The energy transition: what will it look like?

In the Paris Agreement (2015), most nations of the world have agreed to reduce their greenhouse gas emissions so as to keep global warming limited to “well below 2°C”. Since the use of fossil fuels (oil, gas, coal) is the main cause of greenhouse gas emissions (they cause about three-quarters of total emissions), this implies that the world must move away from the current energy system based on fossil fuels to one that is “climate neutral” or “CO2-free”. This is what is referred to as “the energy transition”.

The need for an energy transition away from “unabated” fossil fuels (unabated means that the CO2 emitted from the combustion of the fossil fuel is not captured and stored but released into the air) is hardly in dispute. But there Is still fierce debate about what the most cost-effective and efficient alternatives are.

At this moment, around 80% of global energy supply comes from coal, oil and gas. Some researchers believe that it is possible for the world to move to a 100% renewable energy based system in the foreseeable future. For example, the Solutions Project, led by Mark Jacobson of Stanford University, has published scenarios showing it is possible for the world to use only sun, wind and water to produce all its energy needs in 2050 and to phase out all fossil fuels as well as nuclear power, at affordable cost.

More gradual

Most experts, however, envision a more gradual transition. The International Energy Agency, usually regarded as the most authoritative think tank in the world representing the established energy industry, has developed a “Sustainable Development Scenario”, which shows a possible energy future “in line with the objectives of the Paris Agreement”, in which the use of coal, oil and gas is reduced gradually from 81% today to less than 50% by 2050:

World Energy Outlook and the total primary energy demand from the International Energy Agency (IEA)

Source: World Energy Outlook 2019, International Energy Agency (IEA), November 2019

The IEA’s Sustainable Development Scenario contains three important takeaways about the energy transition which virtually all experts agree with:

  • Energy efficiency must be improved strongly
  • The energy system will see strongly increased electrification
  • Renewable energy will grow strongly

Firstly, in the Sustainable Development Scenario global “energy intensity” (energy use compared to GDP) is reduced by 55% in 2040 compared to 2017. This means that to meet the Paris targets, the world must improve its energy efficiency by 3.4% per year. This represents a big challenge: according to the IEA the rate of energy intensity reduction was only 1.6% per year in the period 2000-2017 and only 1.2% in 2018.

Secondly, in the Sustainable Development Scenario the proportion of electricity in final energy use will grow from  19% in 2018 to 38% in 2050. “Electrification” is often a cost-effective way to “decarbonise” certain energy uses, for instance in transport, where conventional cars are likely to be gradually replaced by electric vehicles.

Thirdly, the Sustainable Development Scenario foresees strong growth in solar, wind and hydropower, a projection that almost all analysts agree with. However, it also projects considerable growth in nuclear power and in carbon capture and storage (CCS). These projections are more controversial. Many environmentalist organisations are opposed to nuclear power and CCS.

The Sustainable Development Scenario projects the following development of electricity generation:

The Sustainable Development Scenario projects the following development of electricity generation from International Energy Agency (IEA)

World Energy Outlook 2019, International Energy Agency (IEA), November 2019

Another controversial technology is biomass. Many energy experts believe that biomass can be produced sustainably and will have an important role to play in a sustainable energy future, but others argue that the use of biomass leads to higher CO2 emissions and should not be counted as “carbon neutral”.

Other routes

The IEA’s Sustainable Development Scenario is only one possible route to a climate neutral future. There are many others. Shell, for example, has published a sustainable energy scenario called Sky, which consists of these building blocks:

  • A step-change in the efficiency of energy use leads to gains above historical trends. 
  • Carbon-pricing mechanisms are adopted by governments globally over the 2020s, leading to a meaningful cost of CO2 embedded within consumer goods and services.
  • The rate of electrification of final energy more than triples, with global electricity generation reaching a level nearly five times today’s level. 
  • New energy sources grow up to fifty-fold, with primary energy from renewables eclipsing fossil fuels in the 2050s.
  • Some 10,000 large carbon capture and storage facilities are built, compared to fewer than 50 in operation in 2020. 
  • Net-zero deforestation is achieved. In addition, an area the size of Brazil being reforested offers the possibility of limiting warming to 1.5°C, the ultimate ambition of the Paris Agreement.

The energy transition will not look the same everywhere. Each country or region will make its own choices depending on their natural resources and political circumstances. The European Union (EU) has adopted an EU-wide CO2-emission reduction target of 40% and a renewable energy target of 32% for 2030 compared to 1990.

In November 2018, the European Commission presented a vision for a “Climate Neutral Europe” in 2050. In other words, according to the Commission, by 2050 “net greenhouse gas emissions” should be zero in Europe.

Natural gas

One big topic of debate is what role natural gas will play in the energy system of the future. The European Commission believes natural gas will be almost phased out in 2050 in Europe. The IEA and other institutions believe natural gas will be important at least until 2050 and possibly several decades longer. Natural gas can help reduce emissions if it is used to replace coal in power generation, but it is still a fossil fuel, so it can’t be used indefinitely if the world is to reduce its emissions to zero, unless it is combined with CCS.

A different question is whether natural gas could be replaced by other gases, for example biogas or renewable hydrogen. Many analysts believe it is more cost-effective to continue to use existing gas infrastructure with renewable gases than to replace all forms of gas with electricity. For more on renewable gas and hydrogen, see our thematic pages Hydrogen – the missing link in the energy transition and The promise of renewable gas.

In March 2019, energy consultancy Navigant published a study, “Gas for climate”, commissioned by a group of European gas network operators, comparing the costs of a “minimal gas” use scenario with an “optimised” gas scenario in which natural gas is replaced by renewable methane and hydrogen. It concluded that “optimised” use of the would save European society €217 billion annually across the energy systemby 2050.

Our energy transition programmes

International Gas Value Chain

International Gas Value Chain

  • 9 Mar 2020 - 12 Mar 2020
  • Athens, Greece
Executive Programme Energy Transition and Innovation

Executive Programme Energy Transition and Innovation

  • 23 Mar 2020 - 27 May 2020
  • The Netherlands and France
European Energy Markets

European Energy Markets

  • 11 May 2020 - 14 May 2020
  • To be determined
Executive Programme Large Energy Projects – Investment and Realisation

Executive Programme Large Energy Projects – Investment and Realisation

  • 15 Jun 2020 - 18 Jun 2020
  • Moscow or St. Petersburg, Russia
Innovative European Gas TSO

Innovative European Gas TSO

  • 9 Nov 2020 - 11 Nov 2020
  • To be determined
Executive Programme New Energy Realities

Executive Programme New Energy Realities

  • 23 Nov 2020 - 5 Feb 2021
  • The Netherlands, Germany and United Kingdom