Electricity generation

The electricity generation sector is essential to meeting modern energy needs. Utilities and other electricity producers transform different types of primary energy—everything from natural gas to coal to wind and hydroelectric power—into electricity to be used in homes and businesses. Through 2040, global demand for electricity will continue to rise steeply, as the fuels used for electricity generation continue to shift to lower-carbon sources, such as natural gas, nuclear and renewables.

Industrial, residential/commercial sectors lead electricity rise
Electricity generation is the largest and fastest-growing source of global energy demand—bigger than the amount of primary energy used in the transportation and residential/ commercial sectors combined.

Demand for electricity continues to rise in all parts of the world. Population and economic growth are two main reasons, just as they are for the projected demand growth in other fuels. But with electricity there is an extra factor at work: the switch to electricity from other forms of energy, such as oil or biomass for lighting and heating in the home, or coal in the industrial sector.

However, we also expect the electricity generation sector to become far more efficient than it is today.

As a result, even though global demand for electricity will rise by more than 80 percent from 2010 to 2040, demand for fuels to make that electricity will rise by only about 45 percent. More than 90 percent of this fuel demand growth through 2040 will come from China and the other Non OECD countries.

Natural gas, nuclear and renewables will see strong growth
Because electricity can be produced from many sources, and because the economics of electricity generation are influenced by a range of factors—including technology, environmental policies, capital investment costs and fuel prices—the mix of fuels used for electricity generation represents one of the biggest variables in the energy landscape in coming decades.

Largely because of environmental policies that will encourage a shift to cleaner fuels, by 2030 global coal demand will begin a long-term decline for the first time in modern history.

On the other hand, lower-carbon sources will gain share. Natural gas, which emits up to 60 percent less CO2 than coal when used for electricity generation, will gain the most. By 2040, natural gas will account for 30 percent of global electricity generation, compared to just over 20 percent today. Renewable fuels also will grow significantly, led by wind.

Also significant will be growth in nuclear power. ExxonMobil sees global nuclear capacity growing by more than 80 percent through 2040, rising by 2 percent a year on average.

U.S. and Europe continue to shift to lower-carbon sources
Although the fuels used for electricity generation vary greatly by region, all regions are shifting toward less carbon-intensive sources. Europe already is a leader in this regard. Today, Europe gets about half its electricity from nuclear and renewable fuels. This percentage will rise to nearly 65 percent by 2040, mostly because of strong growth in wind power, which will account for 20 percent of Europe’s power by then, up from 5 percent currently.

However, we expect China will do what the United States and Europe have been doing which is to shift its electricity generation away from coal.