ARKANSAS, Sept 27 (Future Headlines)- The energy landscape of North America is undergoing a monumental transformation, driven by a robust shift away from fossil fuels towards renewable energy sources and electrification. DNV‘s recently published report, the Energy Transition Outlook North America, explores the trajectory of the United States and Canada’s energy future up to 2050. This report reveals that massive investments in renewable technologies, coupled with progressive policies and electrification, are reshaping the energy sector in the region.
DNV’s report forecasts a staggering $12 trillion investment in grid infrastructure and renewables in the United States and Canada from now until 2050. This substantial commitment reflects the significant role renewables will play in the energy mix. As renewables and electrification inherently offer higher efficiency, the overall energy expenditure is expected to decline from 4% of GDP currently to just 2.5% by 2050. Crucially, this transition is projected to overhaul the capital expenditure (CAPEX) dynamics, with renewables surpassing fossil fuel CAPEX by 2040. A pivotal driving force behind this transformation is the consistent reduction in domestic fossil fuel demand, which is anticipated to decline by a remarkable 60% by 2050.
Electrification emerges as a key catalyst for the energy transition, offering benefits to both consumers and the environment. Household energy expenditures are expected to halve by 2050, primarily due to the plummeting cost of electricity generated from renewables. However, to accommodate the surge in renewable energy resources, the electricity grid must undergo a substantial expansion, increasing its capacity by 2.5 times by 2050. Addressing current grid transmission bottlenecks is paramount to unlocking the full potential of wind and solar installations. Policymakers have already initiated actions to bolster grid capacity, with transmission- and distribution-system operators poised to seize the vast opportunities presented by the growing renewable power market.
“The cost efficiencies of renewable power are proving irresistible even in the land of big oil,” remarked Remi Eriksen, Group President and CEO at DNV. This monumental investment of $12 trillion offers North America the opportunity to position itself as a global leader in clean energy technologies, including hydrogen e-fuels, while simultaneously delivering more affordable energy to households.
North America’s decarbonization efforts are accelerated by the Inflation Reduction Act (IRA) and proactive government policies. The IRA provides much-needed stability to the renewables industry, curbing the previous boom-and-bust cycles linked to regulatory and fiscal shifts. Under the influence of the IRA, solar and wind power are expected to experience extraordinary growth, expanding by 15-fold and 8-fold, respectively, by 2050. Investments in crucial areas such as hydrogen, carbon capture and storage (CCS), and direct air capture (DAC) are front-loaded, thanks to these fiscal incentives.
The report highlights a significant shift in hydrogen’s share of the energy mix in North America, increasing from 5% to 9% by 2050. Green hydrogen, derived from dedicated renewables, is set to surpass blue hydrogen by the mid-2030s. Fossil fuels, currently accounting for roughly 80% of the energy supply in North America, are projected to decline to less than 50% by 2050. Notably, coal production is anticipated to plummet by 85% as it grapples with competition from cheaper and cleaner sources of electricity production, such as wind, solar, and natural gas.
Electrification is set to double by 2050, constituting 41% of North America’s overall energy demand. This surge is driven by emerging categories such as electrified road transport, electrolysis for hydrogen production, and the widespread use of heat pumps in buildings and manufacturing. Solar power is expected to become the predominant source of electricity generation by the mid-2030s, accounting for nearly half of all electricity produced in North America by 2050. Despite facing inflationary pressures and supply chain challenges, continued policy support for wind energy ensures that wind will contribute 35% of the region’s electricity supply by midcentury.
While policies enacted in North America accelerate the energy transition, reaching net-zero CO2 emissions by 2050 remains challenging. CO2 emissions are projected to decrease by 75% by 2050, driven by the declining role of fossil fuels, especially natural gas. Nevertheless, North America will not achieve net-zero emissions by mid-century due to the continued presence of fossil fuels and the emissions associated with hard-to-electrify industrial processes.
According to DNV’s Pathway to Net Zero scenario, achieving the goals of the Paris Agreement would require North America to reach net zero by the early 2040s. This ambitious objective necessitates an even more rapid scaling up of CCS and a nearly sixfold increase in DAC compared to current forecasts. Realizing this vision would demand a concerted effort akin to the focus that led to the atomic and space ages.
DNV’s Energy Transition Outlook North America paints a vivid picture of a transformative decade ahead, where renewables, electrification, and forward-thinking policies drive the region towards a cleaner, more affordable, and sustainable energy future. The report’s findings underscore the massive investments that will shape the energy landscape, ultimately benefiting both consumers and the environment. North America stands on the precipice of becoming a global leader in clean energy technologies, and the opportunities for innovation and progress are boundless. While challenges persist on the path to net zero, the region’s unwavering commitment to decarbonization promises a brighter and more sustainable future for all.
Writing by Sarah White