Tuesday, December 11, 2018
Major transformations are under way for the global energy sector, from growing electrification to the expansion of renewables, upheavals in oil production, and globalization of natural gas markets, writes the International Energy Agency (IEA) in its World Energy Outlook 2018 report. “Across all regions and fuels, policy choices made by governments will determine the shape of the energy system of the future,” the organization asserts.
Noted is that geopolitical factors are exerting new and complex influences on energy markets, underscoring the importance of energy security. While the geography of energy consumption continues its historic shift to Asia, the report finds mixed signals on the pace and direction of change. Oil markets, for instance, are entering a period of renewed uncertainty and volatility, including a possible supply gap in the early 2020s. Demand for natural gas is on the rise, erasing talk of a glut as China emerges as a giant consumer. Solar photovoltaics is charging ahead, but other low-carbon technologies and especially efficiency policies still require a big push.
“In all cases, governments will have a critical influence in the direction of the future energy system,” IEA observes. “Under current and planned policies…energy demand is set to grow by more than 25% to 2040, requiring more than $2 trillion a year of investment in new energy supply.” The agency’s analysis shows that more than 70% of global energy investments will be government driven, “and as such the message is clear: the world’s energy destiny lies with government decisions,” says Fatih Birol, IEA executive director. “Crafting the right policies and proper incentives will be critical to meeting our common goals of securing energy supplies, reducing carbon emissions, improving air quality in urban centers, and expanding basic access to energy in Africa and elsewhere.”
IEA analysis shows oil consumption growing in coming decades due to rising petrochemical, trucking, and aviation demand. But meeting this growth in the near term means that approvals of conventional oil projects need to double from their current low levels. Without such a pickup in investment, U.S. shale production, which has already been expanding at a record pace, would have to add more than 10 MMbbld from today to 2025, the equivalent of adding another Russia to global supply in seven years—an historically unprecedented feat.
In power markets, renewables have become the technology of choice, making up almost two-thirds of global capacity additions to 2040 thanks to falling costs and supportive government policies. “This is transforming the global power mix, with the share of renewables in generation rising to over 40% by 2040, from 25% today, even though coal remains the largest source and gas remains the second-largest,” IEA observes. The agency adds that this expansion brings major environmental benefits but also a new set of challenges that policymakers need to address quickly.
With higher variability in supplies, power systems will need to make flexibility the cornerstone of future electricity markets in order to keep the lights on. The issue is of growing urgency as countries around the world are quickly ramping up their share of solar photovoltaics and wind, and will require market reforms, grid investments, and improved demand-response technologies such as smart meters and battery storage technologies.
Noted is that geopolitical factors are exerting new and complex influences on energy markets, underscoring the importance of energy security. While the geography of energy consumption continues its historic shift to Asia, the report finds mixed signals on the pace and direction of change. Oil markets, for instance, are entering a period of renewed uncertainty and volatility, including a possible supply gap in the early 2020s. Demand for natural gas is on the rise, erasing talk of a glut as China emerges as a giant consumer. Solar photovoltaics is charging ahead, but other low-carbon technologies and especially efficiency policies still require a big push.
“In all cases, governments will have a critical influence in the direction of the future energy system,” IEA observes. “Under current and planned policies…energy demand is set to grow by more than 25% to 2040, requiring more than $2 trillion a year of investment in new energy supply.” The agency’s analysis shows that more than 70% of global energy investments will be government driven, “and as such the message is clear: the world’s energy destiny lies with government decisions,” says Fatih Birol, IEA executive director. “Crafting the right policies and proper incentives will be critical to meeting our common goals of securing energy supplies, reducing carbon emissions, improving air quality in urban centers, and expanding basic access to energy in Africa and elsewhere.”
IEA analysis shows oil consumption growing in coming decades due to rising petrochemical, trucking, and aviation demand. But meeting this growth in the near term means that approvals of conventional oil projects need to double from their current low levels. Without such a pickup in investment, U.S. shale production, which has already been expanding at a record pace, would have to add more than 10 MMbbld from today to 2025, the equivalent of adding another Russia to global supply in seven years—an historically unprecedented feat.
In power markets, renewables have become the technology of choice, making up almost two-thirds of global capacity additions to 2040 thanks to falling costs and supportive government policies. “This is transforming the global power mix, with the share of renewables in generation rising to over 40% by 2040, from 25% today, even though coal remains the largest source and gas remains the second-largest,” IEA observes. The agency adds that this expansion brings major environmental benefits but also a new set of challenges that policymakers need to address quickly.
With higher variability in supplies, power systems will need to make flexibility the cornerstone of future electricity markets in order to keep the lights on. The issue is of growing urgency as countries around the world are quickly ramping up their share of solar photovoltaics and wind, and will require market reforms, grid investments, and improved demand-response technologies such as smart meters and battery storage technologies.
