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Home Jurisdictions Asia

IEA Sees Signs of Energy Transition, But Backtracks on Paris-Compliant Modelling

November 14, 2018
Reading time: 6 minutes
Primary Author: Mitchell Beer @mitchellbeer

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An end to new fossil plant construction, a coal industry already past its production peak, a surge in natural gas use, and up to a billion electric vehicles on the road by 2040, with gasoline demand peaking in 2025, are among the key findings and projections in the annual World Energy Outlook (WEO) released this week by the International Energy Agency.

But despite the hints at transformation, the Paris-based agency concludes that clean energy is not surging fast enough to solve the climate crisis. Its prescriptions and projections are nowhere near the level of change required to decarbonize the economy by mid-century and avert the worst impacts of global climate change. The IEA came under immediate fire from Oil Change International for stepping away from an earlier commitment to align its modelling scenarios with the targets in the 2015 Paris Agreement.

“Governments and investors alike have been calling on the IEA to help guide them towards achievement of the Paris goals,” notes Research Director Greg Muttitt. “Today, however, the IEA has backtracked, removing any reference to the higher-ambition scenarios, or to the 1.5°C goal. This comes just a month after the Intergovernmental Panel on Climate Change (IPCC) released a powerful report showing both the critical importance of limiting warming to 1.5°C, and pathways for doing so.”

“We need the world’s foremost energy modelers to model global success in meeting our climate goals, yet this year’s WEO again emphasizes a business-as-usual pathway to climate failure,” Muttitt adds in a release. “Political and financial decision-makers alike urgently need the tools to plan for Paris success. The IEA has what it takes to deliver those—but once again this year it chooses not to.”

The agency does warn that countries can no longer build new fossil plants without blowing through the world’s remaining carbon budget through 2040, The Guardian reports. The outlook says existing fossil infrastructure would already “lock in” 550 gigatonnes of carbon dioxide emissions over the next 22 years, leaving a margin of only 40 Gt—about a year’s worth of emissions at today’s rates—to stay within a 2.0°C threshold.

“We have no room to build anything that emits CO2 emissions,” said IEA Executive Director Fatih Birol. “We are eating up 95% of the [carbon] budget, even if we don’t do anything else. Which of course is impossible, not building any more trucks or power plants.”

“To limit temperature rises to 2.0°C, let alone the 1.5°C that scientists recommend, either all new energy projects would have to be low-carbon, which is unlikely, or existing infrastructure would need to be cleaned up,” The Guardian adds, citing Birol. “That could include incentives for dirty power plants to be retired early or installing carbon capture and storage technologies.”

Both The Guardian and the New York Times pick up on the IEA’s conclusion that renewable energy is surging and fossil fuel use is on the decline, but not fast enough to bend the curve on greenhouse gas emissions.

“Wind and solar power are poised to become dominant sources of electricity. China’s once-relentless appetite for coal is set to wane. The amount of oil we use to fuel our cars could peak and decline,” the Times states. “But there’s a catch: The global march toward clean energy still isn’t happening fast enough to avoid dangerous global warming, at least not unless governments put forceful new policy measures in place to reduce carbon dioxide emissions.”

The report points to the global electricity sector “experiencing its most dramatic transformation since its creation more than a century ago,” with average solar costs falling 65% and onshore wind prices down 15% over the last five years. “Our solar expectations are about 20% higher than they were last year, both because of new policies in China and India and because the costs are coming down so fast,” Birol said.

“The report warns, however, that many countries will need to retool their grids to manage the output from wind and solar plants, which run intermittently. That will mean overhauling rules for how electricity markets operate, relying on batteries and gas plants for grid flexibility, and exploring new tools like hydrogen storage,” the Times writes.

The 662-page report also says global coal use may have peaked in 2014. “The IEA’s view on coal is a ray of light amidst these gloomy prospects for climate change,” Carbon Brief reports. “The 2018 outlook’s NPS [New Policies Scenario] has global coal use remaining at similar levels during 2017-2040. This would mean coal demand had effectively peaked in 2013/2014.”

But that pathway still puts the world on course to 2.7°C average global warming, compared to the 1.7 to 1.8°C in the IEA’s Sustainable Development Scenario (SDS). Getting to that lower threshold would require “systematic preference for investment in sustainable energy technologies,” Birol said in a release.

The New Policies Scenario shows coal demand in China falling 13% by 2040, dropping as well in the United States, the European Union, and other developed countries, but more than doubling in India and increasing in other parts of Asia. But “this trend comes despite the IEA itself acknowledging that new renewables are—or soon will be—cheaper sources of electricity in India than new coal,” Carbon Brief notes. “Indeed, some analysts argue that this point has already been passed, and that much of India’s planned new coal capacity is unlikely to be built.”

The projection that India could still double its coal demand “also comes despite the IEA pointing to 350 GW of excess power generating capacity spread between India, China, and other countries in the Middle East and Asia,” notes Carbon Brief Deputy Editor Simon Evans. “This huge excess—equivalent to a third of the Chinese coal fleet or more than all the plants in India—weighs on coal operator profits as it cuts the running hours at each unit.”

The IEA also acknowledges the dramatic part that energy efficiency has played in keeping energy use and greenhouse gas emissions under some degree of control. “In its main scenario—based on existing national policies, plus pledges and targets not yet codified in law—the 2018 outlook points to a 25% increase in energy demand by 2040,” Carbon Brief states. But “this growth, largely driven by Asia, would be twice as large in the absence of continued improvements in energy efficiency.”

In 2030, the IEA sees oil persisting as the world’s biggest energy source, with natural gas overtaking coal as the second-biggest source “due to a drive to cut air pollution and the rise in liquefied natural gas (LNG) use,” Reuters reports. “Global gas demand would increase by 1.6% a year to 2040 and would be 45% higher by then than today,” with China becoming the world’s biggest gas importer.

“Although talk of a global gas market similar to that of oil is premature, LNG trade has expanded substantially in volume since 2010 and has reached previously isolated markets,” the report states.

“The United States could account for 40% of total gas production growth to 2025, the IEA said, while other sources would take over as U.S. shale gas output flattened and other nations started turning to unconventional methods of gas production, such as hydraulic fracturing,” Reuters states. “Global electricity demand will grow 2.1% a year, mostly driven by rising use in developing economies. Electricity will account for a quarter of energy used by end users such as consumers and industry by 2040.”

The IEA reinforces other recent reports that global gasoline consumption is about to peak, setting 2025 as the year when demand will hit a ceiling. “Ever since the first Model T Ford rolled off the production line in 1908, cars and oil have shared a relationship that has transformed the world,” the Irish Times reports. “But the IEA said oil consumption in cars will hit a ceiling by the middle of the next decade, as adoption of electric vehicles becomes more widespread and more fuel-efficient automobiles hit the road, offsetting the increase in numbers of drivers in emerging market countries.”

The IEA sees oil demand maxing out at 23 million barrels per day in the late 2020s, then falling back to today’s level of 21.4 million barrels per day by 2040. While EVs will curb daily demand by about three million barrels, fuel economy standards will have three times the impact, at nine million barrels. “Improvements in fuel efficiency of the global car fleet are the single largest contributor to moderating oil demand growth in cars,” the report states.

The IEA foresees between 300 million and one billion EVs on the world’s roads by 2040, with the larger figure accounting for half of the global fleet, compared to 0.3% today, The Driven notes.



in Asia, Auto & Alternative Vehicles, Batteries / Storage, Carbon Levels & Measurement, CCS & Negative Emissions, China, Clean Electricity Grid, Coal, Community Climate Finance, COP Conferences, Demand & Efficiency, Drive to 1.5, Ending Emissions, Energy / Carbon Pricing & Economics, Energy Politics, General Renewables, India, International, International Agencies & Studies, Oil & Gas, Shale & Fracking, Solar, UK & Europe, United States, Wind

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