The International Energy Agency (IEA) World Energy Outlook 2016, unveiled in Brussels by Executive Director Fatih Birol on Monday 21 November, underlines the massive changes in the global energy landscape between now and 2040, where renewable energy and natural gas will be the big winners in the race to satisfy the world’s growing demand.
The report’s detailed analysis of the pledges made for the 2015 Paris Agreement on climate change finds that the era of fossil fuels appears far from over and underscores the challenge of reaching more ambitious climate goals, even though government policies and cost reductions across the energy sector will see a doubling of the share of renewables in the global energy mix and of improvements in energy efficiency over the next 25 years. Natural gas will continue to expand its role while the shares of coal and oil will decline.
Natural gas, wind and solar power will be the clear winners, replacing coal but, in practice, it will be government policies that determine where we go from here, stated Birol.
Furthermore, the change in the global energy mix will mean that risks to energy security will also evolve: traditional concerns related to oil and gas supply remain and are reinforced by record falls in investment levels, the IEA states.
In the short term, further lower upstream oil investment in 2017 would create a significant risk of a shortfall in new conventional supply within a few years.
In the longer-term, investment in oil and gas will remain essential to meet demand and replace declining production but the growth in renewables and energy efficiency will lessen the demand for oil and gas imports in many countries, says the IEA, stating that increased liquefied natural gas (LNG) shipments will also change how gas security is perceived.
At the same time, the variable nature of renewables, especially wind and solar, in power generation will require a new focus on electricity security, the agency adds.
Global oil demand will continue to grow until 2040, mostly because of the lack of easy alternatives to oil in road freight, aviation and petrochemicals. However, oil demand from passenger cars will decline even as the number of vehicles doubles in the next quarter of a century, thanks mainly to improvements in efficiency, but also biofuels and rising ownership of electric cars, the IEA says. Coal consumption will barely grow in the next 25 years, as demand in China starts to fall back thanks to efforts to fight air pollution and diversify the fuel mix.
The IEA also expects changes in the gas market, with the share of LNG overtaking pipelines and growing to more than half of the global long-distance gas trade, up from a quarter in 2000. In an already well-supplied market, new LNG from Australia, the United States and elsewhere will trigger a shift to more competitive markets and changes in contractual terms and pricing, it adds.
The Paris Agreement came into force on 4 November but the IEA warns that meeting more ambitious climate goals will be extremely challenging and will require a steep change in the pace of decarbonisation and efficiency. It says that implementing current international pledges will only slow down the projected rise in energy-related carbon emissions from an average of 650 million tonnes per year since 2000 to around 150 million tonnes per year in 2040, which would only limit the rise in average global temperatures to 2.7°C by 2100.
The path to limiting the increase to 2°C will be tough, but it can be achieved if policies to accelerate further low-carbon technologies and energy efficiency are put in place across all sectors, the IEA insists. It would require carbon emissions to peak in the next few years and the global economy to become carbon neutral by the end of the century. For example, in a scenario where the rise in temperature is limited to 2°C, the number of electric cars would need to exceed 700 million by 2040, and displace more than 6 million barrels a day of oil demand.
Renewables will make great strides but their gains remain largely confined to electricity generation. The next frontier for the renewable story is to expand their use in the industrial, building and transportation sectors where enormous potential for growth exists, the IEA says. (Original version in French by Emmanuel Hagry)