A world in transition. How is the global energy landscape evolving.
The shift towards cleaner energy is one of today’s most pressing challenges. Since the Paris Agreement was signed in 2015, significant progress has been made in addressing climate change.
This agreement set clear goals: limit global temperature increases to below 2°C above pre-industrial levels, aim for a 1.5°C threshold, and achieve carbon neutrality by 2050. While advancements are visible, companies and governments still face new obstacles: rising costs, energy supply fluctuations, and technologies that sometimes lag behind global ambitions.
However, this doesn’t mean things are stagnant – quite the opposite. Despite these hurdles, renewable energy is gaining ground, and energy markets continue to adapt to support this transformation.
Who leads in global energy demand growth?
According to the Global Energy Perspective 2024 report (downloadable here), global energy demand is expected to rise by 11% to 18% by 2050, depending on the scenario. Much of this increase will come from emerging economies – Southeast Asia, India, and the Middle East will be the primary hubs of energy demand, contributing between 66% and 95% of global demand growth.
This shift will not only reshape energy markets but will also impact geopolitical flows, turning these regions into influential global centers.
In contrast, energy demand in developed countries and China is expected to remain stable or even decline. The U.S., however, may see growth due to rapid electrification and industrial resurgence.
The future is electric
A key takeaway from the report is that electricity will become the primary energy source by 2050. Between 2023 and 2050, global electricity consumption could double or even triple, depending on the transition dynamic. Traditional sectors, like building and transport electrification, will contribute significantly to this growth.
An unexpected boost comes from the tech sector – the boom in data centers and artificial intelligence (AI) is projected to substantially increase electricity demand. By 2050, these centers could consume between 2.500 and 4.500 terawatt-hours, equating to 5% – 9% of global electricity demand.
This “crowning” of electricity as the primary energy source is also supported by the widespread adoption of electric vehicles. By 2050, battery electric vehicles (BEVs) are expected to account for the majority of global car sales, up from just 13% today.
Challenges behind the transition: technology and costs
However, this transition will not be easy – it faces both technological and significant economic challenges. While forecasts indicate that by 2050, between 65% and 80% of global electricity production will come from renewable sources, this shift cannot occur without ensuring energy system stability.
Renewable systems, although increasingly cost-effective, are intermittent, creating a need for “firming capacity” to ensure a steady energy supply. This includes long-term storage solutions, like large-scale battery energy storage systems (BESS), and other technologies that stabilize power grids.
A major obstacle is the economic impact on energy prices. Renewable energy, while cheaper to produce, tends to lead to lower or even negative prices at certain times due to very low marginal costs. This fluctuation can affect the economic viability of new renewable investments. In scenarios prioritizing efficient decarbonization pathways, renewable energy development may not be profitable without government interventions or legislative adjustments to create a favorable investment environment.
Besides technological and economic requirements, energy infrastructure plays a vital role. According to estimates, investments in transmission and distribution infrastructure will need to triple by 2050 to meet growing energy demand and efficiently integrate new renewable energy sources. This includes modernizing and expanding power grids to manage intermittent supplies and maintain a consistent flow of energy to consumers.
In this context, public policy and regulation become crucial. A stable legislative framework, combined with economic incentives, can facilitate the development and integration of energy storage solutions into a predominantly renewable-based energy system.A motivating factor for younger generations
Oil and coal still in the energy mix
Despite global efforts shifting more toward renewables, the reality is that oil and coal still play a significant role in the global energy mix. According to the report, even in the most ambitious transition scenarios, fossil fuels like oil, natural gas, and coal are projected to cover between 40% and 60% of global energy demand in 2050, down from 78% in 2023.
While renewable energy sources are growing rapidly, the energy transition has been slower than anticipated in some sectors, and key technologies are not yet mature or cost-effective enough. This, combined with increasing energy demand, means that renewables alone may not be sufficient to meet future energy needs.
Investments in fossil fuels are expected to continue for at least the next decade to ensure global energy system stability and address growing needs.
A challenging yet opportunity-rich future
Ultimately, the global energy transition is a balancing act: between innovation and economic realities, rising demand, and technological constraints. This transition is not just an environmental goal but a challenge impacting every aspect of the global economy – from infrastructure and policy to consumer habits.
The real question is no longer whether we will make this transition but how quickly and effectively we can achieve it. The success of this transition will depend on technology, our ability to collaborate, investments in flexible solutions, and rapid adaptation of policies and regulations to new realities.