BNEF New Energy Outlook 2024 Highlights

Introduction

Each year Bloomberg New Energy Finance (BNEF) drops New Energy Outlook - an overview of where we are on the energy transition path and what should happen until 2050 to reach the Net-Zero Scenario (NZS). While no battle plan ever survived first contact with the enemy, it pays to have a battle plan and understand where you are now and what forces are at play. This article is a collection of the posts I've been writing this week, bringing together various themes from the New Energy Outlook 2024, such as the breakneck speed of the fourth energy transition, the emerging business of heat pumps, slow fizzling out of hydrogen and a huge question mark about carbon capture technology. The report itself has much more details about these and other aspects of energy transition. I’ve highlighted in this text the ones that I see most relevant to supercharging energy transition right now, rather than in a couple of decades.

The Fourth Energy Transition: A Global Shift by 2030

I've been raving a lot recently about the rapid pace of energy transition, spotlighting countries like Turkey and trailblazing companies like Ørsted. These examples show that if you are tough and don't take any nonsense from oil and gas execs, you can quickly stage a renewable energy takeover. Now, fasten your seatbelts, because according to BNEF by 2030, half of the world's electricity will come from solar and wind power. That’s right, we're talking about a global shift happening in this decade. And the best part? This revolution will happen without any additional policies. Solar and wind are already competitive enough to lead the charge.

But don't break out the champagne just yet. The BNEF report also lays out the Herculean task ahead. To hit net-zero goals, the power sector must slash emissions by 93% by 2035 and triple its capacity to 11 TW by 2030. That's a lot of ground to cover, and there's no room for complacency.

Pumping Up the Heat

One of the standout highlights from the BNEF New Energy Outlook 2024 is the rising prominence of heat pumps. These devices are set to be the unsung heroes of the energy transition. Alongside their flashier cousins, electric vehicles (EVs), heat pumps are set to abate 15% of all CO2 emissions by 2050. That’s right, these (literally) quiet achievers will help save the planet while you stay cozy indoors. Only wind and solar will avoid more CO2 emissions this decade, but let’s not get into a sibling rivalry here.

BNEF’s classification of heat pumps as an “electrification” technology is intriguing, as simultaneously they also identify "energy efficiency" as a separate source of emissions reduction. Any experienced heat pump installer will tell you that the energy efficiency of a building is crucial when determining the appropriate heat pump system. It's like installing a state-of-the-art security system but leaving the front door wide open. Addressing potential heat leaks, fixing windows, and other efficiency improvements are necessary steps before installation. Thus, each heat pump installation inherently includes an energy efficiency upgrade. It's like getting a bonus feature without the cheesy sales pitch.

The forecast is ambitious: over 500 million heat pumps by 2050, a tenfold increase from today’s numbers. That’s a lot of pumps! Despite this anticipated growth, BNEF currently doesn’t consider heat pump technology as mature as wind or solar. They remain expensive to install, and gas boilers continue to be the budget-friendly choice.

Hydrogen: The Slow Burn

Now it is the hydrogens’ turn. The report makes it clear that there will be a negligible amount of clean hydrogen in this decade, whatever the hydrogen boosters say. It starts growing from 2031 onwards, and only after 2040 will it contribute to a sizable 11% reduction in CO2.

The total demand for hydrogen is expected to quadruple by 2050. However, this growth will take off later in the next decade as other technologies scale up more quickly. It's important to note that this forecast has been reduced by almost a quarter from the last BNEF forecast.

As for hydrogen use cases, BNEF still holds out hope for hydrogen use in heavy transport, but in my opinion, this will never happen at any meaningful scale. This leaves replacing ammonia with green ammonia, energy storage, and some heavy industry decarbonization.

The BNEF report confirmed my position on hydrogen - the hype is slowly fizzing out.

CCS: A Long Way To Go

CCS will remove 35% and 34% of CO2 emissions in the steel and cement sectors, respectively. However, cement sector emissions are still expected to rise by 27%, which is puzzling because cement made with CCS is already price-competitive with traditional cement.

The power sector, however, will be the biggest contributor in volume, with about three-quarters of all CO2 reductions coming from CCS in power generation. That’s the message on CCS for 2050 from the BNEF New Energy Outlook 2024, estimating the total amount of CO2 captured by CCS at about 8 gigatons per year. Considering that current CCS volumes in power generation are essentially zero, it has a long way to go, but plenty of time to get there.

However, there’s a catch. For CCS to be truly effective, it needs credible demonstrations of reliable point capture and significant cost reductions. The technology is still seen as costly and unproven at scale. Without a carbon price in some form, introduced fast, this will be almost impossible to pull off.

Still, there exists an industry where CCS could establish a foothold now and “cement” its role as another commercialized green technology. Yes, you guessed it - it’s cement. Today, cement made with CCS technology is already price-competitive with traditional cement.

Conclusion

The BNEF New Energy Outlook 2024 paints a dynamic picture of the future energy landscape, highlighting significant shifts and emerging technologies that will drive the next phase of the energy transition. From the dominance of solar and wind to the rise of heat pumps and the potential of CCS, the report underscores both the challenges and opportunities ahead.

If you’re involved in greentech as a startup or an investor, let’s connect and explore how we can drive these innovations forward together. Also, I am currently in the process of raising our pre-seed round for ETR - the heat-by-susbcription startup, and if you're passionate about driving the energy transition forward—or just enjoy investing in the future—I’d love to connect. Drop me a line, and I’d be more than happy to share our pitch deck with you. Who knows? You might just find yourself at the forefront of the next big thing in energy. And hey, you’ll have a great story to tell at dinner parties.