OECD/IEA 2016 OECD/IEA Canberra November 2016

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1 Canberra November 2016

2 The global energy context today Key points of orientation: Middle East share in global oil production in 2016 at highest level for 40 years Transformation in gas markets deepening with a 30% rise in LNG Additions of renewable capacity in the power sector higher in 2015 than coal, gas, oil and nuclear combined Energy sector in the spotlight as the Paris Agreement enters into force Billions remain without basic energy services There is no single story about the future of global energy; policies will determine where we go from here

3 Renewables Renewables Mtoe A new fuel in pole position Change in total primary energy demand Nuclear Rest of world European Union Latin America India US Africa China Nuclear Coal Oil Gas Coal Oil Gas Lowcarbon Lowcarbon Low-carbon fuels & technologies, mostly renewables, supply nearly half of the increase in energy demand to 2040

4 TWh TWh Greater policy support boosts prospects for solar PV and wind Solar PV and wind generation, Additional in the 2 C scenario Increase in WEO-2016: Rest of world United States China WEO-2015 Solar PV Wind power Stronger policies on solar PV and wind help renewables make up 37% of electricity generation in 2040 in our main scenario & nearly 60% in the 2 C scenario

5 The next frontiers for renewables are heat and transport Renewable energy use by sector Mtoe Additional to Electricity Heat Transport Today renewables in electricity and heat use are nearly at par; by 2040, the largest untapped potential lies in heat and transport

6 mb/d A suite of tools to address energy security Net oil imports 20 United States European Union China India Net oil imports Reduction in net oil imports due to: Switch to electric and natural gas vehicles Switch to renewables Efficiency improvements Increase in oil production The energy transition provides instruments to address traditional energy security concerns, while shifting attention to electricity supply

7 Entering a period of greater oil market volatility Approvals of new conventional crude oil projects in have fallen to the lowest level since the 1950s If approvals remain low in 2017, an unprecedented effort will be needed to avoid a supply-demand gap in a few years time US tight oil provides a potential lifeline, but cannot be relied upon to cover a major shortfall in the baseload of oil supply Without a pick-up in investment, or a rapid slowdown in demand growth, the stage is set for the next boom-and-bust cycle for oil

8 No peak yet in sight, but a slowdown in growth for oil demand Change in oil demand by sector, mb/d Power generation Buildings Passenger cars Maritime Freight Aviation Petrochemicals The global car fleet doubles, but efficiency gains, biofuels & electric cars reduce oil demand for passenger cars; growth elsewhere pushes total demand higher

9 A wave of LNG spurs a second natural gas revolution Share of LNG in global long-distance gas trade bcm bcm bcm Pipeline LNG 26% Pipeline LNG 42% Pipeline LNG 53% Contractual terms and pricing arrangements are all being tested as new LNG from Australia, the US & others collides into an already well-supplied market

10 Coal: a rock in a hard place Coal demand in key regions China United States India European Union 2014 Change : Decreasing demand Increasing demand Southeast Asia Mtce The peak in Chinese demand is an inflexion point for coal; held back by concerns over air pollution & carbon emissions, global coal use is overtaken by gas in the 2030s

11 Still a long way from a pathway to energy sector decarbonisation Energy-sector CO 2 emissions Gt Early peak in emissions Net-zero by the end of the century Current pledges fall short of limiting the temperature increase to below 2 C; raising ambition to 1.5 C is uncharted territory

12 Gt The Power Sector in the Frontline of Decarbonsiation: CO2 reductions in NPS and 450 By technology 38 New Policies Scenario 34 Efficiency Scenario Renewables Fuel switching Nuclear CCS Other By sector Power Industry Transport : 450 Scenario Additional in New Policies Scenario Buildings Gt

13 Power Sector Emissions need to Fall. To levels seen in the 1970s. Global CO 2 emissions from fossil-fuel combustion in the power sector by scenario 20 Gt Current Policies Scenario New Policies Scenario Scenario The New Policies Scenario almost breaks the link between rising power demand and related CO 2 emissions, but the two are completely decoupled in a 450 Scenario

14 The Power Sector: Pivotal in the 450 Scenario The power sector is transformed and almost decarbonised by 2040 in the 450 Scenario TWh TWh Nuclear 11% Hydro 16% 18% 16% Wind Solar PV 8% 67% 3% Other renewables 11% 20% 2% 1% CCS Unabated fossil Fuels 9% 18%

15 Low Carbon Generation in a Decarbonising world Growth in generation to 2040 by low-carbon technology in the New Policies and 450 Scenarios Additional in 2040 Additional in 2040 Additional in New Policies 450 Scenario Nuclear: 2014 New Policies 450 Scenario CCS: 2014 New Policies 450 Scenario Renewables: TWh Wind and solar PV Other renewables Generation from renewables more than triples in a 450 Scenario, compared with today; nuclear and CCS also support decarbonisation

16 Annual Capacity Additions of low carbon power in the 450 Scenario G W CCS Nuclear Other renewables Hydro Wind Solar PV Annual capacity additions of low-carbon technologies need to exceed 300 GW per year by the 2030s

17 Renewable Power Capacity is Growing Quickly GW Renewables-based power capacity additions set a new record in 2015 and exceeded those of all other fuels for the first time % Other renewables % 40% 30% 20% 10% Solar PV Wind Hydro Fossil and nuclear Share of renewables (right axis)

18 Electricity demand slowdown & renewable ramp-up Renewables are leading the charge in the power sector, meeting the lion s share of slowing global power demand in TWh Other renewables Solar PV Wind Hydropower Global demand increase

19 Total Power Sector Investment in NPS and 450 Scenarios Trillion dollars (2015) By the 2020s, the investment needs for the power sector in a 450 Scenario overtake those for fossil fuel supply 12 Power plants Infrastructure Other 0.9 Bioenergy Hydro Solar PV CCS Wind, NPS 450 NPS 450 NPS 450 NPS 450 Fossil fuels Nuclear Renewables T&D

20 The Power Sector is the Key Deployment Sector for Renewables

21 Conclusions Energy security remains a major concern; potential vulnerabilities are growing, so too is the range of tools available to address them New oil market dynamics & subdued upstream investment are ushering in a period of greater market volatility A wave of LNG is the catalyst for a second natural gas revolution, with far-reaching implications for gas pricing & contracts The next chapter in the rise of renewables requires policies to push their role in heat & transport & changes in power market design The Paris Agreement is a framework; its impact on energy depends on how its goals are translated into real government policy actions

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23 Global Power Sector Emissions by Scenario and Fuel In the 450 Scenario, power sector CO 2 emissions are cut by 80% by 2040, with renewables accounting for nearly 60% of global electricity supply Gt CO New Policies Scenario 450 Scenario Oil Gas 9 Coal

24 Electricity Demand and Generation in the US in NPS Electricity demand 5 Thousand TWh Power services* End-use demand: Other final uses Transport Services Residential Industry Generation: Other renewables Solar Wind Hydro Nuclear Oil Gas Coal Electricity generation The US Clean Power Plan provides a major boost to renewables-based generation, while efficiency measures restrain demand growth Thousand TW

25 Electricity Demand and Generation in the EU in NPS Electricity demand and generation in the European Union in the New Policies Scenario Electricity demand 3.5 Thousand TWh Power services* End-use demand: Other final uses Transport Services Residential Industry Generation: Other renewables Solar Wind Hydro Nuclear Oil Gas Coal Electricity generation Wind becomes the largest single source of generation in the European Union soon after Thousand TW

26 Electricity Demand and Generation in Japan in NPS Electricity demand and generation in Japan in the New Policies Scenario Electricity demand 1.2 Thousand TWh Power services* End-use demand: Other final uses Transport Services Residential Industry Generation: Other renewables Solar Wind Hydro Nuclear Oil Gas Coal Electricity generation Thousand TWh While demand barely grows, the return of nuclear and the expansion of renewables allow for rapid growth in low-carbon power

27 Electricity Demand and Generation in China in NPS Electricity demand and generation in China in the New Policies Scenario Electricity demand 12 Thousand TWh Power services* End-use demand: Other final uses Transport Services Residential Industry Generation: Other renewables Solar Wind Hydro Nuclear Oil Gas Coal Electricity generation Thousand TW Coal stands still while renewables, nuclear and gas meet China s rising power needs

28 Global Electrcity Demand by Region and Scenario Latin America Africa* Middle East E. Europe/Eurasia OECD Asia Oceania Other Asia India OECD Europe OECD Americas China Thousand TWh 2014 Additional in 2040 in New Policies Scenario End-point of range: 450 Scenario Current Policies Scenario Countries outside the OECD account for more than 80% of power demand growth to 2040 in all scenarios

29 Electrcity Demand in 2040 NPS and 450 Scenarios 36 Thousand TWh 32 Industry 28 Residential Services Transport Other 24 New Policies Scenario 450 Scenario Transport is the only sector that sees higher global power demand in the 450 Scenario relative to the New Policies Scenario

30 Global Electricity Generation by Fuel and Scenario Global electricity generation by fuel and scenario Coal Gas and oil Nuclear Hydro Other renewables 2014 Additional in 2040 in New Policies Scenario End-point of range: 450 Scenario Current Policies Scenario Thousand TWh Coal-fired generation sees the greatest variation across scenarios