typical industry scenarios see coal, oil and gas use growing by 30%-50% and still making up 75% of the energy supply mix in 2040. These scenarios do not reflect the huge potential for reducing fossil fuel demand in accordance with decarbonisation pathways.
The full report can be found here.
The in-depth analysis exposes that fossil fuel industry thinking is skewed to the upside, and relies too heavily on high demand assumptions to justify new and costly capital investments to shareholders. Reviewing previous industry, IEA and U.S. EIA projections, shows them to be too conservative in their expectations for renewables growth. This raises questions over the likely accuracy of their future projections.
Carbon Tracker’s head of research, James Leaton, said: “We have seen in recent weeks how the fossil fuel sector has misled consumers and investors about emissions — the Volkswagen scandal being a case in point — and deliberately acted against climate science for decades, judging from the recent Exxon expose. Why should investors accept their claims about future coal and oil demand when they clearly don’t stack up with technology and policy developments?
“Investors need to challenge companies who are ignoring the demand destruction that the market sees coming through much sooner than the business as usual scenarios being cited by the industry. Otherwise they will be on the wrong side of the energy revolution.”
The report, entitled Lost in transition: How the energy sector is missing potential demand destruction, examines alternative trajectories to mainstream energy industry modelling, produced by reputable financial houses like Bernstein and CitiGroup, that signal a more concerted drive to a low-carbon energy transition, hitting fossil fuel demand as a result.
The study finds that conventional fossil fuel company business models could be woefully behind the curve due to, for example, underestimating changes in emissions policy, technological advances or energy efficiency gains that can cause dramatic changes in demand trends. This is the first time a wide-range of fossil fuel industry demand scenarios has been compared with alternative and credible financial market views.
The analysis shows how the industry is assuming very slow incremental changes in the energy supply mix going forward. This ignores the potential downside risk explored in the research. Across all factors contributing to energy demand there is scope for reducing future emissions levels and staying within the 2˚C threshold. This includes considering different fundamental market conditions relating to population rise and GDP growth as well as more obvious advances in energy efficiency and clean technology.
Carbon Tracker’s senior analyst and co-author, Luke Sussams, said: “The incumbents are taking the easy way out by exclusively looking at incremental changes to the energy mix which they can adapt to slowly. The real threat lies in the potential for low-carbon technologies to combine and transform society’s relationship with energy. This is currently being overlooked by Big oil , coal and gas.”
Key findings of the report are:
– Global population growth may not rise to 9 billion by 2040 – the UN’s 2015 median-variant forecast applied by all fossil fuel companies – but population may only climb to 8.3 billion according to climatic and socioeconomic modelling.
– GDP growth could be lower than expected in major markets, including China and the U.S. For example, the OECD sees global GDP grow at 3.1% to 2040 rather than the 3.4% assumed by the IEA – a key industry reference point. This difference equates to roughly a drop in demand equivalent to half a year’s global energy demand in 2012.
– Moreover, the world is increasing its ability to decouple energy demand from economic growth. For example, we find that demand is drastically lower if global energy intensity of GDP falls by 2.8% per annum in line with the IEA’s 450 Scenario as opposed to 2.2% in the IEA’s New Policy Scenario.
– Fossil fuel company assumptions about future carbon intensity are inconsistent with decarbonisation plans set out by some 150 countries in their Intended Nationally Determined Contributions (INDCs). Incumbents generally expect carbon fuels to make up 75% of energy demand by 2040. We calculate that their scenarios see cumulative CO2 emissions to 2030 being up to 100GtCO2 higher than in an INDC scenario. These higher carbon intensity assumptions overlook huge shifts that are occurring in the energy sector:
-> The speed and scale of advancements in the competitiveness of renewable energy technologies is exceeding expectations. We show the extent to which the IEA in particular has been hugely conservative in the past and remains so compared to other industry forecasts.
-> The cost of energy (battery) storage is falling rapidly and is seven years ahead of average forecasts made last year, meaning the technology could be cost-competitive with power grids by 2025. The synergy between energy storage and renewable energy technologies has the potential to transform energy markets, but is not being factored into fossil fuel scenarios.
-> Global coal demand is structurally declining. China has shifted its energy system to such a degree that peak coal demand could occur in the very near-term. India has an ambitious short-term solar PV plan (160GW of solar and wind by 2022) that, by our calculations, could displace 158 million tonnes – roughly India’s total coal imports in 2012.
-> Electric vehicles (EVs) and energy efficiency will hit demand. Fossil fuel companies expect oil demand to grow between 0.4% and 0.8% a year to 2040, much from the road transport sector, oil’s biggest market. However, regulations requiring greater efficiency from combustion engine cars will hit oil demand in the short-term. Longer-term, oil industry scenarios see negligible take-up of electric vehicles (EVs) by 2040 but EVs could be cost-competitive with combustion engines by 2025 according to alternative forecasts, resulting in exponential growth.
-> All scenarios see future growth in gas demand. But as energy markets change, the levels of gas demand will be lower if the fuel loses its base-load role and switches to being a backup for renewables.
The full report can be found here.
A Good Look At How Homes Will Become More Energy Efficient Soon
Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.
There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.
1. The Rise Of Smart Windows
When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.
If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.
2. A Better Way To Cool Roofs
If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.
Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.
3. Low-E Windows Taking Over
It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.
They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.
4. Magnets Will Cool Fridges
Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.
The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.
5. Improving Our Current LEDs
Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.
That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.
Maybe Homes Will Look Different Too
Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.
ShutterStock – Stock photo ID: 613912244
IEMA Urge Government’s Industrial Strategy Skills Overhaul To Adopt A “Long View Approach”
IEMA, in response to the launch of the Government’s Industrial Strategy Green Paper, have welcomed the focus on technical skills and education to boost “competence and capability” of tomorrow’s workforce.
Policy experts at the world’s leading professional association of Environment and Sustainability professionals has today welcomed Prime Minister Teresa May’s confirmation that an overhaul of technical education and skills will form a central part of the Plan for Britain – but warns the strategy must be one for the long term.
Martin Baxter, Chief Policy Advisor at IEMA said this morning that the approach and predicted investment in building a stronger technical skills portfolio to boost the UK’s productivity and economic resilience is positive, and presents an opportunity to drive the UK’s skills profile and commitment to sustainability outside of the EU.
Commenting on the launch of the Government’s Industrial Strategy Green Paper, Baxter said today:
“Government must use the Industrial Strategy as an opportunity to accelerate the UK’s transition to a low-carbon, resource efficient economy – one that is flexible and agile and which gives a progressive outlook for the UK’s future outside the EU.
We welcome the focus on skills and education, as it is vital that tomorrow’s workforce has the competence and capability to innovate and compete globally in high-value manufacturing and leading technology.
There is a real opportunity with the Industrial Strategy, and forthcoming 25 year Environment Plan and Carbon Emissions Reduction Plan, to set long-term economic and environmental outcomes which set the conditions to unlock investment, enhance natural capital and provide employment and export opportunities for UK business.
We will ensure that the Environment and Sustainability profession makes a positive contribution in responding to the Green Paper.”