When Renewables Replace Fossil Fuels

Most analysts think that the world's demand for energy will keep growing in the near future. But they also believe that as time passes, renewable sources of energy — hydroelectric, biomass and perhaps nuclear energy, but above all wind and solar — will replace fossil fuels, reducing carbon emissions. The main disagreements are over how quickly that will happen.

Most experts have concluded that change will come slowly. Analysts at Shell predict it will take a quarter of a century to reach a tipping point where the annual output of renewable energy matches the overall growth in demand and the amount of carbon being released into the atmosphere levels off. Their peers at BP think 30 years will pass before then; those at Exxon say 75. The International Energy Agency (IEA) largely agrees, though it recently cut its estimate from 60 years to 35.

When compared with actual data, however, forecasters' records have consistently erred on the side of conservatism. Shell and BP base their estimates out to 2040 on the assumption that total energy demand will grow by 1.4 percent each year, even though the recent rate has been more like 1.0 percent. All conclude that the demand for fossil fuels will continue growing through the 2020s and 2030s at 0.7-1.2 percent per year, though the recent trend has been 0.5 percent.

Still, no one knows what will happen. The best we can do is to make our assumptions explicit, map out their consequences and ask whether they are plausible. In this spirit, Kingsmill Bond, a new energy strategist for the investment research company TS Lombard, recently published the above chart showing when the tipping point described above will arrive under different assumptions about growth in demand and solar and wind power.

Which columns and rows we select depends on our guesses about future policies and attitudes, engineers' abilities to solve daunting technical problems, enthusiasm for investment in infrastructure and, of course, the performance of the global economy. But despite this heaping up of "ifs," "buts" and "maybes," neither the top and bottom rows nor the left- and right-hand columns seem very likely. That leaves us in the middle of the grid, with a tipping point coming in the 2020s or 2030s. Bond himself leans earlier rather than later, expecting wind and solar energy to grow at 20 percent and overall demand at 1 percent, in large part because of gains in efficiency. If he's right, the lines will cross in 2020, and by the early 2040s half of the world's energy will come from renewables. If so, then Rabah Arezki, the head of commodities at the International Monetary Fund, must also be right when he says we stand "at the onset of the biggest disruption in oil markets ever."