In its recently released Energy Transition Outlook 2023, energy research company Wood Mackenzie underscores the imperative of investing a minimum of $2.7 trillion annually in renewable energy, infrastructure, and energy transition technologies to attain global net-zero emissions by the year 2050. The report outlines three distinct scenarios, with the most ambitious targeting carbon emissions aligned with the 1.5-degree goal set forth in the 2015 Paris Agreement. Low-carbon hydrogen and carbon removal technologies are projected to play pivotal roles in this endeavor.
Under the 1.5-degree scenario, the report predicts that the share of electricity in final energy demand will surge to 50% by 2050. Meanwhile, in the 2-degree scenario, an annual investment of $1.9 trillion is deemed necessary. Wealthier nations are expected to reach net-zero emissions by 2050, while global net-zero emissions would be achieved by 2070.
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The 2.5-degree scenario also calls for an annual investment of $1.9 trillion, with the world still on course for an average temperature increase of 2.5 degrees Celsius by the year 2100. Notably, renewables are anticipated to constitute 70-90% of the energy supply across all scenarios, compensating for the decline in thermal power generation.
However, a sobering reality persists: no major country is presently on track to meet its 2030 emissions reduction targets, as highlighted in the report. Wood Mackenzie emphasizes that nations worldwide must address impediments such as permitting restrictions and constraints within the electricity supply chain.
Moreover, the financial landscape poses challenges to the expansion of renewable capacity, with high interest rates, global cost inflation, and supply chain disruptions slowing down the pace of renewables implementation. Furthermore, many readily available sites for solar and wind projects are already hosting renewable energy endeavors. To usher in the next phase of growth, investments in grid infrastructure and interconnections in more remote areas are essential.
Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, remarked, “The supply of low-carbon energy has grown by a third since 2015, but the world's energy demand has grown much faster with rising incomes and populations. The good news is that sustainability is alive and kicking, spurred on by policy, including the introduction of the US Inflation Reduction Act (IRA) and Europe's REPowerEU. Achieving the 1.5-degree Celsius target is going to be extremely challenging.”
