Global Energy Perspective 2023: Industrial electrification outlook

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The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar “About the Global Energy Perspective 2023”). These wide-ranging scenarios sketch a range of outcomes based on varying underlying assumptions—for example, about the pace of technological progress and the level of policy enforcement. The scenarios are shaped by more than 400 drivers across sectors, technologies, policies, costs, and fuels, and serve as a fact base to inform decision makers on the challenges to be overcome to enable the energy transition. In this article, we examine the key role of electrification in the energy transition, as well as the potential bottlenecks that need to be overcome along the electrification supply chain—and the value that doing so could create.

The energy transition is driving significant demand for technologies that enable electrification. Electrification and the continuing shift toward green and carbon-neutral power generation are likely to play a large role in reducing global emissions, but enabling technologies, such as solar PV, wind, heat pumps, and battery energy storage systems (BESS), may require significant scaling over the next decade. Moreover, bottlenecks along the electrification supply chain, including supply chain risks, labor shortages, and uncertainty in capital deployment, would need to be overcome to ensure that future supply can meet growing demand. Nevertheless, these bottlenecks can be turned into value-creation opportunities, particularly for original equipment manufacturers (OEMs).

Electrification is a crucial decarbonization lever

Electrification and carbon-neutral power are projected to play a critical role for emissions abatement.

Electrification is projected to drive the uptake of enabling technologies across scenarios

Enabling technologies will require significant scaling to realize electrification.

Bottlenecks along the electrification supply chain may need to be overcome

Six bottlenecks along the electrification supply chain.

Electrification could provide significant value-creation opportunities for OEMs if bottlenecks are overcome

Global OEM revenues in electrification hardware are projected to reach up to $1.4 trillion by 2030 for key technologies.

Margins and growth rates are expected to vary significantly by technology

Relevant margins alongside growth opportunities could be achieved by components with high entry barriers.

To meet the significant demand for electrification-enabling technologies driven by the energy transition and to avoid slowing the transition down, several supply chain bottlenecks would need to be overcome. By resolving these bottlenecks, OEMs could seize the opportunity for value creation that electrification can offer and take advantage of high margins and growth rates for key components of electrification technologies.

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