In what may come as welcome news to North American consumers grappling with the latest fuel price spike, Oslo-based certification and research body DNV has forecast a decades-long decline in household energy spending due to renewables-driven electrification, but found that the region will still fall short of its mid-century net zero targets.
“Electrification will be a key driver of the energy transition, which will ultimately benefit consumers,” the group said in its latest regional forecast to 2050, Energy Transition Outlook North America.
“Household bills are set to halve by 2050 as they reap the rewards of cheaper electricity generated by renewables,” DNV predicted.
The new report explores the most likely energy future of the US and Canada to the middle of the century, forecasting “more than $12trn will be spent in the two countries on grid and renewables between now and 2050”.
“The cost efficiencies of renewable power are proving irresistible even in the land of big oil,” said Remi Eriksen, group president and CEO at DNV.
“The intrinsic efficiency of renewables and electrification mean that overall expenditure on energy will be the equivalent of 2.5% of GDP by 2050, compared to 4% now,” DNV said.
The one-year anniversary of passage of landmark clean energy legislation in August, the US Inflation Reduction Act (IRA), has seen a flurry of revised forecasts on the nation’s energy transition by research consultancies.
While all agree that the law’s open-ended incentives will spur mass investment and deployment of clean power, particularly solar, wind and storage, DNV stands out for touting consumer benefits as a key driver of growth.
It sees the US and Canada investing an accumulated $2.3trn in solar for a 15-fold increase, and $1.5trn in wind energy to grow it eight-fold.
Further, the IRA’s clean hydrogen and carbon capture, utilisation and storage (CCUS) incentives promise to “front-load” both segments, enabling them to develop “much more” rapidly than without.
North America is on course to spend $7trn on clean energy, including nuclear and hydrogen, and $5trn on grids.
“The trend has been firmly set by the $240bn already committed in clean investments in the US, as part of the IRA,” the consultancy said.
The needed investment “should be viewed as an opportunity to put the region at the heart of technologies essential to the global energy transition, such as hydrogen e-fuels, whilst reducing energy bills for households,” said Eriksen.
The view seems at odd with the current state of renewable energy in North America, where offtake contract awards get pricier and projects especially in offshore wind seek to renegotiate projects bid before inflation surged last year.
Equinor-BP’s 1.2GW Beacon Wind project for New York is seeking offshore renewable contract pricing at $190/MWh, which would make it some of the priciest power in the country.
Canada meanwhile is struggling to develop any meaningful scale in solar and wind as the lone province driving expansion – Alberta – shut down permit approvals in August for seven months as it assesses the impact of deregulation that ignited growth over the last two years.
Yet DNV maintains that, despite near-term headwinds, greater efficiencies gained from electrification will lead to less energy waste, which, combined with plunging costs of renewables and battery storage, will profoundly reduce energy intensity in economic activity.
“That the green shift comes with such an upside for so many suggests that North America should set its sights on an even faster transition, including an urgent focus on electricity transmission and distribution infrastructure,” added Eriksen.
Despite accelerated progress and its upward revision from last year’s forecast, DNV still sees the continent missing its net zero by 2050 goals.
“CO2 emissions are forecast to drop 75% by 2050 as fossil fuels, especially natural gas, will still play a role in the energy mix and the emissions of hard to electrify industrial processes like cement production will remain significant,” DNV said.
To meet global targets laid out by the Paris Accord of 2016, North America would need to decarbonise by the early 2040s, even earlier than pledged.
“This would require the type of single-minded American focus that ushered in the atomic age and the space age,” DNV said.