Falling costs of electric vehicle and solar technology could halt growth in global demand for oil and coal from 2020, a new report co-authored by the Grantham Institute at Imperial College London and the Carbon Tracker Initiative launched on Thursday finds, challenging the wisdom of backing fossil fuel expansion.
The scenario analysis warns that big energy companies are seriously underestimating low-carbon advances with a business-as-usual (BAU) approach, and that stranding of fossil fuel assets is likely as the low- carbon transition gathers pace. Growth in electric vehicles (EVs) alone could lead to 2 million barrels of oil per day (mbd) being displaced by 2025 – the same volume that caused the oil price collapse in 2014-15. This scenario sees 16mbd of oil demand displaced by 2040 and 25mbd by 2050, in stark contrast to the continuous growth in oil demand expected by industry.
“Electric vehicles and solar power are game-changers that the fossil fuel industry consistently underestimates. Further innovation could make our scenarios look conservative in 5 years’ time, in which case the demand misread by companies will have been amplified even more,” said Luke Sussams, senior researcher at Carbon Tracker.
SOLAR PV – The cost of solar PV has fallen 85% over the last seven years and this study’s starting point scenario sees it becoming “materially cheaper than alternative power options globally” with a huge build-out adding more than 5000GW of capacity between 2030 and 2040. “In such a scenario of rapid change, the mass stranding of downstream fossil fuel assets is highly likely,” it says.
ELECTRIC VEHICLES – EVs are currently growing 60% year-on-year and there are already more than a million on the roads. Battery costs have fallen 73% to $268/kWh in the seven years to 2015 according to the US Department of Energy, and Tesla, the electric car maker, predicts they will reach $100/kWh by 2020. Our scenarios assume that EVs are cheaper than conventional ICEs from 2020.
The report finds that EVs could have a fifth of the road transport market by 2030 and, with additional growth in hydrogen cars and oil/electric hybrids, conventional ICEs could account for less than half the market. By 2050 EVs could grow to 1.7 billion (69% of the market) while ICEs would make up just 12%.
CLIMATE CHANGE – If the international response to climate change is stronger than NDC commitments then market trends in solar PV and EVs could help limit global warming to 2.2°C to 2.4°C (50% and 66% probabilities) by 2100.
INTERACTIVE TOOL: There is an accompanying online interactive dashboard so readers can delve into the scenario results. This will be live after the embargo lifts at: carbontracker.org/expect-the-unexpected-dashboard
