Wood Mackenzie Energy Transition Outlook 2023

Energy for One World
Energy for One WorldFounder of Energy For One World en Energy for One World
2023 Energy
Transition Outlook
The energy challenge trinity:
Security, sovereignty, and sustainability
Part of Wood Mackenzie’s Energy Transition Service
2
Industry Value
Chain Depth:
Assets,
Technologies,
and Costs
Integrated
Global
Perspectives
Investible
Market
Intelligence
Executive summary
Broad and deep – Forming an integrated view of various energy transition scenarios across each segment,
commodity, technology and market
Wood Mackenzie’s ETO – a strategic view of the energy transition
Regional Power
& Renewables
Markets
Oils & Refining
Global LNG
& Gas
Regional Gas
Markets
Bulks and Metals
Markets
Chemicals
Markets
Energy Transition Research (Global Energy and Emerging Technologies)
Includes our Energy Transition Outlook (ETO)
Wind Solar Grid Edge Energy
Storage
Electric &
Fuel cell
Vehicles
Hydrogen &
Ammonia
CCUS Oil &
Gas
Metals &
Mining
Chemicals
3
Executive summary
…but many of the challenges remain the same
Since our last ETO the market context has changed
Energy security fears have increased
• COVID-19 and the war in Ukraine unsettled
general public more widely.
• Russia’s invasion of Ukraine reduced the
supply of energy and metals to the world,
amplifying the impact of underinvestment over
the last decade. It’s led to supply security fears
around the world, and higher prices fueling
inflation.
• Many countries are facing a multi-year period
of slow growth and weak investment. Energy
transition offers an opportunity to invest in new
technologies that boost local manufacturing
and create jobs.
• Investment is now accelerating across all
sectors.
• But low-carbon sectors such as renewables
are growing fastest.
Financial landscape is less favourable
• High interest rates, cost inflation globally and
supply chain issues are slowing pace of
change to below required levels.
• Renewable technologies are capital intensive.
Companies not keen to deploy more capital
into early stage projects that are risky and
don’t assure returns. High interest rates
changed the calculus and FID criteria.
• Easy locations for solar and wind have been
utilised. Next phase of growth requires
investment into grid infrastructure and
interconnections. These projects are
significantly more capex heavy and are sitting
unconnected at record levels.
• Historically, governments have invested in
infrastructure projects and energy transition is
likely to be no different.
• Partnership and cooperation will be key to
mitigate risks.
Not on track to hit emissions targets
• No major country is currently on track to meet
their 2030 emissions reduction goals.
• Urgently need to address obstacles including
permitting restrictions and constraints in the
electricity supply chain. Policy landscape is
shifting to direct incentives and targeted
support to accelerate the development of new
technologies.
• Governments can’t meet their 2030 emissions
targets but they don’t want to bin their Net Zero
Emissions goals yet because they have been
legislated and passed into law.
• CCUS offers significant opportunity. Once
operationalised and scaled this technology
makes up for ‘lost decades’ of no or limited
reductions in carbon emissions. This is
resulting in increased investment and
corporate activity in this sector.
4
Executive summary
The energy transition is highly uncertain, our ETO models different pathways and outcomes
Wood Mackenzie’s 2023 Energy Transition Outlook
Net zero 2050
1.5 degree scenario
Country pledges
2 degree scenario
• Wood Mackenzie’s base case view
across all commodity and technology
business units – our central, most likely
outcome
• Our base case incorporates the
evolution of current policies and
technology advances
• Electricity share of final demand rises
from 20% to 22% by 2030
• Oil demand peaks at 108 mb/d in 2032
and falls to 92 mb/d in 2050.
• US$1.9 trillion annual average
investment required
• Our base case is broadly consistent with
a 2.5˚C global warming view by 2050
Base case
2.5 degree scenario
• Wood Mackenzie’s scenario on how
country pledges may be implemented in
the future. The 2˚C trajectory aligns with
the upper temp limit from the Paris
Agreement
• The rapid decarbonisation of power and
electrification across multiple sectors
drives emissions reduction in this scenario
• Electricity share of final demand rises to
30% by 2050
• Oil demand falls to 50 mb/d in 2050
• US$2.2 trillion annual average investment
required
• Developed countries reach net zero by
2050; global net zero by 2070
• Wood Mackenzie’s scenario on how a
1.5˚C world may play out over the next 30
years. Carbon emissions align with the
most ambitious goal of the 2015
Paris Agreement
• Immediate peak energy, low-carbon
hydrogen and carbon removal
technologies play a major role, while
consumer behaviour must change radically
• Electricity share of final demand rises to
50% in 2050
• Oil demand falls to 30 mb/d by 2050
• US$2.7 trillion annual average investment
required
• Global net zero emissions arrive by 2050
5
Executive summary
The world needs to reach net zero before 2050 to meet the goals of the Paris Agreement
Global energy-related CO₂ emissions, billion tonnes (Bt)
The three ETO scenarios
(5)
-
5
10
15
20
25
30
35
40
2000 2010 2020 2030 2040 2050
Outlook Trajectory Policy Enablers
Base case Consistent with
2.5 degrees global
warming
Evolution of current
policies and aligns
with our commodity
outlooks released in
H1 2023
Steady advancement of
current and nascent
technologies
Country
pledges
Consistent with
below 2 degrees
warming (Global
net zero by 2060)
Aligned with net
zero pledges
announced in the
run up to COP28
Incorporates policy
response to the current
energy crisis, and
geopolitical challenges
facing global economy
Net zero 2050 Consistent with
1.5 degrees
warming (Global
net zero by 2050)
Aligned with most
ambitious goal of
Paris Agreement
Immediate peak
energy; rapid hydrogen
and carbon removal
deployment; consumer
shift
Base case Net zero 2050
Country pledges
6
Achieved (self-declared)
Declaration / pledge
In law
In policy document
Proposed / in discussion
Executive summary
Countries meet their mid-century goals in our scenarios; only the EU27 and the UK come close to meeting the
2030 emissions reduction targets
Source: Wood Mackenzie, Net Zero Tracker
Status of net zero pledges by country
Net zero pledges now cover 88% of annual global emissions
Country
2030 target vs
baseline
Net Zero
year
Base case
(2030)
Pledges
scenario (2030)
Net zero
scenario (2030)
UK
68% decline vs
1990
2050 - 44% - 55% - 62%
EU-27
55% decline vs
1990
2050 - 40% - 50% - 53%
US
50-52% decline
vs 2005
2050 - 15% - 22% - 30%
Japan
46% decline vs
2013
2050 - 23% - 30% - 37%
South
Korea
40% decline vs
2017
2050 - 13% - 23% - 25%
China
Peak emissions
before 2030
2060 - 5% - 16% - 21%
India
45% drop in
intensity by 2030
2070 + 47% +32% + 6%
WoodMac 2030 emissions comparison is against announced country targets and baseline
years.
Announced pledges WoodMac ETO
7
Executive summary
Emissions must fall rapidly across all sectors to meet the long-term climate targets
Global emissions remain far from a 1.5˚C pathway even if announced pledges are met
Key measures required to achieve climate pledges longer term:
• In our base case, emissions peak around 2027 and fall ~ 30% by
2050 from 2019 levels. Annual decline needs to be twice as fast in
the base case to limit the temperature increase to 1.5 ˚C warming.
• Expand global energy infrastructure across power transmission
and distribution, EV charging network, and delivery of emerging
technologies such as CCUS and low carbon hydrogen, and long
duration energy storage.
• Incentivise heavy industry to electrify processes and adopt Scope
1-3 emissions targets in hard to abate sub-sectors such as iron
and steel and cement production.
• COP28 needs to create a framework for investment into low
carbon infrastructure and energy supply in non-OECD markets
which are struggling to raise finance and are slow to transition.
Note: area in the positive axis show gross emissions and removals in the negative axis.
Global energy-related net emissions, billion tonnes CO2
-10
-
10
20
30
40
2000 2010 2020 2030 2040 2050
Coal Gas
Oil Industrial processes
CCUS Direct air capture
Nature-based solutions ETO net emissions
AET2 net emissions AET1.5 net emissions
Base case net emissions
Pledges scenario net emissions Net zero scenario net emissions
8
0
100
200
300
400
500
600
700
2000 2010 2020 2030 2040 2050
Exajoule
(EJ)
Coal Gas
Oil Bio energy
Electricity Low-carbon hydrogen
Base Case Pledges scemario
Net zero scenario
Executive summary
Share of electricity and low-carbon hydrogen in TFC rises to 34% in the base case and 61% in our net zero
scenario by 2050
Total final consumption (TFC)
Global energy demand will continue to grow with rising incomes and population
Total primary energy demand (TPED)
• Electricity is more efficient to meet energy demand than fossil fuels due to
reduced losses.
• Although global GDP and population continue to grow, greater
electrification enables a reduction in energy consumption per unit of GDP
65%
9%
16%
10%
0
100
200
300
400
500
600
700
2000 2010 2020 2030 2040 2050
Exajoule
(EJ)
Coal Gas Oil
Bio energy Nuclear Hydro
Renewables Base case Pledges scenario
Net zero scenario
scenario
9
Executive summary
Fossil fuels meet over half of total demand; their decline depends on the pace and scale of low-carbon supply
ETO total final consumption (TFC) by sector: base case and scenario comparison
Industry accounts for about 50% of final energy consumption
Chemicals Cement
Iron & Steel Other
75%
46% TFC by 2050
Energy intensive, fossil fuel dependent processes and
high cost of new technologies hinder transition.
Mitigation: efficiency, circular feedstock, CCUS
21% TFC by 2050
EVs reach 90% new car sales in developed markets
by 2050, heavy duty mobility remains oil dependent.
Long term focus: EV & FCEV infrastructure and support
for less developed markets
33% TFC by 2050
Strong regulatory support will drive consumer shifts to
heat pumps and other electric devices.
Critical enabler: grid infrastructure and deployment of
zero-carbon power.
61%
0
50
100
150
200
250
2023 2030 2040 2050 2023 2030 2040 2050 2023 2030 2040 2050
Industry Transport RCA
Exajoule
(EJ)
Coal Gas Oil Bio energy Electricity Low carbon hydrogen Base case Pledges scenario Net zero scenario
10
0
10
20
30
40
50
60
70
80
2015 Industry Transport RCA 2023 Industry Transport RCA Renewables-
based
hydrogen
CCUS and
DAC
2050
PWh
Base case Pledges scenario Net zero scenario
Executive summary
Electrolysis-based hydrogen contributes to nearly half of the demand growth in the scenario
Power demand by sector
Power demand doubles in the base case by 2050 and trebles in our net zero scenario
• Global GDP doubles to US$169 trillion by 2050. Economic growth drives industrial
output while policies to reduce emissions spur electrification
• Buildings and industry drive power demand in the base case. Hydrogen production
contributes to 50% of total power demand growth in the net zero scenario
• Improvement in electrolyser efficiency reduces power requirement by about 1,000
TWh in 2050 in the net zero scenario compared to the base case
Electrolysis-
based
hydrogen
11
Executive summary
Flexible assets such as gas plants, batteries and hydrogen will be key for grid stability and decarbonisation
Note: * Solar, wind, and energy storage capacities are 10x the values indicated on the chart
Renewables account for 70% to 90% of supply to offset the decline in thermal power
across scenarios
0
1,000
2,000
3,000
2020
2030
2040
2050
2020
2030
2040
2050
2020
2030
2040
2050
2020
2030
2040
2050
2020
2030
2040
2050
Coal unabated Gas unabated Solar* Wind* Other renewables
Capacity
GW
0
500
1,000
1,500
2020
2030
2040
2050
2020
2030
2040
2050
2020
2030
2040
2050
2020
2030
2040
2050
2020
2030
2040
2050
Coal CCUS Gas CCUS Energy storage* Low-carbon hydrogen
and ammonia
Nuclear
Capacity
GW
Base case Pledges scenario Net zero scenario
Despite contributing to power
demand growth, hydrogen
electrolysers allow for more
integration of solar and wind
Small modular reactors can
be effective in land-
constrained markets difficult
to scale solar and wind
12
0
2
4
6
8
2020
2030
2040
2050
2020
2030
2040
2050
2020
2030
2040
2050
CCUS Nature-based solutions Direct air capture
Bt
CO
2
Executive summary
Funding and policy support are increasing for low-carbon hydrogen and CCUS adoption
Low-carbon hydrogen production
Net zero requires 515 Mt Hydrogen and 12.7 Bt CO2 capture and removals by 2050
Carbon capture and removals
In our base case, CCUS and direct air capture
reach 2 billion tonnes and nature-based
solutions reach 1 billion tonnes by 2050
0
100
200
300
400
2020
2030
2040
2050
2020
2030
2040
2050
Green hydrogen Blue hydrogen
Mtpa
Capacity growth of more
than 5 Mt a year electrolytic
hydrogen is expected
This needs to accelerate to
more than 13 Mt additional
capacity a year to meet net zero
Note: CCUS includes BECCS. Nature-based solutions forecast in the
graphic is additional to existing LULUCF sink capacity.
Base case Net zero scenario
Pledges scenario
13
Executive summary
Urgency of investment undermined by 7- to 10-year build time for new mines
Base metals, Mt
Base metals and battery raw materials supply will be crucial to support electrification
Battery raw materials, Mt
0
20
40
60
80
100
2020 2030 2050 2020 2030 2050 2020 2030 2050
Aluminium Copper Manganese
Base case Net zero scenario
0
2
4
6
8
10
2020 2030 2050 2020 2030 2050 2020 2030 2050
Lithium Nickel Cobalt
Base case Net zero scenario
14
Executive summary
About 75% of total capital is needed in power and infrastructure sectors; clear policies can unlock the finance
Actual capex (2010-2022)
Annual global spend needs to increase by about 150% to achieve net zero
Pledges capex (2023-50)
Base case capex (2023-50) Net zero capex (2023-50)
US$26
trillion
US$52
trillion
US$60
trillion
US$75
trillion
• Average annual capex
US$2 trillion
• Upstream 57%
• Power and renewables 35%
• Average annual capex
US$1.9 trillion
• Upstream 27%
• Power and renewables 63%
• Average annual capex
US$2.2 trillion
• Upstream 14%
• Power and renewables 73%
• Average annual capex
US$2.7 trillion
• Upstream 7%
• Power and renewables 79%
Upstream oil and gas Power and renewables Power grid and EV infrastructure M&M Hydrogen and CCUS
How Wood Mackenzie
can help
To find out more about the data and insights included in
this executive summary please email
contactus@woodmac.com
16
Wood Mackenzie is the global insight business for
renewables, energy and natural resources.
Driven by data. Powered by people.
Who we are
In the middle of an energy revolution, businesses and governments need reliable
and actionable insight to lead the transition to a sustainable future. That’s why we
cover the entire supply chain with unparalleled breadth and depth, backed by over
50 years’ experience in natural resources. Today, our team of over 2,100 experts
operate across 30 global locations, inspiring customers’ decisions through real-
time analytics, consultancy, events and thought leadership. Together, we deliver
the insight they need to separate risk from opportunity and make bold decisions
when it matters most.
Part of the Veritas group.
For more information visit www.woodmac.com
17
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of the new energy economy. We provide commercial insight and access to our experts,
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18
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19
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Wood Mackenzie Energy Transition Outlook 2023

  • 1. 2023 Energy Transition Outlook The energy challenge trinity: Security, sovereignty, and sustainability Part of Wood Mackenzie’s Energy Transition Service
  • 2. 2 Industry Value Chain Depth: Assets, Technologies, and Costs Integrated Global Perspectives Investible Market Intelligence Executive summary Broad and deep – Forming an integrated view of various energy transition scenarios across each segment, commodity, technology and market Wood Mackenzie’s ETO – a strategic view of the energy transition Regional Power & Renewables Markets Oils & Refining Global LNG & Gas Regional Gas Markets Bulks and Metals Markets Chemicals Markets Energy Transition Research (Global Energy and Emerging Technologies) Includes our Energy Transition Outlook (ETO) Wind Solar Grid Edge Energy Storage Electric & Fuel cell Vehicles Hydrogen & Ammonia CCUS Oil & Gas Metals & Mining Chemicals
  • 3. 3 Executive summary …but many of the challenges remain the same Since our last ETO the market context has changed Energy security fears have increased • COVID-19 and the war in Ukraine unsettled general public more widely. • Russia’s invasion of Ukraine reduced the supply of energy and metals to the world, amplifying the impact of underinvestment over the last decade. It’s led to supply security fears around the world, and higher prices fueling inflation. • Many countries are facing a multi-year period of slow growth and weak investment. Energy transition offers an opportunity to invest in new technologies that boost local manufacturing and create jobs. • Investment is now accelerating across all sectors. • But low-carbon sectors such as renewables are growing fastest. Financial landscape is less favourable • High interest rates, cost inflation globally and supply chain issues are slowing pace of change to below required levels. • Renewable technologies are capital intensive. Companies not keen to deploy more capital into early stage projects that are risky and don’t assure returns. High interest rates changed the calculus and FID criteria. • Easy locations for solar and wind have been utilised. Next phase of growth requires investment into grid infrastructure and interconnections. These projects are significantly more capex heavy and are sitting unconnected at record levels. • Historically, governments have invested in infrastructure projects and energy transition is likely to be no different. • Partnership and cooperation will be key to mitigate risks. Not on track to hit emissions targets • No major country is currently on track to meet their 2030 emissions reduction goals. • Urgently need to address obstacles including permitting restrictions and constraints in the electricity supply chain. Policy landscape is shifting to direct incentives and targeted support to accelerate the development of new technologies. • Governments can’t meet their 2030 emissions targets but they don’t want to bin their Net Zero Emissions goals yet because they have been legislated and passed into law. • CCUS offers significant opportunity. Once operationalised and scaled this technology makes up for ‘lost decades’ of no or limited reductions in carbon emissions. This is resulting in increased investment and corporate activity in this sector.
  • 4. 4 Executive summary The energy transition is highly uncertain, our ETO models different pathways and outcomes Wood Mackenzie’s 2023 Energy Transition Outlook Net zero 2050 1.5 degree scenario Country pledges 2 degree scenario • Wood Mackenzie’s base case view across all commodity and technology business units – our central, most likely outcome • Our base case incorporates the evolution of current policies and technology advances • Electricity share of final demand rises from 20% to 22% by 2030 • Oil demand peaks at 108 mb/d in 2032 and falls to 92 mb/d in 2050. • US$1.9 trillion annual average investment required • Our base case is broadly consistent with a 2.5˚C global warming view by 2050 Base case 2.5 degree scenario • Wood Mackenzie’s scenario on how country pledges may be implemented in the future. The 2˚C trajectory aligns with the upper temp limit from the Paris Agreement • The rapid decarbonisation of power and electrification across multiple sectors drives emissions reduction in this scenario • Electricity share of final demand rises to 30% by 2050 • Oil demand falls to 50 mb/d in 2050 • US$2.2 trillion annual average investment required • Developed countries reach net zero by 2050; global net zero by 2070 • Wood Mackenzie’s scenario on how a 1.5˚C world may play out over the next 30 years. Carbon emissions align with the most ambitious goal of the 2015 Paris Agreement • Immediate peak energy, low-carbon hydrogen and carbon removal technologies play a major role, while consumer behaviour must change radically • Electricity share of final demand rises to 50% in 2050 • Oil demand falls to 30 mb/d by 2050 • US$2.7 trillion annual average investment required • Global net zero emissions arrive by 2050
  • 5. 5 Executive summary The world needs to reach net zero before 2050 to meet the goals of the Paris Agreement Global energy-related CO₂ emissions, billion tonnes (Bt) The three ETO scenarios (5) - 5 10 15 20 25 30 35 40 2000 2010 2020 2030 2040 2050 Outlook Trajectory Policy Enablers Base case Consistent with 2.5 degrees global warming Evolution of current policies and aligns with our commodity outlooks released in H1 2023 Steady advancement of current and nascent technologies Country pledges Consistent with below 2 degrees warming (Global net zero by 2060) Aligned with net zero pledges announced in the run up to COP28 Incorporates policy response to the current energy crisis, and geopolitical challenges facing global economy Net zero 2050 Consistent with 1.5 degrees warming (Global net zero by 2050) Aligned with most ambitious goal of Paris Agreement Immediate peak energy; rapid hydrogen and carbon removal deployment; consumer shift Base case Net zero 2050 Country pledges
  • 6. 6 Achieved (self-declared) Declaration / pledge In law In policy document Proposed / in discussion Executive summary Countries meet their mid-century goals in our scenarios; only the EU27 and the UK come close to meeting the 2030 emissions reduction targets Source: Wood Mackenzie, Net Zero Tracker Status of net zero pledges by country Net zero pledges now cover 88% of annual global emissions Country 2030 target vs baseline Net Zero year Base case (2030) Pledges scenario (2030) Net zero scenario (2030) UK 68% decline vs 1990 2050 - 44% - 55% - 62% EU-27 55% decline vs 1990 2050 - 40% - 50% - 53% US 50-52% decline vs 2005 2050 - 15% - 22% - 30% Japan 46% decline vs 2013 2050 - 23% - 30% - 37% South Korea 40% decline vs 2017 2050 - 13% - 23% - 25% China Peak emissions before 2030 2060 - 5% - 16% - 21% India 45% drop in intensity by 2030 2070 + 47% +32% + 6% WoodMac 2030 emissions comparison is against announced country targets and baseline years. Announced pledges WoodMac ETO
  • 7. 7 Executive summary Emissions must fall rapidly across all sectors to meet the long-term climate targets Global emissions remain far from a 1.5˚C pathway even if announced pledges are met Key measures required to achieve climate pledges longer term: • In our base case, emissions peak around 2027 and fall ~ 30% by 2050 from 2019 levels. Annual decline needs to be twice as fast in the base case to limit the temperature increase to 1.5 ˚C warming. • Expand global energy infrastructure across power transmission and distribution, EV charging network, and delivery of emerging technologies such as CCUS and low carbon hydrogen, and long duration energy storage. • Incentivise heavy industry to electrify processes and adopt Scope 1-3 emissions targets in hard to abate sub-sectors such as iron and steel and cement production. • COP28 needs to create a framework for investment into low carbon infrastructure and energy supply in non-OECD markets which are struggling to raise finance and are slow to transition. Note: area in the positive axis show gross emissions and removals in the negative axis. Global energy-related net emissions, billion tonnes CO2 -10 - 10 20 30 40 2000 2010 2020 2030 2040 2050 Coal Gas Oil Industrial processes CCUS Direct air capture Nature-based solutions ETO net emissions AET2 net emissions AET1.5 net emissions Base case net emissions Pledges scenario net emissions Net zero scenario net emissions
  • 8. 8 0 100 200 300 400 500 600 700 2000 2010 2020 2030 2040 2050 Exajoule (EJ) Coal Gas Oil Bio energy Electricity Low-carbon hydrogen Base Case Pledges scemario Net zero scenario Executive summary Share of electricity and low-carbon hydrogen in TFC rises to 34% in the base case and 61% in our net zero scenario by 2050 Total final consumption (TFC) Global energy demand will continue to grow with rising incomes and population Total primary energy demand (TPED) • Electricity is more efficient to meet energy demand than fossil fuels due to reduced losses. • Although global GDP and population continue to grow, greater electrification enables a reduction in energy consumption per unit of GDP 65% 9% 16% 10% 0 100 200 300 400 500 600 700 2000 2010 2020 2030 2040 2050 Exajoule (EJ) Coal Gas Oil Bio energy Nuclear Hydro Renewables Base case Pledges scenario Net zero scenario scenario
  • 9. 9 Executive summary Fossil fuels meet over half of total demand; their decline depends on the pace and scale of low-carbon supply ETO total final consumption (TFC) by sector: base case and scenario comparison Industry accounts for about 50% of final energy consumption Chemicals Cement Iron & Steel Other 75% 46% TFC by 2050 Energy intensive, fossil fuel dependent processes and high cost of new technologies hinder transition. Mitigation: efficiency, circular feedstock, CCUS 21% TFC by 2050 EVs reach 90% new car sales in developed markets by 2050, heavy duty mobility remains oil dependent. Long term focus: EV & FCEV infrastructure and support for less developed markets 33% TFC by 2050 Strong regulatory support will drive consumer shifts to heat pumps and other electric devices. Critical enabler: grid infrastructure and deployment of zero-carbon power. 61% 0 50 100 150 200 250 2023 2030 2040 2050 2023 2030 2040 2050 2023 2030 2040 2050 Industry Transport RCA Exajoule (EJ) Coal Gas Oil Bio energy Electricity Low carbon hydrogen Base case Pledges scenario Net zero scenario
  • 10. 10 0 10 20 30 40 50 60 70 80 2015 Industry Transport RCA 2023 Industry Transport RCA Renewables- based hydrogen CCUS and DAC 2050 PWh Base case Pledges scenario Net zero scenario Executive summary Electrolysis-based hydrogen contributes to nearly half of the demand growth in the scenario Power demand by sector Power demand doubles in the base case by 2050 and trebles in our net zero scenario • Global GDP doubles to US$169 trillion by 2050. Economic growth drives industrial output while policies to reduce emissions spur electrification • Buildings and industry drive power demand in the base case. Hydrogen production contributes to 50% of total power demand growth in the net zero scenario • Improvement in electrolyser efficiency reduces power requirement by about 1,000 TWh in 2050 in the net zero scenario compared to the base case Electrolysis- based hydrogen
  • 11. 11 Executive summary Flexible assets such as gas plants, batteries and hydrogen will be key for grid stability and decarbonisation Note: * Solar, wind, and energy storage capacities are 10x the values indicated on the chart Renewables account for 70% to 90% of supply to offset the decline in thermal power across scenarios 0 1,000 2,000 3,000 2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050 Coal unabated Gas unabated Solar* Wind* Other renewables Capacity GW 0 500 1,000 1,500 2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050 Coal CCUS Gas CCUS Energy storage* Low-carbon hydrogen and ammonia Nuclear Capacity GW Base case Pledges scenario Net zero scenario Despite contributing to power demand growth, hydrogen electrolysers allow for more integration of solar and wind Small modular reactors can be effective in land- constrained markets difficult to scale solar and wind
  • 12. 12 0 2 4 6 8 2020 2030 2040 2050 2020 2030 2040 2050 2020 2030 2040 2050 CCUS Nature-based solutions Direct air capture Bt CO 2 Executive summary Funding and policy support are increasing for low-carbon hydrogen and CCUS adoption Low-carbon hydrogen production Net zero requires 515 Mt Hydrogen and 12.7 Bt CO2 capture and removals by 2050 Carbon capture and removals In our base case, CCUS and direct air capture reach 2 billion tonnes and nature-based solutions reach 1 billion tonnes by 2050 0 100 200 300 400 2020 2030 2040 2050 2020 2030 2040 2050 Green hydrogen Blue hydrogen Mtpa Capacity growth of more than 5 Mt a year electrolytic hydrogen is expected This needs to accelerate to more than 13 Mt additional capacity a year to meet net zero Note: CCUS includes BECCS. Nature-based solutions forecast in the graphic is additional to existing LULUCF sink capacity. Base case Net zero scenario Pledges scenario
  • 13. 13 Executive summary Urgency of investment undermined by 7- to 10-year build time for new mines Base metals, Mt Base metals and battery raw materials supply will be crucial to support electrification Battery raw materials, Mt 0 20 40 60 80 100 2020 2030 2050 2020 2030 2050 2020 2030 2050 Aluminium Copper Manganese Base case Net zero scenario 0 2 4 6 8 10 2020 2030 2050 2020 2030 2050 2020 2030 2050 Lithium Nickel Cobalt Base case Net zero scenario
  • 14. 14 Executive summary About 75% of total capital is needed in power and infrastructure sectors; clear policies can unlock the finance Actual capex (2010-2022) Annual global spend needs to increase by about 150% to achieve net zero Pledges capex (2023-50) Base case capex (2023-50) Net zero capex (2023-50) US$26 trillion US$52 trillion US$60 trillion US$75 trillion • Average annual capex US$2 trillion • Upstream 57% • Power and renewables 35% • Average annual capex US$1.9 trillion • Upstream 27% • Power and renewables 63% • Average annual capex US$2.2 trillion • Upstream 14% • Power and renewables 73% • Average annual capex US$2.7 trillion • Upstream 7% • Power and renewables 79% Upstream oil and gas Power and renewables Power grid and EV infrastructure M&M Hydrogen and CCUS
  • 15. How Wood Mackenzie can help To find out more about the data and insights included in this executive summary please email contactus@woodmac.com
  • 16. 16 Wood Mackenzie is the global insight business for renewables, energy and natural resources. Driven by data. Powered by people. Who we are In the middle of an energy revolution, businesses and governments need reliable and actionable insight to lead the transition to a sustainable future. That’s why we cover the entire supply chain with unparalleled breadth and depth, backed by over 50 years’ experience in natural resources. Today, our team of over 2,100 experts operate across 30 global locations, inspiring customers’ decisions through real- time analytics, consultancy, events and thought leadership. Together, we deliver the insight they need to separate risk from opportunity and make bold decisions when it matters most. Part of the Veritas group. For more information visit www.woodmac.com
  • 17. 17 Wood Mackenzie is ideally positioned to support consumers, producers and financers of the new energy economy. We provide commercial insight and access to our experts, leveraging our integrated proprietary data and analytics. Global Outlook, Regional Knowledge ASTANA WASHINGTON D.C CHICAGO BOSTON LONDON RIO MEXICO CITY CALGARY PERTH SYDNEY BRISBANE DUBAI NEW DELHI BEIJING SEOUL TOKYO SHANGHAI JAKARTA SINGAPORE KUALA LUMPUR HOUSTON LIMA ABUJA NEW YORK SAN FRANCISCO AUSTIN AMSTERDAM HAMBURG EDINBURGH AARHUS WOOD MACKENZIE OFFICES • 2,000 employees across 30 locations, close to customers and industry contacts • Over 700 sector-dedicated analysts and consultants globally • Leaders in the energy transition and cross-commodities VANCOUVER LOUISVILLE MADRID HYDERABAD MUMBAI
  • 18. 18 Trusted analysis established from a deep understanding of our customers’ business With over 3,200 customers globally, we cover a number of areas and expertise. Our customers Energy transition Upstream Oil & Gas Energy Markets Gas Power Refining & Oil products Macro economics Metals & Mining NGL Chemicals Renewables LNG • Investment Banks • E&P • IOC • Materials Producers • NOC • NGO • Government • Miners • Utilities • Industrials • Service Companies • Institutional Investors
  • 19. 19 Creating value for our customers Wood Mackenzie delivers… • High-quality proprietary data and models • Experts with deep industry knowledge • Integrated analysis and advice • Objectivity and integrity • Access to our analysts • Understanding of customers’ challenges • A global presence • Trusted commercial intelligence to enable these teams… • Strategy and policy makers • Corporate planning groups • Business development • New ventures • Market analysis groups • Commodity price analysts • Investors and advisors • Procurement teams • Traders to address these business challenges • Understand their markets • Value assets • Reduce risk • Identify and screen opportunities • Assess competitors • Strengthen strategy • Enhance in-house views • Save time • Confidently make strategic decisions
  • 20. These materials, including any updates to them, are published by and remain subject to the copyright of the Wood Mackenzie group ("Wood Mackenzie"), or its third-party licensors (“Licensors”) as relevant, and are made available to clients of Wood Mackenzie under terms agreed between Wood Mackenzie and those clients. The use of these materials is governed by the terms and conditions of the agreement under which they were provided. The content and conclusions contained are confidential and may not be disclosed to any other person without Wood Mackenzie's prior written permission. Wood Mackenzie makes no warranty or representation about the accuracy or completeness of the information and data contained in these materials, which are provided 'as is'. The opinions expressed in these materials are those of Wood Mackenzie, and do not necessarily represent our Licensors’ position or views. Nothing contained in them constitutes an offer to buy or to sell securities, or investment advice. Wood Mackenzie's products do not provide a comprehensive analysis of the financial position or prospects of any company or entity and nothing in any such product should be taken as comment regarding the value of the securities of any entity. If, notwithstanding the foregoing, you or any other person relies upon these materials in any way, Wood Mackenzie does not accept, and hereby disclaims to the extent permitted by law, all liability for any loss and damage suffered arising in connection with such reliance. Copyright © 2023, Wood Mackenzie Limited. All rights reserved. Disclaimer
  • 21. Wood Mackenzie™ is a trusted intelligence provider, empowering decision-makers with unique insight on the world’s natural resources. We are a leading research and consultancy business for the global energy, power and renewables, subsurface, chemicals, and metals and mining industries. For more information visit: woodmac.com WOOD MACKENZIE is a trademark of Wood Mackenzie Limited and is the subject of trademark registrations and/or applications in the European Community, the USA and other countries around the world. Europe Americas Asia Pacific Email Website +44 131 243 4477 +1 713 470 1700 +65 6518 0888 contactus@woodmac.com www.woodmac.com