U.S. CHAMBER OF COMMERCE

A Look at IEA’s New Global Energy Forecast

By Stephen Eule

The International Energy Agency (IEA) just released its latest global energy forecast, the World Energy Outlook 2018 (WEO2018). Although IEA provides three different scenarios—the Current Policies, New Policies, and Sustainable Development Scenarios—we’ll focus on its mid-range “New Policies Scenario,” which includes current policies and expected or announced policies. IEA’s forecasts peer 22 years into the future from an (estimated) 2017 baseline.

Here are the highlights:

  • Global Energy Demand Growth: Energy demand is expected to grow by about 27%, or 3,743 million tons oil equivalent (mtoe), worldwide from 2017 to 2040. Demand in developing countries—i.e., from Organization of Economic Co-operation and Development (OECD) countries—are on course to shrink their combined energy demand by 4% (230 mtoe) in 2040. As a result, the share of global demand (less international bunker fuels) from developed countries falls from 36% to 30%. Developing countries, on the other hand, are on course to increase their combined energy demand by 45% (3,743 mtoe) and their share of global demand from 64% to 70%.
  • Demand in Asia Pacific Region Grows Most Rapidly: About 65% of the increase in developing country demand will come from the Asia Pacific region. Looking at just the rate of increase, demand in India is forecast to more than double by 2040 while demand in South East Asia grows 67% and China’s demand 26%. By 2040, the Asia Pacific region will consume 46% of the world’s energy. This is a truly remarkable development. Developing regions outside of Asia also are anticipated to see large demand growth: the Middle East (67%); Africa (52%, and almost all of which occurs outside of South Africa); and Central and South America (26%).
  • Hydrocarbon Fuels Remain the Mainstay of Global Energy Supplies: Combined petroleum, natural gas, and coal use is forecast to grow 16% between 2017 and 2040. Each of these fuels is expected to grow, but at very different rates, led by natural gas at 43%, petroleum at 10%, and coal at 2%. Although the share of total global energy demand met by fossil fuels is forecast to declines by 2040, hydrocarbons still are expected to account for 74% compared to 81% in 2017. While the share of total demand from natural gas increases in 2040 compared to 2017 (by 3 percentage points), the share from oil and coal each decreases (by 4 and 5 percentage points, respectively).
  • Electricity Demand Grows Rapidly in Developing Countries: IEA forecasts that the pace of electricity demand growth will exceed that of total energy demand growth. IEA is forecasting a 62% increase in global power generation between 2017 and 2040, the vast majority of which will come from developing countries. The fastest growth will occur in Africa, where generation is expected to jump 140%. The Middle East (96%), Asia Pacific (84%), and Central and South America (68%) also will experience tremendous growth. In contrast, electricity demand in Europe and North America are each expected to increase 15% by 2040. Access to electricity in developing countries in Asia has been a tremendous success story, with 870 million people—500 million in India alone—gaining access. IEA also reports that in sub-Saharan Africa, electrification has been increasing at a greater rate than population since 2014. The WEO018 suggests that these positive trends show no signs of slowing down.
  • U.S Emerges as a Key Supplier in Global Oil & Natural Gas Markets: IEA sees the U.S. continuing to have a growing influence in global oil and natural gas markets on the supply side. It notes that the United States is expected to increase by providing nearly 75% of the 7.1 million barrel per day increase in global oil production to 2025. Crude oil from shale formations reaches 9.2 million barrels per day in the mid-2020s before declining slowly thereafter. Still, by 2040 U.S. output should be 23% higher in 2040 compared to 2017. Production in Canada and Mexico also is forecast to increase. As a result, “North America switches its role in international oil trade during the projection period, becoming a net exporting region largely thanks to burgeoning tight oil production in the United States. The United States becomes a net oil exporter [both crude oil and refined products] in the early 2020s.” Turning to natural gas, the United States will provide 41% of the increase in global output to 2025. U.S. production is forecast to rise from about 760 billion cubic feet in 2015 to 1,074 billion in 2040, an increase of 41%. The United States became a net exporter of natural gas in 2017. These projected increases should set us on a path to become the world’s largest provider of liquefied natural gas before 2030, as global demand for natural gas rises, particularly in Asia.
  • Price of Crude Oil Rises Above $100: In IEA’s New Policies Scenario, oil demand continues to rise, but its growth is moderated by a variety of new policies and technologies that promote greater efficiency. In these circumstances, the price of crude oil is expected to more than double, from about $52 dollars to $112 per barrel (in 2017$) by 2040.
  • Renewables Use Grows Rapidly: Total demand for renewable energy sources—including hydropower, wind, solar (PV and concentrated), biofuels, marine, geothermal—is expected to increase about 81% by 2040, at which time they will account for 20% of overall energy demand. Solar energy grows at the fastest rate and by 2040 will supply nearly nine times as much energy as it did in 2017. Over the same period, wind energy will grow to four times its 2017 level. Bioenergy also is slated for fast growth. Bioenergy is today and will remain the most widely used renewable energy source. It accounted for about 70% of total renewable energy in 2017 and is expected to account for 51% in 2040. About half of current biomass in use today is tradition solid biomass—wood, dung, etc. The use of modern biomass (mostly as transportation fuels but also in power generation), however, grows rapidly and by 2040 accounts for 68% of total biomass demand in 2040. Much of these renewable fuels and technologies will be used in developing countries, which are estimated to account for about 69% of the total increase in renewable energy consumption globally.
  • Nuclear: Nuclear power is forecast to grow 41% between 2017 and 2040, and its overall share of demand in 2040 is expected to be about 5.5%, up a bit from the current 5%. While developed countries will be decommissioning plants and reducing generation of nuclear energy, developing countries are set to expend nuclear generation, especially in China, India, and the Middle East.
  • Carbon Dioxide Emissions: Under IEA’s New Policies Scenario, carbon dioxide emissions from energy (including international bunker fuels) grow from 32.6 gigatons to 35.9 gigatons of carbon dioxide between 2017 and 2040, a rise of 10%. Whereas developed country carbon dioxide emissions are expected to drop by 23%, developing country emissions are anticipated to rise 27%. The difference between developed and developing is starker when looking at power sector emissions. Developed countries are projected to decrease power sector emissions by about one-third by 2040 while developing countries are anticipated see their emissions climb by about 20%.

 

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