By August 10, 2017 0 Comments Read More →

Future of renewable energy is a radical global disruption – Wood Mackenzie

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Future of renewables

With current trends, Wood Mackenzie expects EVs accounting 21% of global car stock by 2035

The oil market downturn and the tone set by the Paris Agreement have already shifted the focus away from fossil fuels, but how quickly could we see the tides change and decisively tip the scales to renewables?

Together with GTM Research, a Wood Mackenzie company focused on researching decarbonisation and the decentralisation of energy, they created a carbon-constrained scenario.

This is an alternative path to the future that focuses on the consistent, marginal change that will disrupt established markets long before a wholesale switch away from hydrocarbons occurs.

The most striking aspect of our carbon-constrained scenario is long-term, double-digit growth for renewable energy , specifically wind and solar power.

Combined, these two sources currently supply approximately 8 per cent of the world’s power demand needs but will supply 30 per cent in 2035.

SKYACTIV-XThis constitutes a seven-fold increase in the size of the renewables market and will be driven by a dramatic fall in the costs of wind and solar capacity, as well as the cost of energy storage.

Wind and solar also cut coal’s contribution by 30 per cent, almost obviate the need for new nuclear and eventually curtail gas.

Because short-term energy storage technologies enjoy significant overlap with EV batteries, Wood Mackenzie expects that a feedback loop will develop as adoption of both accelerates, further driving down costs.

The transportation and petrochemicals sectors currently command approximately 79 per cent of global oil demand, with the remainder consumed in industry and the residential/commercial arena.

Under the carbon-constrained scenario, Wood Mackenzie remains confident that petrochemical demand growth will still remain positive, although to a lesser degree than in their base case. But the transport sector’s adoption of EVs will seriously disrupt oil demand.

 In 2017, EVs are attracting increasing attention, but remain a niche market.
However, the falling cost of EVs and their batteries will put EV purchase prices on par with ICE vehicles, and automakers are responding to this trend by developing new EVs.
If this continues, Wood Mackenzie sees EVs accounting  for 21 per cent of the global car stock by 2035.

Although this is still less than a quarter of the global vehicle fleet, EVs will threaten the status quo in two ways: displacing oil demand as the EV fleet size increases and forcing ICEs to become more efficient as consumers demand comparable running costs from legacy engine types.

Following exponential growth in EV use, we see oil demand hitting its peak by 2025 before declining.

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A paradigm shift could arrive long before oil demand peaks in 2025. After President Trump announced his intent to withdraw the US from the Paris Agreement, other countries, US states, cities and global corporations reaffirmed their commitment to curtailing emissions growth.

Meanwhile, momentum is building within business to adapt to a changing world. Dormant for a decade, carbon has resurfaced as a critical concern in the boardrooms around the world.

The downturn spurred the majors into focusing on renewables to build diversity and optionality into portfolios and best position themselves in today’s radically different energy landscape.

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While we consider the Paris Agreement’s 2° C world impossible to achieve given current technology, pressure to do more — for governments and energy companies alike —would lead to a future that’s much closer to our carbon-constrained scenario than many would expect.

Through consistent changes in consumer preferences and carbon policies, renewables and other low-carbon technologies could radically disrupt the energy landscape far sooner than expected.

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