Dr. Fatih Birol, the Executive Director of the International Energy Agency, gave a talk at Imperial College London on 20 March 2018 to discus how new technologies - including electrification & digitalisation – create opportunities, but also risks & uncertainty.
This year’s World Energy Outlook covers many themes, fuels and technologies, as always, but in essence it is the story of four major upheavals in global energy:
In the United States the shale revolution is not yet done – and it is turning the US into the undisputed global leader for oil & gas production. In our outlook, for example, US oil output growth is equivalent to 80% of the growth in global demand to 2025. The second upheaval is on cost reductions for clean energy technologies. Since 2010, costs for new solar PV have come down by 70% and this technology is on track to be the cheapest source of new generation in many countries e.g. in India by 2025 and China by 2030. Costs of new wind power are down by 25% over the same period, with recent cost trends for offshore wind particularly impressive. Battery costs down by 40%. This is upending traditional assumptions about how we can meet our future energy needs. We are all used to the idea that China drives many global trends, but typically we’re talking about markets for coal and oil. However, China’s energy future will not be the same as its energy past. As President Xi has announced, China is entering a new era in its development, and one key aspect of this is the ‘drive to make China’s skies blue again’ and tackle the issue of air pollution. China already the global leader in many clean energy technologies – for example, accounting for half of new global deployment of solar PV in 2016 (no sign of a let-up in 2017). It is also setting the pace in gas markets: LNG imports to China so far in 2017 are up 40% year-on-year. Last but not least – electrification. Electricity is becoming an ever-larger part of our energy use and our energy-related spending. The rising middle classes in warmer climates, especially in Asia, are installing air conditioners in record numbers.. electric vehicles are making a move in the transport sector; we are all surrounded by an increasing number of digital and connected devices in our daily lives. In our Outlook, electricity demand increases at twice the speed of overall energy demand. [CLICK] These changes bring reasons for optimism – they brighten the perspective for more affordable and sustainable energy, as well as access to electricity for the 1.1 billion that remain without. But there are some new risks too – need to constantly reappraise and reinforce our approaches to energy security, for example to take into account the changes on electricity. And, as we shall see, we’re still not on track to meet global objectives on climate, on access and on air quality. There are still multiple uncertainties over how these upheavals will play out and it’s never been more important to understand the underlying dynamics of a fast-changing energy world – those who misread the signs risk being caught out or left behind.
As ever, there is no single story about the future of global energy – that is why, in the World Energy Outlook, we have multiple scenarios and case studies; in first part of this presentation, focus on our main scenario, the New Policies Scenario, which show where today’s policies and policy intentions are leading the energy sector..
However, during our forecast period production from the non-OPEC countries booms, led by the United States. Gains from the United States alone will cover 80% of the world’s demand growth, with Canada, Brazil and Norway – all members of the IEA family – able to cover the rest through 2020. Total non-OPEC supply growth is 5.2 mb/d.
The OPEC countries manage only to increase their capacity by 1.2 mb/d. Within the OPEC group, the largest expansion is seen in Iraq. Our forecast assumes that production from the Neutral Zone resumes. However there are several countries within the group where product is actually expected to decline. We have already mentioned Venezuela, but there is also expected to be a big decline in Angola. There remain long term concerns about political stability in Libya and Nigeria.
Another impact of rising US production is the fact that US net imports have fallen dramatically in the last few years. At the same, China’s net imports have ramped up considerably, surpassing the US last year.
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Thanks to the second wave of the shale, US net imports will fall further, to only half of their historical record.
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At the same time, Chinese net imports will grow. By 2023, China will reach the historical record of the US.
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In fact, India’s import volumes in 2023 will be higher than the US.
Our forecast shows that after 2020 there will be no net crude exporting country in Asia. Middle East exporters will only be able to provide 1 mb/d more to Asian importers. So, most of the 3.6 mb/d of incremental import requirements will have to come from the Atlantic Basin, taking longer time. This raises important issues in energy security for the Asian economies.
The chokepoints, such as the Suez canal and, especially Malacca Straights will become even more vital.
Another impact of rising US production is the fact that US net imports have fallen dramatically in the last few years. At the same, China’s net imports have ramped up considerably, surpassing the US last year.
<<CLICK>>
Thanks to the second wave of the shale, US net imports will fall further, to only half of their historical record.
<<CLICK>>
At the same time, Chinese net imports will grow. By 2023, China will reach the historical record of the US.
<<CLICK>>
In fact, India’s import volumes in 2023 will be higher than the US.
Our forecast shows that after 2020 there will be no net crude exporting country in Asia. Middle East exporters will only be able to provide 1 mb/d more to Asian importers. So, most of the 3.6 mb/d of incremental import requirements will have to come from the Atlantic Basin, taking longer time. This raises important issues in energy security for the Asian economies.
The chokepoints, such as the Suez canal and, especially Malacca Straights will become even more vital.
Another impact of rising US production is the fact that US net imports have fallen dramatically in the last few years. At the same, China’s net imports have ramped up considerably, surpassing the US last year.
<<CLICK>>
Thanks to the second wave of the shale, US net imports will fall further, to only half of their historical record.
<<CLICK>>
At the same time, Chinese net imports will grow. By 2023, China will reach the historical record of the US.
<<CLICK>>
In fact, India’s import volumes in 2023 will be higher than the US.
Our forecast shows that after 2020 there will be no net crude exporting country in Asia. Middle East exporters will only be able to provide 1 mb/d more to Asian importers. So, most of the 3.6 mb/d of incremental import requirements will have to come from the Atlantic Basin, taking longer time. This raises important issues in energy security for the Asian economies.
The chokepoints, such as the Suez canal and, especially Malacca Straights will become even more vital.
There is more room for Japan to align current support to renewables to the falling cost of technologies. The recent introduction of the auction system for utility-scale solar PV is a good move.
However, just focusing on the cost of technologies (i.e. LCOE) is not sufficient. Policy challenge would be to minimise total system cost, while ensuring flexibility and interconnections. Thermal power plants as a flexibility source is needed for the moment, while electricity storage and demand response can be explored as a future source of flexibility.
Japan’s geography is complex and its internal interconnections are limited. In addition to prioritizing internal infrastructure development, the introduction of a location signal to steer renenewable investment could be considered.
The challenge is all the more imperative, as Japan cannot rely on international connections to source flexibility, as in Europe.
In our central scenario, global nuclear capacity grows by over 100 GW, to 520 GW by 2040.
Nuclear power is still the largest single source of low carbon generation in both Europe and the United States. Losing aging nuclear capacity is a major challenge for both decarbonisation and energy security. This decade 20 billion USD was invested every year into renewable facilities that simply replace decomissioned nuclear plants without any impact on CO2 emissions. Given the risk profile and capital needs of nuclear a strong government involvement is indispensable. China’s successful nuclear program is based on two pillars: a nuclear industry that has the project management capability for efficient construction and a strong policy support with appropriate financing.