Energy News

World Energy Outlook Points to Energy Transition

           Energy News
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The International Energy Agency (IEA) has published its World Energy Outlook 2015 in which it forecasts how energy supply and demand is expected to change over the next 25 years. The IEA considers there to be two main areas that have implications for energy, these being current low energy prices and the UN Climate talks scheduled to take place in Paris this year.

Low oil and gas prices have resulted in reduced levels of investment in the industry this year, a trend which is expected to continue next year. This will be the first time since the 1980s that there have been two consecutive years of falling investment, which the IEA sees as risking a sharp rebound in prices. The report also raises energy security concerns as low oil prices increase reliance on a small number of low-cost producers. IEA Executive Director Fatih Birol said, “Now is not the time to relax. Quite the opposite: a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats.”

The IEA predicts the oil market will rebalance to a level of $80 per barrel by 2020 as demand slowly increases.

In contrast to the oil and gas sectors, a surge in global renewables investment is expected as costs fall and climate change commitments are made. The IEA forecasts that renewables will account for 50% of power generation in Europe by 2040 and 30% in China and Japan. Two-thirds of the growth in renewables will be attributed to emerging economies. Speaking at the launch of the World Energy Outlook, Birol said that renewables were no longer a niche industry and could now be considered as mainstream.

While the IEA predicts that the global economy will grow by 150% between 2013 and 2040, growth in world energy demand is expected to increase by just one-third due to energy efficiencies. The report’s central scenario predicts that the next 25 years will see a decoupling of the economy and growth in energy demand in the EU, US, and Japan.

In China, less energy will be required for economic growth due to improvements in both energy efficiency and expansion of the services sector. Whereas China has traditionally been reliant on oil and coal, an increase in gas, nuclear, and renewables is expected in China over the next 25 years. The IEA sees China and the Middle East driving demand for gas, which is predicted to rise by 1.4% a year to 5.16 trillion cubic metres in 2040. Low gas prices and climate change policies that encourage a move away from more carbon-intensive coal is driving demand for gas, which is forecast to make up 24% of power generation by 2040. China’s use of gas is expected to rise the fastest, at 4.7% per annum.

India is described as moving to the centre stage of energy consumption as increasing numbers of people connect to an electricity supply over the next 25 years. By 2040, energy demand in India will be as large as the US, although, on a per capita basis, only at 40% of the global average. This will drive an increase in demand for coal and oil but there will also be increased reliance on wind and solar.

More than 150 countries have made climate pledges for COP21, which are consistent with a temperature rise of 2.7°C degrees compared to pre-industrial levels. However, this is still above the goal of keeping global warming below 2°C. Birol said the difference between 2°C and 2.7°C degrees “will have a major implication for all of us” and commented that 2.7°C would also be difficult to achieve in itself.

The World Energy Outlook points towards an energy transition where fossil fuels will still be the dominant source of energy supply, but due to increased energy efficiencies and uptake of renewables, emissions and energy usage could see a decoupling. The full report can be found here.

Written By- Nikki Wilson


Alfa Energy Group

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