Released October 28, 2022 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--While there are quarrels over the origin of the phrase, "In danger is opportunity," nothing demonstrates the validity of the saying like today's global energy markets.
As much of the world was focused on making a transition to lower-carbon fuels, Russia invaded Ukraine earlier this year, upending plans and scrambling the world's energy ecosystem.
In its signature annual report, World Energy Outlook (WEO), the International Energy Agency (IEA) (Paris, France) sees opportunities in the current energy crisis, even as Europe pays exorbitant prices for natural gas, electricity and transportation fuels -- a situation likely to get worse before it gets better when the European Union's (EU) embargo on Russian fossil fuels goes into effect in December.
It is not hopelessly optimistic to seek the silver lining inside the dark clouds of the world's current energy crisis. Supply chains need to get rebuilt. Commercial relations between countries need to be restored. Investment capital will be needed. Why not do all of that with an eye to lower-carbon solutions?
"Today's energy crisis is delivering a shock of unprecedented breadth and complexity," the energy agency said in a statement accompanying the release of the 524-page report on October 27. "The biggest tremors have been felt in the markets for natural gas, coal and electricity -- with significant turmoil in oil markets as well, necessitating two oil stock releases of unparalleled scale by IEA member countries to avoid even more severe disruptions."
"With unrelenting geopolitical and economic concerns, energy markets remain extremely vulnerable, and the crisis is a reminder of the fragility and unsustainability of the current global energy system," the statement continued.
This year's WEO report comes just weeks before the 27th U.N. climate change conference, scheduled for November 6-18 in the Egyptian city of Sharm el-Sheikh.
The IEA report found "scant evidence to support claims from some quarters that climate policies and net zero commitments contributed to the run-up in energy prices. In the most affected regions, higher shares of renewables were correlated with lower electricity prices--and more efficient homes and electrified heat have provided an important buffer for some consumers, albeit far from enough. The heaviest burden is falling on poorer households where a larger share of income is spent on energy."
The report lauded actions by a variety of nations to more actively fight the growth of CO2 in the atmosphere: "Many governments are now taking longer-term steps. Some are seeking to increase or diversify oil and gas supplies, and many looking to accelerate structural changes." In particular, the agency recognized the Inflation Reduction Act in the U.S., the EU's Fit for 55 package and REPowerEU, Japan's Green Transformation (GX) program, South Korea's aim to increase the share of nuclear and renewables in its energy mix, and what it called "ambitious clean energy targets" in China and India.
As it has done in prior WEO reports, the IEA laid out three scenarios: Stated Policies (SP), Announced Pledges (AP) and Net-Zero Emissions by 2050 (NZE). It evaluated the effect that different levels of governmental action could have on all three.
For more information on the IEA's 2021 WEO, and the three climate-change scenarios it set forth, see October 24, 2021, article - IEA Warns of Complacency, Return to Business as Usual in Latest Report. To review an IEA report from earlier this year on how Russia's invasion of Ukraine scrambled energy and electricity markets around the world, see July 20, 2022, article - Russia's Invasion of Ukraine Upends Energy and Electricity Markets.
For the first time ever, a WEO scenario based on today's prevailing policy settings -- in this case, the SP scenario, basically business as usual -- has global demand for every fossil fuel exhibiting a peak or plateau.
In its SP scenario, IEA said, coal use will ebb 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 falling gradually in 2050.
The declines are much faster and more pronounced in the report's more aggressive climate-focused scenarios, AP and NZE.
Reversing a 200-year trend of heavy reliance on fossil fuels "will be a pivotal moment in energy history," the IEA said.
Current growth rates for deployment of solar, wind, EVs and batteries, if maintained, would lead to a much faster transformation than projected in the SP scenario," the IEA report said. Accomplishing that would require supportive governmental policies not just in the early leading markets for these technologies but across the world.
The world is projected to make energy capital investments totaling about $1.3 trillion this year, a sum that includes about $650 billion in oil and gas exploration & production, the report said. "While annual global clean energy investment is expected to rise above $2 trillion by 2030 in the SP scenario, it would need to be over $4 trillion annually by the same date in the NZE Scenario, the report observed.
IEA Executive Director Fatih Birol commented, "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. 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."
He continued: "The environmental case for clean energy needed no reinforcement, but the economic arguments in favor 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."
"It is essential to bring everyone on board, especially at a time when geopolitical fractures on energy and climate are all the more visible. This means redoubling efforts to ensure that a broad coalition of countries has a stake in the new energy economy. The journey to a more secure and sustainable energy system may not be a smooth one. But today's crisis makes it crystal clear why we need to press ahead."
In crafting a path forward that lowers worldwide carbon dioxide emissions, the IEA report recommends 10 essential principles to make the next stage of the energy transition more secure and just:
As much of the world was focused on making a transition to lower-carbon fuels, Russia invaded Ukraine earlier this year, upending plans and scrambling the world's energy ecosystem.
In its signature annual report, World Energy Outlook (WEO), the International Energy Agency (IEA) (Paris, France) sees opportunities in the current energy crisis, even as Europe pays exorbitant prices for natural gas, electricity and transportation fuels -- a situation likely to get worse before it gets better when the European Union's (EU) embargo on Russian fossil fuels goes into effect in December.
It is not hopelessly optimistic to seek the silver lining inside the dark clouds of the world's current energy crisis. Supply chains need to get rebuilt. Commercial relations between countries need to be restored. Investment capital will be needed. Why not do all of that with an eye to lower-carbon solutions?
"Today's energy crisis is delivering a shock of unprecedented breadth and complexity," the energy agency said in a statement accompanying the release of the 524-page report on October 27. "The biggest tremors have been felt in the markets for natural gas, coal and electricity -- with significant turmoil in oil markets as well, necessitating two oil stock releases of unparalleled scale by IEA member countries to avoid even more severe disruptions."
"With unrelenting geopolitical and economic concerns, energy markets remain extremely vulnerable, and the crisis is a reminder of the fragility and unsustainability of the current global energy system," the statement continued.
This year's WEO report comes just weeks before the 27th U.N. climate change conference, scheduled for November 6-18 in the Egyptian city of Sharm el-Sheikh.
The IEA report found "scant evidence to support claims from some quarters that climate policies and net zero commitments contributed to the run-up in energy prices. In the most affected regions, higher shares of renewables were correlated with lower electricity prices--and more efficient homes and electrified heat have provided an important buffer for some consumers, albeit far from enough. The heaviest burden is falling on poorer households where a larger share of income is spent on energy."
The report lauded actions by a variety of nations to more actively fight the growth of CO2 in the atmosphere: "Many governments are now taking longer-term steps. Some are seeking to increase or diversify oil and gas supplies, and many looking to accelerate structural changes." In particular, the agency recognized the Inflation Reduction Act in the U.S., the EU's Fit for 55 package and REPowerEU, Japan's Green Transformation (GX) program, South Korea's aim to increase the share of nuclear and renewables in its energy mix, and what it called "ambitious clean energy targets" in China and India.
As it has done in prior WEO reports, the IEA laid out three scenarios: Stated Policies (SP), Announced Pledges (AP) and Net-Zero Emissions by 2050 (NZE). It evaluated the effect that different levels of governmental action could have on all three.
For more information on the IEA's 2021 WEO, and the three climate-change scenarios it set forth, see October 24, 2021, article - IEA Warns of Complacency, Return to Business as Usual in Latest Report. To review an IEA report from earlier this year on how Russia's invasion of Ukraine scrambled energy and electricity markets around the world, see July 20, 2022, article - Russia's Invasion of Ukraine Upends Energy and Electricity Markets.
For the first time ever, a WEO scenario based on today's prevailing policy settings -- in this case, the SP scenario, basically business as usual -- has global demand for every fossil fuel exhibiting a peak or plateau.
In its SP scenario, IEA said, coal use will ebb 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 falling gradually in 2050.
The declines are much faster and more pronounced in the report's more aggressive climate-focused scenarios, AP and NZE.
Reversing a 200-year trend of heavy reliance on fossil fuels "will be a pivotal moment in energy history," the IEA said.
Current growth rates for deployment of solar, wind, EVs and batteries, if maintained, would lead to a much faster transformation than projected in the SP scenario," the IEA report said. Accomplishing that would require supportive governmental policies not just in the early leading markets for these technologies but across the world.
The world is projected to make energy capital investments totaling about $1.3 trillion this year, a sum that includes about $650 billion in oil and gas exploration & production, the report said. "While annual global clean energy investment is expected to rise above $2 trillion by 2030 in the SP scenario, it would need to be over $4 trillion annually by the same date in the NZE Scenario, the report observed.
IEA Executive Director Fatih Birol commented, "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. 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."
He continued: "The environmental case for clean energy needed no reinforcement, but the economic arguments in favor 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."
"It is essential to bring everyone on board, especially at a time when geopolitical fractures on energy and climate are all the more visible. This means redoubling efforts to ensure that a broad coalition of countries has a stake in the new energy economy. The journey to a more secure and sustainable energy system may not be a smooth one. But today's crisis makes it crystal clear why we need to press ahead."
In crafting a path forward that lowers worldwide carbon dioxide emissions, the IEA report recommends 10 essential principles to make the next stage of the energy transition more secure and just:
- Synchronize scaling up a range of clean energy technologies with scaling back of fossil fuels
- Tackle the demand side and prioritize energy efficiency
- Reverse the slide into energy poverty and give poor communities a lift into the new energy economy
- Collaborate to bring down the cost of capital in emerging market and developing economies
- Manage the retirement and reuse of existing infrastructure carefully, some of it will be essential for a secure journey to net-zero emissions
- Tackle the specific risks facing producer economies
- Invest in flexibility -- a new watchword for electricity security
- Ensure diverse and resilient clean energy supply chains
- Foster the climate resilience of energy infrastructure
- Provide strategic direction and address market failures, but do not dismantle markets
