The International Energy Agency’s ‘World Energy Outlook 2017’ report, released on 14 November, introduced a new pathway to meet three critical policy goals: lower greenhouse gas emissions, cleaner air and universal access to modern energy. The analysis presents a way to meet the goals of the Paris Agreement that is compatible with expanding energy access and reducing air pollution - objectives that are often key drivers of energy policy in many places, particularly emerging countries.
The World Energy Outlook does not offer a forecast of what the energy system will look like but instead presents various projections to 2040 based on different policy assumptions, in order to give policy makers the tools to decide what path to follow. The main case is called the New Policies Scenario, and it models current and announced energy policies, including those in the Paris Agreement. This year, the report introduces the Sustainable Development Scenario, which offers an integrated way to achieve a range of goals: climate stabilisation, cleaner air and universal access to modern energy.
Deep lying changes
The resurgence in oil and gas production from the United States, a steep decline in the cost of renewables, and growing electrification are changing the face of the global energy system and upending traditional ways of meeting energy demand, according to WEO 2017. A cleaner and more diversified energy mix in China is another major driver of this transformation.
Over the next 25 years, the world's growing energy needs will be met first by renewables and natural gas, as fast-declining costs turn solar power into the cheapest source of new electricity generation. Global energy demand is 30% higher by 2040 – but still half as much as it would have been without efficiency improvements. The boom years for coal are over – in the absence of large-scale carbon capture, utilisation and storage (CCUS) – and rising oil demand slows down but is not reversed before 2040 even as electric-car sales rise steeply.
WEO-2017 finds that over the next two decades the global energy system is being reshaped by four major forces: the United States is set to become the undisputed global oil and gas leader; renewables are being deployed rapidly thanks to falling costs; the share of electricity in the energy mix is growing; and China's new economic strategy takes it on a cleaner growth mode, with implications for global energy markets.
Solar PV is set to lead capacity additions, pushed by deployment in China and India. Meanwhile in the European Union, wind becomes the leading source of electricity soon after 2030.
"Solar is forging ahead in global power markets as it becomes the cheapest source of electricity generation in many places, including China and India," said Dr Fatih Birol, the IEA's executive director "… but it is far too early to write the obituary of oil, as growth for trucks, aviation, petrochemicals, shipping and aviation keep pushing demand higher. The US becomes the undisputed leader for oil and gas production for decades, which represents a major upheaval for international market dynamics."
This year, WEO-2017 includes a special focus on China, where economic and energy policy changes underway will have a profound impact on the country's energy mix, and continue to shape global trends. A new phase in the country's development results in an economy that is less reliant on heavy industry and coal.
At the same time, a strong emphasis on cleaner energy technologies, in large part to address poor air quality, is catapulting China to a position as a world leader in wind, solar, nuclear and electric vehicles and the source of more than a quarter of projected growth in natural gas consumption. As demand growth in China slows, other countries continue to push overall global demand higher – with India accounting for almost one-third of global growth to 2040.
The shale oil and gas revolution in the United States will promote it to the position of the world's largest LNG exporter and a net oil exporter by the end of that decade. This is having a major impact on oil and gas markets, challenging incumbent suppliers and provoking a major reorientation of global trade flows, with consumers in Asia accounting for more than 70% of global oil and gas imports by 2040. LNG from the United States is also accelerating a major structural shift towards a more flexible and globalised gas market.
Global oil demand continues to grow to 2040, although at a steadily decreasing pace, with petrochemicals, trucks, aviation, and shipping driving up oil demand to 105 million barrels a day by 2040.
While carbon emissions have flattened in recent years, the report finds that global energy-related CO2 emissions increase slightly by 2040, but at a slower pace than in last year's projections. Still, this is far from enough to avoid severe impacts of climate change.