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The pandemic has emphasized that the world is experiencing a profound energy transition. The shift from fossil energy-based systems toward renewable has not only gained traction, but large parts of DM population segments adhere more and more to sophisticated renewable energy systems. The shift is a fundamental re-organization of how the present global economic system, which is about 150 years old, is interacting. One might think that the most important and profound changes will occur at the level of the present fossil-energy-producing countries. Maybe, but we don’t think so. The energy transition toward renewables highlights an opportunity for emerging economies and developing countries to become less dependent on third parties. One example that can be mentioned here is Morocco. Up till now, the country has had a 90% energy import dependency, but under the new scenario, to be implemented by 2030, the goal is 52% dependency on alternative energies. Provided the transition is successful, it will occur on the back of state-of-the-art technologies and low-cost power generation, transmission, and next-generation utilization systems. Chile is another country that is moving forward in an efficient and coherent manner. In both cases, renewable energy systems are mitigating broader social-political and social-economic stress. Improving access to energy across EM will benefit about 1 billion people—the ramifications will be vast: it will create jobs, reduce local pollution, promote sustainable development, and alleviate competition over scarce natural resources.
Global energy demand Driven by market share gains, in particular renewable energy resources, fossil energy resources that have impacted our economic development for about the last 150 years will experience a peak demand by 2030. Primary energy demand will grow by about 14% between now and 2050, while global GDP is expected to double during the same time. Renewables, coupled with nuclear energy, will double their market share by 2050. Future energy demand will be covered by wind, solar, and water.
Global Energy Players: Buy list
Electricity consumption Electricity consumption is expected to grow by 100% in the next 25 years. This occurs on the back of heavy demand from segments like transportation and construction. EV are expected to reach cost parity with conventional fuel vehicles by 2025. On the back of this achievement, demand for EVs will increase, and by 2035, it can be expected that sales parity will be achieved. Higher living standards in fast-growing areas such as India, China, and Brazil are expected to increase demand for space-cooling appliances and broad-based cooling systems. This in turn will increase over-proportionally peak energy demand that needs to be covered by state-of-art storage systems. It can be expected that by 2035 about 50% of global energy demand will be covered by wind and solar!
Building an efficient grid: Buy list
Gas sector shifts
Despite declining growth rates, gas is the only fossil-based energy to maintain its market share. Like fuel consumption, gas consumption growth is around 1.8% per annum. This constant increase is due to a stark demand from the utility sector. Midterm, while the demand from the utility sector will decline, the demand from various other sectors will increase. All in all, the market share growth is therefore limited. In the past, liquified natural gas (LNG) was seen as a valuable alternative, yet the uptake was slow because of a complex and heavy industrial process to deliver LNG efficiently.
Four major shifts can be expected in the gas sector:
Oil demand
Up to now, oil demand has experienced an annual growth rate of about 1.25% p.a. Against global expectations, while the fuel consumption for transportation is decreasing, there is a constant increase for polymer products. As EV are leading the transition, the demand for fossil energies (oil in particular) is expected to peak around 2035. Yet, even with half of today’s oil consumption by 2050, further new investments in up-and down-stream facilities are required. Higher oil prices and lower consumption are expected to accelerate the cost parity in favor of EV which in turn will reduce oil-related capex. Ultimately, oil will become a rare and costly product, which makes today’s investment opportunities more interesting than ever. The chemical sector (polymers) accounts for more than 50% of the oil demand growth over the next decades. Other segments that are expected to grow include aviation. While COVID-19 has temporarily reduced travel activities, prominent hub cities such as New York, London, Hong Kong, and Dubai, amongst others, are expected to return to previous utilization ratios by 2024.
Efficient oil companies: Buy list
Meeting CO2 emission targets Energy production systems and consumption are experiencing rapid changes. New technologies bring important changes to the way we commute, heat our buildings, and power our industrial activities. These changes have widespread ramifications for investors, businesses, governments, and individuals.
Meeting global carbon emission targets comes mainly on the back of broad-based coal reduction while other sectors and activities can contribute, in relative and absolute terms, only a fractional part. Coal demand is expected to fall by 40% by 2050. The primary driver for this reduction is China. In fact, China is phasing out in a relatively fast manner coal-enabled power plants. Hydrogen can play an important role in achieving CO2 emission targets. While retail prices for hydrogen are expected to remain elevated, the use of hydrogen in industrial areas could prove opportune.
X-Ref's for meeting C02 standards : Buy list
Knowledge is power.
