IEEJ：February 2018○ｃIEEJ 2018
Special Bulletin
A Japanese Perspective on the International Energy Landscape (364)February 28, 2018

IEA Executive Director Birol’s Special Speech on “Rapidly Changing Global
Energy Landscape”
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn February 27, the National Graduate Institute for Policy Studies (GRIPS) and theInstitute of Energy Economics, Japan, cosponsored a special lecture meeting at the GRIPS
Soukairou Hall in Tokyo, where International Energy Agency Executive Director Fatih Birol made aspeech under the title “Rapidly Changing Global Energy Landscape.”
The global energy market now sees various great changes and growing uncertainties about
the future. However, it is very important and significant for energy policy and industry stakeholders
in the world to depict the future picture of energy over a long term with uncertainties and multiple
scenarios taken into account. It is also significant to extract a driver as a likely key element for
anticipating the future. At the meeting, Dr. Birol built on the IEA’s World Energy Outlook 2017
released last November to make an energetic report that was rich with deep analyses on andprofound insights into the global energy market and included clear messages. In the following, I
would like to summarize the Birol report’s key points that were impressive for me:
First, Dr. Birol emphasized the importance of the United States as a factor that has led andwill lead the global energy situation to dramatically change. The U.S. shale revolution, which started
in the early 21st century, has fundamentally changed the supply and demand environment for theU.S. oil and gas market, the largest in the world. After the age of energy shortages since the 1970s,the United States entered the age of energy abundance. This change has dramatically altered thesupply and demand environment for the international oil and gas market. Oil and gas are the world’s
largest and second largest energy trade goods, exerting great influence on the global economy andinternational politics. As a result, the U.S. shale revolution has brought about a sea change in energy
geopolitics.
Dr. Birol pointed out that U.S. oil and gas production would continue expanding over along term and emphasized that the United States would become a very important gas and LNG
exporter. Noting that gas demand would continue increasing in the global energy market and thatgas’s role would grow more important, he anticipated that LNG demand would grow particularlysignificant. In this context, Dr. Birol highlighted the significance of U.S. LNG export expansion. It issignificant for the United States to retain its oil and gas market leadership that is one of the major
influential factors for the future international energy situation.

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Second, the Birol report emphasized anew that Chinese energy market changes are one of
the most important points for analyzing the global energy situation. China is the largest energy
consumer and carbon dioxide emitter in the world. It has increased its presence not only in theenergy and environment field but also in international politics and the global economy, becoming a
key country that is indispensable for discussions on global governance. Although Chinese energy
demand growth has decelerated from the rapid pace in the early 21st century, China will continue toexpand energy demand at least until around 2040 and grow more important as the gravity center ofthe global energy market. Furthermore, China will rapidly switch from coal, which had accounted
for dominant part of the total energy supply in China, to cleaner energy sources. Dr. Birolemphasized the importance of this point.
China is expected to increase its presence in the global gas and LNG market as its gas
demand expands sharply amid such transition. As China has pursued clean energy, it has become thelargest market for renewable energy including wind and solar photovoltaics. China plans to greatly
increase nuclear power plants as a baseload power source free from CO2 emissions and may replace
the United States as the world’s largest nuclear power generator in the 2020s. While the UnitedStates has remained the world’s largest nuclear power generator since the launch of nuclear power
generation, gas and electricity price drops under the shale revolution have led some existing U.S.
nuclear power plants to be shut down. Dr. Birol pointed out that China’s replacement of the UnitedStates as nuclear power generation leader would represent a symbolic change in the global energysituation.
Third, Dr. Birol emphasized that electricity’s growing importance and its expanding shareof the energy mix are certain while the global energy situation is covered with uncertainties. Even indeveloped countries where primary energy demand will decline, electricity demand is predicted tocontinue slow expansion over a long term. Furthermore, developing countries’ electricity demand isvery brisk. Dr. Birol noted that China’s electricity demand growth until 2040 would amount to thepresent U.S. market size, while India’s electricity demand growth would rival the present European
Union market size. The world will thus grow more dependent on electricity.
Dr. Birol pointed out that how to supply electricity would grow even more important. His
report highlighted that renewable energy as a domestic CO2-free electricity source, on which greathopes are placed, has attracted the most global attention due particularly to solar PV cost cuts. On
the user side, hopes are growing on the electrification of vehicles with demand increasing for electricvehicles. In this way, the general electrification of energy is creating new giant business chances. Aselectricity grows important, its stable supply will have vital importance. Dr. Birol pointed out that as
new challenges and threats are emerging in regard to stable electricity supply, appropriate responses
to them have become indispensable for foreseeing the future global energy situation.
Even amid great uncertainties about the future, energy policy and industry stakeholders
must make choices and decisions regarding the future. Objective and rational analyses must beutilized to this end. The roles of the IEA and other energy institutions will thus remain important inthe future. As part of such institutions, I myself am inspired to make efforts to play such roles.
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