īNīRGY TRANSITIONOUTLOOK2022 Aglobalandregionalforecastto2050 Highlights ĒORīWORDHIGHLIGHTS Lookingbeyondtoday’shighenergypricestoseewhatthelonger-termenergyfutureholdsisdifficult.ThatiswhatthisOutlookdoes.OurforecastconsidersthedemandshockofthepandemicandthesupplyshockthatcamewithRussia’sinvasionofUkraineandconcludesthatthosedevelopmentsexertlittlelong-terminfluenceoveratransitionthatwillberapidandextensive. SHORTTERM HighenergypricesandagreaterfocusonenergysecurityduetothewarinUkrainewillnotslowthelong-termtransition –Europeaimstoaccelerateitsrenewablesbuild-outtoachieveenergysecurity –Intherestoftheworld,tacklinghighenergyandfoodpricesmayshiftdecarbonizationdownthelistofprioritiesintheshortterm –Thelong-terminfluenceofthewaronthepaceoftheenergytransitionislowcomparedwithmainlong-termdriversofchange:plungingrenewablescosts,electrification,andrisingcarbonprices Thepresentturbulenceinenergymarketsisnotinconse-quential,however.Europewilltransitiontoarenewables-dominatedpowersystemmorerapidly,buthigherenergypricesmaydampeninvestmentincleanenergyelsewhere.Thesetwoeffectstendtooffseteachothergloballyovertime.Supply-chaindisruptionswillcontinueintheshorterterm,delayingtheglobalEV‘milestone’(whentheEVshareofnewvehiclesalessurpasses50%)byoneyearinourforecast—to2033.Butheretootherearecompensatorydevelopments,wherehighpriceswillencourageenergy-savingbehaviouramongpowerconsumers.Foraviation,wealsoforecastapermanentreductionof7%inannualpassengertripsduetopandemic-relatedchangesinworkhabits. Thisyear,ourforecastseesnon-fossilenergynudgeslightlyabove50%oftheglobalenergymixby2050.Theprincipalunderlyingdynamicisrapidelectrification,withsupplyclimbingfrom27PWh/yrnowto62PWh/yrin2050.Wedetailhowthisleadstoenormousenergy-efficiencygainsinpowergenerationandend-use. Weareenteringaprolongedperiodwhereefficiencygainsinourenergysystemoutstriptherateofeconomicgrowth.OverthelongtermthismeanstheworldwillspendsignificantlylessonenergyasaproportionofGDP.Intheory,thatshouldprovidepolicymakerswithconfi-dencetoacceleratethetransition. Boldandbravepolicychoicesarecriticalinthefaceofclimatechange.Thisyear,forthefirsttime,weincludeour‘PathwaytoNetZero’alongsideour‘bestestimate’forecastfortheenergytransition.Putanotherway, wecompareaforecastthatwethinkwillunfoldwitha pathwaythatwehopetheworldwillembrace.Evenunderanetzeropathwaywethinkitinfeasiblefortheworldtocompletelydiscontinuefossil-fueluse,whichiswhyyouwillfinda13%fossilshareintheenergymixinourPathwaytoNetZeroin2050.Thatovershoot infossilusewillrequirehugeexpenditureoncarboncaptureandremovaleffortsinthe2040s–runningtoUSD1trillionperyear. Deglobalizationismuchtalkedabout.However,theenergytransitionislikelytoseeunprecedentedregionalandcross-industrycooperation—forexamplewithinhydrogenecosystemsorthecreationofgreenshippingcorridors.DNVwill,asanindependentprovideroftechnicalexpertise,strivetocatalysesuchcooperationwhereverwecan. IhopeyoufindthisOutlookausefulstrategyandplanningtool,and,asever,Ilookforwardtoyourfeedback. RemiEriksen GroupPresidentandCEODNV COP26andtheIPCChavecalledforurgentactionwhichhasnotmaterialized:emissionsremainatrecordlevels –Emissionsmustfallby8%eachyeartosecurenetzeroby2050 –Opportunitiesforintensifiedactionabound–thetransitionisopeningupunprecedentedopportunitiesfornewandexistingplayersintheenergyspace LONG-TERMFORECAST Electricityremainsthemainstayofthetransition;itisgrowingandgreeningeverywhere –Withan83%shareoftheelectricitysystemin2050,renewablesaresqueezingthefossilshareoftheoverallenergymixtojustbelowthe50%markin2050 –Despiteshort-termrawmaterialcostchallenges,thecapacitygrowthofsolarandwindisunstoppable:by2050theywillhavegrown20-foldand10-fold,respectively Hydrogenonlysupplies5%ofglobalenergydemandin2050,athirdofthelevelneededfornetzero –Purehydrogenusescalesinmanufacturingfromtheearly2030sandinderivativeform(ammonia,e-methanolandothere-fuels)inheavytransportfromthelate2030s –Greenhydrogenfromdedicatedrenewablesandfromthegridwillbecomedominantovertime;bluehydrogenandblueammoniaretainimportantrolesinthelongterm PATHWAYTONETZERO Weareheadingtowardsa2.2°Cwarming;war-footingpolicyimplementationisneededtosecurenetzeroby2050 –Massive,earlyactiontocurbrecordemissionsiscritical;thewindowtoactisclosing –Nonewoilandgaswillbeneededafter2024inhighincomecountries,andafter2028inmiddle-andlow-incomecountries. Netzeromeansleadingregionsandsectorshavetogomuchfurtherandfaster –OECDregionsmustbenetzeroby2043andnetnegativethereafter;Chinaneedstoreduceemissionstonetzeroby2050 –Renewableelectricity,hydrogenandbioenergyareessential,butinsufficient:almostaquarterofnetdecarbonizationreliesoncarboncaptureandremovalcombinedwithland-usechanges(reduceddeforestation). 23 DNVEnergyTransitionOutlook2022Highlights Highlights–shorttermHighlights–longterm HighenergypricesandaheightenedfocusonenergysecurityduetothewarinUkrainewillnotslowthelong-termtransition EuropeislikelytoaccelerateitsenergytransitionduringandafterthewarinUkraine.Therewillbearapidphase-outofimportedRussianfossilfuelsou