Figure 6.1 presents the evolution of the total final demand for energy for the five scenarios considered (presented in Chapter 1). REF shows a relatively uniform evolution in energy demand for all sources in response to the natural evolution in energy services associated with economic and population growth. Inclusion of the impact of the proposed carbon tax until 2030 (CF30) changes relatively little in the overall evolution of energy demand, which continues to increase with respect to 2016, albeit at a slower rate than for REF. However, on the shorter horizon, the energy mix shows a faster increase in electricity production than all other scenarios. Moreover, the carbon tax is adequate to stabilize demand of oil and gas at 2016 levels.
Direct constraints imposed in scenarios NZ60, NZ50 and NZ45 have a much larger impact on the diversity of energy sources and the total demand. In fact, between 2016 and 2030, an overall reduction in demand for all energy sources is observed in these three scenarios; in the subsequent decade, growth also appears much slower than for REF and CF30. While more detailed explanations for this trend are provided in the examination of sectorial energy consumption below, in broad terms, it can be linked to increased energy efficiency efforts, the accelerated shrinkage of the oil and gas sector, and the electrification of energy-intensive activities.
The share of fossil fuels, including natural gas, drops markedly for NZ scenarios, starting before 2030 and accelerating rapidly between 2030 and 2040. While the evolution of these three scenarios is very similar until 2030, the more aggressive ones move into electrification more quickly, while moving away from fossil fuels at the same time. A comparison with REF and CF30 suggests that some applications will remain particularly costly to fully decarbonize. In view of these results, policy and regulatory constraints are necessary to bring about the reductions needed to achieve net-zero targets.
Figure 6.1 – Final energy consumption by source #
- The decrease in total energy demand does not result in a corresponding reduction in the energy services provided. Instead, a large part of the demand for these services is met by more energy efficient technologies and sources, mainly electricity.
- Once net-zero is reached, increases in energy demand are possible without breaching carbon neutrality, as illustrated by the higher total demand in net-zero scenarios in 2060 compared with 2050. However, the growth in demand after net-zero is very slow.
- The proposed evolution of carbon prices up to 2030 is insufficient to reach the GHG reductions targeted.
- In the context of a 2050 NZ horizon, natural gas cannot be used as a transition energy.
- The almost identical total energy demand in 2060 for the three NZ scenarios suggests that there is limited risk in accelerating the electrification of the economy.
- In the NZ scenarios, around 22% of final energy demand for 2060 is satisfied by fossil fuels, representing, in absolute value, 25% of the total fossil fuel demand for 2016.
Interestingly, the final energy mix for NZ scenarios in 2060 is largely independent of the pathway selected. The final energy distribution is almost identical, with electricity meeting more than 55% of all energy needs and oil and gas still contributing 15% and 6% of the final energy demand in sectors for which low-carbon technologies are still uncertain. Respectively, these values correspond to only 32% and 16% of the quantities of oil and gas consumed in 2016.
6.1.1 Low-emitting energy sources and vectors
While potential hydrogen applications are broad, the considerable uncertainties that remain make this vector difficult to model. Within these limits and given its high cost compared to other options, hydrogen plays only a small role in the evolution of the energy mix and is confined to specific applications where it can be most useful, especially when electrification is available only at very high cost (see the sectoral discussion below). It should be noted that while hydrogen use increases by 50% in some net-zero scenarios before 2060, it will no longer be used in refining activities but in applications in industry and transport. Chapter 9 presents a sensitivity analysis that explores this energy vector more extensively.
In all scenarios, bioenergy continues to grow up to 2030. If this increase reaches 27% in NZ45, CP30 shows an even greater increase (47%), reflecting the relatively low cost of using bioenergy to rapidly decarbonize certain applications. Growth continues after 2030 in CP30 (70% for the entire 2030-2060 period with respect to 2016). Nonetheless, this picture is misleading in comparing overall biomass use throughout the economy, since NZ scenarios use a significant quantity of biomass as primary energy for hydrogen and electricity production with carbon capture (BECCS), which does not appear in final consumption numbers.
Taking this last point into account, in all three net-zero scenarios, availability remains the determining factor: after an initial increase, the total quantity of biomass available becomes an important constraint (Chapter 9 also presents a sensitivity analysis based on this factor). In any case, the potential of biofuels is limited in NZ scenarios because it results in residual emissions, which become more problematic as the net-zero point is approached.
6.1.2 An increased role for electricity
While the share of electricity in the energy basket remains relatively constant in REF and CP30, electricity becomes the dominant final energy source by 2050 in all NZ scenarios. This energy derives mainly from an expansion in renewable electricity generation, overwhelmingly produced from intermittent wind and solar (Figure 6.2), coupled with increased storage capacity.
The 50% increase in nuclear generation’s share, in NZ scenarios, masks a more profound technology change: decommissioned larger plants are replaced with nuclear small modular reactors (SMR)—based on current costs estimates for this yet-to-be-developed technology. This represents an important difference from REF in the longer term, where no SMRs come into play after ageing plants close down. Electricity generation and other energy production are discussed at more length in Chapter 7.
Chapter 9 further examines these key vectors and sources (hydrogen, bioenergy and low-emission electricity) and analyzes their respective roles in net-zero pathways.