I IEEJ：May 2019○ｃIEEJ 2019
Special Bulletin
A Japanese Perspective on the International Energy Landscape (430)

May 31, 2019

What Are the Driving Forces for Global Energy Transition?
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
Energy transition or global energy transition has become a keyword for energy stakeholders
in the world. If global energy transition is defined as long-term structural changes in global energy
supply and demand, markets and industries, it should be very significant for energy stakeholders
including energy policy planners, energy industry people, energy technology developers, energy sector
finance experts and those benefitting from energy consumption or use.
Nearly 20 years have passed since the 21st century started. The 20th century was called “thecentury of oil,” as described below. Oil is still a key energy source that accounts for the largest shareof global energy consumption. However, the oil share has steadily been decreasing. What would therepresentative energy source be for the 21st century? Energy stakeholders now widely recognize thatthe world is in a transition to a new age.
There may be numerous factors that exert influence on the global energy transition towards
a new era. Given the essential significance of energy, however, it will remain important to provide
energy in a stable, environmentally friendly and affordable manner. A key matter attracting attention
in regard to the environment is how far the world could implement low-carbonization ordecarbonization. This is because low-carbonization or decarbonization is a new challenge that has
never been seen in past energy transitions. In a bid to get useful implications for considering how theglobal energy transition would make progress and how the world would address the new challenge, Iwould like to analyze factors or driving forces for the past energy transitions.
Energy has remained an essential material or good that holds the key to survival for humanbeings. Over a very long term in human and social history, human beings have depended on naturalenergy sources. Human labor, livestock labor, traditional biomass (such as firewood), windmills,
waterwheels and other natural energy sources remained main energy sources even in the late modernperiod. A fundamental change came on the industrial revolution. Industrialization since the 19th
century has required far more energy consumption than ever before. Coal was selected on the supply
side to meet the giant change on the demand side. Since then, human society has forged ahead withmassive energy consumption. Therefore, what energy sources to select and how to meet such energy
demand have become central challenges for the global energy transition.
The transition to oil from coal as a central energy source for the industrial revolution maderapid progress. Various factors were behind the rapid transition to oil. However, a simple conclusion
is that oil took advantage of its competitiveness, abundance and convenience to replace coal as thelargest energy source. Nominally, it is no exaggeration that the dramatic expansion of oil astransportation fuel under the rapid diffusion of automobiles ushered in the century of oil. The discovery
and development of enormous oil resources mainly in the Middle East have played a key role in paving
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I IEEJ：May 2019○ｃIEEJ 2019the way for the century of oil. So have the development and diffusion of large tankers in a technologicalinnovation that has supported the massive oil transportation to large scale consuming areas in the world.
The oil crises in the 1970s brought about an inflection point in the century of oil. Thosecrises came as the world increased dependence on oil as the most competitive energy source, leading
the world to understand the importance of energy security as an externality. Since then, member
countries of the Organization for Economic Cooperation and Development have powerfully developed
policies to lower their dependence on oil and diversify energy sources. As a result, OECD oil demandhas stopped expanding, with oil’s energy mix share falling. Nevertheless, global oil consumption hascontinued expanding because non-OECD oil demand has robustly increased due to sustained
economic growth and progress in motorization. In anticipating future oil demand, therefore, we must
pay attention to what would bring about an inflection point in non-OECD oil demand.
In this way, factors behind the past global energy transitions included great changes inenergy consumption or use, dramatic changes in the availability of energy sources, the emergence anddiffusion of advanced or innovative energy technologies and the development of powerful energy
policies for specific purposes. Particularly, we must take note of the point that some external events
triggered or accelerated changes.
While having continued to reduce its share of global primary energy consumption since thebeginning of the 21st century, oil has remained the largest energy source, accounting for 34% of global
energy consumption as of 2017. Fossil fuels, including coal as the second largest energy source andnatural gas as the third largest in addition to oil, have a combined share of 85%, indicating that theworld depends heavily on fossil fuels. While stable energy supply and energy security remain
important challenges due to the structural dependence of energy supply, demand and markets on fossil
fuels, however, switching to non-fossil fuels is attracting global attention because of the importanceof addressing fossil fuel consumption’s environmental load including air pollution and climate change.
In this respect, the substantial expansion of renewable energy including solar photovoltaics
and wind power generation has recently attracted global attention due to a rapid decline in solar PV
and wind power generation costs. The advancement and diffusion of important electricity storage
technologies for addressing the intermittency of renewable energy are also given priority. In theautomobile field that exerted great influence on the century of oil, vehicle electrification and changes
in mobility are seen as key factors to innovate the energy field. Various other technologies leading toenergy transition are also blossoming, including innovative information technologies like artificial
intelligence and the Internet of Things, hydrogen and other innovative energy technologies, and newnuclear power generation technologies.
However, what technologies or energy sources would lead the global energy transition isstill uncertain at present. In the face of enormous uncertainties, all energy stakeholders will be required
to closely, coolly and objectively watch and analyze what policies, events, social need changes andtechnologies would drive innovations and shape a new energy world.

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