Fossil fuels and renewables both under pressure from soaring energy demands
The global demand for energy is expected to grow by 25 per cent by 2040, according to a new report which warns that energy grids will need to expand their supply considerably over the coming years.
The World Energy Outlook 2018 report from the International Energy Agency (IEA) warned that oil markets are entering a period of renewed “uncertainty and volatility” which could result in a “supply gap” in the early 2020s.
It also found that natural gas is expected to overtake coal as the world’s second-largest energy source after oil by 2030 due to a drive to cut air pollution and the rise in liquefied natural gas (LNG) use.
Elsewhere, the report found that energy from solar PV is expanding rapidly, but other low-carbon technologies are being hampered by inaction from governments.
“Governments will have a critical influence in the direction of the future energy system,” the report states. “Under current and planned policies, energy demand is set to grow by more than 25 per cent to 2040, requiring more than $2tr a year of investment in new energy supply.”
The IEA said that energy demand would grow by more than a quarter between 2017 and 2040 assuming improvements in energy efficiency usage. Without such improvements the increase in demand could rise by twice that much.
It also warns that reducing carbon emissions is made more difficult due to energy infrastructure that is already “locked-in”.
In particular, coal-fired power plants, which account for one-third of energy-related CO2 emissions today, represent more than a third of cumulative locked-in emissions to 2040.
The vast majority of these are related to projects in Asia, where average coal plants are just 11 years old on average, with decades left to operate, compared with an average age of 40 years for plants in the United States and Europe.
China, already the world’s biggest oil and coal importer, is soon expected to become the largest importer of gas and net imports would approach the level of the European Union by 2040, the IEA said.
Although it is the world’s third-biggest user of natural gas behind the United States and Russia, it has to import about 40 per cent of its needs as local production cannot keep pace.
Emerging economies in Asia would account for about half of total global gas demand growth and their share of LNG imports would double to 60 per cent by 2040, the IEA report said.
“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,” it said.
LNG involves cooling gas to a liquid so it can be transported by ship.
The United States would account for 40 per cent of total gas production growth to 2025, the IEA said, while other sources would take over as US shale gas output flattened and other nations started turning to unconventional methods of gas production, such as hydraulic fracturing or fracking.
Global electricity demand will grow 2.1 per cent 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, it said.
Coal and renewables will swap their positions in the power generation mix. The share of coal is forecast to fall from about 40 per cent today to a quarter in 2040, while renewables would grow to just over 40 per cent from a quarter now.
A report yesterday found that finance was lacking to connect the last 1.1 billion people to electricity networks worldwide.