Fossil Fuel Demand Has Peaked
It is increasingly clear that global fossil fuel demand has peaked. In fact, it peaked in 2019, and demand is now bouncing along a plateau before the inevitable decline in the second half of this decade. As more renewable solutions enter the energy mix, fossil fuels are inexorably squeezed between the growth of superior technology and the increase in efficiency. Our latest presentation sets out the facts in more detail.
The primary driver of change is the exponential growth of clean energy technologies. The key feature of exponential change is the fact that change increases over time. For example, there were almost no electric vehicles a decade ago, 17 million in 2021, and by 2031 there will be at least 250 million in most forecasts: the change this decade is far higher than that in the past decade. In 2011 the world struggled to sell 29 GW of expensive solar panels, in 2021 we deployed 182 GW, and by 2031 the industry is gearing up to sell 1,000 GW. Putin’s War, the desire for domestic energy sources, and high fossil fuel prices only add to the pressure to change. When we add up deployments in solar, wind, EVs, heat pumps, and hydrogen, we expect clean technology deployment over the course of this decade to replace four times as much fossil fuel demand as it did in the past decade.
It is not hard to show how renewables will grow to supply all the growth in primary energy demand. The annual growth in primary energy demand over the past decade averaged 7 EJ, or 1.3 percent. In 2022 the growth of renewable energy (using the BP methodology) will already be around 7 EJ. Assuming solar and wind growth rates of 15–20 percent per year continue, renewables will be adding 14 to 25 EJ of additional supply yearly by the end of the decade.
Meanwhile efficiency will curtail total energy demand growth. Fossil fuels are notoriously inefficient: it takes 10 percent of their energy just to extract and process them, and up to two thirds of their energy is usually lost in thermodynamic losses. Renewable energy technologies are dramatically more efficient: an EV uses about a quarter the amount of energy of an internal combustion engine (ICE) vehicle, solar is 2.5 times more efficient than coal, and a heat pump uses three times less energy than a gas generator. As these superior solutions enter the market in size, they will increase global efficiency gains by nearly 1 percent a year and drive primary energy demand growth toward zero.
This peak in global fossil fuel demand has been looming for a while. OECD demand for fossil fuels peaked in 2007, coal demand in 2013, industrial demand for fossil fuels as energy peaked in 2014, and ICE car demand in 2017. By 2019, 58 percent of the world by demand had already seen peak fossil fuels. In 2019 renewables supplied 85 percent of the growth in energy demand, and in the crash and recovery of 2020–21, renewables supplied all of the net increase in energy demand of 8 EJ. The calculation is finely balanced in 2022, but the slowdown in 2023 will certainly see a further decline in fossil fuel demand. By the time the contest for growth resumes in 2024, solar and wind generation will be more than twice the size of 2019. Fossil fuels are thus forming the peak, plateau, decline pattern we have observed in many other areas, and by the second half of the decade the decline will be plain for all to see.
Peak demand for fossil fuels is increasingly recognized by forecasters outside the fossil fuel incumbency. DNV of Norway was the first mainstream forecaster to argue that fossil fuel demand had peaked, and they have recently been joined by the IEA, which argues in the 2022 World Energy Outlook that fossil fuel demand has reached a peak or plateau in its three key scenarios for the future of energy.
The stone age did not end for want of stones, nor the horse age for lack of horses. The fossil fuel age of hunting for finite fossil stocks is giving way to the renewable age of farming infinite renewable flows. Superior renewable technology is winning the battle for the future of energy, and it is time to recognize this key turning point. Countries, companies, and investors that accept and embrace the energy transition will prosper, while those that deny and resist will struggle and eventually fall.
For the full analysis find the presentation here