World Energy Outlook 2010 Nobuo Tanaka Executive Director International Energy Agency Cancun, 7 December 2010, IEA day
The context: A time of unprecedented uncertainty The worst of the global economic crisis appears to be over but is the recovery sustainable? Oil demand & supply are becoming less sensitive to price what does this mean for future price movements? Natural gas markets are in the midst of a revolution will it herald a golden era for gas? Copenhagen Accord & G-20 subsidy reforms are key advances but do they go far enough & will they be fully implemented? Emerging economies will shape the global energy future where will their policy decisions lead us?
Overview of WEO-2010 scenarios New Policies Scenario is the central scenario in WEO-2010 > assumes cautious implementation of recently announced commitments & plans, even if yet to be formally adopted > provides benchmark to assess achievements & limitations of recent developments in climate & energy policy Current Policies Scenario takes into consideration only those policies that had been formally adopted by mid-2010 > equivalent to the Reference Scenario of past Outlooks The 450 Scenario sets out an energy pathway consistent with the goal of limiting increase in average temperature to 2 O C
International oil price assumptions Dollars per barrel (2009) 140 120 100 80 60 40 20 0 1980 1990 2000 2010 2020 20302035 Current Policies Scenario New Policies Scenario 450 Scenario CO 2 price International oil price Effective oil price Scenario in 2035 ($/ tco 2 ) in 2035 ($/bbl) in 2035 ($/bbl) Current Policies 42 in EU 135 152 in EU New Policies 50 in OECD 113 134 in OECD 450 Scenario 120 in OECD 90 139 in OECD The age of cheap oil is over, though policy action could bring lower international prices than would otherwise be the case
World primary energy demand by fuel in the New Policies Scenario Mtoe 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 1980 1990 2000 2010 2020 2030 2035 Other renewables Biomass Hydro Nuclear Gas Oil Coal WEO-2009 Total: Reference Scenario Fossil fuels maintain a central role in the primary energy mix in the New Policies Scenario, but their share declines, from 81% in 2008 to 74% in 2035
Recent policy commitments, if implemented, would make a difference Mtoe World primary energy demand by region in the New Policies Scenario 18 000 Rest of world 16 000 China 14 000 OECD 12 000 10 000 WEO-2009: Reference Scenario 8 000 6 000 4 000 2 000 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Global energy use grows by 36%, with non-oecd countries led by China, where demand surges by 75% accounting for almost all of the increase
Fossil-fuel subsidies are distorting price signals Economic value of fossil-fuel consumption subsidies by country, 2009 Billion dollars 100 80 60 40 Additional subsidy in 2008 Electricity (generated from fossil fuels) Gas Oil Coal 20 0 Iran Saudi Arabia Russia India China Egypt Venezuela Indonesia UAE Uzbekistan Iraq Kuwait Pakistan Argentina Ukraine Algeria Malaysia Thailand Bangladesh Mexico Turkmenistan South Africa Qatar Kazakhstan Libya Fossil-fuel consumption subsidies amounted to $312 billion in 2009, down from $558 billion in 2008, with the bulk of the fall due to lower international prices
More oil from fewer producers Incremental oil production by key country in the New Policies Scenario, 2009-2035 Saudi Arabia Iraq Brazil Kazakhstan Canada Venezuela UAE Kuwait Iran Qatar Nigeria Libya Algeria OPEC Non-OPEC 0 1 2 3 4 5 6 mb/d Production rises most in Saudi Arabia & Iraq, helping to push OPEC s market share from 41% today to 52% by 2035, a level last seen prior to the first oil shock of 1973-1974
A golden age for gas? Gas is set to play a key role in meeting the world s energy needs > demand rises by 44%, led by China & Middle East Unconventional gas accounts for 35% of the increase in global supply to 2035, with new non-us producers emerging Gas glut will peak soon, but may dissipate only very slowly The glut will keep pressure on gas exporters to move away from oil-price indexation, notably in Europe Lower prices could lead to stronger demand for gas, backing out renewables & coal in power generation
Coal remains the backbone of global electricity generation Coal-fired electricity generation by region in the New Policies Scenario TWh 12 000 10 000 8 000 6 000 China India Other non-oecd OECD 4 000 2 000 0 1990 2000 2010 2020 2030 2035 A drop in coal-fired generation in the OECD is offset by big increases elsewhere, especially China, where 600 GW of new capacity exceeds the current coal-fired capacity of the US, EU & Japan
Renewables enter the mainstream. Renewable primary energy demand in the New Policies Scenario OECD Pacific Africa 2008 2035 India Brazil China United States European Union 0 100 200 300 400 500 Mtoe The use of renewable energy triples between 2008 & 2035, driven by the power sector where their share in electricity supply rises from 19% in 2008 to 32% in 2035
.but only if there is enough government support Annual global support for renewables in the New Policies Scenario Billion dollars (2009) 210 180 150 120 90 Biofuels Renewables-based electricity 60 30 0 2007 2008 2009 2015 2020 2025 2030 2035 Government support remains the key driver rising from $57 billion in 2009 to $205 billion in 2035 but higher fossil-fuel prices & declining investment costs also spur growth
China becomes the market leader in low-carbon technologies China s share of cumulative global additions to 2035 for selected technologies 30% 20% 85 GW 335 GW 105 GW 8.5 million vehicles Capacity additions Passenger car sales 10% 0% Solar PV Wind Nuclear Electric & plug-in hybrids Given the sheer scale of China s market, its push to expand the role of low-carbon energy technologies is poised to play a key role in driving down costs, to the benefit of all countries
The 450 Scenario: A roadmap from 3.5 C to 2 C The 450 Scenario sets out an energy pathway consistent with limiting the increase in temperature to 2 C Assumes vigorous implementation of Copenhagen Accord pledges to 2020 & much stronger action thereafter The failure of the Copenhagen Accord pledges: > As many lack transparency, there is 3.9 Gt of uncertainty over the level of abatement pledged to 2020 > As many lack ambition, the cost of achieving the 2 C goal has increased by $1 trillion in 2010-2030 compared with WEO-2009
The 450 Scenario: Abatement by technology World energy-related CO2 emission savings by technology in the 450 Scenario relative to the Current Policies Scenario Gt 45 40 Current Policies Scenario 42.6 Gt Share of cumulative abatement between 2010-2035 Efficiency 53% 35 30 20.9 Gt Renewables 21% Biofuels 3% Nuclear 9% CCS 15% 25 20 450 Scenario 2008 2015 2020 2025 2030 2035 21.7 Gt In the 450 Scenario, compared with the Current Policies Scenario, efficiency measures provide 53% of the necessary abatement, but renewables, CCS & nuclear are also crucial
The 450 Scenario: Abatement by country World energy-related CO2 emission savings by country in the 450 Scenario relative to the Current Policies Scenario Gt 45 40 35 30 25 20 Current Policies Scenario 450 Scenario 2008 2015 2020 2025 2030 2035 42.6 Gt 20.9 Gt 21.7 Gt Share of cumulative abatement between 2010-2035 China 33% United States 15% European Union 9% India 8% Middle East 5% Russia 3% Japan 3% Rest of world 24% In the 450 Scenario, compared with the Current Policies Scenario, China & the US account for 48% of the cumulative emission abatement that is needed in 2010-2035
Low ambition to 2020 makes faster and deeper cuts necessary afterwards Trillion dollars (2009) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 2010 2015 2020 2025 2030 2035 34 32 30 28 26 24 22 Gt CO 2 WEO 2009: Investment Emissions (right axis) WEO 2010: Investment Emissions (right axis) 0 20 2010-2015 2016-2020 2021-2025 2026-2030 2031-2035 Overall, this year s 450 Scenario will cost $1 trillion more than last year s by 2030, and requires a total of $18 trillion in investment by 2035
Achieving the 2 C goal will require rapid decarbonisation of global energy Average annual change in CO 2 intensity in the 450 scenario 6% 5% 4% A four-fold increase needed 3% 2% 1% 0% 1990-2008 2008-2020 2020-2035 Carbon intensity would have to fall at twice the rate of 1990-2008 in the period 2008-2020 & almost four times faster in 2020-2035
A fundamental change is needed in power generation Share of world electricity generation by type and scenario 100% Low-carbon generation in the NPS 80% 60% 40% Additional low-carbon generation in 450 Scenario Fossil-fuel fired generation in the 450 Scenario 20% 0% 2010 2015 2020 2025 2030 2035 Low-carbon technologies account for over three-quarters of global power generation by 2035 in the 450 Scenario, a four-fold increase on today
and also in transport Sales of plug-in hybrid and electric vehicles in the 450 Scenario & CO2 intensity of the power sector Million 70 60 50 40 30 700 600 500 400 300 Grammes per kwh Plug-in hybrids Electric vehicles CO 2 intensity in power generation (right axis) 20 200 10 100 0 2010 2015 2020 2025 2030 2035 0 Plug-in hybrids & electric vehicles reach 39% of light-duty vehicle sales by 2035, making a big contribution to CO 2 abatement, thanks to a major decarbonisation of the power sector
Will peak oil be a guest or the spectre at the feast? mb/d 100 96 92 88 84 80 76 72 Oil demand in the 450 Scenario 68-16 2009 2015 2020 2025 2030 2035 16 World demand in New Policies Scenario 12 World demand in 8 450 Scenario Peak demand 4 0-4 -8-12 mb/d Right axis: Inter-regional (bunkers) Other non-oecd India China OECD Oil demand peaks at 88 mb/d before 2020 & falls to 81 mb/d in 2035, with a plunge in OECD demand more than offsetting continuing growth in non-oecd demand
Combating climate change will bring economic benefits as well as costs Oil-import bills as share of GDP in selected countries 8% 1980 7% 2008 6% 2009 2035: New Policies Scenario 5% 2035: 450 Scenario 4% 3% 2% 1% 0% European Union United States Japan China India In the 450 Scenario, annual spending on oil imports in 2035 by the five largest importers is around $560 billion, or one-third, lower than in the New Policies Scenario
Summary & conclusions Recently announced policies can make a difference, but fall well short of what is needed for a secure & sustainable energy future Lack of ambition in Copenhagen has increased the cost of achieving the 2 C goal & made it less likely to happen Unless commitments are fully implemented by 2020, it will be all but impossible to achieve the goal The age of cheap oil is over, though policy action could bring lower international prices than would otherwise be the case Renewables are entering the mainstream, but long-term support is needed to boost their competitiveness Getting the prices right phasing-out fossil-fuel subsidies, is the single most effective measure to cut energy demand Pricing CO2 through the carbon market
Drivers of abatement in the 450 Scenario OECD countries > Increased deployment of renewables and nuclear > Development of CCS technology Middle East > Phase-out of fossil fuel subsidies > Efficiency measures China > Efficiency measures > Development of CCS for coal > Wide deployment of electric vehicles Other Countries > Efficiency measures > Promote renewables CCS will require CDM