Norwegian oil major Equinor in an update to its annual long-term energy market outlook said the share of electricity in the world’s final energy consumption is slated to rise from about 20% today to between 52% and 85% in 2050 – depending on how ambitious global energy transition efforts are.

In parallel, power generation by wind and solar would increase from 7% of global electricity production in 2018 to between 32% and 52% in 2050.

Equinor in its ‘Energy Perspectives 2021’ takes into account long-term energy markets as well as Covid-19 recovery policies around the world, and for the first time looks more closely at how hydrogen can play a role in decarbonisation.

“Equinor has a robust strategy to face a long-term decline in oil and gas demand, and we are developing a portfolio that can also create value in a net zero future,” said Eirik Wærness, chief economist of Equinor.

“Profitable oil and gas production are necessary to fund growth in renewables, CCS and hydrogen, all of which will be needed in a low carbon future. In this future there will be plenty of new business opportunities for us.”

As in its previous outlook, Equinor outlines three different scenarios, Rebalance, Reform and Rivalry. Only under the Rebalance scenario, the world would achieve the goals of the Paris climate agreement.

In Rebalance, total energy demand would have peaked already in 2019 due to immediate and coordinated tightening of climate policies, as well as behavioural changes on the back of the Covid-19 recovery, while under Reform and Rivalry, it would have peaks in 2040 and 2045, respectively.

Under the Rebalance scenario, electricity in 2050 would account for 44% of global energy consumption, and wind and solar combined would make up 52% of electricity output.

But Equinor argues that wind and solar capacities alone won’t be enough to meet future demand due to the intermittency of their generation.

The report suggests other technologies with dispatchable power generation and no or low CO₂ footprints, such as hydro power (including pumped hydro storage), natural gas linked to post combustion carbon capture, and nuclear power. The latter two are highly controversial in many regions, and nuclear is out of the question in countries such as Germany or Austria.

As an addition to Rebalance, Equinor also has carried out a hydrogen sensitivity study, but acknowledges that projections for its future use vary widely, making a precise outlook difficult.

“In the reimaging of Rebalance, slow initial growth is assumed in the global H2 market, with 53m tonnes (Mt) of demand by 2030,” the report reads. “This accelerates to 385 Mt by 2050, with China accounting for 28% of demand.”

Equinor assumes that hydrogen will take market share from fossil fuels, primarily gas. But the oil & gas major unsurprisingly also expects that natural gas at first will receive a certain boost from blue hydrogen production (H₂ made from natural gas linked to CCS).

The report sees blue hydrogen dominating until the mid-2030s, while green hydrogen (made through electrolysis from renewable energy) gradually increases and from about the mid-2040s on will be produced in larger volumes than blue H₂.

While under the normal Rebalance scenario, world electricity demand is seen growing by 90% between 2018 and 2050, that share increases to 133% over the same period if hydrogen use is included.

“This gives an additional demand compared with Rebalance of about 11,500 terawatt hours (TWh), or 1.6 times China’s 2018 electricity use,” the report states.

Equinor in this calculation assumes that all green hydrogen for energy purposes will be produced from renewable energies. Wind generation in the hydrogen study needs to supply some 4,800TWh in 2050, close to 42% more compared with Rebalance.

While concentrating on the Rebalance scenario, the report acknowledges that global energy policies currently are not sufficient or adequate to reach it, and therefore also points to a Reform and a Rivalry scenario.

Under the Reform scenario, there will be a continued tightening of climate policies in line with the Paris Agreement, but it won’t be enough to actually reach the climate targets. Under such a scenario, developed countries are the main drivers of development, but there is limited success for technologies such as CCS or new energy carriers like hydrogen.

Under the Rivalry scenario, climate policy is not sufficiently prioritised and the energy transition thus won’t gain enough momentum as it is only driven by market forces. It would be the least sustainable outlook. In such a scenario, nationalism, xenophobia and key leaders’ penchant for grandstanding (think of Trump) and scepticism to science and expert advice put security of supply at the top of counties’ agenda, the report describes.

Paradoxically, Equinor admits that under the Rivalry scenario, oil demand would be the highest.

The company sees its Energy Perspectives as its contribution to a fact-based dialogue.

“An energy transition is a matter of urgency. The discussions on our common energy future, where it might go, and where it should go, have never been more relevant, particularly during the Covid-19 crisis,” Wærness said.

“Globally coordinated efforts from governments, as well as innovation from industries and changing behaviour from consumers are required to reach targets.”

Energy Transition

'We are developing a portfolio that can create value in a net zero future': Equinor