Annual additions of up to 550GW of solar and wind could propel renewables to a 60% share of global energy supply by 2050, said BP as it admitted oil demand may already have peaked.

The huge increase in renewables’ share from just 5% of primary energy in 2018 is at the top end of a trio of scenarios in BP’s latest yearly Energy Outlook – all three of which have wind and solar as the planet’s fastest-growing sources of energy in the next 30 years.

The 550GW of new solar and wind compares to an annual average of 60GW since 2000, according to BP.

The steep growth will be fuelled by further falls in development costs of up to 35% for wind and 70% for solar, predicts the supermajor’s annual study, which is seen as one of the most comprehensive attempts to forecast long-term energy trends.

BP chief executive Benard Looney said the outlook had been “instrumental” in developing the company's recently-announced strategy to increase its annual low carbon investment to about $5bn per annum, and increase its renewable generating capacity to about 50GW by 2030.

“This year the Outlook reaches out a decade further than before, to 2050 – the year by which we intend to deliver our net zero ambition,” Looney said on Monday. He is expected to give more details of BP's plans for the energy transition over the next few days.

The release of the 2020 Energy Outlook comes a few days after UK-based BP made a dramatic entry into offshore wind with a $1.1bn deal to join Equinor in its US projects.

Oil never recovers

All three of its scenarios forecast a decline in oil demand over the next 30 years, and in two of the three it “never fully recovers ‎from the fall caused by Covid-19”.

The steepest decline is forecast under the “Net Zero” scenario, with BP predicting an 80% drop in oil demand if carbon emissions are reduced by more than 95%, from 2018 levels, by 2050 to limit temperature rises to 1.5 degrees Celsius.

Under the company’s “Rapid” scenario, BP predicts oil demand could fall 55%, as the carbon emissions decline about 70% by 2050 as policy measures are introduced to cut emissions, led by a significant increase in carbon prices. Under both Rapid and Net Zero, BP forecasts carbon prices to reach $250 per tonne in the developed world and $175 per tonne in emerging economies by 2050.

Even under BP’s “Business-as-usual” (BAU) scenario the company’s outlook predicts a 10% fall in oil demand. The BAU scenario assumes government policies, technologies and societal preferences continue to evolve in a similar and manner and speed as recent years, which would only see emissions fall to 10% below 2018 levels by 2050.

The decline across all three scenarios will be driven by increasing efficiency and electrification of road transportation.

BP also highlighted the increasing importance of hydrogen and bioenergy in the energy transition, with hydrogen’s use in the energy mix anticipated to increase in the second half of the outlook under the Net Zero and Rapid scenarios.

Under the Net Zero scope, hydrogen is anticipated to account for 16% of all energy consumption by 2050, while under Rapid it accounts for about 7%.

By 2050, bioenergy accounts for about 7% of primary energy in Rapid and almost 10% in Net Zero.

Better outlook for gas

BP’s outlook for gas is more positive than oil, with natural gas expected to continue to play a key role in the transition to a lower carbon future.

Under the Net Zero scenario, BP forecasts gas demand to peak by the mid-2020s and be a third lower than 2018 levels by 2050, while under the rapid scenario it would peak a decade later in the mid-2030s, but demand would be similar to 2018 levels by the end of the forecast period.

Under the BAU scenario, BP expects demand for gas to continue to grow over the entire forecast period, to be about a third higher in 2050 than it was in 2018.

BP noted that gas would continue to support a shift away from coal in fast growing, developing economies, where renewables and other non-fossil fuels may not be able to grow quickly enough to replace coal.

It also highlighted that the adoption of carbon capture, utilisation and storage (CCUS) provided a source of “near” zero-carbon power, noting that CCUS accounted for between 8% and 10% of primary energy by 2050 under its Rapid and Net Zero scenarios.

Note: Amends earlier version to correct level of wind and solar build under high scenario.