The Future of Global Energy Markets: Implications for Security, Sustainability and Economic Growth

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Darlene Byrd
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1 The Future of Global Energy Markets: Implications for Security, Sustainability and Economic Growth Dr. Fatih Birol, Executive Director, International Energy Agency Delft University of Technology, 20 March January 2019

2 Today s energy context Mixed signals about the pace & direction of change in global energy: North America has entered a new age of oil & gas wealth Natural gas is on the rise: China s rapid demand growth is erasing talk of a gas glut Solar PV has the momentum while other key technologies & efficiency policies need a push For the first time, global population without access to electricity fell below 1 billion Electricity is carrying great expectations, but questions remain over the extent of its reach in meeting demand & how the power systems of the future will operate Policy makers need well-grounded insights about different possible futures & how they come about. 2

3 Global emissions increased in 2018 again Global energy-related CO 2 emissions Gt CO CO 2 emissions Increase in CO 2 emissions rose for a second year in a row, after remaining flat for the three previous years 3

4 The new geography of energy Energy demand United States China European United States Union China European Union China India European Union Africa India European Union Africa India Southeast Middle Asia East Southeast Middle Asia East Mtoe In 2000, more than 40% of global demand was in Europe & North America and some 20% in developing economies in Asia. By 2040, this situation is completely reversed. 4

5 Renewables Fuelling the demand for energy Mtoe Renewables & nuclear Gas Oil Coal Nuclear 900 Other Power Industry Cars Other Petrochemical Cars Power Other Power -600 Advanced economies Developing economies Advanced economies Developing economies Advanced economies Developing economies Advanced economies Developing economies The increase in demand would be twice as large without continued improvements in energy efficiency, a powerful tool to address energy security & sustainability concerns 5

6 Our energy destiny rests with governments Total investment in energy supply to 2040: $42.3 trillion Market-driven 30% trillion dollars Government-driven 70% More than 70% of the $2 trillion required each year in energy supply investment either comes from state-directed entities or receives a full or partial revenue guarantee 6

7 mb/d US leads the way in global oil supply growth Change in total oil supply US Guyana UAE Norway Iraq Brazil Iran Venezuela US expansion is 70% of global growth. Gains in Brazil, Iraq, Norway, the UAE and Guyana. Main declines in Iran and Venezuela. 7

8 US takes the lion s share of the growth in global gas supply Natural gas production growth for selected countries and regions, bcm US Russia Middle East China Australia East Africa Europe Domestic market Export market The United States accounts for a third of growth in global natural gas production to 2025 & two-thirds of anticipated growth in LNG exports 8

9 Europe will need to seek new gas imports Produced / contracted gas & additional import requirements in the EU, bcm Additional supply needed LNG Caspian North Africa pipe Russia pipe Norway pipe EU-28 production The European Union needs to find imports to cover one-third of its demand by 2025, due to sharp declines in the EU s own production & the expiry of nearly 100 bcm of long-term gas import contracts 9

10 Wind and solar PV costs falling rapidly Announced wind and solar PV average auction prices by commissioning date USD/MWh Onshore wind average auction price Solar PV average auction price Technology progress and competition have driven down prices to record-low levels in countries with good renewable resources, transparent policies and well-designed auction schemes 10

11 Flexibility: the cornerstone of tomorrow s power systems Integration phase Phases of integration with variable renewables share, All sources of flexibility needed 6 5 Germany United Kingdom Targeted investment in flexibility needed Mobilise existing power system flexibility European Union China Germany United States India China United Kingdom India United States European Union Higher shares of variable renewables raise flexibility needs and call for reforms to deliver investment in power plants, grids & energy storage, and unlock demand-side response 0% 10% 20% 30% 40% 50% 60% Wind and solar PV share of generation 11

12 GW GW Two directions for nuclear power Without policy changes Growth markets Retirements from Additions to United States European Union Japan China Russia India The contribution of nuclear power could decline substantially in leading markets, while large growth is coming, as China takes first position within a decade 12

13 Can we unlock a different energy future? Gt CO 2 36 New Policies Scenario Existing and under construction power plants, factories, buildings etc. Increased room to manoeuvre Sustainable Development Scenario (Paris) 6 Coal-fired power plants Coal plants make up one-third of CO2 emissions today and half are less than 15 years old; policies are needed to support CCUS, efficient operations and technology innovation 13

14 How is clean energy technology progressing globally? Solar PV Lighting EVs Data centres & networks Renewable Power Hydropower Onshore wind Offshore wind Nuclear power Natural gas-fired power Cooling Appliances & equipment Fuel economy of LDVs Trucks/HDVsfuel economy Rail Cement Chemicals Steel Aluminium Pulp & paper Energy storage Smart grids Hydrogen fuel cells Bioenergy International shipping Digitalisation Demand response Ocean Coal-fired power CCS in power CSP Geothermal Aviation Transport biofuels CCS in Industry Renewable heat Heating Buildings codes Out of the 38 technologies included in Tracking Clean Energy Progress (TCEP) 2018, only 4 are on track, 23 need improvement and 11 are off track 14

15 million Electrification success elsewhere, but sub-saharan Africa still remains in the dark Population without electricity access Rest of World Sub-Saharan Africa India China China was a remarkable success story for electrification, bringing access to hundreds of millions in record time; India achieved electricity access for all its villages in 2018; Today the challenge is concentrated in sub-saharan Africa 15

16 Conclusions The links between energy & geopolitics are strengthening & becoming more complex, a major factor in the outlook for energy security US emerges as the n.1 source of oil and gas growth in the next five years. Despite rapid deployment of electric vehicles, global oil demand shows no sign of peaking Electrification & digitalisation is creating new opportunities in the global energy system, but market designs need to deliver both electricity and flexibility to keep the lights on There is no single solution to our energy and climate challenges: renewables, efficiency & a host of innovative technologies, including storage, CCUS & hydrogen, are all required The future pathway for energy is open: governments will determine where our energy destiny lies 16

OECD/IEA Dr Fatih Birol IEA Executive Director Oslo, Norway 20 November 2018

OECD/IEA Dr Fatih Birol IEA Executive Director Oslo, Norway 20 November 2018 Dr Fatih Birol IEA Executive Director Oslo, Norway 20 November 2018 Global energy demand and the growing IEA Family Share of IEA member and association Global energy countries demand in global energy demand