Renewables led by solar and wind will account for half of global energy sources by 2040, BP said in its annual outlook, where it cautioned trade disputes could weigh down demand, adding a risk premium to energy imports.
"The growth in renewable energy will replace coal as the primary source of power generation in 2040,” Spencer Dale, BP's chief economist, said at the launch of the outlook report, which is seen as a bellwether for global energy demand.
The growth of renewables "will be dominated by the developing world, which will account for two-thirds of demand,” he added.
Coal, long seen as the source fuelling rapid industrial development in emerging economies is being increasingly scrapped in favour of renewables, to mitigate rising pollution levels in metros in countries such as India and China. Falling prices of solar panels as well as the increased volatility of the oil markets have pushed Asia's top energy consuming nations to switch to cleaner sources.
India, the world's second most populous nation, cancelled 14GW worth of coal power projects over the last decade, with domestic deployment of renewables hitting 75GW presently. The country, seen as a key driver of future energy demand, notably for the oil markets, will also look to tender nearly 500GW of renewables capacity by 2028.
Though BP noted the precedence of renewables in driving the energy outlook for the foreseeable future, it said large scale investment in new oil would be required as the world faces a 4.5 per cent annual decline in output, which will lead to a fall in supplies by 35 million barrels per day by 2040.
"Many trillions of dollars of investment will be needed in new oil without which the world will not be able to deliver the dual aspects of the challenge,” said Mr Dale.
He was referring to the challenge to meet energy demand while keeping carbon emissions low.
Escalating trade disputes also weighed on BP’s latest outlook for energy following the face-off between the US, the world’s top producer of oil and China, the largest consumer globally for the resource.
Reduced openness of the global economy will lead to a slight reduction of around 0.3 percentage points per annum in global gross domestic product growth, with increased concerns about energy security likely to add a 10 per cent risk premium to imported sources of fuel, BP said in its outlook. That assessment mirrors concerns of the International Monetary Fund.
In January, the Washington-based lender cut its global growth forecasts on trade uncertainty and other downside risks, and now projects global GDP to expand by 3.5 per cent in 2019 and 3.6 per cent in 2020 – 0.2 and 0.1 percentage points below its last projections in October.
A starker assessment by the oil giant, which didn't cite US-Chinese tensions specifically, maintains that trade disputes could slash the global economy's output by 6 per cent and lower energy demand by 4 per cent by 2040.