IEEJ：October 2016 © IEEJ2016

The global energy outlook
and what it means for Japan

Paul Simons
Deputy Executive Director, International Energy Agency
Japan IDR launchTokyo, 21 September 2016
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IEEJ：October 2016 © IEEJ2016

Long-term energy demand set to growfast in Asia
Change in energy demand in selected regions, 2014-2040
1 200

Mtoe

900
600
300

0-300
EuropeanUnion

UnitedStatesJapan

Latin
America

Middle Southeast
EastAsia

AfricaChina

Energy use worldwide grows by one-third to 2040, driven by Asia.

India

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Global oil demand set to grow slower inthe medium term
Oil demand growth projections by region
2009-152015-21
EuropeFSU
138-76-179

52

Asia/Pacific969

Americas826

Middle East164

283

215

27

Africa104

155(kb/d)© OECD/IEA, 2016

+1.2% 2016-21 versus 1.7% in previous 5-year period,
as efficiency gains trim momentum© IEA 2016

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Also natural gas demand growth slows
Change in global natural gas demand
600
500

bcm

400
300
200
1000
2009-152015-21

Gas faces greater competition in the power sector; yet it is theonly fossil fuel that does not suffer a decline in its share of the energy mix.

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Unprecedented wave of investment cutsin the upstream oil and gas industry
USD (2015) billion

Global upstream capital spending 2010-2017
900-25%

800
700

-24%

600
500
400
300
200
100

2017

2016

2015

2014

2013

2012

2011

2010

0

Cost deflation, efficiency improvements and reduced activity levels might lead forthe first time to three consecutive years of investment decline

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There is no “second” China waiting
to drive medium-term coal use
Global coal demand by region, 2000-2020

Mtce
6 000

Rest of world
5 000
European Union
United States
Southeast Asia
India

4 000
3 000
2 000

China
1 000

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Strong growth in coal use in India & Southeast Asia to offset declines inthe EU & the US, but does not match the rise seen over last decade in China.

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Slowing fossil fuels demand growth – haveenergy-related CO2 emissions peaked?
Global energy-related CO2 emissions
Gt 35

Global economic
downturn30
25

Secondoil shock20Dissolution ofSoviet Union

151051975

1980

1985

1990

1995

2000

2005

2010

2015

IEA analysis shows renewables, led by wind, and improvements inenergy efficiency were key to keeping emissions flat for a second year in a row.
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The cost of clean energy continues to fallIndexed cost of onshore wind, utility scale PV and LED lighting120%)
Indexed cost (2008=100%)

100%
80%
60%
40%
20%0%
2008

2009

2010

Onshore wind

2011

2012

Solar PV - utility scale

2013

2014

2015

LEDsThe falling cost of clean technologies opens new opportunities,
but support mechanisms need to be reviewed as costs decline.
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Greater efforts are still needed toreach a 2°C pathway
Trend post-COP21
40
36
Energy efficiency
32
Gt

Fuel & technology
switching in end-uses
17.9 Gt

28

Renewables
Nuclear24

CCS

2°C Scenario

Other

20
162010

2015

2020

2025

2030

2035

2040

Energy efficiency & renewables will deliver most of the additional emissions
reductions required for a 2°C pathway, but all forms of clean technology are needed© OECD/IEA 2016

IEEJ：October 2016 © IEEJ2016

Turning to Japan

From global energy context
toa focus on Japan’s energy policy© OECD/IEA 2016

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How can Japan contribute?
CO2 emissions in relation to GDP and total primary energy supply

Japan has decoupled energy demand from economic growth,
but CO2 emissions have jumped since 2009.
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IEEJ：October 2016 © IEEJ2016

Electricity generation dominated by fossil
fuels, especially since nuclear shutdown
Monthly electricity generation by source, July 2010 to March 2016

Increased use of fossil fuels helped maintain electricity supply,
but raised CO2 emissions, import dependence and electricity prices.
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Electricity outlook to 2030
Electricity demand and electricity supply by source

To reach 2030 INDC (-26% from 2013), fossil fuels use must decline.
The outlook also foresees nuclear restarts and a strong increase in renewables.
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IEEJ：October 2016 © IEEJ2016

Plans to cut GHG emissions by
2030 and 2050
2030 INDC: -26% from 2013
 Meeting the INDC relies on improving energy efficiency, restarting nuclear power

plants and increasing renewable energy supply Efficiency: Japan can build on its successful policies and measures for industry,vehicles and appliances. New requirement for buildings to be introduced.
 Nuclear: safety approvals and public acceptance must be won Renewables: reducing cost and removing technical and non-technical barriers
essential

2050 objective: -80%
 The leap from -26% by 2030 to -80% by 2050 requires new technology
 Japan is world leader in several low-carbon technology sectors already National Strategy on Energy Technology Innovation to 2050 adopted in April 2016

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IEEJ：October 2016 © IEEJ2016

Electricity market reform very welcome
Reform in 2015-20 aims to:Secure stable supply of electricity, suppress electricity prices,and expand consumer choice and business opportunities.
Suggestions for further steps
 Build more transmission lines and frequency conversion capacity
 Develop the Organization for Cross-regional Co-ordination of Transmission Operators


(OCCTO) into a fully independent Transmission System Operator
Establish regional price zones to give sufficiently strong signals for locating powergeneration where it is most valuable
Develop a liquid and transparent wholesale electricity market, including a vibrantpower exchange
Develop demand side response
Ensure the regulator and competition authority have sufficient independence andresources© OECD/IEA 2016

IEEJ：October 2016 © IEEJ2016

IEA also welcomes natural gas market
reform
Gas infrastructure 2015

Combination of domestic and international market reform
efforts should benefit Japanese gas consumers© OECD/IEA 2016

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Renewable energy receiving a boost
 RES can help reduce CO2 emissions and import dependence 2012 feed-in tariffs led to fast growth in renewable electricity generation
 Growth concentrated to some regions and solar PV. Cost control and grid

integration became concerns.
 To control costs:
 tariffs for new facilities are reviewed every year
 comprehensive reform of the feed-in tariff system and other renewable energy

support policies is underway
 auctions for large solar PV projects will be introduced in April 2017.

 An independent body should be designated to address technical issues withgrid integration of variable renewables© OECD/IEA 2016

IEEJ：October 2016 © IEEJ2016

IEA recommendations:
how can Japan meet its challenges?
 Take measures to meet the 2030 and 2050 objectives

 increase low-carbon sources in TPES and electricity supply, and address
safety, costs and public acceptance continue to gradually introduce fiscal incentives and stricter requirements forenergy efficiency
 promote Japan’s proven potential for innovation in low-carbon technologies.
 Fully implement electricity and gas market reforms.
 Continue to support renewable energy, control the costs and aim for a morebalanced capacity mix by region and technology.

Contact :report@tky.ieej.or.jp© OECD/IEA 2016