IEA World Energy Outlook 2022 | Update
many are looking to accelerate structural changes. The most notable responses include the US Inflation Reduction Act (see pp 16-21), the EU’s Fit for 55 package and REPowerEU, Japan’s Green Transformation (GX) programme, Korea’s aim to increase the share of nuclear and renewables in its energy mix, and ambitious clean energy targets in China and India.
In the WEO’s Stated Policies Scenario, which is based on the latest policy settings worldwide, these new measures help propel global clean energy investment to more than USD 2 trillion a year by 2030, a rise of more than 50% from today (although it is estimated that $4 trillion per year is needed by 2030 to be on track for 1.5 °C).
As markets rebalance in this scenario, the upside for coal from today’s crisis is temporary as renewables, supported by nuclear power, see sustained gains. As a result, a high point for global emissions is reached in 2025. At the same time, international energy markets undergo a profound reorientation in the 2020s as countries adjust to the rupture of Russia– Europe flows.
“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” said IEA executive director Fatih Birol. “Even with today’s policy settings, the energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system.” For the first time ever, a WEO scenario based on today’s prevailing policy settings – in this case, the Stated Policies Scenario – has global demand for every fossil fuel exhibiting a peak or plateau. In this scenario, coal use falls back within the next few years, natural gas demand reaches a plateau by the end of the decade, and rising sales of electric vehicles (EVs) mean that oil demand levels off in the mid-2030s before ebbing slightly to mid-century. This means that total demand for fossil fuels declines steadily from the mid-
Above: The era of natural gas demand growth is coming to an end. Strengthened policies, high near-term prices & energy security concerns bring the “Golden Age of Gas” (as described by the IEA in 2011) to a close but LNG remains crucial amid lower pipeline flows to Europe & robust import demand in Asia (source IEA)
2020s to 2050 by an annual average roughly equivalent to the lifetime output of a large oil field. The declines are much faster and more pronounced in the WEO’s more climate- focused scenarios.
Global fossil fuel use has grown alongside GDP since the start of the Industrial Revolution in the 18th century: putting this rise into reverse will be a pivotal moment in energy history.
The share of fossil fuels in the global energy mix in the Stated Policies Scenario falls from around 80% to just above 60% by 2050. Global carbon dioxide emissions fall back slowly from a high point of 37 billion tonnes per year to 32 billion tonnes by 2050. This would be associated with a rise of around 2.5°C in global average temperatures by 2100, far from enough to avoid severe climate change impacts. Full achievement of all climate pledges would move the world towards safer ground, but there is still a large gap between today’s pledges and a stabilisation of the rise in global temperatures to around 1.5°C.
Today’s growth rates for deployment of solar PV, wind, EVs and batteries, if
maintained, would lead to a much faster transformation than projected in the Stated Policies Scenario, although this would require supportive policies not just in the early leading markets for these technologies but across the world.
Supply chains for some key technologies – including batteries, solar photovoltaics and electrolysers – are expanding at rates that support greater global ambition. If all announced manufacturing expansion plans for solar PV see the light of day, manufacturing capacity would exceed the deployment levels in the Announced Pledges Scenario in 2030 by around 75%. In the case of electrolysers for hydrogen production, the potential excess of capacity of all announced projects is around 50%.
Stronger policies will be essential to drive the huge increase in energy investment that is needed to reduce the risks of future price spikes and volatility, according to the WEO. Subdued investment due to lower prices in the 2015-2020 period made the energy sector much more vulnerable to the sort of disruptions we have seen in 2022. While clean energy investment rises above USD 2 trillion by 2030 in the States Policies Scenario, it would need to be above USD 4 trillion by the same date in the Net Zero Emissions by 2050 Scenario, highlighting the need to attract new investors to the energy sector. And major international efforts are still urgently required to narrow the worrying divide in clean energy investment levels between advanced economies and emerging and developing economies.
Above: Peak fossil fuel demand is coming this decade. Today’s policy settings are now sufficiently strong that they produce a distinct peak in fossil fuel use before 2030 (source IEA)
“The environmental case for clean energy needed no reinforcement, but the economic arguments in favour of cost-competitive and affordable clean technologies are now stronger – and so too is the energy security case. Today’s alignment of economic, climate and security priorities has already started to move the dial towards a better outcome for the world’s people and for the planet,” Dr Birol said.
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