Last week, the International Energy Agency (IEA) released its annual report assessing the future global energy landscape. Here’s what you need to know.
When organisations like the IEA release big reports assessing how we’re doing on our path to Net Zero, they can sometimes make for grim reading. That isn’t the case with this year’s World Energy Outlook, however.
As things stand, the global average surface temperature is already around 1.2 °C above pre-industrial levels, and greenhouse gas emissions are yet to peak. Under current government policies, we can expect global warming to hit 2.4 °C by the end of the century, the report says.
The energy sector is also the primary cause of the polluted air that more than 90% of the world’s population breathes, linked to more than 6 million premature deaths a year.
That said, a quick glance through the World Energy Outlook 2023 should provide the reader with at least a glimmer of hope for the planet.
Investment in clean energy has risen by 40% since 2020, and while in 2020 one in 25 cars sold was electric, three years later that number is now one in five. This year the world will also add more than 500 gigawatts of renewable energy generation capacity — a new record. As well as that, the world now spends more than $1 billion on solar deployment every day.
In short, the tide is changing.
Fossil fuel demand is set to peak by 2030
For the very first time, the IEA has predicted that under governments’ existing and planned policies — the Stated Policies Scenario (STEPS) — global demand for coal, oil and natural gas will all peak before 2030.
The report cites a few important policies that have caused this predicted change in demand:
- Thanks largely to the Inflation Reduction Act in the United States, 50% of new U.S. car registrations will be electric by 2030 in the STEPS. Two years ago, that projected figure was just 12%.
- In the European Union in 2030, heat pump installations will reach two-thirds of the level needed to reach Net Zero — double the amount predicted two years ago.
- In China, projected additions of solar and offshore wind to 2030 are now three-times higher than they were in 2021.
These three examples highlight the power of government-driven policy to affect change. When it comes to energy, bold government policy works, simple as.
China is changing
China’s influence on the global energy picture can’t be understated. The country is both a major driver of fossil fuel demand and a key innovator in renewable technology.
According to the report, “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”.
Today, its economic growth is slowing, and its economy is restructuring as a consequence.
The IEA predicts China’s Gross Domestic Product (GDP) will grow by just under 4% per year to 2030, compared to an average of over 9% since 1978.
China’s growth, the report says, is closely linked to demand for fossil fuels: “If China’s near-term growth were to slow by another percentage point, this would reduce 2030 coal demand by an amount almost equal to the volume currently consumed by the whole of Europe. Oil import volumes would decline by 5% and LNG imports by more than 20%.”
Developing sustainably is key to moving faster
The population of the world is anticipated to increase by 1.7 billion by 2050, almost all of which will be in urban areas of Africa and Asia. “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,” the report says.
The IEA predicts that India will be the world’s largest source of energy demand growth in the STEPS, ahead of Southeast Asia and Africa.
The report clearly outlines what these countries need to do to meet their targets.. For example:
- In India, 60% of two- and three-wheelers sold in 2030 must be electric, a share ten times higher than today.
- In sub-Saharan Africa, 85% of new power generation plants must be renewables by 2030.
- In Indonesia, the share of renewables in power generation will have to double by 2030 to more than 35%.
Solar power is a ray of hope if we can figure out how to deploy it
According to the report, our capability to manufacture solar panels by the end of the decade will be more than double the rate at which we are deploying them.
Solar energy has proven to be the cheapest and most readily available renewable technology, and up to 2030 the IEA expects it will contribute 80% of new power capacity under the STEPS. But to maximise solar’s impact, governments the world over need to invest heavily in strengthening energy grids and adding storage.
If we can successfully integrate solar into energy grids, the report says just 70% of anticipated solar manufacturing capacity is needed to bring deployment to the levels projected in the Net Zero by 2050 scenario.
Beware of concentrated supply chains
The concentration of fossil fuels in select regions of the planet has long created energy security challenges, highlighted most recently by the energy crisis following Russia’s invasion of Ukraine.
In all, sheltering consumers from volatile fuel prices in 2022 cost governments $900 billion in emergency support.
How can we prevent such expenditures in the future? The report suggests deploying “cost-effective, clean technologies at scale, especially in poorer households, communities and countries that struggle to finance the upfront investments required”.
But another danger lurks around the corner: supply chains.
The report points out that our clean energy supply chains are becoming too concentrated. For example, China holds half of the planned lithium chemical plants, and Indonesia represents nearly 90% of the planned nickel refining facilities. Both of these are critical raw materials used in batteries.
Renewable energy is abundant all over the world, but if we want our new energy system to be more resilient than the fossil fuel-based one we’ve inherited, diversification of supply chains is needed.
We need to move further and faster together
The take home message from this report is simple: we have the answers and the technology, but we’re still not at the pace needed to limit warming to 1.5 °C, and getting there will require unity.
Each successive World Energy Outlook from the IEA has painted a more optimistic picture “but still points towards very widespread and severe impacts from climate change”.
On the bright side, the key solutions are widely known and invariably 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,” the report says.
In times of increasing global instability, finding the geopolitical will to achieve these changes is the challenge. The solutions are readily available; the only question is whether we can come together to put them into action.