Fri. Mar 31st, 2023
Silhouette of wind power plants over the sea at sunset.

Silhouette of wind power plants over the sea at sunset.

Every year, the International Energy Agency spends months preparing an analysis of the global energy economy and where it is headed. The report takes into account economic, technological and policy developments and attempts to project the trends that will shape our energy consumption in the coming decades. This year’s report suggests that a combination of economics and policy will fuel an explosion in renewables, making them the largest energy source built between now and 2040.

However, the report was written at what is obviously an awkward moment in hindsight: after the Paris Agreement but before the election of Donald Trump. As such, it’s not clear how relevant some of his assumptions are, and the authors steadfastly refuse to comment on the changes the US election may bring.

The IEA’s work is based on a massive computer model that takes into account most important aspects of the world’s energy economy, from basic issues such as price and supply to more complicated issues such as the expected lifespan of certain infrastructure. The model allows the researchers to put in various assumptions or constraints, such as limiting the carbon content in the atmosphere to 450 parts per million, and see how the world responds.

For this year’s report, the IEA has drawn up scenarios for an extension of the current policy, one for the new post-Paris policy, one that limits warming to 2 degrees Celsius and one that envisages extensive decarbonisation. These scenarios have been extended to 2040 to provide a glimpse into the future.

The big picture

But the report begins with a look at the present, including the fact that carbon emissions have remained flat for years in a row, even as the global economy grew. The report suggests we may have reached the point where a combination of efficiency and deployment of renewables has decoupled economic growth from carbon emissions. That had happened before in a number of countries, but it was not clear when it would apply to the global economy.

Other good signs include the rapid electrification of transportation (more than 1 million electric vehicles are now in operation) and a decline in fossil fuel subsidies, which fell to $325 billion. Renewable energy subsidies rose to $150 billion, making them the largest source of new generating capacity added last year. (The IEA expects the incredible price drop in wind and solar power to mean that renewables subsidies will never reach the amount currently given to fossil fuels.)

But all that positive news is embedded in the recognition of a difficult reality: under current policies, demand will grow by 30 percent by 2040, meaning all current energy sources are likely to expand to meet it. The only exception is coal, where consumption remains the same. Of the $44 trillion in investment that will be made to make sure the energy economy works, 60 percent will go to fossil fuels by 2040.

That’s largely because the EIA finds that most countries are already on track to meet what they pledged for Paris. For some countries, those promises are significant. China is shifting its economy from heavy industry to the service sector, allowing it to flatten its use of coal; demand is expected to fall by 15 percent by 2040. Nearly all of the growth in the intervening years will come from other sources, primarily renewables and nuclear power.

But for many other countries, the commitments are no more than business as usual. The growth of renewables is sufficient to ensure that, under post-Paris policies, 60 percent of generation capacity through 2040 will come from those sources. But to stay within the 2 degrees Celsius target, 60 percent of the actual generation in 2040 must come from renewable sources. “The energy sector is largely low-carbon in this scenario,” as the IEA puts it. Efficiency is also essential, and it has a beneficial effect, as it offsets any increases in consumer electricity prices resulting from a radical realignment of the energy economy.

Individual Resources

Coal: The use of coal is falling and shifting drastically. In developed economies, where demand is more or less equal, coal use is dropping by about 50 percent, largely replaced by renewables. Many coal-fired power plants become stranded assets, still capable of producing electricity, but simply no longer being used. But this keeps the price of coal low enough that emerging markets will find it an attractive way to electrify quickly. This shifts the center of gravity of coal use to Asia and Africa.

Oil: While electric vehicles are quickly becoming an important part of the market, it will take decades for them to displace a large number of internal combustion engine vehicles. Meanwhile, the IEA does not see a good alternative to oil in three segments: cargo, aviation and as a chemical feedstock. Due to declining production in existing wells, we will have to replace an Iraqi oil every two years, a limitation that could lead to price shocks. In fact, the IEA foresees one in the near future, unless the investment returns to developing new fields in a year or so.

Natural gas: This is the only fossil energy source to show growth under almost all scenarios and a 1.5 percent annual increase through 2040 under current policies. Until now, natural gas has mainly been supplied via pipelines, which has resulted in a number of geographically diverse markets. But the IEA expects the growth of liquefaction and transport capacity to create a global market for natural gas within this period.

nuclear: Here, social factors are the dominant driver for adoption. That probably means less use in Europe, stagnation in the US and rapid growth in China. It is generally not seen as a viable solution for emerging economies.

renewable energysources: The cost of photovoltaics is expected to fall by 40 to 70 percent during this period, and wind prices will also be lower. By 2030, both are expected to be cost competitive without subsidies in India and China. The limits to the growth of renewables are primarily determined by two factors: how quickly we decide to decarbonize electricity and how much excess capacity we are willing to build to ensure sufficient power on low generation days. If extensive decarbonisation becomes the dominant policy choice, renewable electricity will become even more important, as things like heating and transport will be shifted to electricity.

Water: The IEA recognizes that you can no longer talk about energy without thinking about water. Currently, four percent of global electricity consumption is spent on the supply of water or the treatment of wastewater. Meanwhile, the energy sector accounts for 10 percent of humanity’s water withdrawals. As water supplies become increasingly limited, regional disparities will become dramatic. The IEA predicts that by 2040, more than 15 percent of electricity consumed in the Middle East will be used for water supply.

What the IEA won’t tell you

At the press conference that released the analysis to reporters, several asked questions about how things will change if President-elect Trump follows through on his campaign promises. While the report’s authors declined to speculate, there are a few things worth noting.

The current US energy economy is driven by the low price of natural gas and renewables, and Trump is unlikely to change that. The subsidies that currently help renewables were popular enough in Congress to be one of the few things passed during the Obama administration, and the trajectory of renewable energy prices is such that the subsidies won’t last much longer. will be needed for cost competitiveness. While Trump may repeal some regulations that make coal less competitive, it’s not clear whether companies will be confident enough that these changes will survive long enough to make something like a coal-fired power plant, with a life span of decades, a reasonable risk.

The reality is also that the US may be a token leader on climate but is not a leader in most other ways. Energy efficiency in Europe and Japan is much better; Europe has also been at the forefront of wind, and it is now the driving force behind offshore wind technology. The rapid decline in photovoltaic prices is largely a result of China’s commitment to renewable energy.

A fully committed US can be invaluable in tackling climate change. However, it is not clear whether it is essential.

By akfire1

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