Energy transition

outlook 2024
World on the edge: net zero by 2050 in doubt
without doubling annual investment in energy
supply to US$3.5 trillion
October 2024
A strategic perspective of the energy transition
Broad and deep – forming an integrated view of various energy transition scenarios across each segment,
commodity, technology and market

Regional Hydrogen
Investible Bulks and
power and Oils and Global LNG Regional gas Chemical and Bioenergy Carbon
market metals
renewables refining and gas markets markets ammonia markets markets
intelligence markets
markets markets

Integrated
Energy transition research (global energy and emerging technologies)
global
perspectives includes our Energy Transition Outlook (ETO)

Industry value
chain depth:
assets, Wind Solar Grid Energy Electric Carbon Hydrogen Nuclear Geo- Oil and Metals Chemicals
technologies edge storage vehicles capture and thermal gas and
and costs electrolyser mining

2
Energy transition model design
Our integrated approach allows us to assess the impact on commodities from climate risks

1) Inputs: base case 2) Inputs: scenarios 3) Outputs: scenarios

Macro Energy Transition Service

Above (GDP, IP) RCA
ground
risks
(Buildings) • Primary energy supply storage
Carbon SME and end-use demand • SMR nuclear
Transport
policies
inputs Carbon • Oil, gas and coal demand • Geothermal
New budget • Bioenergy • Low-carbon hydrogen supply
technologies
New
Tech
Steel Energy • Gross and net carbon and demand
efficiency emissions • Point-source and direct-air
• Power demand capture volumes
Energy Energy
NbS Chems • Power supply and • Nature-based solutions
models
model
capacity mix • Capex outlook by scenario
(base
• Solar, wind and energy and segment
case)
CCUS
(base
Cement
and DAC
case)

Commodity research services

Wind Oil
• Oil and products • Nickel • Rare earth
• LNG • Zinc elements
Energy model (Scenarios) • Ferro and noble
Solar Gas • Coal trade • Lithium
• Copper • Cobalt alloys
Hydrogen Coal
• Aluminium • Manganese • Iron and steel
P&R

3
Energy Transition Service
Quantify the energy transition across all commodities, markets, technologies, segments and
scenarios
Overview Selected analysis
See how today’s fossil fuels-
Use it to:
based energy system will shift • Energy Transition Outlook
Identify US$78 trillion Benchmark 200+ new
to lower carbon options through • Country pledges and net zero investment opportunities by technologies and use cases
to 2050 and beyond. scenarios market segment in a net zero that will accelerate the energy
world transition
• Investment needed for the
Ideal for industry leading energy transition
strategy, corporate planning,
finance, and low carbon • New technologies; bioenergy, Compare integrated energy Examine market opportunities
ventures teams. nuclear, hydrogen, carbon transition modelling outcomes in the bioenergy space across
from our ETO base case, solid biomass, liquids and
Key workflows and questions country pledges and net zero biomethane
scenarios
Is further exploration justified under How large will hydrogen and CCUS be in
accelerated energy transition scenarios? the overall energy mix?
Assess the role green and blue Quantify carbon capture and
What is the outlook for gas & low carbon How resilient is my current business and hydrogen and their derivatives removal by market and
fuels in power generation? where do I need to be in 10 years time? will play in reaching Paris scenario across CCUS,
climate targets BECCS, direct-air capture, and
What markets have decarbonisation What is the next big technology in the nature-based solutions
potential – what sectors and in what fuels? energy sector?

Last Updated: February 2024 44

Executive summary

Our Energy Transition Outlook explores four possible transition trajectories

Delayed transition 3 °C Base case 2.5 °C Country pledges 2 °C Net zero 1.5 °C
45 45 45 45

BtCO2e
BtCO2e

BtCO2e
BtCO2e

-5 -5 -5 -5
2000 2050 2000 2050 2000 2050 2000 2050

Scenario: a cascade of geopolitical crises Base case outlook: Steady advancement of Scenario: coordinated policy responses to Scenario: immediate peak energy, rapid
continue to fragment global trade. current and nascent technologies largely the current energy crisis and geopolitical deployment of negative emissions
Policymakers choose protectionism over driven by affordability and supply security challenges facing the global economy, technologies, nuclear, long-duration storage
cooperation, driving up the cost of concerns. building momentum in the 2030s. and geothermal.
alternative energies.

Key 2050 metrics Key 2050 metrics Key 2050 metrics Key 2050 metrics

Investment EV share: Investment EV share: Investment EV share: Investment EV share:

US$ 52 44% US$ 55 51% US$ 65 71% US$ 78 91%
trillion trillion trillion trillion

Power mix: Carbon price: Power mix: Carbon price: Power mix: Carbon price: Power mix: Carbon price:
79% $68/t 82% $84/t 91% $133/t 94% $157/t
renewables renewables renewables renewables

Note: investment amount is cumulative between 2024-2050. Renewables includes solar, wind, geothermal, tidal, nuclear, hydroelectric, bioenergy, and low-carbon hydrogen. 5
Executive summary

Electrification and renewables temper energy demand from rising incomes

Each unit of electricity generated from renewable sources displaces three times as much in fossil fuel demand

GDP, constant (2015) US$ billion End-use energy demand, EJ

• Between 2000 and 2024, GDP ballooned
180 by 96% while end-use energy demand 2050 600 Delayed transition
rose by 64%. Country pledges
160 • Between 2024 and 2050, GDP is set to
500 Net zero
explode by 81% but we expect end-use +81% Americas
140 energy demand to increase by only 19%. Base case
Americas
120 400
2024 Europe, Europe,
100
Middle East 300 Middle East
80 +96% and Africa and Africa

60 200

40 2000
Asia Pacific 100 Asia Pacific
20

0 0
2000 2010 2020 2030 2040 2050 2000 2010 2020 2030 2040 2050

Source: Wood Mackenzie Macroeconomics service Source: Wood Mackenzie Energy Transition Service

6
Executive summary

Fossil fuels demand outlook is uncertain, but the long-term direction of travel is clear
Oil may plunge with greater EV adoption while natural gas remains resilient and coal is in structural decline

Liquids, million barrels per day Gas, billion cubic metres Coal, billion tonnes
120 5,000 7

100 6
4,000
5
80
3,000
4
60
3
2,000
40
2
1,000
20 1

0 0 0
2000 2010 2020 2030 2040 2050 2000 2010 2020 2030 2040 2050 2000 2010 2020 2030 2040 2050

Delayed transition Base case Country pledges Net zero

Note: liquids refers to oil and biofuels

Source: Wood Mackenzie Energy Transition Service

7
Executive summary

Power demand doubles in base case by 2050 as electrification expands

Dispatchable power supply remains steady as solar and wind meet incremental power demand across all cases

Power demand, PWh Power supply, PWh

80 Net zero 80
Unabated fossil fuels Carbon capture
70 Country pledges 151% Nuclear Hydroelectric
70
Base case 128%
60 Other renewables Solar and wind
Delayed transition 100% 60
Low carbon hydrogen
Low-carbon
50
50 68%
40 67%
40 59%
30 56%
82%
20 30 30%
17%
10 20
0 10

0
Base case Delayed Base case Country Net zero
transition pledges
2024 2030 2050
Note: percentages based on increase from 2024 Source: Wood Mackenzie Energy Transition Service

8
Executive summary

Solar and wind capacity surge to five times existing levels in 2050 base case
Gas into power remains resilient to support variable renewables

Conventional thermal capacity, TW Mature low-carbon capacity, TW Advanced low-carbon capacity, TW

5 100% 30 100% 3 100%

25
4 80% 80% 80%

20 2
3 60% 60% 60%
15
2 40% 40% 40%
10 1
1 20% 20% 20%
5

0 0% 0 0% 0 0%
Base Base Delayed Base Country Net zero
Base Base Delayed Base Country Net zero Base Base Delayed Base Country Net zero
case case transition case pledges
case case transition case pledges case case transition case pledges
2024 2030 2050
2024 2030 2050 2024 2030 2050

Coal Gas Oil Generation share Hydroelectric Nuclear Carbon capture Hydrogen and ammonia
Source: Wood Mackenzie Energy Transition Service Solar Wind Nuclear SMR Geothermal
Energy storage Generation share Bioenergy Generation share
9
Executive summary

Net zero requires 10 Bt of CO2 capture and removal and 460 Mt of hydrogen by 2050
Emissions reductions alone are no longer sufficient, removal technologies need to be scaled up

Carbon capture and removals1, Btpa Low-carbon hydrogen supply, Mtpa

5 500

4
400

3
300
2

200
1

0 100
2020

2030

2040

2050

2020

2030

2040

2050

2020

2030

2040

2050
0
CCUS Nature-based solutions* 2 Direct air capture
2020 2030 2040 2050

Delayed transition Base case Country pledges Net zero

1. Indicates captured volumes, not project capacity.
2. Nature-based solutions (NBS) include both forest sinks and advanced NBS such as geoengineering. NBS values indicate incremental additions only.

10
Executive summary

Base metals and battery raw materials supply crucial to support electrification
Urgency of investment underpinned by 7 to 10-year build times for new mines

Base metals demand, Mt Battery raw materials demand, Mt

90 Base case Country pledges Net zero 10 Base case Country pledges Net zero

80 9
70 8
7
60
6
50
5
40
4
30
3
20 2
10 1
0 0
2024
2030
2040
2050

2024
2030
2040
2050

2024
2030
2040
2050

2024
2030
2040
2050

2024

2030

2040

2050

2024

2030

2040

2050

2024

2030

2040

2050
Aluminium Copper Nickel Zinc Lithium Cobalt Manganese

Lithium demand in Lithium carbonate equivalent (LCE)

Source: Wood Mackenzie EVBSC

11
Executive summary

Energy supply investment to nearly double by 2050 to US$3.5 trillion to reach net zero
Power generation and infrastructure account for up to 80% of total spending
Cumulative capex spend by segment and scenario (2024-50), US$ trillion (real 2024 terms)
$35

$30

$25

$20

$15

$10

$5

$-
Upstream oil and gas Power generation Power grid and EV Hydrogen and CCUS Energy storage Metals and mining Bioenergy
infrastructure
Delayed transition Base case Country pledges Net zero
Source: Wood Mackenzie Energy Transition Service

12
Executive summary

The transition is underway but mounting risks could slow it down

Successive shocks to global markets threaten to derail progress and knock the world onto 3 °C pathway

In our base case outlook, China has the largest absolute decline in net energy-related Net emissions by sector, BtCO2e
emissions. Emissions by 2050 will be 7.8 Bt lower than in 2024 due to electrification targets, the
phase-down of thermal coal in the power sector and the country’s advanced manufacturing 50
Industry
supply-chain for solar and batteries. In Europe, compliance markets under the EU Emissions Transport
Trading Scheme (ETS), Power Purchase Agreements (PPA) pipelines for wind and solar, and 38 RCA
40
policy support for emerging technologies under RePowerEU result in a 2 Bt decline in net Power
energy-related emissions. Carbon capture
30 28 Nature-based solutions
Progress is not as swift elsewhere. With a patchwork of carbon pricing regimes, nationwide 25
Net emissions
infrastructure permitting uncertainty and the incentive-based energy policy of the Inflation
Reduction Act, capital is not being deployed fast enough to realise a net zero trajectory in the 20
United States. Latin America, Africa, and Southeast Asia face a combination of instability in
10
energy and macroeconomic policies and affordability challenges for emerging technologies.
10
To support a net zero pathway, the major levers available via the United Nations Framework
Convention on Climate Change (UNFCC) include a global climate bank, launching global carbon -1
markets under Article 6 of the Paris Agreement and more ambitious Nationally Determined 0
Contributions (NDCs) in 2025.
National-level permitting reform to support large-scale infrastructure projects, deploying grid- -10
enhancing technologies, greater research and development spending on emerging technologies Delayed Base case Country Net zero
and improved planning across power generators and regulators are options available to national transition pledges
and local governments worldwide. 2024 2050
Source: Wood Mackenzie Energy Transition Service Note: RCA = Residential, commercial, agricultural
Charts show gross emissions as positive numbers and removals as negative.

13
Executive summary

Signposts for a crucial decade ahead

The first global stocktake (GST), concluded at COP28 in November 2023, required
that countries raise their ambitions in the next round of nationally determined
• GST concluded in December that no country was on track
contributions (NDC) submissions, due in 2025. to meet the 2030 emissions reduction target.
2023
The GST also found that no major country was on track to meet its 2030 goals. That
• Countries must lower emissions and triple renewables
leaves an opportunity both for course correction in the next NDC round and for capacity by 2030.
higher emissions-reduction goals for 2035. The GST emphasised the importance of
protecting land ecosystems and addressing biodiversity loss, including halting and
reversing deforestation by 2030.

But none of this will be easy without increased cooperation at the COP29 meeting in • NDCs are due for submission in 2025 before COP30.
Azerbaijan in November 2024. Key issues include finalising Article 6 of carbon 2025 • COP29 in Baku and COP30 in Brazil will address
markets and setting a new global climate finance goal that replaces the existing
outstanding issues – finance, Article 6 and adaptation.
US$100 billion a year. That figure was not achieved until 2022 and is considered
grossly insufficient to meet the needs of developing countries.

Strengthened NDCs and global cooperation will be crucial to mobilising the US$3.5
trillion annual investment into low-carbon energy supply and infrastructure, including • The UNFCCC requires emissions to fall by 60% by 2035
critical minerals. But if these challenges are not overcome and emissions continue from 2019 levels to limit warming to 1.5 °C.
to rise, then governments and industry could be forced to invest in mitigation and
spend much more on adaptation. A delayed energy transition – and all the
2035 • The timeline is significant as the 2030 emissions
uncertainty it brings – would mean the world teeters on the edge. reduction goals will most likely be missed in
major markets.

Source: Wood Mackenzie Energy Transition Service 14

Authors
The Energy Transition Outlook represents contributions from our global multi-commodity research group, with
key authors from our Scenarios and Technologies team

Prakash Sharma Vice President Research, London

David Brown Research Director, Houston

Jom Madan Senior Research Analyst, Singapore

Lindsey Entwistle Senior Research Analyst, Edinburgh

Roshna Nazar Research Analyst, Bangalore

Sarah Jameson Data Analyst, London

Gerardo Bocard Research Associate, Mexico City

Zoé Sulmont Student Researcher, London

15
Disclaimer

These materials, including any updates to them, are published by and remain
subject to the copyright of the Wood Mackenzie group ("Wood Mackenzie"),
or its third-party licensors (“Licensors”) as relevant, and are made available to
clients of Wood Mackenzie under terms agreed between Wood Mackenzie and
those clients. The use of these materials is governed by the terms and conditions
of the agreement under which they were provided. The content and conclusions
contained are confidential and may not be disclosed to any other person without
Wood Mackenzie's prior written permission. Wood Mackenzie makes no warranty or
representation about the accuracy or completeness of the information and data
contained in these materials, which are provided 'as is'. The opinions expressed
in these materials are those of Wood Mackenzie, and do not necessarily represent
our Licensors’ position or views. Nothing contained in them constitutes an offer
to buy or to sell securities, or investment advice. Wood Mackenzie's products do not
provide a comprehensive analysis of the financial position or prospects of any
company or entity and nothing in any such product should be taken as comment
regarding the value of the securities of any entity. If, notwithstanding the foregoing,
you or any other person relies upon these materials in any way, Wood Mackenzie
does not accept, and hereby disclaims to the extent permitted by law, all liability
for any loss and damage suffered arising in connection with such reliance.

Copyright © 2024, Wood Mackenzie Limited. All rights reserved.

Europe +44 131 243 4477
Americas +1 713 470 1700
Asia Pacific +65 6518 0888
Email [email protected]
Website www.woodmac.com

Wood Mackenzie is a trusted intelligence provider, empowering decision-makers with unique insight on the
world’s natural resources. We are a leading research and consultancy business for the global energy, power
and renewables, subsurface, chemicals, and metals and mining industries.
For more information visit: woodmac.com

WOOD MACKENZIE is a trademark of Wood Mackenzie Limited and is the subject of trademark registrations
and/or applications in the European Community, the USA and other countries around the world.