Tipping the energy world off its axis Four large-scale upheavals in global energy : - The United States is turning into the undisputed global leader f

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1 The rapidly changing global energy landscape Dr. Fatih Birol Executive Director, International Energy Agency IEEJ, Tokyo, 27 February 2018 IEA

2 Tipping the energy world off its axis Four large-scale upheavals in global energy : - The United States is turning into the undisputed global leader for oil & gas - Solar PV is on track to be the cheapest source of new electricity in many countries - China s new drive to make the skies blue again is recasting its role in energy - The future is electrifying, spurred by cooling, electric vehicles & digitalisation These changes brighten the prospects for affordable, sustainable energy & require a reappraisal of approaches to energy security There are many possible pathways ahead & many potential pitfalls if governments or industry misread the signs of change

3 India takes the lead, as China energy growth slows Change in energy demand, (Mtoe) Europe Eurasia United States -30 Middle East 480 China 790 Japan -50 Central and South America 270 Africa 485 India Southeast Asia India, China and other developing Asia will be critical in determining the future trajectory of global energy demand & C02 emissions

4 .... A world in motion..as China moves global energy markets, again Change in world energy demand by fuel Coal (Mtce) Oil (mb/d) Gas (bcm) Low-carbon (Mtoe) China Other countries Low-carbon sources & natural gas meet 85% of the increase in global demand: China s switch to a new economic model & a cleaner energy mix drives global trends

5 EVs are on the way, but oil demand still keeps rising Electric car fleet Change in global oil demand Million cars Other countries Japan United States India European Union China Petrochemicals Aviation and shipping Trucks mb/d 0 Passenger cars Other sectors Electric cars are helping to transform energy use for passenger cars, slowing the pace of growth in global oil demand: however, trucks, aviation, shipping & petrochemicals keep oil on a rising trend

6 US becomes undisputed leader of oil & gas production Oil and gas production in the United States mboe/d mboe/d Shale oil Shale gas Other unconventionals Conventional oil & gas The US is already switching to become a net exporter of gas & becomes a net exporter of oil in the 2020s, helped also by the demand-side impact of fuel efficiency & fuel switching

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9 LNG ushers in a new global gas order Global Gas importers exporters gas trade bcm in bcm in 2016 Europe 52% Middle East Africa Asia 37% Europe 35% US & Canada Asia 60% Africa 59% shipped by LNG Russia & Caspian US & 39% Other shipped by LNG Australia Canada Other Russia & Caspian Other Middle East Australia Other Growing gas import requirements in developing Asia, Japan and Korea are largely met by LNG, with exports from the US accelerating a shift towards a more flexible, liquid global market

10 The future is electrifying Electricity generation by selected region Sources of global electricity demand growth China United States India European Union Southeast Asia Middle East Africa Japan Large appliances Other Electric vehicles Connected & small appliances Cooling Industrial motors Growth to 2040 TWh India adds the equivalent of today s European Union to its electricity generation by 2040, while China adds the equivalent of today s United States

11 Wind and solar PV costs being driven down by competition Wind and solar PV average LCOEs and auction results by commissioning date USD 2016/MWh Onshore wind average auction price Solar PV average auction price Offshore wind LCOE Solar PV - utility scale LCOE Onshore wind LCOE The cost of wind and solar PV have fallen sharply, with further reductions expected; Cost-optimal integration requires interconnections, flexible generation, storage & demand response

12 A new leader emerging on nuclear Nuclear power generation capacity GW China 120 United States 80 France 40 Japan Without additional lifetime extensions, the largest nuclear fleets face significant declines, while China is soon set to overtake the United States as the global leader

13 Japan s Power Mix: Policy determines uptake of low-carbon sources Power generation mix in Japan by fuel and scenario 100% 80% 60% 40% 20% 0% 18% 8% 40% 33% 2% 27% 22% 28% 22% 1% 2016 Central Scenario % 32% 9% SDS 2040 Coal Gas Oil Nuclear Renewables 0% 2% Decarbonisation of Japan s power sector can be achieved through the uptake of variable renewables and the restart of nuclear plants while ensuring their safety

14 A new strategy for energy & sustainable development Global CO 2 emissions by scenario Gt 40 New Policies Scenario 30 Sustainable Development Scenario 20 Sustainable Development Scenario The Sustainable Development Scenario reduces CO2 emissions in line with the objectives of the Paris Agreement, while also tackling air pollution and achieving universal energy access

15 The potential of clean energy technology remains under-utilised Solar PV and onshore wind Energy storage Electric vehicles Nuclear Transport Fuel economy of light-duty vehicles Energy efficiency in industry Lighting, appliances and building equipment Hydrogen and Fuel Cells More efficient coal-fired power Carbon capture and storage Building energy efficiency Transport biofuels Not on track Accelerated improvement needed On track Despite good progress in some areas, many technologies still need a strong push to achieve their full potential and deliver a sustainable energy future

16 Conclusions The oil & gas boom in the United States is shaking up the established order, with major implications for markets, trade flows, investment & energy security The versatility of natural gas means that it is well placed to grow, but it cannot afford price spikes or uncertainty over methane leaks China continues to shape global trends, but in new ways as its energy revolution drives cost reductions for a wide range of clean energy technologies Concerted action is needed to address climate change, including deployment of all low carbon options Electrification & digitalisation are the future for many parts of the global energy system, creating new opportunities but also risks that policy makers have to address

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