BP Technology Outlook2018How technology could change the way energy is produced and consumedContents1 Energy and technology 11.1 Background 21.2 Foreword – Bob Dudley, CEO, BP 41.3 Challenges and game-changers 61.4 Digital technology 122 Production and uses of energy 172.1 Resources and production 182.2 Power 302.3 Transport 412.4 Heating and cooling 503 The environmental perspective 55A sustainable energy system 564 Insights 63Fuel for thought 645 Appendix 67Our approach 68Section PageEnergy and technology11.1 Background2 BP Technology OutlookThe Technology Outlook explores how technology could affect the whole energy system – from production through to use in power, transport and heat.The BP Technology Outlook examines the potential of technology to change the way we produce and use energy to 2050.It draws on a series of studies carried out over three years by BP and eight partners in universities and research institutes, using a combination of fundamental analysis and energy system modelling to produce insights into long-term trends. It examines three regions, China, Europe and North America, which together account for more than 50 of the world’s primary energy consumption but have very different energy systems.It is designed to in thinking in business, governments, academia and beyond. About the BP Technology OutlookBP would like to thank its partners in the production of this publication IHS Markit for studies on the oil Ricardo for a study on ground transportation; Marakon for a study on the industrial heat sector; the Cambridge University Foreseer team and the Resource Efficiency Collective for studies on air quality and energy efficiency; KanORS-EMR for energy systems modelling and Imperial College, London, for a study on integrating renewables into power grids.RETURN TO CONTENTS3BP Technology OutlookBy taking this approach, the Outlook provides an insight into how the world of energy could evolve independently of policy or regulation. It may therefore help policy-makers consider what additional incentives and measures to introduce.The Outlook is thus not a set of forecasts – as forecasts would try to anticipate societal and policy-driven change in order to predict outcomes. Instead the Outlook uses modelling and analysis to provide insights into what technology advances could deliver, other factors aside.The Outlook is based on developments anticipated in technologies known today without attempting to predict breakthrough innovations that might arise out to 2050. To make best use of this Outlook, it is important to understand what it seeks to do – and what it does not do – and how it differs from other views on future trends.The Outlook uses ‘techno-economic’ analysis to show how the costs and deployment of a range of energy-related technologies could develop out to 2050. This approach takes account of factors such as investment, operating and fuel costs, capacity factors, and advances in technology including ‘learning rates’, whereby costs fall as experience is accumulated.The core analysis therefore does not factor in the impact of policies, such as those aimed at reducing greenhouse gas emissions or improving air quality. However, in the studies on power, transport and heat, a carbon price has been overlaid on the core calculations to see what difference it could make.This publication is the second BP Technology Outlook; the first was published in 2015. The research undertaken for this edition, carried out during 2015-17*, has been expanded to include deeper studies of important areas, including Energy-system modelling of a lower-carbon future The costs of providing back-up for wind and solar power when used at scale Options for energy storage, particularly advanced batteries and their implications for electric vehicles and power grids Air quality in cities, examining sources of emissions and potential solutions.* Initiated in 2015, the study uses long-term price assumptions for a range of fuels, including 75 per barrel for Brent crude oil and 4 per million British thermal units for Henry Hub natural gas.A highway intersection in Los Angeles – the BP Technology Outlook examines energy systems in China, Europe and North America.4 BP Technology OutlookBob Dudley Group chief cutive Such investments need to be ined by an understanding of what the future may hold and BP has always made this topic a priority. As we look to the future, our technology teams work with our businesses, specialists and partners to understand technological trends and forces. We are grateful to the experts in academia and elsewhere who have contributed to the research underpinning this Outlook. Taking the long-term viewIt is an exciting time to be involved in the energy industry. Access to heat, power and mobility is continuing to help millions emerge from poverty across the developing world, and to underpin growth in industrialized economies.However, as demand for energy grows, the way it is supplied is changing. Renewable energy is growing rapidly. Oil and gas are also still growing and being produced and used ever more efficiently. Meanwhile global coal use looks set to plateau and the prospects for nuclear power vary by region.Although the speed of change seems to accelerate every day, the energy industry still needs a long-term view, as it is making investments in projects, developments and systems today that will last for decades.1.2 Foreword – Bob Dudley, CEO, BPRETURN TO CONTENTS5BP Technology OutlookEnergy and technology | Foreword – Bob Dudley, CEO, BPHowever, while such advances strongly support the transition to a low-carbon economy, our analysis also suggests they will not deliver it by themselves. Some further impetus will be needed, particularly policies that put a cost on carbon and encourage all of the ways in which emissions can be reduced – from greater energy efficiency and investments in low-carbon s of energy to the wider use of carbon offsetting programmes. Modelling insights are always approximate and certain to differ from what actually transpires, but the message is clear. As the statistician George Box said, “All models are wrong, but some are useful.”Another important insight is the continued importance of natural gas. The analysis suggests gas can remain an integral part of the energy mix in a lower carbon world. It can be used in transportation as well as in heat and power, and it can be deployed along with carbon capture use and storage CCUS to provide the back-up that renewables need when used at scale. The study also suggests that CCUS is a critical component of a lower-carbon future.While a study such as this Outlook can provide insights into the future of energy technology, it also highlights many uncertainties and ‘wild cards’. Digital technology is bound to continue to have a profound impact, including artificial intelligence, robotics and automation. So far in my own career, I have seen technology trans the energy world through advances such as seismic imaging, shale production techniques, manufacturing innovations and reductions in renewable energy and battery costs.This second BP Technology Outlook looks to the next generation of advances in the period to 2050. It reaffirms many of the insights from the first Outlook in 2015; for example, that energy resources remain abundant. It highlights how energy systems vary from region to region. It reminds us that it is less costly to reduce carbon emissions in power than in transport or heat. And it examines how digital technology is transing energy.However, the 2018 Outlook also provides some important new insights into technologies where progress has been even faster than expected three years ago. For example, the potential for growth among electric and self-driving vehicles is explored in more detail, as are the increasing competitiveness of wind and solar power and the rapidly falling costs of batteries.The modelling shows us what technology has the potential to achieve over the coming three decades. The changes in prospect are exciting and profound – such as digitization and artificial intelligence, the electrification of transport, and the scaling up of renewable energy.Emerging technologies, such as those covered here, from laser drilling to new types of solar photovoltaic modules, could also disrupt the trends and economics of the energy system.Over the past few years, the BP Technology Outlook and its companion publication the BP Energy Outlook have helped shape BP’s choices. For example, our new investments in long-term natural gas projects reflect our projections of its strong growth and potential use in many technologies for decades to come. Digital technologies that are helping us discover and produce oil reserves – oil that will be used with increasing efficiency as vehicle technology evolves. Meanwhile our increased venturing investments in a range of high-technology start-ups, from bio-jet fuel made using domestic waste to artificial intelligence, embrace many new technologies that have potential to support the transition to a low-carbon energy system.I hope that the BP Technology Outlook 2018 will prove valuable for all those who work in the world of energy or take an interest in it.For more ination on the BP Technology Outlook BP Technology Outlook20186 BP Technology OutlookWhy energy technology mattersThe technology used to produce and consume energy has always been important. Today, however, it is critical to the future of the global economy and the environment.The Industrial Revolution transed economies through energy technologies such as the steam engine, locomotives and electricity. It started an era of unprecedented growth in which the world’s population has grown eightfold and life expectancy has doubled.Asia at night – energy-hungry megacities shine the brightest.How can technology help provide more energy and a sustainable environment 1.3 Challenges and game-changers RETURN TO CONTENTS7BP Technology OutlookEnergy and technology | Challenges and game-changersMeeting increasing demand for energyThat era of industrialization has provided benefits undreamed of by previous generations, but it also has contributed to a growing world population facing challenges such as increased greenhouse gas emissions and overcrowded, polluted cities. The dual challengeSociety now faces a dual challenge – to meet increasing demand for energy at the same time as reducing emissions of greenhouse gases. Other issues such as air quality and water pollution also need to be managed.This dilemma can be addressed by using energy as efficiently as possible, thus limiting the total consumed – energy saving; and by shifting to lower, zero or negative carbon sources of energy – energy switching. As well as using renewables or nuclear energy, switching can include substituting gas for coal in electricity generation as gas has roughly half the carbon emissions of coal when burned for power.Technology has a key role to play, in both areas increasing the efficiency with which energy is used and improving the affordability and availability of low-carbon energy.Game-changing technologiesThis Outlook is based on analysis of around 130 energy technologies including oil and gas production, refineries and power stations; renewable power such as wind and solar; vehicles from conventional cars to electric cars and hybrids; heat technologies from gas boilers to electric heat pumps; and energy storage from batteries to hydrogen. Many technologies have a part to play in resolving the dual challenge. However, this report highlights five particular areas in which our analysis suggests technology can play a game-changing role.As populations and economies grow, so does demand for energy – but at the same time, greenhouse gas emissions need to fall to meet environmental goals.The dual challenge Reducing emissions of greenhouse gases8 BP Technology OutlookEnergy sourcesOperations Devices ServicesInternal combustion engineMobilityCars/vansTrains/trucksShipsAeroplanesIndustryPetrochemical productsOther industryBuildingsHeatingCoolingLightingCooking/washingOther services Oil31Coal29Other renewables4Biomass10Gas21Nuclear5 Power stationsSolid fuel transationOil refineriesHeatersJet enginesLight bulbsElectric motorsNon-energyInternal combustion enginesOther devicesBased on IEA data from the World Energy Statistics and Balances OECD/IEA 2013, www.iea.org/statistics. Licence www.iea.org/t as modified by the Resource Efficiency Collective – University of Cambridge and BP.A complex systemThis chart, known as a Sankey diagram, shows how energy is converted and consumed. On the left are the natural resources that provide energy – known as primary energy. The diagram shows how these resources are converted, for example in industrial operations such as oil refineries or power stations, and then consumed using devices from engines to light bulbs in order to provide us with the energy services shown on the right, such as mobility and lighting. Gas resources, for example, are used to generate power but also piped directly into homes for use in heating or cooking. The width of each strand indicates the quantity of energy involved. Although not reflected in this diagram, energy losses and inefficiencies occur at each stage, and can be material.ConversionRETURN TO CONTENTS9BP Technology OutlookEnergy and technology | Challenges and game-changersEnergy efficiency The energy system that has emerged since the late 19thcentury is a complex one with multiple supply chains, in which primary energy such as oil, gas, coal, uranium for nuclear power and renewable resources are converted through processes such as refining and power generation and consumed to provide services such as heat, light and mobility. During the process, most of the energy consumed is lost before consumers experience the benefits. On pages 10 and 11 our partners in the University of Cambridge Resource Efficiency Collective describe specific technically feasible measures by which up to 40 of global primary energy could be saved, cost considerations aside, by wider use of higher pering technologies, many of which are available today.Digitization Digitization has the capacity to achieve new types and levels of energy efficiency, from smart grids and demand management in power systems to self-driving vehicles and ride-sharing that optimize use of vehicles and lower fuel consumption. In this Outlook, we cover digital technology in a special feature in section 1.4 as well as in the sections on energy production, power and transport.Renewable power Renewable power, particularly wind and solar, is already growing fast, driven by a combination of technology advances and supportive policies. The analysis suggests that the process is set to accelerate significantly to 2050, with wind, when available, projected to become the cheapest source of ne