Electricity demand set to double by 2050

Global electricity demand is set to double by 2050, according to a report from DNV, a global assurance company specialising in energy.

DNV’s ‘New Power Systems’ report states that, as the world steadily decarbonises, three things will need to happen to accommodate the increased dependence on electricity. Firstly, there will need to be significant grid expansion. Secondly, solutions for grid congestion will be required. Thirdly, there will need to be new business models to deal with rising electricity demand and generation from wind and solar.

In some good news, the report concludes that grid expansion will be affordable. DNV also expects that global grid charges passed on to consumers will remain stable or even decline in the long term.

The growing demand for electricity and renewables

The primary drivers in this predicted surge in global electricity demand are global economic growth and the electrification of transport, heating and industry. The development of data centres, especially for AI applications, will also be a significant factor in this increase; however, AI also has the potential to make both the provision and use of power more efficient.

By mid-century, electricity will constitute 37% of global final energy use, up from 20% in 2023. This upswing is accompanied by a dramatic shift towards renewable energy, with wind and solar expected to generate half of the world’s electricity by 2040 and 70% by 2050. The decarbonisation trajectory predicts that nearly 90% of electricity will be sourced from non-fossil sources by 2050.

A flexible system is critical

The growing share of renewable power will require considerable flexibility and a robust system of demand-response. As variable renewable energy sources (VRES) expand ninefold, the need for short-term flexibility will double.

Fluctuating demand from sectors like heat and transport will require new services such as synthetic inertia products (which maintain a steady power frequency) and fast frequency response (delivery of a rapid increase or decrease by generation or load in a time frame of two seconds or less)¹. It is critical that market and regulatory frameworks adapt to support these technologies.

“Deep digitalisation, including the application of AI, is crucial for managing the increased complexity of a renewable-dominated power system,” said Remi Eriksen, Group President and CEO at DNV.

“So there will be a rapid growth in both information technology and operational technology in the coming years which must be supported by a robust approach to risk management, particularly on cybersecurity, to reap the benefits of the new power systems.”

Energy storage will also be hugely important in tackling the intermittent nature of renewable energy sources. According to DNV, lithium-ion battery technology is set to play a dominant role in this segment, offering three times more storage capacity than hydropower and pumped storage by 2050. However, achieving the necessary level of flexibility will require innovative market designs and advanced tariff schemes to incentivise automated demand-response, vehicle-to-grid (V2G) and behind-the-meter storage systems.

Power-to-hydrogen value chains are a critical market element for renewable generation and will need to be scaled through concerted investment efforts.

Grid expansion is necessary: will it be affordable?

For the energy transition to succeed, global grid capacity needs to grow 2.5 times its current size, DNV said, with annual expenditure on grids more than doubling to US$970 billion by 2050.

While grid enhancing technologies (GETs) can offer potentially significant temporary relief, the long-term solution lies in accelerating the construction of new grid infrastructure and advanced controlling systems, which are currently hampered by permitting timelines, the scarcity of human and material resources, and financial constraints.

Luckily, despite a rise in global grid expenditures from 15% to over 25% of annual energy expenditure by 2050, efficiencies in grid technology and increased electricity distribution will likely keep consumer grid charges stable or declining in most regions. Only four out of 10 regions might see an increase.

Predicting future unit electricity costs is challenging due to varying tax treatments and government incentives. However, the continuous decline in renewable power costs suggests that consumer prices are unlikely to rise. Electrifying end-use sectors like transport and heating will further enhance efficiencies and cost savings, leading to lower overall household energy bills in high- and middle-income regions. In low-income regions, while absolute household energy expenses may slightly increase, rapid GDP growth should offset this rise.

A systemic approach to the energy transition

“We believe in systems-thinking, looking at the big picture, to consider how energy is generated, transmitted, consumed and stored across all energy carriers,” said Ditlev Engel, CEO for Energy Systems at DNV.

“There will be no transition without transmission. The new energy system will require data-driven solutions and policies that address all interconnections, from permitting to the integration of AI and cyber-resilience. Planning for a new wind farm must include a strategy for grid connection; similarly, GETs and new wire integrations require IT upgrades at most control centres,” he continued.

“The pathway to a decarbonised power system is clear: renewables integration and grid expansion require significant investment, innovation, coordination and commitment from all players, especially governments. As the world moves towards a greener future, addressing these challenges with a systemic and forward-thinking approach will be essential for a successful energy transition.”

DNV’s Energy Transition Outlook 2023 served as the foundation for the report, with additional insights provided by experts in demand modelling, power grids, new market models, digitalisation and AI.

The full report can be accessed at: https://www.dnv.com/publications/new-power-systems-report.

_{1. https://www.aemc.gov.au/faster-frequency-response-support-future-security-power-system}

Image credit: iStock.com/Stefan Dinse