A glimmer of hope - Energy Outlook 2024

Executive summary

1 Off track?

• Against the backdrop of the hottest year on record, the COP28 stocktake summit of the Paris Agreement provided a gloomy picture. As though the energy transition is off track. 

• It is not (yet). We see firming acceleration of the energy transition after the Russian invasion, with stepped-up government intervention, energy efficiency and lower CO2 emissions.
• Bright spots are visible: China taking up a major role in the energy transition, investments significantly picking up, technology costs continuing to fall, and clean energy becoming increasingly competitive.

2 Bright spots improve scenarios

• These bright spots translate into an improved scenario. Fossil fuel demand peaks earlier, the momentum in deploying renewables, especially solar PV, continues as China turns to clean energy.
• Advanced economies are leading with lower and cleaner energy demand, helped by strong policy support. The emerging economies, excluding China, need commitments, policies, and funding.
• The gap between announced and implemented policies is closing, firming up the scenario of Net Zero Emissions (NZE) by 2050 as well. But the gap remains wide. 
• One should therefore make no mistake. The call for implementation and funding is as loud as ever. 

3 Renewable energy outlook

• 2023 was a record year for adding renewable capacity. The ongoing high prices for oil and gas, energy security, combined with declining costs, especially for solar, contributed to this. Besides, supportive policy initiatives aid the renewables momentum.
• China is adding the most renewable capacity, both solar and wind. Large investments in solar manufacturing contributed to a drop in local solar modules prices, improving the competitiveness of solar energy. China is expected to add the most capacity towards 2030 and in the longer term to 2050.
• In our baseline scenario demand for electricity will grow strongly, especially in emerging and developing countries driven by economic development, the increasing population and rising incomes. Particularly in the transport sector, electrification will take off. Additional electricity demand will be entirely met by low-emissions sources, with renewables becoming the dominant electricity source. Solar PV will become the most dominant electricity source. In the NZE scenario these developments are even more pronounced.
• Large investments in the electricity sector are needed to keep the electricity supply reliable and stable. In order to keep up with the strong growth in renewables, investments in the grid are crucial. Just like speeding up the permissions process is. 

4 Oil market outlook

• The volatility that characterised oil markets after the pandemic eased in 2023. The short-term outlook is more balanced. Global demand growth is muted as the global economy is slowing and demand-targeting policies are taking effect. Strong production growth in the Americas is largely offsetting OPEC+ production cuts. 
• Global oil demand is expected to peak s and begin declining in the second half of the 2020s. More decisive energy transition policies, especially in Europe and North America targeting the electrification of the vehicle fleet, are the key drivers to declining demand. Lower demand will drive production to low-cost sources. OPEC+ will therefore increase its share of a smaller oil market. 
• The future price of oil is consequently substantially lower than the levels around USD 80 per barrel today. We forecast the price to ease to USD 74 per barrel in 2030 and further to USD 60 in 2050. Volatility remains, especially in the event of an escalation of geopolitical conflicts. Still, the risk of sharp upward spikes is lower.
• In the NZE scenario, oil demand will fall much more rapidly due to significantly more aggressive energy transition policies, especially in EMEs. Oil production will be even more concentrated in resource-rich countries with lower operating costs, further driving op OPEC + market share. The oil price may fall to USD 25 per barrel in 2050.

5 Gas market outlook

• Gas markets have gradually rebalanced in 2023, after the high stress following Russia’s invasion of Ukraine. Gas prices are now 68% lower year-on-year in the US, 39% lower in Asia and 54% lower in Europe.
• We expect global gas demand to peak soon and to be 7% lower in 2030 and even 42% lower in 2050. Robust policy support will reduce the share of gas in the energy supply by 2030 in the power sector and then increasingly in buildings and industry. 
• Demand for gas is expected to grow in Asia-Pacific, Middle East and Africa until 2030 and then start to decline The US and Europe are projected to see a decline in gas demand both in the medium and long term.
• Russia is expected to be the largest gas supplier in 2050, whereas currently this is the US. But Russian supply will be almost 40% lower. The global surplus of LNG leaves Russia with fewer options to diversify into non-European markets. The Middle East remains the largest near-term source of supply growth.
• The gas price is trending down in all three regions (US, Europe, Asia). Gas prices will stay somewhat elevated until the middle of the decade, as global gas markets continue to adjust to the loss of Russian pipeline gas supply to Europe. This has knock-on effects on prices in other importing regions.