Solar 'charging ahead' but 'unprecedented' investment action required, IEA warns

Christopher Davidson
November 15, 2018

Global gas demand would increase by 1.6 percent each year up to 2040, making demand 45 percent higher than today, the IEA's latest publication the World Energy Outlook (WEO) reported.

The IEA said that energy demand would grow by more than a quarter between 2017 and 2040 assuming more efficient use of energy - but would rise by twice that much without such improvements.

The IEA has, however, this year introduced a new "Future is Electric" scenario, under which nearly half of the world's total auto fleet is electric by 2040, electricity makes "rapid inroads" into building and industry heating and digital technologies are widespread, connecting almost all consumer devices and appliances.

Carbon emissions from the energy sector are expected to increase slowly until 2040, undermining hopes of world countries to turn the corner on tackling climate change, the International Energy Agency said.

Switching more heating, industrial processes and transport to electricity - such as electric cars - would lead to a peak in oil demand by 2030, and reduce localised air pollution in cities.

Fatih Birol, executive director at the IEA, noted that with more than 70% of global energy investments set to be government-driven, the "world's energy destiny" is intertwined with global politics.

A more comprehensive energy system strategy - centred on significantly more widespread deployment of renewables - would be required to both accommodate for rising demand and meet climate targets.

The Agency notes that by 2025, electricity, oil and natural gas will provide about 85% of the growth of final energy demand in nearly equal shares.

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"By 2025, almost every fifth barrel of oil and every fourth cubic meter of gas in the world come from the United States".

Under the scenario, global oil demand grows by around one-million barrels a day (mb/d) on average each year to 2025, following which average yearly demand growth is forecast to slow to around 0.25 mb/d. "Without such a pick-up in investment, United States shale production, which has already been expanding at record pace, would have to add more than 10 million barrels a day from today to 2025, the equivalent of adding another Russian Federation to global supply in seven years - which would be an historically unprecedented feat", the IEA said.

And like in every commodity, China is the major driver of this change.

At a time when geopolitical factors were exerting new and complex influences on energy markets, underscoring the critical importance of energy security, the World Energy Outlook's scenario-based analysis outlines different possible futures for the energy system across all fuels and technologies.

But other emerging economies in Asia are projected to lift demand for reasons similar to China's in coming decades.

On the supply side, the United States, already the world's biggest producer, will dominate output growth to 2025, with an increase of 5.2 million bpd, from current levels around 11.6 million bpd.

From that point onwards, the IEA expects USA oil production to decline and the market share of the Organization of the Petroleum Exporting Countries will climb to 45 percent by 2040, from closer to 30 percent today.

However, the report notes that most emissions related to energy infrastructure are "essentially locked-in", with relatively young coal-fired power plants in Asia set to contribute to global Carbon dioxide emissions for decades to come.

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