Most growth in global power generation by 2050 will be solar and wind, according to oil supermajor BP’s annual benchmark report, the 2023 Energy Outlook.

This lead of wind and solar in global decarbonising will be because of “continuing cost competitiveness and an increasing ability to integrate high proportions of these variable power sources into power systems,” said BP.

Renewables will need to expand by a factor of about 15 by 2050 to limit global warming, said the report. As much as 600 GW of new renewables capacity will be needed yearly until 2035 to keep to the Paris Agreement target of 1.5C of temperature rise, says the report.

This is about 2.5 times faster than the highest rate of increase seen in the past, said BP. Much of the new capacity will be in the developed world and China.

The growth in wind and solar requires a significant acceleration in the financing and building of new capacity, it said. Greater support for renewables is required, such as quicker permitting and approval of low-carbon energy and infrastructure, said BP.

The use of modern biofuels – modern solid biomass, biofuels and biomethane – will grow rapidly, helping to decarbonise hard-to-abate sectors and processes, said BP.

The report flagged the Russia-Ukraine war and the passing of the Inflation Reduction Act (IRA) in the US as major changes. The IRA, passed in August, offers generous 10-year tax credits for renewable and other low-carbon electricity as well as for domestic manufacturing plants of major renewable energy components.

The Russia-Ukraine war underscores the energy trilemma – secure, affordable and lower carbon, said the report. The heightened focus on energy security increases demand for domestically produced renewables and other non-fossil fuels helping to accelerate the energy transition, said BP.

Additionally, Russia’s war in the Ukraine has long-lasting effects on the global energy system. The war will decrease global economic activity by 2035 by around 3% compared to BP’s 2022 forecast, issued just before Moscow invaded Ukraine in February. Globally, Russia is a major exporter of fossil-fuel products.

“The events of the past year have highlighted the complexity and interconnectedness of the global energy system,” said BP’s chief economist, Spencer Dale. “The increased focus on energy security as a result of the Russia-Ukraine war has the potential to accelerate the energy transition as countries seek to increase access to domestically produced energy, much of which is likely to come from renewables and other non-fossil fuels.”

He added: “But the events also show how relatively small disruptions to energy supplies can lead to severe economic and social costs, highlighting the importance that the transition away from hydrocarbons is orderly, such that the demand for hydrocarbons falls in line with available supplies.”

BP, which has a goal of net zero by 2050, is getting involved increasingly in renewable energy. This is in line with other European oil and gas companies, but less so the non-European oil and gas sector.

The report stresses that the carbon budget is running out. Despite the marked rise in government ambitions, CO2 emissions have increased every year since the Paris COP in 2015 except for 2020. The longer the delay in taking decisive action to reduce greenhouse gas (GHG) emissions on a sustained basis, the greater are the likely resulting economic and social costs, said BP.

In all three scenarios studied, the structure of energy demand changes with the importance of fossil fuels declining, replaced by a growing share for renewable energy and by increasing electrification. The transition to a low-carbon world requires a range of other energy sources and technologies, including low-carbon hydrogen, modern bioenergy and carbon capture use and storage,” said BP.

Through 2050, oil demand declines over the outlook, driven by falling use in road transport as the efficiency of the vehicle fleet improves and the electrification of road vehicles accelerates.

Even so, oil will continue to play a major role in the global energy system for the next 15-20 years across all three scenarios, said BP, though demand will start decreasing after 2030 in all three of the report’s scenarios. Demand today is about 100mn barrels per day, and that will drop to 70mn to 80mn bpd by 2035.

The prospects for natural gas depend on the speed of the energy transition, with increasing demand in emerging economies as they grow and industrialise offset by the transition to lower-carbon energy sources led by the developed world.

The oil company lowered its forecasts of oil and gas demand by the mid-2030s by 5% and 6% respectively if governments stick to their current energy transition plans.

The recent energy shortages and higher prices highlight the importance of the transition away from hydrocarbons being orderly, such that the demand for hydrocarbons falls in line with available supplies, said the report. Natural declines in existing production sources mean there needs to be continuing upstream investment in oil and natural gas over the next 30 years, including in Net Zero.

On the issue of hydrogen, the report says that low-carbon hydrogen will play a “critical role” in decarbonising the energy system, especially in hard-to-abate processes and activities in industry and transport.

Low-carbon hydrogen is dominated by green and blue hydrogen, with green hydrogen – made from renewable energy – growing in importance over time. Hydrogen trade will consist of a mix of regional pipelines transporting pure hydrogen and of global seaborne trade in hydrogen derivatives.

As much as one-third of renewable energy capacity could be used to produce green hydrogen by mid-century, says the report.

Carbon capture use and storage (CCUS) plays a central role in enabling rapid decarbonisation trajectories, suggests the report. This will be by capturing emissions from industrial processes, acting as a source of CO2 removal, and abating emissions from the use of fossil fuels. A range of techniques for CO2 removal – including bioenergy combined with carbon capture and storage (CCS), natural climate solutions, and direct air CCS – are needed for the world to achieve a deep and rapid decarbonisation.