DNV GL has a strong footing in the fossil and renewable energy industries. 

We are a world leading provider of risk management, assurance and technical advisory services to customers in more than 100 countries. Around 70% of our business is related to energy in one or other form. This outlook draws on DNV GL’s broad involvement across entire energy supply chains, spanning complex offshore infrastructure, onshore oil & gas installations, wind, solar and energy efficiency projects, and electricity transmission and distribution grids. 

The core model development and research for this outlook was conducted by a dedicated Energy Transition research team in our corporate R&D unit. The team relied on input from around one hundred colleagues across our organization, as well as dozens of external experts.

This outlook, based on our own, independent model of the world’s energy system, was undertaken to aid analysts and decision-makers at our customers’ firms, and other stakeholders in the global energy supply chain. It will also support our own business strategy. 

Our findings suggest that there are immense challenges and opportunities in store for the industries we serve, and we explore these further in three ’industry implications’ supplements to this main publication: 

Our intention, from the outset, has been to construct what we in DNV GL see as ’a most likely future’ for energy through to 2050. This contrasts with scenario-based approaches. Typically, scenarios are set up to contrast possible futures, for example varying the speed of the transition from the current energy mix to one dominated by renewables. As an organization with equal exposure to both the fossil and renewable energy worlds, our aim has been to produce a objective, balanced view of the future. 

DNV GL strongly supports the Paris Agreement, and the efforts of almost all the world’s countries to limit global warming from pre-industrial levels to well below 2°C. Our outlook does not see the world on track to meet the Paris Agreement climate goal.

Future GDP is a function of population and productivity growth. 

Energy forecasts often take the number of people as a departure point and commonly rely for their projections on the World Population Prospects published biennially by the UN’s Department of Economic and Social Affairs. 

The UN has, however, been criticized for not taking country-specific education levels sufficiently into consideration, which matter for future fertility and mortality trends. For that reason, we prefer the approach used by the IIASA/Wittgenstein Centre for Demography and Global Human Capital in Austria, which specifically considers how urbanization and rising education levels are linked to declining fertility. 

Taking the IIASA models, but adjusting for a faster rate of population growth in Sub-Saharan Africa which lags other regions in terms of socio-economic development, gives us a global population in 2050 of 9.2 billion, some 6% lower than the 2017 UN median forecasts.

The oil and gas industry normally presents its energy figures in millions of tonnes of oil equivalents (Mtoe), while the power industry uses terawatt-hours (TWh), to describe large amounts of electrical energy. The SI system’s main unit for energy, however, is joules, or rather exajoules (EJ) when it comes to national or global energy statistics, which is also the unit we have chosen in this outlook. The conversion factors we use are: 

1 EJ = 23.88 Mtoe
1 EJ = 277.8 TWh

Another way of understanding joules is in terms of the energy needed per person. The amount of energy used per person today averages 78 gigajoules (GJ) annually. We forecast Europe’s average primary energy use to be 76 GJ per person per year by 2050.

The premise behind the notion of ’learning curves’ is that the cost of a technology decreases by a constant fraction with every doubling of installed capacity, owing to the growth in experience, expertise and industrial efficiencies associated with market deployment and ongoing R&D. 

After a decade or two, depending on the region, we see the energy transition gaining a self-reinforcing momentum. This will be the main consequence of interacting cost and technology dynamics that enable low-carbon solutions to stand on their own feet.

Our outlook shows that the world’s energy system is highly sensitive to changes in energy efficiency. The world’s energy intensity (units of energy per units of GDP) has been declining on average by 1.4% per year for the last two decades. We find that this rate will almost double to an average annual 2.5% decline. 

The main reason for this is the accelerating electrification of the energy system. Simply put, electricity use is much more efficient with less heat losses than is the case for fossil fuels. This effect is accentuated by ever-more solar and wind generation capacity being added, with only inconsequential energy losses. The efficiency trend will be further boosted by the mainstreaming of EVs, which typically consume only a quarter of the energy used by comparable gasoline-powered vehicles.

There are lower efficiency improvements in aviation and maritime, due to the continued use of internal combustion engines for propulsion.

Nevertheless, we anticipate improvement rates of 2.0%/yr per passenger-trip and 0.8%/yr per tonne-mile, respectively. Our forecast ramp-up of efficiency also relies on automation and digitalization, which enables a host of efficiency enhancements, for example in manufacturing efficiencies and in the energy-efficient design and operation of buildings.

Fossil power plants convert only a portion of their input energy to electricity, as much of the input energy is lost as heat. Though combined heat and power (CHP) plants capture some of this heat for useful purposes, globally such heat losses are enormous. 

In the case of renewable power generation, electricity is generated directly from wind, solar irradiance, and from running or elevated water. Although 100% of the input is not converted into electricity, the electricity generated is considered primary energy according to the physical energy content method (as explained in section 4.2 of our main report), and the wind, sun or water not captured is never counted as part of the energy system. 

Hence, with a growing proportion of renewable power generation in the energy mix, losses to heat in the production of energy will decline. This is a major reason why the world’s primary energy supply will peak before 2030.

"Ensuring access to affordable, reliable, sustainable and modern energy for all"

The future we forecast is one where humanity’s energy demand flattens after 2030. We foresee this happening even as the world makes steady positive progress with SDG #7, addressing the energy poverty that afflicts more than one billion people today. Energy demand flattens mainly because the energy intensity of economic activity is decelerating. Less energy is required per person. 

We forecast that the third target in UN Sustainable Development Goal No.7 — to double the rate of improvement in energy efficiency by 2030 — will be met. More specifically, we see energy efficiency doubling from an average of 1.3%/yr over the period 2000-2015 to 2.7%/yr in 2015- 2030.

This outlook is one of the few we know of that predicts that humanity will collectively start using less energy in the coming decades. Even so, the emissions associated with our forecast will not bring the planet within the so-called 2 °C target — the maximum level of warming above pre-industrial levels agreed upon in Paris, 2015. 

CO₂ will continue to be emitted to the atmosphere long after 2050. Simple extrapolation suggests that the first emission free year will only occur in 2090. This produces an overshoot, beyond the so-called 2 °C carbon budget, of some 700 Gt CO2. 

We nevertheless hazard an estimate that our forecast points towards 2.5 °C planetary warming by the end of the century. We also explore ways to ’close the gap’ between our forecast and the kind of future envisioned by the parties to the Paris Agreement. However, our main conclusion is that ’closing the gap’ will require a mix of extraordinary measures working in synchrony.