IEA 2015 World Energy Outlook Report

The International Energy Agency (IEA) released its 2015 World Energy Outlook Report in November with the following findings (condensed from the Executive Summary): 

• China’s move to less-energy-intensive development, the entry of Iran as a large energy supplier, the rise of renewables to account for half of global new power generation capacity in 2014, the prevalence of mandatory energy efficiency regulations worldwide covering more than a quarter of global energy consumption, a lure of possible de-coupling of CO2 emissions and economic activity, all pave the way for a more positive outcome of COP21 UN Climate Change Summit in Paris later this year.

• Energy use worldwide is set to grow by one-third to 2040 driven by India, China, Africa, the Middle East and Southeast Asia. Non-OECD countries account together for all the increase in global energy use.

• Declines in energy intensity are led by the European Union (-15% over the period to 2040), Japan (-12%) and the United States (-3%). Share of non-fossil fuels will grow from 19% of the global mix today to 25% in 2040. Natural gas, the least-carbon intensive fossil fuel, is the only one to see its share rise.

• China’s total energy demand in 2040 is almost double that of the United States. Steel and cement production are likely to have peaked in 2014, paving the way for 85% less energy-intensity for economic growth compared to the past 25 years. China is poised to introduce an emissions trading scheme in 2017. From 3% in 2005, half of China’s energy use today is already subject to mandatory efficiency standards. With large-scale deployment of wind, solar, hydro and nuclear power, China’s CO2 emissions are expected to flatten and then peak around 2030.

• Entering a sustained period of rapid growth in energy consumption, India representing one-sixth of the world’s population and its third-largest economy accounts for only 6% of global energy use.  20% of the population – 240 million people – still lacks access to electricity. With policies to accelerate the country’s modernisation and develop its manufacturing base (“Make in India”), population and incomes will rise with 315 million people anticipated to live in India’s cities by 2040. Share of coal is to rise to almost half of the energy mix, making India by far the largest coal-user. Oil demand increases more than any other country with oil import dependence rising above 90% by 2040. India also steps up its deployment of low-carbon technologies with strong reliance on solar and wind power to attain 40% share of non-fossil fuel capacity by 2030.

• Today an estimated 1.2 billion people (17% of global population) remain without electricity. UN Sustainable Development Goals aim to achieve universal access to energy by 2030. The Outlook Report expects the number of people without electricity falling to 800 million by 2030.

• Working off the excess supply, the oil market is expected to rebalance at $80/bbl in 2020, with further price increases expected thereafter in line with declining production in existing fields, decline in upstream spending and instabilities in some of the largest producers like Iraq and Iran.

• US tight oil’s rise is ultimately constrained by the rising costs of production, as operators deplete the “sweet spots” and move to less productive acreage. US tight oil output reaches a plateau in the early-2020s, just above 5 mb/d, before starting a gradual decline.

• A more prolonged period of lower oil prices cannot be ruled out. Low Oil Price Scenario would mean close to $50/bbl until the end of this decade, before rising gradually back to $85/bbl in 2040. OPEC oil export revenue would fall by a quarter despite higher output. Cheaper oil would also dis-incentivize the world from making transition to greener energies.

• Gas as a gradually decarbonising energy system is the fastest-growing of the fossil fuels. China and the Middle East are the front runners, both becoming larger consumers than the European Union. Its rapid growth however is constrained by low prices hampering sufficient infrastructure investment, methane leakage problems and geology, water availability and other issues surrounding unconventional gas in China.

• Coal’s share is expected to decline from 45% of the increase in global energy demand to only around 10% of further growth to 2040, despite a tripling in coal demand in India and in Southeast Asia.China’s coal consumption is expected to reach a plateau before a slow decline. By 2040, Asia is projected to account for four fifths of global coal consumption, mainly for power generation. However, its continued use around the world is arrested by more stringent environment standards.

• The power sector leads the way towards a decarbonised energy system. Non-OECD countries account for 7/8 of additional units of electricity demand. With 60% investment in new power plants to 2040 spent on renewable energy technologies, global renewables-based electricity generation would equal to the output of all of today’s fossil-fuel generation plants in China, the United States and the European Union combined. The share of coal in the global electricity mix will drop from 41% to 30%. By 2040, renewables-based generation reaches a share of 50% in the European Union, around 30% in China and Japan, and above 25% in the United States and India. Coal accounts for less than 15% of electricity supply outside of Asia. Electricity is set to become more affordable, relative to GDP, in most regions. With more generation from renewable energy and nuclear power, and more efficient thermal plants, CO2 emissions from power generation are set to grow at only one-fifth of the rate at which power output rises to 2040.

• Energy efficiency plays a critical role in limiting world energy demand growth to one-third by 2040, while the global economy grows by 150%. Mandatory targets in China and India have increased the global coverage of efficiency regulation in industry from 3% in 2005 to more than a third today. In OECD countries, efficiency measures reduce demand growth to 60% of what would otherwise be expected. Changing product design and re-use and recycling (“material efficiency”) also offers huge potential for energy saving to 2040.

• Policy preferences for lower carbon energy options are reinforced by trends in costs. Oil and gas gradually become more expensive to extract while the costs of renewables and of more efficient end-use technologies continue to fall. The share of non-hydro-renewables that is competitive without any subsidy support is expected to double to one-third.

• However, cumulative $7.4 trillion invested in renewable energy to 2040 represents only around 15% of total investment in global energy supply. The steady decarbonisation of electricity supply is not matched by a similarly rapid shift in end-use sectors, where it is much more difficult and expensive to displace coal and gas as fuels for industry, or oil as a transport fuel. The net result is that energy policies, as formulated today, lead to a slower increase in energy-related CO2 emissions, but not the full de-coupling from economic growth and the absolute decline in emissions necessary to meet the Climate Change 2 °C target.

Download IEA World Energy Outlook 2015 (Full Executive Summary)