There must be an “unprecedented global political and economic effort” to shift energy towards more sustainable means if climate targets are to be reached, the International Energy Agency (IEA) has warned.
The stark note comes within the IEA’s World Energy Outlook (WEO), the body’s annual analysis of global energy trends, this year’s edition of which was released earlier today (13 November).
The WEO discusses the “major transformations” that are underway, narrowing specifically on the expansion of renewables and growing electrification of the economy, charting them in various scenarios based on expected trends and datasets.
Amidst the projections and forecasts however is a commonality that more significant efforts must be made if climate targets are to be reached and global warming limited to within two degrees, echoing similar warnings made by the United Nation’s Intergovernmental Panel on Climate Change last month.
The IEA says there remain “mixed signals” on the pace and direction of change in the power sector. Solar PV, highlighted as an energy technology which is “charging ahead” globally, is set against other renewables and energy efficiency technologies which require a “big push”.
Globally energy demand is expected to grow by more than 25% by 2040, requiring more than US$2 trillion of annual investment.
In charting projections for electricity generation capacities and demand, the IEA has suggested there remains a significant gap between its forecasts and staying within those climate targets, requiring what the IEA has termed as a “systematic preference” for investments in sustainable energy technologies.
In simple terms, both developing and advanced economies can no longer invest in carbon-emitting power stations if the effects of climate change are to be limited to within two degrees.
Fatih Birol, executive director at the IEA, noted that with more than 70% of global energy investments set to be government-driven, the “world’s energy destiny” is intertwined with global politics.
“Crafting the right policies and proper incentives will be critical to meeting our common goals of securing energy supplies, reducing carbon emissions, improving air quality in urban centres, and expanding basic access to energy in Africa and elsewhere,” he said.
The electricity focus
Included in this year’s WEO is a special focus on the growth of electricity demand and consumption, with power’s share of total final energy consumption set to grow from 19% now to 24% by 2040 in the IEA’s ‘New Policies’ scenario, described as a “far cry from full electrification”.
The IEA has, however, this year introduced a new ‘Future is Electric’ scenario, under which nearly half of the world’s total car fleet is electric by 2040, electricity makes “rapid inroads” into building and industry heating and digital technologies are widespread, connecting almost all consumer devices and appliances. Furthermore, almost full electricity access is realised across the globe.
This, the IEA surmises, would have significant repercussions throughout the energy market with electricity demand increasing to nearly 7,000TWh ahead of the agency’s ‘New Policies’ scenario by 2040, an increase equivalent to the total demand of China and India today.
Meanwhile, peak oil demand would be reached by 2030, spending on electricity would overtake that of oil products before 2035 and premature deaths owing to air pollutants would fall by nearly 2 million.
But while the benefits would be abundant, the IEA warns that overall energy sector carbon emissions would steadily increase under the scenario without more significant efforts to decarbonise electricity supply.
A more comprehensive energy system strategy – centred on significantly more widespread deployment of renewables – would be required to both accommodate for rising demand and meet climate targets.
As a result of a drastically changed power mix, flexibility looks set to be the “cornerstone” of electricity system design and management, the IEA has said, with demand-side response and energy storage becoming increasingly prominent in countries that have a higher penetration of variable sources of generation.
Equally, the destination of energy investments will also need to be managed accordingly, with government policy set to play an important role. This will become clearer in competitive wholesale markets where renewables are placing downward pressure on prices and, in extension, pricing signals necessary for investment decisions, with the IEA raising the prospect that market reforms may be needed.
Should the expansion of renewables occur as required, new challenges will arise and become of “growing urgency” across the globe, requiring market reforms, more significant investments in national grids and more prolific adoption of demand side response, smart meters and energy storage.