Connective Wisdom Series

Energy security fears triggered by the Russia-Ukraine war are likely to hasten the energy transition, resulting in a mounting share of renewables in the primary energy mix by 2050 and a decline in the importance of fossil fuels, BP said in its Energy Outlook 2023 report published Jan. 30. Noting that Russia-Ukraine war will have "long-lasting effects" on the global energy system, BP said: "The heightened focus on energy security increases demand for domestically produced renewables and other non-fossil fuels, helping to accelerate the energy transition." In an introduction to the report, BP Chief Economist Spencer Dale said recent events had showed how relatively small disruptions to energy supplies can lead to severe economic and social costs, and urged the need for an "orderly" transition away from hydrocarbons. In its long-term outlook, BP said a rapid expansion in renewables encouraged by increased electrification and the growth of low-carbon hydrogen will coincide with a declining role of hydrocarbons. The share of renewables in the global primary energy mix is likely to increase to between 35%-65% by 2050 from around 10% in 2019, while the share of fossils fuels will slump to 20%-50% in 2050 from around 80% in 2019, according to the report. This will be driven by the improved cost competitiveness of renewables along with more low-carbon energy policies globally. The pace at which renewable energy will penetrate the global energy system is quicker than any previous fuel in history, the report added. New momentum In the report, BP explored three different scenarios: "Net Zero," "Accelerated" and "New Momentum," all of which consider key developments such as the Russia-Ukraine war and the passing of the US Inflation Reduction Act (IRA). Under BP's base-case scenario, New Momentum, CO2e emissions will peak in 2025 and by 2050 they will be around 30% below 2019 levels. "The lower level of CO2 emissions is largely driven by a weaker GDP profile caused in the near term by the impact of the war on commodity prices and further out by the reduction in the pace of growth of global integration and trade," it said. Oil demand will also decline under all three scenarios, driven by falling use in road transport due to the efficiency and electrification of the vehicle fleet. But BP warned greater government for energy transition is needed due to the scale of the decarbonization challenge. Under the New Momentum scenario, global oil demand would remain close to 100 million b/d through 2030 then shrinks gradually to around 75 million b/d by 2050. Low-carbon shift In renewables, wind and solar power is set to expand rapidly, driven by increasing cost-competitiveness and policies supporting a shift to low carbon electricity and green hydrogen. Wind and solar installed capacity will jump around 15-fold over the outlooks in BP's Accelerated and Net Zero scenarios and nine-fold in the New Momentum setting. Growth in capacity out to 2035 is dominated by China and the developed world. Analysts at S&P Global Commodity Insights also hold a bullish view for wind and solar generation. "Solar generation set to more than double in major markets such as US, China and Western Europe," they said in a recent report. Solar generation is likely to quadruple in the US by 2030 as the IRA will significantly reduce levelized costs for new wind and solar projects via tax credits, S&P Global analysts added. Central to the importance of renewable energy will be continued electrification of the energy system. Electricity demand will jump by around 75% by 2050 in all three scenarios, with the transport sector seeing the largest increase. Growing prosperity in emerging economies and increased electrification will push global electricity demand. The share of electricity in total final energy consumption increases from around a fifth in 2019 to between a third and a half by 2050 Low-carbon hydrogen will also play a significant role in the decarbonization of the energy system, "especially in hard-to-abate processes and activities in industry and transport," BP said. But hydrogen's growth will only accelerate in 2030s and 2040s supported by falling costs of production and tightening CO2 emissions policies.

The shift to greener fuels in shipping is gathering pace, with a almost a third of orders reflecting that, amid a wider re-evaluation of energy sources in the wake of Russia's invasion of Ukraine and the resulting change in energy flows, engineering company Wartsila said Jan. 31. The number of vessels ordered in 2022 fell 16% on the year to 1,538, due to almost full order books at many shipyards and to higher newbuild prices. Of those, 466 globally were for alternative fuel-capable vessels, representing 30% of all contracted ships and 60% of vessel capacity in 2022, the company said, as it posted full-year results. "Despite the currently high price for LNG, it continues to represent over 80% of all alternative fuel capable vessel orders, although shipowners' interest in other alternative fuels, such as methanol, has clearly emerged in 2022," Wartsila said. Alternatives to 0.5% sulfur fuel oil, the default marine fuel for now, not least LNG, remain expensive. Platts, part of S&P Global Commodity Insights, assessed delivered 0.5%S fuel oil at Rotterdam on a calorific basis at $14.70/Gigajoule Jan. 30, compared to $19.01/Gj for conventionally produced methanol and $19.35/Gj for LNG as a bunker fuel. Momentum was expected to build for alternative fuels as companies strive to meet international CO2 targets for 2030, analysts at S&P Global said Jan. 5. The issue is the lack of fuel availability and of main engines for these ammonia and hydrogen dual-fueled vessels being built in shipyards. Until that changes, LNG and biofuels, along with a handful of methanol-powered vessels, are the main candidates to fill the slots until the new fuels are tested and more prevalent, S&P Global said. S&P Global analysts expected LNG to account for 7.8% of bunker demand in 2030 and other alternatives, excluding LPG, to account for 2.2%. Of that 2.2%, methanol will make up 34.3%, hydrogen 16.8%, ammonia 14.7% and biofuel 6.2%. Growing demand for backup power Uncertainty caused by the geopolitical situation continues to affect the investment environment for liquid and gas-fueled power plants and energy storage, Wartsila said. However, contracting for gas and liquid-fueled power plants of less than 500 MW has grown. Wartsila's market share in the up-to-500 MW market segment increased to 8% as global orders for natural gas and liquid-fueled power plants increased 13% to 26.7 GW during the 12 months to September. Some 42% of the company's full-year thermal order intake was related to balancing power, company CEO and President Hakan Agnevall said during a conference call. "Beyond some short-term setbacks, the energy transition outlook is very strong: advancing the renewable energy build-up strengthens the security of supply by reducing dependency on fossil fuels," Wartsila said. Looking ahead, the increasing levels of intermittent renewable energy in power systems are expected to further accelerate the need for various flexible balancing solutions, such as energy storage and grid-balancing power plants, the company said. S&P Global's latest European Electricity Long-Term Forecast sees year-end West European wind capacity rising to 227 GW by 2025 from 162 GW in 2020. Solar capacity was seen doubling to 260 GW over the same period.

Becoming critically important of late, business decisions now-a-days look to incorporate detailed data with regards to greenhouse gas emissions. This highlights the efforts being made globally to address the persistent issue of climate change along with accelerating the process of energy transition. KNOW MORE HERE

In this episode of the Platts Future Energy podcast, Varaleka Pant and Arsalan Syed discuss with Deb Ryan the importance of evaluating the carbon intensity for crude and some of the major global crude grades, and explain the need for standards in this space to ensure consistency in low carbon crude trading.More listening options:Explore and identify low-carbon crude grades with our Periodic Table of Oil™

What is the Voluntary Carbon Market, how does it work and what role does it have in the global drive to reduce emissions? The first video in this series explains how carbon credits are created and traded in the VCM and who's involved in the market.Learn more about Platts carbon price assessments and indices, daily news and market commentary, from S&P Global Commodity Insights.

Voluntary carbon markets have seen significant growth in recent years and are expected to surge in the years ahead. But they have traditionally been seen as opaque, complex and niche. That is rapidly changing as a large range of companies start to engage with them.In the latest Platts Future Energy podcast, Jonty Rushforth is joined by Paula Vanlaningham and Jeff Berman to discuss the ‘beauty' of carbon credit markets.

Navigating a pathway to a low-carbon global economy requires a new plan. The S&P Global Platts Atlas of Energy Transition™, produced in collaboration with S&P Global Market Intelligence, is your map to the sustainable commodity markets of the future. LAUNCH REPORT

Witness the shift in momentum from energy transition to energy security as governments across the globe prioritise meeting near-term energy needs of the masses. Impacted by Russia's invasion of Ukraine, know how energy transition commitments have been altered with policy interventions, rebalancing climate goals and on-going climate negotiations at COP27.READ HERE

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