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 2019 31 January 2019
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
Global emissions increased in 2018 again Global energy-related CO 2 emissions Gt CO 2 35 30 25 CO 2 emissions Increase in 2017 20 15 10 5 CO 2 emissions rose for a second year in a row, after remaining flat for the three previous years 3
The new geography of energy Energy demand 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 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 1 000 2 000 3 000 4 000 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
Renewables Fuelling the demand for energy Mtoe Renewables & nuclear 1 500 Gas Oil Coal 1 200 Nuclear 900 Other 600 300 0-300 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
Our energy destiny rests with governments Total investment in energy supply to 2040: $42.3 trillion Market-driven 30% 2018-2040 42.3 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
mb/d US leads the way in global oil supply growth Change in total oil supply 2018-24 5 4 3 2 1 0-1 -2 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
US takes the lion s share of the growth in global gas supply Natural gas production growth for selected countries and regions, 2018-2025 bcm 200 150 100 50 0-50 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
Europe will need to seek new gas imports Produced / contracted gas & additional import requirements in the EU, 2018-2025 bcm 500 400 300 200 100 Additional supply needed LNG Caspian North Africa pipe Russia pipe Norway pipe EU-28 production 2018 2019 2020 2021 2022 2023 2024 2025 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
Wind and solar PV costs falling rapidly Announced wind and solar PV average auction prices by commissioning date USD/MWh 180 160 140 120 100 80 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 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
Flexibility: the cornerstone of tomorrow s power systems Integration phase Phases of integration with variable renewables share, 2017 2030 All sources of flexibility needed 6 5 Germany United Kingdom Targeted investment in flexibility needed Mobilise existing power system flexibility 4 3 2 1 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
GW GW Two directions for nuclear power Without policy changes Growth markets 160 160 120 80 40 Retirements from 2017 2017 2040 Additions to 2040 2017 120 80 40 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
Can we unlock a different energy future? Gt CO 2 36 New Policies Scenario 30 24 18 12 Existing and under construction power plants, factories, buildings etc. Increased room to manoeuvre Sustainable Development Scenario (Paris) 6 Coal-fired power plants 2017 2025 2030 2035 2040 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
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
million Electrification success elsewhere, but sub-saharan Africa still remains in the dark 2 500 Population without electricity access Rest of World 2 000 Sub-Saharan Africa 1 500 1 000 India China 500 1985 2000 2017 2030 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
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