Forecast for the increase in the share of electricity in final energy demand by 2050

The share of electricity in final energy demand is expected to increase dramatically from 20 % to 70 % by 2050. This change will bring about a revolutionary shift in the way society generates and uses energy.

The current inefficient fossil fuel approach will give way to a decentralized, electrified system. It is becoming apparent that the demand for electricity will increase faster than expected, particularly in areas such as transportation, construction and industry, as the accessibility and affordability of electricity increases.

Although the transition will take place over several decades, attractive investment opportunities are already available today. In this context, we focus on three key factors: demand, supply and potential solutions.

In an effort to meet the Paris Agreement targets for net zero emissions by 2050, around 70 % of our economy will need to be electrified by then. The majority of this electricity will come from renewable sources, particularly solar and wind power. The traditional centralized energy generation model tends to change towards a decentralized system where energy is generated from different sources and fed into a smart grid.

It is predicted that around USD 24.5 trillion will be invested in electrification over the course of this decade. This presents significant opportunities for investors looking to capitalize on the growth potential of the green transition. Although 2050 is still a long way off, the change is already happening now.

Changing industries – Ecological transformation of demand

We believe that sectors such as electromobility, wind and solar energy generation and building refurbishment will benefit significantly from this development. On the other hand, sectors such as oilfield services, combustion engines and natural gas infrastructure could be affected by declines.

The ecological transformation of demand is focused on the areas of buildings, mobility and industry. In buildings, there are opportunities to increase thermal energy efficiency through solutions such as insulation and heat pumps. In the mobility sector, the focus is on electric vehicles and the associated infrastructure. In industry, large-scale applications of green hydrogen and heat pumps as well as other electrified heating technologies could play a role.

The following figures illustrate our expectation that the share of electricity in each of these sectors will increase significantly by 2050:

Buildings: from 35 % to 83 % of energy consumption
Mobility: from 1 % to 70 %
Industry: from 22 % to 55 %
Falling costs for renewable energies favor the transition away from fossil fuels and at the same time generate positive feedback effects and transformative forces. One example of this is the ability to use solar energy more efficiently by combining it with heat pumps and electric vehicles in the home. This could make the energy savings such that they offset a significant portion of the solar investment. As a result, conventional electricity suppliers, gas grids and filling stations could become less important.

Carrier case study

Carrier is a leading provider of heating, ventilation, air conditioning and refrigeration technology, offering both products and services in the aftermarket worldwide. Through recent acquisitions, Carrier has strengthened its commitment to emerging technologies such as heat pumps and smart home solutions in Europe and the Asia-Pacific region.

We forecast that Carrier’s sales growth and profitability will be influenced by a portfolio of efficient cooling and heating solutions and a focus on expanding the aftermarket and networked platforms.

Case study Array Technologies

Array Technologies (NASDAQ: ARRY) develops and produces tracking systems for large-scale solar parks. By tracking the sun, the systems can increase power generation by 20-30 % compared to static modules.

Array Technologies is the second largest supplier of tracking systems for solar parks in the USA. We expect Array to grow strongly in the US and margins to improve, supported by incentives under the Inflation Reduction Act. Profitability has normalized in recent quarters following a period of high steel prices in 2021-2022.

Case study Onsemi

Onsemi is a diversified semiconductor company specializing in energy-efficient electronics for various applications such as automotive, industrial, PC, computer, consumer products and cell phones. The company is a market leader in the emerging silicon carbide semiconductor device sector.

The increased adoption of electric vehicles and the growing acceptance of silicon carbide as the main component for power converters are positive factors for Onsemi. The global semiconductor market (ETR: SEC0) is expected to be a billion-dollar industry by 2030.