The latest global assessment of the world’s energy systems announced by the International Energy Agency (IEA) yesterday keeps pushing for increased ambitions in the renewables front but it makes clear that projected demand for fossil fuels is “far too high” to be in line with the Paris Agreement of keeping global warming below 1.5°C.
IEA’s assessment, World Energy Outlook 2023 (WEO-2023), drew three possible scenarios: on world governments’ stated policies (STEPS), on world government’s announced pledges (APS) and, lastly, on net zero emissions by 2050 (NZE).
IEA’s WEO-2023 shows that natural gas markets have been dominated by fears about security and price spikes after Russia cut supplies to Europe. But a wave of new LNG (liquefied natural gas) export projects is set to overturn gas markets as more than 250 bcm per year of new liquefaction capacity will come online by 2030. The United States and Qatar will account for 60% of this.
However, peaks in global demand for coal, oil and natural gas are all visible this decade, the IEA said, the first time such a forecast happened in a WEO scenario based on today’s policy framework. The reason is due to the combination of growing momentum behind clean energy technologies and structural economic shifts around the world.
1. Clean energy projects
Despite facing considerable headwinds, such as supply challenges and higher borrowing costs, clean energy projects are the most dynamic aspect of global energy investment, IEA says. By 2030, the Paris-based agency projects almost 10 times as many electric cars on the road worldwide and solar panels generating more electricity than the entire US power system does currently.
In all scenarios, the momentum behind the clean energy economy is enough to produce a peak in demand for coal, oil and natural gas this decade, although the rates of post-peak decline vary widely.IEA
The IEA also sees the share of renewables in the global electricity mix nearing 50%, up from around 30% today. Clean technologies like heat pumps and other electric heating systems will outsell fossil fuel boilers globally and new offshore wind projects will have three times as much investment — more than that going into new coal-and-gas-fired power plants.
2. Energy demand
Based on stated policies, 2030 energy demand is set to decrease, compared to the last decade, but it is poised to increase through to 2050. Based on announced pledges, total energy demand flattens, thanks to improved efficiency and the inherent efficiency advantages of technologies powered by electricity — namely electric vehicles and heat pumps — over fossil fuel-based alternatives. In the Net Zero Emissions by 2050 scenario, electrification and efficiency gains proceed even faster, leading to a decline in primary energy of 1.2% per year to 2030.
With the upcoming COP28 climate change conference in Dubai, IEA’s report proposes a global strategy as it calls for “redoubling collaboration and cooperation” rather than retreating. It calls for the world to triple renewable capacity and to double the rate of energy-efficiency improvements.
A red flag is also raised to slash methane emissions from fossil operations by 75% by 2030. A previous report by the IEA found that rapid cuts in methane emissions from fossil fuels could avoid up to 0.1°C in global temperature rise by mid-century — greater than the emissions impact of immediately taking all cars and trucks in the world off the road.
Alongside tripling global renewable capacity, the IEA wants to see large-scale financing mechanisms to triple clean energy investments in emerging and developing economies. Lastly, the IEA calls on measures to “ensure an orderly decline” in the use of fossil fuels, including the end of unabated coal-fired power plants.
“Every country needs to find its own pathway, but international cooperation is crucial for accelerating clean energy transitions,” said Fatih Birol, IEA Executive Director.