- DNV publishes Energy Transition Outlook North America. The report covers the energy future of the U.S. and Canada through to 2050.
- Policies are triggering massive investment into new technologies, accelerating the energy transition in North America.
- Domestic fossil fuel demand declines 60%, mainly in transport and power sectors, but export remains stable while domestic energy use is declining.
Federal and household spending on energy in the U.S. and Canada will drop sharply as the two countries reduce their reliance on fossil fuels, according to DNV’s Energy Transition Outlook North America. The new report explores the most likely energy future of the U.S and Canada to the middle of the century and it forecasts 12 trillion dollars will be spent in the two countries on grid and renewables between now and 2050.
Energy Transition
Electrification will be a key driver of the energy transition, which will ultimately benefit consumers. Household energy bills are set to halve by 2050 as they reap the rewards of cheaper electricity generated by renewables. To support the influx of renewable energy resources, the grid must undergo a vast expansion, increasing its capacity 2.5 times by 2050. The Outlook takes into consideration the current bottleneck in transmission lines, which, if not addressed, will limit the attractiveness of wind and solar installations.
“The cost efficiencies of renewable power are proving irresistible even in the land of big oil,” said Remi Eriksen, Group President and CEO at DNV. “The $12 trillion to be spent on renewables and grid infrastructure in the U.S. and Canada should be viewed as an opportunity to put the region at the heart of technologies essential to the global energy transition, such as hydrogen e-fuels, whilst reducing energy bills for households.” Decarbonization in the two countries is being accelerated by the Inflation Reduction Act (IRA) and policies enacted by the Canadian government. IRA is providing much needed stability for the renewables industry, which previously suffered from boom-and-bust cycles linked to the changing regulatory and fiscal landscape. Boosted by the IRA, solar and wind power will grow 15- and 8-fold respectively by 2050. Investments in hydrogen, carbon capture and storage (CCS) and direct air capture (DAC) are all front-loaded in the 2030s thanks to the fiscal incentives, which otherwise would have matured much more slowly.
Progressive Policies
Currently, fossil fuels account for around 80% of energy supply in the U.S. and Canada, but this will drop to less than 50% by 2050. Coal production in the region will drop 85% by midcentury as it struggles to compete with cheaper forms of electricity production such as wind and solar as well as natural gas. The shift to electric vehicles will be the main reason for a reduction in domestic oil demand, with consumption forecast to decline by 75% by midcentury. Electrification will double by 2050 and account for 41% of the region’s overall energy demand driven by the emergence of new demand categories such as electrified road transport, electrolysis for hydrogen production, and the use of heat pumps in buildings and manufacturing. Solar will become the largest producer of electricity by the mid-2030s, supported by favorable economics and enhanced policy support in the region. By 2050, solar will account for almost half of all electricity generated in North America.
“The progressive policies of the IRA are accelerating the transition and demonstrate a pathway that governments can take to hasten the energy transition. However, the U.S. and Canada, like the rest of the world, still need to do more to reach net zero by 2050,” added Eriksen. Although the policies enacted in North America are accelerating the energy transition, the U.S. and Canada will not reach net zero CO2 emissions by 2050. CO2 emissions are forecast to drop 75% by 2050 as fossil fuels, especially natural gas, will still play a role in the energy mix and the emissions of hard to electrify industrial processes like cement production will remain significant.
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Source: DNV
