DNV forecasts $12tn into grid and renewables in US and Canada by 2050

According to analysis from consultancy DNV between now and 2050 a staggering $12 trillion will be invested in doubling power grid capacity and renewables technologies in the US and Canada.

This is according to DNV’s Energy Transition Outlook North America, which reveals a transformative shift in energy consumption patterns driven by policies and investments in renewables and electrification.

Alongside the significant expenditure over the next two and more decades, the report finds that federal and household spending on energy in both countries will experience a substantial decline as the countries move away from fossil fuels.

Overall energy expenditure is projected by the report to decrease from the current 4% of GDP to 2.5% by 2050, driven by the inherent efficiency of renewables.

Notably, the report states that capital expenditure (CAPEX) on renewables is forecasted to surpass fossil fuel CAPEX by 2040; domestic demand for fossil fuels is anticipated to plummet by 60% by mid-century.

Electrification and an accommodating grid

Electrification is identified as a key driver of this energy transformation, offering significant benefits to consumers. Household energy bills are predicted to halve by 2050, thanks to the affordability of electricity generated from renewables.

However, to accommodate the increasing influx of renewable energy, the grid’s capacity will need to expand by 2.5 times by 2050, states DNV.

The report takes into consideration existing bottlenecks in transmission lines, which, if not addressed, could hinder the attractiveness of wind and solar installations.

However, policies have already been set in motion in both the US and Canada to rectify grid capacity limitations.

“The cost efficiencies of renewable power are proving irresistible even in the land of big oil,” said Remi Eriksen, group president and CEO at DNV.

“The $12 trillion to be spent on renewables and grid infrastructure in the US and Canada should be viewed as an opportunity to put the region at the heart of technologies essential to the global energy transition, such as hydrogen e-fuels, whilst reducing energy bills for households.”

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Fossil phase out

According to DNV, although fossil fuels currently dominate 80% of the energy supply in both countries, this share is expected to decrease to less than 50% by 2050. Coal production is set to decline by a staggering 85% by mid-century as it faces stiff competition from more cost-effective electricity generation methods like wind, solar and natural gas.

The shift towards electric vehicles is the primary driver behind a 75% reduction in domestic oil demand by mid-century, even as oil exports are projected to triple. Natural gas demand, approaching its peak, is expected to decrease by nearly 50% by 2050 as renewables take centre stage in power generation, while exports remain stable.

Electrification is predicted to double by 2050, constituting 41% of the region’s total energy demand. This growth is fuelled by emerging demand categories such as electrified road transport, hydrogen production through electrolysis and the use of heat pumps in buildings and manufacturing.

Additionally, solar energy is poised to become the primary source of electricity by the mid-2030s, contributing to almost half of all electricity generated in North America by 2050.

Although inflation and supply chain pressures pose current challenges, continued policy support for wind energy will ensure that wind accounts for 35% of the region’s electricity supply by mid-century.

Despite the significant progress, states the report, the US and Canada are not expected to achieve net zero CO2 emissions by 2050.

Rather, CO2 emissions are forecasted to decline by 75% by 2050, primarily due to reduced reliance on fossil fuels.

However, fossil fuels, particularly natural gas, will continue to play a role in the energy mix, and emissions from hard-to-electrify industrial processes, such as cement production, will remain significant.