IEA World Energy Outlook 2016

According to the 2016 Outlook of the International Energy Agency (IEA), most countries are on track to deliver their Paris Agreement pledges. However, this is still insufficient for delivering the 2 °C goal – even with the full implementation of the NDCs we’re facing an average temperature increase of 2.7°C by the end of the century – as reported by the IEA World Energy Outlook 2016 launched today.  

Although renewables took more than half of new capacity investments in 2015 and the projected 30% energy demand increase of the next decades will be mostly covered by low-carbon sources the share of fossil fuels will only decrease to 74% from the current 81% of global energy consumption. Global nuclear capacity will expand by 56% in the next 25 years, but mainly due to new build in China. 

The global energy mix in 2014 and 2040  Source: World Energy Outlook 2016, IEA

Expansion of variable renewables (solar PV, wind) is beneficial to the climate, yet it constitutes a growing challenge to the security of electricity supply. The resilience of electricity systems is about to evolve to one of the main issues in the near future. Although overnight costs of PV and wind investments continue to fall ensuring their availability in all regions, due to their increased penetration every additional unit of electricity generated is set to necessitate the provision of 40% more capacity than during the last decade. Dispatchable climate friendly energy sources’ water demand is an emerging issue to be addressed on the long run. At the same time there’s an enormous untapped potential for renewables in transport and heating.

IEA expects the oil market to enter a new period of price volatility, notably if upstream investments will fail to pick up in 2017. Artificially low oil prices have resulted in a concentration of oil supply in the Middle East at a rate unprecedented since the 70s while production declines are equivalent to losing the current oil output of Iraq from the global balance every two years. As a reaction to any price rebound US tight oil can return but it is not expected to cover the growing demand after 2020 driven by maritime, air and road freight transport and the chemical industry.

 After shale gas the second revolution of natural gas is underway: the share of liquified gas (LNG) to pipeline gas is growing rapidly rewriting the rules of the market. Besides US and Australia, others, namely Canada, Tanzania and Mozambique has joined the supply side while demand for natural gas is likely to broaden in all countries due to its ideal properties to replace more polluting coal and to fill energy deficits between demand and intermittent resource generation. Accordingly, coal consumption is likely to grow by only 7% until 2040 driven by demand growth in Southeast Asia and India.    

The energy sector, responsible for two-thirds of all greenhouse-gas emissions is undergoing a transformation which has switched to an unprecedented speed, yet in terms of expected results it is still slower than needed. However, the current pace poses serious challenges to policymakers and its sustainability depends largely on their persistent political commitment. Fatih Birol, IEA’s executive director calls upon governments to promote energy-related R&D both in terms of fossil fuels and renewables. IEA’s Technology Collaboration Programmes provide platforms for researchers to international cooperation in energy technology R&D.  

Gabriella Pálos