In this latest monthly flash info on ODDO BHF Green Planet, ODDO BHF AM takes a look at electrification, one of the main levers for decarbonising the economy and achieving the goal of carbon neutrality by 2050. According to the "Net Zero Emissions" scenario of the International Energy Agency (IEA), the share of electricity in final energy consumption should rise from 20% in 2020 to 50% in 2050.
Towards a profound transformation of electricity networks
In the update of its "Net Zero 2050" scenario published in October 2021, the International Energy Agency (IEA) estimates the investments needed in green technologies at around $5,000 billion per year. Electricity generation accounts for a more than third of this, or about $1,800bn per year split between grid transformation (≈ $1,100bn) and the implementation of storage capacity (≈ $700bn).
The acceleration of the electrification of the economy will be accompanied by a profound transformation of the networks to move from an organisation that is currently highly centralised around a few large generation plants to a much more decentralised scheme in order to connect the new renewable capacities (numerous wind farms and solar farms for example) and develop smart grids and storage capacities.
This transformation will go hand in hand with a major shift in electricity demand, particularly in four areas:
- Buildings, with heat pumps expected to account for 55% of energy needs by 2050 (vs 7% in 2020);
- Industry, where the share of electricity in energy consumption should reach 76% in 2050 (vs. 43% in 2020);
- Mobility, with 86% of the car fleet made up of electric vehicles by 2050 (vs. 1% in 2020);
- Hydrogen, with the use of electrolysis expected to reach 62% of production in 2050 (vs. 5% in 2020).
The electrification project therefore looks set to be colossal, with global electricity demand expected to increase 2.5 times by 2050.
