Newly published world energy’s outlook explores structural shifts in economies and in energy use worldwide. Global energy consumption will grow by about two percent in 2024, largely driven by strong demand in Asia. Despite still-high prices and unsolved supply chain disruptions, demand for fossil fuels will reach record levels, but demand for renewable energy will rise by eleven percent.
The World Energy Outlook-2023, a publication of the International Energy Agency, provides in-depth analysis and strategic insights into every aspect of the global energy system. Against a backdrop of geopolitical tensions and fragile energy markets, the report explores structural shifts in economies and in energy use worldwide to meet rising demand for energy.
The outlook assesses the evolving nature of energy security during last fifty years and examines transformations needed to keep the goal of 1.5 °C. Today’s global average surface temperature is already around 1.2 °C, which is above preindustrial levels, followed by excessive heat waves and other extreme weather events, etc. Finally, the outlook examines the implications of present energy trends in some key development areas, including investment, trade flows, electrification and energy access.
Present report is the energy world’s most authoritative source of analysis and projections; published each year since 1998, its objective data and dispassionate analysis provide critical insights into global energy supply and demand in different scenarios and the implications for energy security, climate change goals and economic development.
Main reference: https://intelligence.weforum.org/topics/a1G680000006xWuEAI/publications/37b73ff97c4448d48c11970ddfdb8d09?utm_source=sfmc&utm_medium=email&utm_campaign=2813263_Prod-Si-WeeklyNewsletterV6&utm_term=
Although some immediate pressures from the global energy crisis have eased, the energy markets, geopolitics and the global economy are unsettled and the risk of further disruption is ever present. Fossil fuel prices are down from their 2022 peaks, but markets are tense and volatile: i.e. continued war in Ukraine is now accompanied by the conflict in the Middle East. The energy sector has been the primary cause of the polluted air that more than 90% of the world’s population is forced to breathe, linked to more than 6 million premature deaths a year. Positive trends on improving access to electricity and clean cooking have slowed or even reversed in some countries.
Against this complex backdrop, the emergence of a new clean energy economy, led by solar PV and electric vehicles (EVs), provides hope for the way forward. Investment in clean energy has risen by 40% since 2020; and the push to bring down emissions is a key component. The economic aspects for mature clean energy technologies are strong; but energy security is also an important factor, particularly in fuel-importing countries, as are industrial strategies and the desire to create clean energy jobs.
Not all clean technologies are thriving and some supply chains, notably for wind, are under pressure with some striking examples of changes: in 2020, one in 25 cars sold was electric, while in 2023, this is now one in 5.
More than 500 gigawatts (GW) of renewables generation capacity are set to be added in 2023, which is a new record. More than one billion USD a day is being spent on solar deployment. Manufacturing capacity for key components of a clean energy system, including solar PV modules and EV batteries, is expanding fast. The IEA recently concluded in its updated Net Zero Roadmap that although a way to limiting global warming to 1.5 °C is very difficult, there are still some open opportunities.
Reference to: https://www.iea.org/reports/world-energy-outlook-2023/executive-summary
Global energy crisis’ effect
The outlook conformed that the global energy crisis has shown the beginning of the end of the fossil fuel era: the momentum behind clean energy transitions is now sufficient for global demand for coal, oil and natural gas to all reaching a high point before 2030. According to the Stated Policies Scenario (STEPS), the share of coal, oil and natural gas in global energy supply, which has been for decades around 80 percent, is slowly reducing and projected to reach about 73 percent by 2030, which could be regarded as a quite important shift. However, it is not enough to reach global climate goals as soon as the demand for these fossil fuels remains at a high level, as has been the case for coal in recent years…
National policies in supporting clean energy sources are delivering as the pace of changes picks up in main states around the world. Due to the US Inflation Reduction Act, it is projected that about half of new US car registrations will be electric in 2030; two years ago corresponding figure was just 12 percent. In the EU in 2030, heat pump installations will reach two-thirds of the level needed, compared with the one-third projected two years ago. In China, projected additions of solar PV and offshore wind to 2030 are now three-times higher than they were in 2021. Prospects for nuclear power have also improved in a number of leading states with support for lifetime extensions of existing nuclear reactors in countries including Japan, Korea and the US; besides, some new will be built soon.
Although demand for fossil fuels has been strong in recent years, there are signs of a change in direction: e.g. the deployment of low-emissions alternatives and slowing rate of new projects in energy mix using fossil fuels; sales of cars and other vehicles with internal combustion engines are already well below the pre-pandemic level; in the world-wide electricity sector the share of coal and natural gas in power plants have halved; sales of residential gas boilers have been trending downwards and are now outnumbered by sales of heat pumps in many countries in Europe and in the US.
China’s components in global energy
China has an outsized role in shaping global energy trends; this influence is evolving as its economy slows and its structure adjusts and as clean energy use grows. Over the past ten years, China accounted for almost two-thirds of the rise in global oil use, nearly one-third of the increase in natural gas, and has been the dominant player in coal markets.
But it is widely recognized in the national governance that China’s economy is reaching an “inflection point”: after a very rapid building country’s physical infrastructure, the scope for further additions is narrowing. The country already has a world-class high-speed rail network; and residential floor space per capita is now equal to that of Japan, even though GDP per capita is much lower.
These and other “saturation points” indicate the lowering future demand in many energy-intensive sectors like cement and steel; the country is becoming a global “clean energy powerhouse” accounting for around half of wind and solar additions and over half of global EV sales in 2022. China’s economic growth is reducing with a greater downside for fossil fuel demand: according some projections, China’s GDP growth would be around four percent by 2030 due to a “peaking” of total energy demand around 2025 with robust expansion of clean energy; both trends would put overall fossil fuel demand and emissions into decline.
The global outlook confirms that if China’s short-term growth would slow by another percentage point, it would reduce the 2030 coal demand by an amount almost equal to the volume currently consumed by the EU-27; besides, oil import volumes would decline by 5% and LNG imports by more than 20%, with major implications for global balances.
Meeting developmental needs: energy’s effect
The global peaks in demand for each of the three main fossil fuels tarnish vital differences among states at different stages of development. The drivers for growth in demand for energy services in most emerging and developing economies remain very strong. Rates of urbanisation, built space per capita, and ownership of air conditioners and vehicles are far lower than in advanced economies.
The global population is expected to grow by about 1.7 billion by 2050, almost all of which is added to urban areas in Asia and Africa. India becomes the world’s largest source of energy demand growth ahead of Southeast Asia and Africa. Finding and financing low-emissions ways to meet rising energy demand in these economies is a vital determinant of the speed at which global fossil fuel use eventually falls. Clean electrification, improvements in efficiency and a switch to lower- and zero-carbon fuels are key levers available to emerging and developing economies to reach their national energy and climate targets.
Meeting the global SDGs targets, including net zero goals, will need fundamental transitions in energy sectors and economies at large: e.g. in India, it means every dollar of value added by India’s industry results in 30% less carbon dioxide (CO2) by 2030 than it does today, and each kilometer driven by a passenger car, on average, emits 25% less CO2. Some 60% of India’s two- and three-wheelers to be sold in 2030 will be electric, a share ten times higher than today. In Indonesia, the share of renewables in power generation doubles by 2030 to more than 35%. In Brazil, biofuels meet 40% of road transport fuel demand by the end of the decade, up from 25% today. In sub-Saharan Africa, meeting diverse national energy and climate targets means that 85% of new power generation plants to 2030 are based on renewables. Significant progress is made towards universal access to modern energy, with some 670 million people gaining access to modern cooking fuels, and 500 million to electricity by 2030.
Renewables in energy mix
Renewables are set to contribute 80% of new power capacity to 2030, with solar PV alone accounting for more than half; however, this uses only a fraction of the world’s potential. Solar has become a major global industry and is set to transform electricity markets. But there is significant scope for further growth given manufacturing plans and the technology’s competitiveness. By the end of the decade, the world could have manufacturing capacity for more than 1 200 GW of panels per year; but only 500 GW is deployed globally in 2030. Boosting deployment up from these levels raises some complex questions: it would require some measures: e.g. expanding and strengthening grids and adding storage in order to integrate the additional solar PV into electricity systems and maximize its impact. Manufacturing capacity is also highly concentrated: China is already the largest producer and its expansion plans far outstrip those in other countries making trade a vital supporter worldwide solar deployment.
Using 70% of anticipated solar PV manufacturing capacity would further cut fossil fuel use, mainly coal; it would change the global energy sector if over 800 GW of new solar PV per year by 2030 would be added. The implications would be particularly strong for China, reducing coal-fired generation by a further 20% by 2030: the average annual capacity factor for coal-fired power plants would fall to around 30% in 2030, from over 50% today. The consequences would spread well beyond China: more than 70 GW of additional solar PV is deployed on average each year to 2030 across Latin America, Africa, Southeast Asia and the Middle East. Even with modest curtailment, this reduces fossil fuel-fired generation in these regions by about one-quarter in 2030. Solar PV alone cannot get the world on track to meet its climate goals, but – more than any other clean technology – it can light up the way, adds the global outlook.
The key actions required to bend the emissions curve downwards to 2030 are widely known and in most cases very cost effective. Tripling renewable energy capacity, doubling the pace of energy efficiency improvements to 4% per year, ramping up electrification and slashing methane emissions from fossil fuel operations together provide more than 80% of the emissions reductions needed by 2030 to put the energy sector on a pathway to limit warming to 1.5 °C.
In addition, innovative, large-scale financing mechanisms are required to support clean energy investments in emerging and developing economies, as are measures to ensure an orderly decline in the use of fossil fuels, including an end to new approvals of unabated coal-fired power plants. Every country needs to find its own pathway, and it needs to be inclusive and equitable to secure public acceptance.
Presently, fifty years on from the first oil shock, the world has lasting solutions to address energy insecurity that can also help tackle the climate crisis. The first oil shock 50 years ago brought two crucial policy responses firmly into play: energy efficiency and low-emissions power, led at the time by hydro-power and nuclear. Today’s energy decision makers are once again facing geopolitical tensions and the risk of energy shocks, but they have a much broader range of highly competitive clean technologies at their disposal and an accumulated wealth of policy experience on how to accelerate their deployment. The crucial step in national governance is needed – to put these readily available solutions to work.
Several countries have adopted policies that encourage the diversification of supply chains for clean energy technologies. This includes policies to promote clean energy technology manufacturing, e.g. the Inflation Reduction Act in the US, Net Zero Industry Act in the EU-27 and the Production Linked Incentives scheme in India, just to name a few…