How quickly will fossil fuels be phased out?

Welcome back to Energy Source, coming to you from Houston today.

Yesterday the Biden administration cancelled its latest plans to refill the country’s strategic reserves as rising oil prices become an increasing headache for the White House. Prices settled at a five-month high, with Brent crude tantalisingly close to breaking $90/barrel.

Elsewhere, the long-running saga surrounding the man dubbed the godfather of US liquefied natural gas was back in the news this week — Charif Souki was ordered by a Texas judge to repay $100mn to lenders following a years-long clash over defaulted loans.

On to today’s newsletter. Modelling the future of energy trends can be a nightmare at times, with dozens of different scenarios posited by different outfits with different motivations assessing different factors.

Resources for the Future, a think-tank, this week released its annual assessment that seeks to parse major outlooks. For today’s Energy Source, I dug into the report and pulled out five key takeaways.

Thanks for reading.

Myles

Energy transition trends: 5 key takeaways

Resources for the Future’s Global Energy Outlook, released this week, combines a plethora of different scenarios modelled by intergovernmental bodies — from the International Energy Agency to Opec — and major energy companies — from BP to ExxonMobil — on energy trends over the coming decades.

Some scenarios assume a rapid energy transition, others a much slower one. Some are designed to hit net zero emissions, others to chart current policies. Lining them up side by side gives a good big picture overview of the route ahead for the energy transition. These are Energy Source’s key takeaways from the report.

1. How quickly will fossil fuels be phased out?

While some of the more ambitious outlooks suggest a sharp drop-off in fossil fuel usage after 2030, the majority project hydrocarbon usage will remain chunky until at least the middle of the century.

But RFF’s report suggests an incomplete phaseout does not preclude meeting climate goals. Even in many scenarios that are in line with limiting global warming to 1.5C by 2100, there is still a substantial use of fossil fuels until at least 2050.

“To achieve international climate goals and limit warming to 1.5C or 2C by 2100, a true energy transition is needed,” the reports authors write. “But does achieving such goals require phasing out fossil fuels entirely? The scenarios we analyse in this report suggest that the answer is no.”

2. Carbon capture is a key part of the equation

But if fossil fuels are not phased out there will be a need for a massive boost in carbon removal technologies that today remain in their infancy.

In 2022 about 42mn tonnes of CO₂ were captured by carbon capture and storage infrastructure around the world, according to RFF. That was triple 2010 levels but still just 0.1 per cent of total annual emissions.

Under the more ambitious scenarios mapped by RFF these technologies would need to grow 14 to 16-fold by 2050.

Such a huge scale-up is not technically unfeasible but there are questions around cost. There is also controversy around the incentives that they provide to continue pumping oil and gas rather than rapidly transitioning.

3. Renewables are way off course . . . 

World leaders agreed at COP28 to triple global renewable generation capacity by 2030 to 11,000GW — a tall order.

To achieve it, there would need to be an average 800GW of capacity additions annually from 2022. To put that into perspective: that year, overall existing global wind capacity stood at 832GW and solar at 892GW.

Only three scenarios analysed by RFF actually achieve this — and none are based on policies that are either in place or announced.

4. . . . and so is nuclear

Another lofty target set at COP28 was to rapidly scale up nuclear, with 22 countries committing to a tripling of capacity by 2050.

Given that 12 of these countries had their nuclear capacity decline over the past decade and another five produce no atomic power, this seems supremely ambitious.

“To even approach the goal of tripling nuclear capacity, more than half of the 22 nations that committed to doing so will need to reverse current trends and rapidly deploy new nuclear power,” notes RFF.

Put another way, that would require compound annual growth of 4 per cent from 2022 to 2050. In the decade from 2010 to 2022 that figure was just 0.3 per cent.

Of the scenarios assessed, only two reach this target, with most anticipating only a modest growth in nuclear.

5. Who knows what will happen to gas

One of the most hotly contested topics in the transition debate is the future of natural gas in the energy mix. Advocates say it has a role to play in weaning developing nations off dirtier coal. (As Jamie, Amanda and I reported last week, they see a bright future in artificial intelligence).

Opponents, though, point out that making gas a central part of the transition locks in decades more of carbon-emitting fossil fuel use.

Gas demand has grown by two-thirds since 2000 and — unlike coal and oil, which are widely expected to peak in the coming years — it is expected to continue growing in about half of the scenarios modelled.

But the controversy over gas’s future is reflected in the huge divergence in the volumes of gas that are expected to be needed in the decades ahead.

Under reference scenarios from the Energy Information Administration and ExxonMobil, usage increases 30 per cent by 2050. Under more ambitious outlooks, meanwhile, such as BP and Shell’s net zero scenarios, there is a 70 per cent drop-off by 2050.

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.