HVAC Breaking News

Dec. 9, 2014: IEA Releases New World Energy Outlook

Organization Sees a Point Where Renewables Become the World’s Number One Source of Electricity Generation

LONDON — Events of the last year have increased many of the long-term uncertainties facing the global energy sector, according to the International Energy Agency’s (IEA’s) World Energy Outlook 2014 (WEO-2014). It warns against the risk that current events distract decision makers from recognizing and tackling the longer-term signs of stress that are emerging in the energy system.

In the central scenario of WEO-2014, world primary energy demand is 37 percent higher in 2040, putting more pressure on the global energy system. But this pressure would be even greater if not for efficiency measures that play a vital role in holding back global demand growth. The scenario shows that world demand for two out of the three fossil fuels — coal and oil — essentially reaches a plateau by 2040, although, for both fuels, this global outcome is a result of very different trends across countries. At the same time, renewable energy technologies gain ground rapidly, helped by falling costs and subsidies (estimated at $120 billion in 2013). By 2040, world energy supply is divided into four almost equal parts: oil, natural gas, coal, and low-carbon sources (nuclear and renewables).

“As our global energy system grows and transforms, signs of stress continue to emerge,” said IEA Executive Director Maria van der Hoeven. “But renewables are expected to go from strength to strength, and it is incredible that we can now see a point where they become the world’s number one source of electricity generation.”

The report sees a positive outlook for renewables, as they are expected to account for nearly half of the global increase in power generation to 2040, and overtake coal as the leading source of electricity. Wind power accounts for the largest share of growth in renewables-based generation, followed by hydropower and solar technologies. However, as the share of wind and solar PV in the world’s power mix quadruples, their integration becomes more challenging both from a technical and market perspective.

World oil supply rises to 104 million barrels per day (mb/d) in 2040, but hinges critically on investments in the Middle East. As tight oil output in the United States levels off, and non-OPEC supply falls back in the 2020s, the Middle East becomes the major source of supply growth. Growth in world oil demand slows to a near halt by 2040: demand in many of today’s largest consumer nations either already being in long-term decline by 2040 (the United States, European Union, and Japan) or having essentially reached a plateau (China, Russia, and Brazil). China overtakes the United States as the largest oil consumer around 2030 but, as its demand growth slows, India emerges as a key driver of growth, as do sub-Saharan Africa, the Middle East, and Southeast Asia.

“A well-supplied oil market in the short-term should not disguise the challenges that lie ahead, as the world is set to rely more heavily on a relatively small number of producing countries,” said IEA Chief Economist Fatih Birol. “The apparent breathing space provided by rising output in the Americas over the next decade provides little reassurance, given the long lead times of new upstream projects.”

Demand for natural gas is more than 50 percent higher in 2040, and it is the only fossil fuel still growing significantly at that time. The United States remains the largest global natural gas producer, although production levels off in the late-2030s as shale gas output starts to recede. East Africa emerges alongside Qatar, Australia, North America, and others as an important source of liquefied natural gas (LNG), which is an increasingly important tool for gas security. A key uncertainty for gas outside of North America is whether it can be made available at prices that are low enough to be attractive for consumers and yet high enough to incentivize large investments in supply.

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