By Nina Chestney
LONDON, Feb 2 (Reuters) - The falling cost of electricvehicle and solar technology will halt demand growth for oil andcoal from 2020, according to research published on Thursday,posing a threat to fossil fuel companies unprepared for thetransition.
The Grantham Institute at Imperial College London andindependent think tank Carbon Tracker Initiative analysed costforecasts for electric vehicle (EV) and solar photovoltaic (PV)technology, government policies and the impact on road transportand power markets, which account for half of global fossil fuelconsumption.
"Fossil fuels may lose 10 percent of market share to PV andEVs within a single decade. This may not sound much but it canbe the beginning of the end once demand starts to decline,"Carbon Tracker said in a statement.
A 10 percent loss of market share caused the collapse of theU.S. coal mining industry and Europe's five biggest utilitieslost more than 100 billion euros ($108 billion) in value from2008-2013 because they were unprepared for renewable energygrowth, it added.
The report said that electric vehicles could make up a thirdof the world's road transport market by 2035 and that solar PVcould supply 23 percent of global power generation by 2040,entirely phasing out coal and leaving natural gas with only a 1percent market share.
Growth in the number of electric vehicles could lead to 2million barrels per day (bpd) of oil demand being displaced by2025, the report estimates.
That would be similar to the volume of oversupply that ledto the 2014/15 collapse in oil prices. By 2040, 16 million bpdcould be displaced, rising to 25 million bpd by 2050, it said.
The International Energy Agency has said that 2 million bpdof oil could be displaced by electric vehicles by 2040.Bloomberg New Energy Finance has forecast that such displacementcould occur as early as 2028.
MISPLACED CONFIDENCE?
"Coal demand could peak in 2020 and fall to half of 2012levels by 2050. Oil demand could be flat from 2020 to 2030 thenfall steadily to 2050," Thursday's report said.
By contrast, the International Energy Agency said this weekit does not expect oil demand to peak any time soon.
Last week BP said that it expects global oil demandto continue growing into the 2040s, citing increased plasticsconsumption, while U.S. peer ExxonMobil has said that itsees fossil fuels meeting almost 80 percent of global energyneeds by 2040.
"Oil majors already do scenario analysis but, as Exxonpreviously indicated, they do not assign sufficient probabilityto a rapid (low-carbon) transition," said James Leaton, head ofresearch at Carbon Tracker Initiative.
"There appears to be a desire to justify business-as-usualat some companies, which does not constitute sound riskmanagement."
Several studies have warned investors that measures to curbcarbon emissions growth will hit earnings at coal, oil and gascompanies as the world shifts to cleaner energy.
Low oil prices over the past couple of years have alsoforced companies to reduce spending and shelve deals on oil andgas fields.
Royal Dutch Shell on Tuesday announced $4.7 billionin asset sales, including a large chunk of its North Seaportfolio, and Exxon posted its lowest quarterly profit since1999 as it wrote down the book value of part of its NorthAmerican gas and crude reserves ($1 = 0.9284 euros) (Editing by David Goodman)
