New
Energy
Outlook
2022

The New Energy Outlook (NEO) is BloombergNEF’s long-term scenario analysis on the future of the energy economy covering electricity, industry, buildings and transport and the key drivers shaping these sectors until 2050.

This edition presents detailed country-level energy and climate scenarios for corporates, financial institutions and policy makers navigating the energy transition.

The Economic Transition Scenario is our baseline assessment of how the energy transition might evolve from today as a result of cost-based technology changes.

The Net Zero Scenario describes an economics-led evolution of the energy economy to achieve net-zero emissions in 2050. This scenario combines faster and greater deployment of renewables, nuclear and other low carbon dispatchable technologies in power with the uptake of cleaner fuels in end-use sectors, most notably hydrogen and bioenergy. Taking a sector-led approach, it describes a credible pathway to meet the goals of the Paris Agreement.

To give you an even deeper dive into some of the sectors and regions covered in the New Energy Outlook, our analysts have developed additional reports available here.

NEO 2022 Key Messages

1. Emissions

The energy transition in the power sector is well under way and global power sector emissions have most likely peaked in 2022. In order to stay on track for net zero, emissions in all sectors need to peak now and start declining fast.

In the Net Zero Scenario, transport sector emissions peak in 2024 and fall quickly due in particular to the electrification of road transport. Industrial sector emissions are already leveling off and then begin their steep decline in 2030. Building-sector emissions, already far lower than industrial or transport emissions, decline relatively slowly from a peak this year. By comparison, industry and buildings emissions both increase through 2050 in the Economic Transition Scenario (ETS), albeit slowly.

Emissions by sector and peak year

Economic Transition Scenario

Source: BloombergNEF

2022

2028

2044

2050

2017

MtCO2

Net Zero Scenario

Source: BloombergNEF

2022

2024

2014

2022

2017

MtCO2

Economic Transition Scenario

Source: BloombergNEF

2022

2028

2044

2050

2017

MtCO2

Net Zero Scenario

Source: BloombergNEF

2022

2024

2014

2022

2017

MtCO2

Economic Transition Scenario

Source: BloombergNEF

2022

2028

2044

2050

2017

MtCO2

Net Zero Scenario

Source: BloombergNEF

2022

2024

2014

2022

2017

MtCO2

2. Carbon Budgets

Our modelling shows that, while a pathway that limits global temperature increases to 1.5 degrees Celsius by 2050 looks increasingly out of reach, there are still plausible pathways to stay within 1.77C of warming in our Net Zero Scenario. Even then, a revolution will be needed in the energy sector to increase momentum and accelerate emissions reductions.

Our modelling suggests emissions need to fall by 30% by 2030 and overall 6% a year to 2040. If achieved, this orderly transition would reach zero emissions in 2050 and achieve the Paris Agreement objective, with climate change of 1.77C by 2050, without overshooting or creating the need for net-negative emissions post-2050. In contrast, emissions in our Economic Transition Scenario fall at 0.9% on average each year, resulting in emissions consistent with 2.6C warming trajectory by the end of the century.

CO2 emissions (budgets) by sector, Net Zero Scenario

Source: BloombergNEF

3. Abatement

Switching power generation from fossil fuels to clean power is the single biggest contributor to global emission reductions in our Net Zero Scenario, accounting for half of all emissions abated over 2022-50. This includes displacing unabated fossil fuel with wind, solar, other renewables and nuclear. Electrification of transport and industrial processes, buildings and heat – using increasingly lower-carbon electricity – is the next biggest contributor, abating about a quarter of total emissions over the period. Hydrogen is a sizeable contributor as well in absolute terms, though significantly smaller in relative terms, accounting for about 6% of reductions.

CCS gains in importance from the early 2030s, as hard-to-abate sectors are being tackled and unabated fossil fuel plants are retrofitted with the technology. CCS accounts for 11% of all emissions abated over the scenario period.

CO2 emissions reductions from fuel combustion, Net Zero Scenario versus no transition scenario

Source: BloombergNEF.  Note: The ‘no transition’ scenario is a hypothetical counterfactual. In the power and transport sector, it keeps the current fuel mix constant at 2021 levels, with emissions growing proportionally to forecast energy demand. For all other sectors, the counterfactual to the Net Zero Scenario (NZS) is the Economic Transition Scenario (ETS). ‘Clean power’ includes renewables and nuclear. ‘Bioenergy’ refers to direct use outside the power sector. ‘Efficiency/recycling’ includes demand-side efficiency gains in aviation, shipping and buildings, and greater recycling in industry.

4. Primary Energy

In our Net Zero Scenario, oil, gas and coal consumption all peak nearly immediately, if they have not done so already. Under this scenario global coal demand peaks in 2022, gas demand peaked in 2021, and oil demand peaked in 2019, before the Covid-19 pandemic. For oil and gas, this is a marked departure from the trajectories in our Economic Transition Scenario.

Primary energy consumption by fuel, Net Zero Scenario

Source: BloombergNEF

Petajoules

Primary energy consumption by fuel, Net Zero Scenario

Source: BloombergNEF

Petajoules

Primary energy consumption by fuel, Net Zero Scenario

Source: BloombergNEF

Petajoules

Primary energy consumption by fuel, Net Zero Scenario

Source: BloombergNEF

Petajoules

Primary energy consumption by fuel, Net Zero Scenario

Source: BloombergNEF

Petajoules

5. End Use Sectors

Final energy use in the Net Zero Scenario has very different profiles for each sector. This is due to several factors, but first among them is electrification of transport, industrial processes and heat.

Final energy consumption by sub-sector and fuel, Net Zero Scenario

Industry

Petajoules

Transport

Petajoules

Buildings

Petajoules

Industry

Petajoules

Transport

Petajoules

Buildings

Petajoules

Industry

Petajoules

Transport

Petajoules

Buildings

Petajoules

Industry

Petajoules

Transport

Petajoules

Buildings

Petajoules

Industry

Petajoules

Transport

Petajoules

Buildings

Petajoules

Source: BloombergNEF

6. Electrification

Reaching net-zero emissions by mid-century requires a significant increase in global electricity generation. The Energy Transition Scenario requires 46,000 terawatt-hours of power generation in 2050, nearly double today’s amount. The Net Zero Scenario, however, requires more than 80,000 terawatt-hours of generation, more than triple today’s amount.

Power demand from hydrogen, which is insignificant in the Economic Transition Scenario, is close to 23,000TWh per year in the Net Zero Scenario by mid-century as we assume that 88% of hydrogen production is achieved via grid-connected electrolyzers. That makes hydrogen the single biggest source of power demand globally by 2050, equal to total global demand in 2020.

Sources of global power demand

Economic Transition Scenario

Source: BloombergNEF

Net Zero Scenario

Source: BloombergNEF

7. A Low-Carbon Power System

In addition to increasing total power generation significantly, the Net Zero Scenario requires a significant change in the production mix. This is not an evolution of the Economic Transition Scenario – it is effectively a completely different power system.

Reaching net zero will result in almost zero fossil fuel-fired power generation operating without carbon capture and storage; it will also require more nuclear power generation, and even more wind and solar power to be deployed. In the Net Zero Scenario, wind and solar power are more than three-quarters of total power generation.

Electricity generation by technology, by scenario

Economic Transition Scenario

Source: BloombergNEF

Net Zero Scenario

Source: BloombergNEF

8. CCS and Hydrogen

Carbon capture and storage and hydrogen emerge as major technologies for deep decarbonization, with applications across industry, power, buildings and transport. We estimate that about 7 gigatons of carbon dioxide will need to be captured annually in 2050 – the equivalent of today’s power sector emissions from Europe, China and India combined. Hydrogen production will rise to 500 million metric tons annually in 2050, a fivefold increase from today’s levels.

500MtH2

Million metric tons of hydrogen demand, 2050

7GtCO2

Gigatons of carbon dioxide captured, 2050

Source: BloombergNEF

9. The Need for Deep Decarbonization

The net zero transition is still in its infancy. Each of these key technologies is still at a fraction of the scale that is needed. Today, more than 40% of the nuclear power capacity needed in 2050 already exists, but less than 10% of the necessary total wind and solar has been installed, and effectively none of the heat pumps, hydrogen electrolyzers, or CCS capacity that are needed.

That said, the ramp rates needed for the four technologies that do exist today – electric vehicles, wind, solar and nuclear power – are very different. Each of these technologies reach peak annual deployments considerably higher than today’s levels. Electric vehicle sales will need to increase fivefold, from under 11 million to 55 million per year, in order to satisfy net-zero targets and meet sector carbon budgets. Solar installations will need to more than triple and wind installations will need to increase sixfold.

Deployment rate of decarbonization technologies, rebased to peak capacity

Source: BloombergNEF  Note: Wind, solar, carbon capture and storage (CCS), and nuclear uptake based on installed capacity in the power sector. Electric vehicle (EV) uptake based on passenger electric vehicle annual sales as modeled under BNEF’s New Energy Outlook Net Zero Scenario. Heat pumps based on fuel consumption for residential heat pumps. Hydrogen uptake based on power demand from grid-connected electrolyzers.

10. Investments

Getting to net zero is a multi-trillion investment opportunity, but to stay on track will require a shift away from fossil-fuel investment. To stay on track in the Net Zero Scenario, this means that for every dollar invested in fossil energy supply, nearly five are invested into low-carbon supply through 2050.

Breakdown of global investment volumes

Economic Transition Scenario

Net Zero Scenario

Note: Carbon capture and storage (CCS) includes investment in power sector (fossil fuel plant and CCS equipment), industry and blue hydrogen production (CCS equipment), as well as storage and transport infrastructure across all sectors.

BNEF Clients

BNEF clients can access the full report as well as previous annual editions.

Read the full report

David Hostert
Head of Economics & Modeling, Lead author

Matthias Kimmel
Head of Energy Economics

Dr. Ian Berryman
Lead Modeler

Amar Vasdev
Energy Economics

Nathaniel Bullard
Content

Hugh Bromley
Content

Dr. Kwasi Ampofo
Metals

Albert Cheung
Head of Research

Sanjeet Sanghera
Grids

Claudio Lubis
Investment

Meredith Annex
Hydrogen

With support from

Vicky Adijanto
Indonesia

Felicia Aminoff
Europe

Ali Asghar
Coal

Dr. Julia Attwood
Industry

Emma Champion
Europe

Jenny Chase
Solar

Caroline Chua
Indonesia

Robert Clarke
Product

Jennifer Cogburn
Gas

David Doherty
Oil

Isabelle Edwards
Product

James Ellis
Latin America

Ryan Fisher
Electric vehicle charging

Chris Gadomski
Nuclear

Andreas Gandolfo
Europe

Logan Goldie-Scot
Clean power

Andrew Grant
Electric vehicles

Yuchen Huo
Metals

Dr. Ali Izadi-Najafabadi
Asia-Pacific

Atin Jain
Asia-Pacific

Shantanu Jaiswal
India

David Kang
Japan

Takehiro Kawahara
Aviation

Nannan Kou
China

Minky Lee
Design

David Lluis Madrid
CCS

Sofia Maia
Energy transitions

Fauziah Marzuki
Gas

Nell Matthews
Marketing

Colin McKerracher
Transport

Oliver Metcalfe
Wind

Tara Narayanan
US

Kostas Pegios
Modeling

Leonard Quong
Australia

Abhishek Rohatgi
Gas

Dr. Tom Rowlands-Rees
Americas

Yayoi Sekines
Batteries

Ashish Sethia
Commodities

Seohee Song
Energy Economics

Dr. Nikolas Soulopoulos
Commercial transport

Sisi Tang
Petrochemicals

Martin Tengler
Hydrogen

Allen Tom Abraham
Indonesia

Andrew Turner
Modelling

Mohith Velamala
Shipping

Ben Vickers
Editorial

Hanyang Wei
China

William Young
Investment

Ethan Zindler
Americas

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