Last year the global energy transition had not truly started. Clean energy had not started replacing fossil energy in absolute terms. Now, one year later, we have reached that point.
2024 is the year that the global energy transition has begun; it is also the year that emissions are likely to peak.
Remi Eriksen
Group President and CEO
DNV
Emissions from energy peaking is, of course, good news, and a milestone for humanity. But since emissions are cumulative, we must now focus on how quickly emissions decline. Worryingly, the decline we forecast is very far from the trajectory required to meet the Paris Agreement targets. Our ‘most likely’ energy transition leads to warming of 2.2°C by the close of this century. If we want a faster transition, we must understand what is working and what is not.
Firstly, solar PV and batteries are booming, growing faster than we previously forecasted. In 2023, new solar installations globally surged by 80% to reach 400 GW. One of the reasons solar is gaining ground so fast is because battery prices are plunging, making 24-hour solar+storage power more accessible. Battery prices fell 14% last year, and they will keep on falling. That means that EVs are poised to become cheaper too. The world is therefore still on track towards our long-standing prediction that 50% of new passenger vehicle sales worldwide will be electric by 2031. Developments in solar and batteries are key reasons for emissions peaking. Owing to record EV sales in China, we are seeing petroleum demand there beginning to ebb away, while record solar installations are finally edging out coal in China’s power sector.
Secondly, the transition is in difficulty with technologies for decarbonizing hard-to-electrify sectors, where market forces and policy are failing to address the challenges. Many of the first commercial hydrogen energy projects have experienced cost overruns or have been stopped amidst market uptake uncertainty. We have revised our long-term forecast for hydrogen and its derivatives down by 20% (from 5% to 4% of final energy demand in 2050) since last year. Without a meaningful carbon price and/or direct market stimulating support, hydrogen will struggle to scale and move down a cost-learning curve. The same holds true for CCS where our current forecast is that investment in CCS during our entire forecast period will be less than the amount invested in solar and wind in 2023 alone.
In this Outlook, we quantify the many efficiencies gained from a doubling of electrification globally in the next 25 years. These efficiencies result in very large cumulative benefits that should give policymakers justification to tackle the difficult hard-to-electrify sectors while doubling down on renewable technologies, including much-needed short-term support for offshore wind.
