Fossil fuels, comprising 80% of the domestic energy supply in both Canada and the United States, have long been predominant in North America’s energy landscape. However, new developments and forecasts indicate a gradual yet significant shift towards renewable energy sources, with implications for global oil demand and domestic energy consumption.
According to World Economic Forum, an energy consultancy firm, the trajectory of North America’s energy future up to the year 2050 has been meticulously analyzed. The report highlights a projected decline in domestic consumption of fossil fuels by 75% from present levels, equating to nearly half of the anticipated reduction in global oil demand.
For decades, the oil and gas industry has been deeply ingrained in North American society and economy. The Model T, emerging from the Highland Park Ford Plant in Michigan, marked the beginning of mass-produced automobiles, with gasoline-powered engines at their core. Today, however, the region faces a monumental transition away from fossil fuels, steering towards renewable energy production.
Despite these changes, the United States maintains its position as the world’s largest oil consumer, a status held for the majority of the past century. Nonetheless, the remarkable efficiencies of solar and wind power are poised to transform the energy mix in North America, and potentially worldwide, within a single generation.
DNV’s study provides an in-depth look at the US and Canada’s anticipated energy transition, based on seven years of global energy transition forecasting. The report predicts a significant reduction in fossil fuel dependency, dropping to just under 50% of the energy supply by 2050. This shift is expected to be driven by widespread electrification, particularly in road transport and residential areas, and a substantial increase in solar and wind energy production.
The report foresees a stabilization of oil production in the US and Canada at around 17 million barrels per day until 2024, followed by a decrease to 7 million barrels per day by 2050. Despite this reduction, North America is projected to remain a dominant player in the oil industry, albeit in a diminished market. The export volumes of oil are expected to grow until 2030 and then stabilize, while natural gas exports are anticipated to remain constant at current levels.
By 2050, electricity is predicted to constitute 41% of the final energy demand, a significant increase from 21% in 2022. Solar energy, currently the third largest renewable source in the power sector, is expected to grow 15-fold from today’s levels, accounting for almost half of North America’s electricity generation and becoming the region’s leading power source. Wind energy, despite short-term inflationary pressures, is forecasted to increase eightfold, contributing to 35% of the electricity generation in the US and Canada by 2050, bolstered by the Inflation Reduction Act (IRA) and the 2023 Canadian Clean Energy Plan.
Policy plays a crucial role in this energy transition. The IRA in the US is providing stability and support to essential technologies, helping to accelerate the shift towards renewable energy. However, for North America to reach net-zero emissions by 2050, policies actively reducing fossil fuel use will need to complement the current support for renewables. Without these additional measures, the region’s per capita emissions are likely to be three times higher than Europe’s by 2050.