Analysis by Carbon Brief shows that, for the first time, the BP Energy Outlook is forecasting a peak in global coal demand. It has trimmed 239 million tonnes of oil equivalent (Mtoe), or 6%, from its 2035 outlook for coal, which it now expects to be below demand in 2030.
The oil major’s annual outlook is widely watched for hints at the firm’s view of the energy world. Its 2017 edition, published this week, is the sixth in a row to raise forecasts for wind and solar energy. It also cuts the outlook for coal for the fourth consecutive year and gas for the third year.
Carbon Brief has produced a series of interactive charts to show how the BP Energy Outlook is slowly adapting to the global energy transition.
The BP Energy Outlook is part of an eagerly awaited annual cycle of forecasts*, along with the International Energy Agency (IEA) World Energy Outlook published each autumn. Before delving into the details of this latest offering, it’s worth pausing to consider its limitations.
Forecasting the future of energy is a huge challenge. These outlooks have repeatedly failed to anticipate major shifts, from the explosive growth of Chinese coal use in the 2000s to its recent decline, through to the emergence of US shale gas to the rise of modern renewables.
BP dubs its “base case” outlook the “most likely” scenario. Given the caveats above, however, it should probably be thought of more as a window into the slowly changing minds of BP executives, rather than as a realistic picture of future trends.
Last year, for instance, the outlook had barely changed in response to the Paris Agreement on climate change. This signaled BP’s belief that the world would fail to meet its collective climate goals, despite a first-ever global deal to tackle warming.
The 2017 outlook broadly maintains this view, with coal, oil and gas remaining the top three sources of energy through to 2035, as the chart below shows.
Despite rapid growth taking them past both hydro and nuclear, BP sees wind and solar energy still far behind fossil fuels in 2035. All low-carbon sources combined, at 3,785Mtoe in 2035, would still supply less energy than coal, oil or gas alone.The most likely path of global energy demand to 2035 according to BP, by fuel, in millions of tonnes of oil equivalent (Mtoe). Wind & solar includes other non-hydro renewables, but excludes biofuels. Source: BP Energy Outlook 2017. Chart by Carbon Brief using Highcharts.
One notable shift is already visible in the chart, however. BP now expects global coal use to peak, plateau and then decline during 2025-2030. This is the culmination of repeated downgrades to coal’s growth prospects in the BP outlook, as shown below.
Note that BP still expects global coal use to increase over the next decade. This would be a turnaround from the record fall in global coal use reported in BP’s own data for 2015. Figures for 2016 are not yet available.
The 2017 BP Energy Outlook is also the first to downgrade expectations for oil demand growth. BP now says global demand will reach 4,892Mtoe in 2035, some 91Mtoe, or 2% below the 4,983Mtoe it expected last year.
It’s worth noting that this still represents an increase of 15% from 2015 levels, when demand was 4,257Mtoe. Until this year, successive outlooks since 2011 had repeatedly raised the baseline for global oil demand, though the expected rate of growth has remained relatively constant.How the BP Energy Outlook has changed since it was first published in 2011. Red lines show the 2017 view for each fuel, in millions of tonnes of oil equivalent (Mtoe). Blue lines show previous years’ forecasts. Wind & solar includes other non-hydro renewables, but excludes biofuels. Source: BP Energy Outlook 2017, previous Outlooks and Carbon Brief analysis. Chart by Carbon Brief using Highcharts.
The charts above show that the 2017 edition is also the first to suggest a global peak in coal use could be coming. It follows each of the last four outlooks in dramatically downgrading coal’s growth prospects.
BP has again raised its expectations for wind and solar. It says that the extent of cost reductions for these technologies “continues to surprise on the downside”. BP has been surprised by wind and solar for six consecutive years, raising its outlook in 2012, 2013, 2014, 2015, 2016 and 2017. Indeed, it has been roundly criticised for failing to take emerging technologies into account.
Intriguingly, the chart above also shows BP reducing its outlooks for gas demand, though it still expects strong growth. Demand in 2035 will be 4,319Mtoe, BP says, some 2.5% lower than it expected last year.
By way of explanation, BP notes that renewables’ rapid growth is denting prospects for both coal and gas demand in the power sector.
The chart below offers another way to look at how the BP Energy Outlooks are changing. It shows global demand for energy in 2030 as expected by each outlook, from the first, published in 2011, through to the latest, from 2017.
Apart from the changes already noted for coal, oil, gas, wind and solar, you can also see how the prospects for nuclear energy were hit in the wake of the Fukushima tsanami in 2011.Top panel: How the BP Energy Outlook for 2030 has changed since the first outlook was published in 2011. Red bars show the 2017 forecast of demand for each fuel, in millions of tonnes of oil equivalent (Mtoe). Blue bars show previous years’ forecasts. Bottom panel: Year-on-year change in the 2030 forecast, percent. Wind & solar includes other non-hydro renewables but excludes biofuels. Source: BP Energy Outlook 2017, previous outlooks and Carbon Brief analysis. Chart by Carbon Brief using Highcharts.
It’s worth asking why BP has downgraded its view for oil demand growth to 2030, after repeated upgrades in previous years. After topping $100 a barrel, oil then dived through $50 during 2015 and went as low as $30 a barrel in early 2016.
It is tempting to blame the cut to BP’s oil outlook on prices, which are back up above $50. Yet this price is unremarkable in historical terms. Instead, BP is grappling with the impact of electric vehicles (EVs).
The company says EVs will claim a 5% market share, with 100m on the road by 2035. Some analysts expect to see this figure revised upwards in future outlooks, in the same way as BP has underestimated renewables.
For now, BP says EVs will only displace 1.2 million barrels per day (mb/d) of car oil demand, which will still increase from 19 today to 23 mb/d in 2035 as car ownership grows.
In contrast, Bloomberg New Energy Finance has suggested EVs could take a 35% share of sales by 2040, leading some to predict that EVs will cause the next oil crisis. EVs could become cheaper than combustion engine cars within a decade.
One final chart, below, shows again how the BP Energy Outlook for 2035 has shifted. It illustrates the brightening prospects for an energy transition away from coal, oil and gas towards low-carbon sources. In its past two outlooks BP has raised the prospects for wind and solar by more than 15%.Top panel: How the BP Energy Outlook for 2035 has changed since 2014. Red bars show the 2017 forecast of demand for each fuel, in millions of tonnes of oil equivalent (Mtoe). Blue bars show previous years’ forecasts. Lower panel: Year-on-year change in the 2035 forecast, percent. Wind & solar includes other non-hydro renewables but excludes biofuels. Source: BP Energy Outlook 2017, previous Outlooks and Carbon Brief analysis. Chart by Carbon Brief using Highcharts.
Note that despite these shifts, as ever, the outlook remains a long way from what would be required to meet the Paris goals of limiting warming to well below 2C, making efforts to keep it below 1.5C.
BP’s “base case” sees emissions continuing to increase through to 2035. It once again offers a “faster transition” scenario, though without the detailed data tables available for its “most likely” outlook. In this view, low-carbon fuels would overtake oil by 2035, BP says.
The faster transition is accompanied in 2017 by an “even faster transition” scenario that sees CO2 emissions from fossil fuel use falling immediately, mainly as a result of a faster-than-expected shift away from coal and gas in the power sector, towards renewables.
Renewables’ share of global energy reaches 10% in 2035 in BP’s base case, compared with 16% in the faster transition and 23% in the even faster transition.
*Note that, strictly speaking, the BP Energy Outlook and those produced by the IEA and others are not forecasts or predictions of the future, even though they are often treated as such.
Instead, they are scenarios reflecting what could happen under a set of assumptions about future policy and prices. As one National Grid analyst put it to Carbon Brief: “We used to do forecasts. The only thing you can say about them is that they’re going to be wrong.”
Analysis by Carbon Brief shows that, for the first time, the BP Energy Outlook is forecasting a peak in global coal demand
BP has trimmed 239 million tonnes of oil equivalent (Mtoe), or 6%, from its 2035 outlook for coal