Limiting global temperature rises is achievable, according to Rystad Energy chief executive Jarand Rystad, but it will require a massive build out in renewables and hurdles remain on the path to net zero emissions.
Speaking during the opening session of Rystad Energy Week on Tuesday, the company’s founder outlined different scenarios for limiting global temperature rises as a result of climate change.
In the most extreme scenario of limiting global temperature rises to 1.4 degrees Celsius, the world would need to reach net zero emissions by 2035, well ahead of the 2050 target many countries are working towards.
Even limiting temperature rises to 1.5 degrees would require the world achieving net zero emissions by 2046, while Rystad explained that limiting global temperature rises to 1.6 degrees would require net zero emissions by 2056.
Reaching the 1.6 degree target would require $20.8 trillion worth of upstream and midstream clean energy investment between now and 2030, which Rystad noted was not too far away from the current average investment of about $2 trillion per annum.
Limiting temperature rises to 1.4 degrees would require $30.1 trillion of investment until the end of the decade, while a less ambitious 2 degree target would only require $17.6 trillion of investment until 2030.
However, Rystad noted that while allowing global temperature rises above 1.8 degrees would require less up front investment, it would require more investment in the future to prevent even higher temperature rises.
“As we see the more you are investing short term in building up infrastructure, within solar and wind especially which is what these investments are used for, the less you need to invest in the future,” he said.
Fall off in oil and gas consumption
Under the 1.6 degree scenario, Rystad sees oil consumption averaging about 61 million barrels per day by 2040, before slumping below 50 million bpd by 2050.
Rystad’s 1.4 degree scenario would see oil consumption averaging just 10 million bpd by 2040 and in a 2 degree scenario oil consumption averages 93 million bpd.
To put this into perspective, global consumption of petroleum and other liquids in 2020 averaged 92.4 million bpd in 2020, according to the International Energy Agency, and that figure is anticipated to rise to nearly 97.4 million bpd this year.
Meanwhile, global gas consumption under Rystad’s 1.6 degree scenario will total about 1.76 trillion cubic metres of gas in 2040, but only 202 billion cubic metres under the 1.4 degree scenario and a whopping 4.54 Tcm under the 2 degree scenario. According to BP’s Statistical Review of World Energy, global gas consumption in 2020 totalled about 3.82 Tcm.
Rapid roll out of renewables
Rystad Energy’s head of Gas and Power Markets Research, Carlos Torres Diaz, explained that in order to limit global temperature rises to 1.6 degrees, it would require $13 trillion of investment to build out 14 terawatts of new solar capacity between 2020 and 2050.
“Additionally we need substantial investment in wind to be able to deploy more than 5 terawatts of offshore and onshore wind capacity representing $7 trillion of investment,” he added.
In order to hit those targets, Rystad Energy’s head of Australia & Global Renewables Gero Farruggio noted that renewable projects would need to scale up in size.
“The average project size has doubled in the last three years, from 20 to 40 megawatts, we expect it will triple by 2025,” he said.
While solar is experiencing the strongest growth, Farruggio claimed the current pipeline of projects announced so far still “falls well short” of what is needed under the 1.6 degree scenario.
“By the end of the decade, seven times more solar is needed than all the projects [currently] in the pipeline, operating and and planned,” he said.
Oil and gas players such as BP and TotalEnergies have set goals to have 50GW of renewables capacity by 2030, while Italian multinational Enel is leading the pack, targeting a renewable energy capacity of roughly 145GW by the start of next decade.
Despite these ambitious targets, Farruggio warned that the current pipeline of anticipated projects was still likely to fall well short of what is needed.
“Essentially we need to see double the current 2030 targets set by the largest global developers and this is to be on track to achieve 20 times all the projects currently operating and announced by 2050,” he said.
A hurdle that could potentially derail the rapid expansion of renewables capacity going forward is project economics, with Farruggio noting that offtake prices had continued to decline in recent years.
“Using our renewable economic models we can calculate the offtake price for each project to break even. This works out to be about $45 per megawatt hour,” he stated, noting he excluded offshore wind from that modelling as its breakeven is closer to $74 per MWh.
“PPAs [power purchase agreements] today are being signed on average at the level of our global breakeven price, straining margins with rising cost pressures also. This is not sustainable. Costs will need to decline, or, offtake agreements will begin to rise.”