Making predictions regarding the future is all about drawing meaningful conclusions from a limited set of assumptions while accounting for changeable conditions.
Typically the further into the future you are making your predictions, the bigger the level of uncertainty becomes. Interestingly this rule does not apply when it comes to envisaging the future of the global energy mix in 20 – 30 years’ time.
If we accept that the decarbonisation of our entire energy generation is a must by 2040, then any serious prediction of the energy mix comes to the conclusion that globally we will have a generation mix of:
40% - 60% solar power
30% - 50% wind power
A mix of hydro power, biomass and biogas
All supported by battery storage. Furthermore, the demand for electricity is bound to rise by a factor of two to three due to the electrification of heat and mobility.
Regionally there will be variations of the contributions of the individual energy sources. However, it’s there’s no doubt that this is what the energy mix in 20 to 30 years will look like on a global scale.
Interestingly it is much more difficult to predict the energy mix in 5 and 10 years’ time compared to the long term goals. The really tricky question is how our decarbonisation goals can be most effectively met.
There are a multitude of pathways to a CO2-neutral future and the big challenge for policymakers and regulators is to make the transition as smooth and as cost effective as possible. This will be done by identifying the right measures and imposing them at the right time. The timing and the strictness of the measures to be imposed is critical.
To all those who believe a minimal regulatory framework will be sufficient and that market forces are suitable to identify the least costly route to the desired outcome I have to say that this is clearly not the case, if only for two fundamental reasons.
Firstly, the feedback loop of climate change is too slow – its consequences manifest themselves over decades and centuries, rather than in months and years. This simply isn’t fast enough to be able to set proper pricing signals and guide investment decisions.
Secondly, a number of consequences of climate change are irreversible once triggered. So there is no economic price you can attribute to fixing a broken system if there is no fix (i.e. rising sea levels).
Therefore the next five years are critical for companies, policymakers and regulators. The typical investment cycle in the energy industry is 20 to 30 years, so any wrong investment decision or missed opportunity to impose suitable market regulations today will have lasting consequences for decades to come.
Fortunately there are metrics by which one can measure if today’s business and policy decisions will be compatible with the future energy system. With these analysis tools at hand we can be well positioned to support all stakeholders in making the energy transition a success.
By Götz Fischbeck, Head of Business Development - Central Europe, Delta-ee