Future of energy markets to 2035 World energy in 15 slides and 15 minutes

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1 World energy in 15 slides and 15 minutes JOHN KEMP REUTERS 01 OCT 2014 (John Kemp is a Reuters market analyst. The views expressed are his own)

2 (Just) as the civilisation of ancient Rome was built on slaves, ours is built on fossil fuels. What happened in the beginning of the 19th century was not an industrial revolution but an energy revolution. Putting carbon into the atmosphere is what we do. What used to be the energy-intensive lifestyle of today s high-income countries has gone global. Economic convergence between emerging and high-income countries is increasing demand for energy faster than improved energy efficiency is reducing it. Not only aggregate CO2 emissions but even emissions per head are rising. The latter is partly driven by China s reliance on coal-powered electricity generation. Martin Wolf, Why the world faces climate chaos, Financial Times, May 14, 2013

3 Energy = power (with apologies to physicists): secure and affordable supply is fundamental to economy and international relations

4 Cost of energy has historically been very variable (especially individual fuels) with major impact on economic structure

5 Energy consumption is uneven with scope for efficiency in the West but tremendous unmet needs in the emerging economies

6 Energy poverty: > 1 billion people still have no access to electricity (and >2 billion still using traditional cooking/lighting fuels)

7 Oil reserves are not running out: reserves are manufactured rather than a gift of nature

8 Global fossil fuel resources are vast

9 Fossil fuels will never in any practical sense run out

10 Global energy (exergy) flows, stores and losses flow is enormous and we need to utilise only a small fraction

11 Carbon budget: Limiting global warming to 2 C implies two-thirds of known fossil fuel reserves must remain unburned by 2050 CO 2 budget = 1,440 billion tonnes CO 2 e billion tonnes already burned billion tonnes will be emitted from non-energy sources 884 billion tonnes implied max emissions

12 Carbon bubble? Current fossil fuel reserves are equivalent to 2,795 billion tonnes of CO 2 e: stranded assets: divestment campaign

13 Fossil fuel consumption remains heavily subsidised in developing countries (and developed economies do not internalise CO 2 cost)

14 Coal has met almost half of primary energy demand growth in the last decade: fastest growing fossil fuel: 21 st century has been built on coal Incremental primary energy demand by fuel (IEA) China has industrialised and lifted hundreds of millions out of poverty using coal

15 Some cautious thoughts on the future of energy markets to 2035 Forecasting is much harder than it looks Predicting six months ahead is hard, five years is very hard, 20 years is a generation (think back to the world in 1994 or before that 1974) Energy demand will continue to grow rapidly, mostly in developing countries Fossil fuel resources are abundant and will not run out in any meaningful timeframe Peak oil will not save us from hard choices about climate change How to consume fossil fuels safely Replace coal and oil with cleaner burning gas Electrify energy system Capture CO 2 emissions Improve combustion efficiency Improve consumption efficiency Zero emissions energy sources: we will need all of them Wind Solar Nuclear

16 Chart and map credits # 3: Global Energy Assessment (IIASA, 2012) # 4: Statistical Review of World Energy (BP, 2014) # 5: Statistical Review of World Energy (BP, 2014) # 6: Energy Poverty: How to make modern energy access universal (IEA, 2010) # 7: Statistical Review of World Energy (BP, 2014) # 8: World Energy Outlook 2013 (IEA, 2013) # 9: World Energy Outlook 2013 (IEA, 2013) # 10: Global Climate and Energy Project (Stanford University, 2006) # 11: World Energy Outlook 2013 (IEA, 2013) # 12: Unburnable Carbon (Carbon Tracker Initiative, 2012) # 13: Fossil Fuel Subsidy Database (IEA, accessed Sep 2014) # 14: World Energy Outlook 2012 (IEA, 2012)

17 Thank you Questions and answers If you would like a copy of this presentation I would be happy to send you one via