ALPS Symposium
9 February 2018
© OECD/IEA 2017

Tipping the energy world off its axis
 Four large-scale upheavals in global energy set the scene for the new Outlook: The United States is turning into the undisputed global leader for oil & gas
 Solar PV is on track to be the cheapest source of new electricity in many countries
 China’s new drive to “make the skies blue again” is recasting its role in energy The future is electrifying, spurred by cooling, electric vehicles & digitalisation

 These changes brighten the prospects for affordable, sustainable energy &require a reappraisal of approaches to energy security

 There are many possible pathways ahead & many potential pitfalls ifgovernments or industry misread the signs of change© OECD/IEA 2017

India takes the lead, as China energy growth slows
Change in energy demand, 2016-40 (Mtoe)

United States-30

Europe-200

135 Eurasia

Middle
East

China
790

485
Central and270
South America

Africa

480

India
1 005

Japan-50
Southeast
Asia
420

Old ways of understanding the world of energy are losing value as countries change roles:
the Middle East is fast becoming a major energy consumer & the United States a major exporter© OECD/IEA 2017

A asworld
in motion..
..
Chinamoves global energy markets, again
Change in world energy demand by fuel2 500

Coal (Mtce)30

Oil (mb/d)

2 000

Gas (bcm)

2 000

2 000

24

1 600

1 600

1 500

18

1 200

1 200

1 000

12800

800

500

6400

400

0- 5001990-2016 2016-40
1990-2016 2016-40

1990-2016 2016-40

China

1990-2016 2016-40

Low-carbon (Mtoe)

1990-2016 2016-40

Other countries

Low-carbon sources & natural gas meet 85% of the increase in global demand:
China’s switch to a new economic model & a cleaner energy mix drives global trends© OECD/IEA 2017

Solar PV forges ahead in the global power mix
Global average annual net capacity additions by typeCoal
2010-2016

Gas
NuclearRenewables
Coal
2017-2040

Solar PVWind

2040

20

Solar PV
4060

Other
80

100120 GW

80

Wind100

Other
120 GW 140

Gas
NuclearRenewables

60160 GW

China, India & the US lead the charge for solar PV, while Europe is a frontrunner for onshore &offshore wind: rising shares of solar & wind require more flexibility to match power demand & supply© OECD/IEA 2017

The future is electrifying
Electricity generation by selected region

Sources of global
electricity demand growth

China
United States
India

OtherEuropean Union

Electric vehicles

Southeast Asia

Industrial
motorsLargeappliances

Middle EastAfrica
2 000
2016

4 000

Growth to 2040

6 000

8 000

10 000TWh

Connected& small
appliances

Cooling

India adds the equivalent of today’s European Union to its electricity generation by 2040,
while China adds the equivalent of today’s United States© OECD/IEA 2017

EVs are on the way, but oil demand still keeps rising

Million cars

Electric car fleet
300

Change in global oil demand
16

Other countries

200

United States
India

12

European Union
China

8
4mb/d100

2016

2025

2040

0-4Petrochemicals
Aviation and shippingTrucks
Passenger cars
Other sectors
2016-2040

Electric cars are helping to transform energy use for passenger cars, slowing the pace of growth inglobal oil demand: however, trucks, aviation, shipping & petrochemicals keep oil on a rising trend© OECD/IEA 2017

US becomes undisputed leader of oil & gas production
Oil and gas production in the United States
mboe/d35Shale oil
Shale gas
Other unconventionals
Conventional oil & gas

302520151051980

1990

2000

2010

2020

2030

2040

The US is already switching to become a net exporter of gas & becomes a net exporter of oilin the 2020s, helped also by the demand-side impact of fuel efficiency & fuel switching© OECD/IEA 2017

LNG ushers in a new global gas orderGlobalGas importers
exporters
gas trade
1 230 bcm in 2040
China

706 bcm in 2016
China
EuropeEurope
52%

Russia& Caspian

MiddleEastEuropeEurope
35%

Asia
37%
Japan
Africa & Korea&39% shipped byUSLNG
Other
Other
Asia
Australia Canada OtherRussia
Other& Caspian

US& CanadaAfrica
Asia
Japan& 60%Korea

59% shipped by LNG
Other Asia
AustraliaMiddle
Other
East

Asia’s growing gas import requirements are largely met by LNG,
with exports from the US accelerating a shift towards a more flexible, liquid global market© OECD/IEA 2017

China a major force in global gas markets
China projected LNG demand versus contracted supply
bcm

140

LNG demand

120
100
80
604020Contracted LNG
20152025

2030

2035

2040

Industrial gas demand leads the way as China accounts for one-quarter of global gas growth to 2040;
China’s growing import needs become a major spur for investment in new global supply© OECD/IEA 2017

China leads the push for clean energy technologies
China’s share of global investment, 2017-2040
Electric vehicles
WindSolar PV
Nuclear
Energy efficiency
10%

20%

30%

40%

50%

China is the leading global investor in power generation and end-use sectors; its emphasis
on clean energy investment is a driver of the global clean energy transition© OECD/IEA 2017

Gt

A new strategy for energy & sustainable development
40

Global CO2 emissions by scenario
New Policies Scenario

30
Sustainable
DevelopmentScenario

20
Sustainable Development Scenario
1020002010

2020

2030

2040

The Sustainable Development Scenario reduces CO2 emissions in line with the objectives of theParis Agreement, while also tackling air pollution and achieving universal energy access© OECD/IEA 2017

Achieving CO2 reductions while meeting air quality andenergy access goals
China energy-related CO2 emissions
Gt CO2 10

New Policies Scenario

839% Efficiency
31% Renewables

6422010

Sustainable
Development Scenario
2020

2030

4%7%
15%
5%

Fuel-switching
NuclearCCS
Other2040

Energy efficiency is central to the steep decline in emissions
seen in the Sustainable Development Scenario© OECD/IEA 2017

Rethinking the energy sector
The Sustainable Development Scenario in 2040

2875

times
more efficientthan today

million electricvehicles

3 250
global solar PV capacity

GW580bcm
additional gas demand

Achieving the three targets of the Sustainable Development Scenario simultaneously
requires a step change in the pace of delivering a clean energy transition© OECD/IEA 2017

Natural gas is the only fossil fuel to grow in theSustainable Development Scenario
Fossil fuel demand in the New Policies Scenario & Sustainable Development Scenario
Mtoe 5 000
4 000
3 000
2 000

New Policies Scenario

OilCoalSustainable DevelopmentScenario

Gas

1 00002000

2005

2010

2015

2020

2025

2030

2035

2040

Coal & oil demand drop in the Sustainable Development Scenario. Gas becomes the largest fossil fuelby 2040 alongside the rapid expansion of low-carbon technologies & improvements in efficiency© OECD/IEA 2017

A complex picture for gas,a clear downward path for coal
Share of coal & gas in energy demand in selected regions in the Sustainable Development Scenario
Share of coal 70%
in primary energy
60%

China

2016
2025

50% India

2040

40%30%20%

Europe10%0%North America

Eurasia
Middle East

10%

20%

30%

40%

50%

60%

Share of gas in primary energy

The share of coal in total primary energy demand falls across all regions in the Sustainable
Development Scenario, but opportunities for gas vary by country, by sector and over time
© OECD/IEA 2017

Air quality is an energy issue
Concentration of fine particulate matter in China

Today
2040: NewPolicies Scenario

2040: SustainableDevelopmentScenario

Source: WEO analysis, IIASA

Urbanisation & an ageing population increase vulnerability to health impacts in China,
but a clean energy transition cuts pollutant emissions considerably© OECD/IEA 2017Electricity access makes progress in all regions,but sub-Saharan Africa lags behind
Population without electricity accessMillion 600people

Sub-SaharanAfricaSub-SaharanAfrica400
India
Other Asia

200

2000

2005

2010

2016

2020

2025

Other Asia
India
2030

Many countries, led by India, are on track to achieving full electrification by 2030,
but – despite recent progress – efforts in sub-Saharan Africa need to redouble© OECD/IEA 2017

Achieving access for all by 2030

© OECD/IEA 2017

Achieving universal energy access is not in
conflict with climate goals
 Grid extension for 150 million additional people,

with hydro accounting for the lion’s share

On-Grid
Mini-Grid
Off-Grid
Existing grid

 Decentralised solutions, mainly solar PV, for theremaining 450 million people in rural areas

 An additional $26 billion per year is needed inelectricity generation and grids

Policies of the Sustainable Development Scenario achieve universal energy access by 2030,improving human health and supporting the achievement of climate change goals© OECD/IEA 2017

Sustainable investment needs

USD billion (2016)

Average annual investment in the Sustainable Development Scenario
1 600

Energy supply

Energy demand

1 200800400

2016

Fossil fuels
Nuclear and CCS

2017-40

Renewables
T&D

2016

2017-40

Buildings
Industry

Transport

The Sustainable Development Scenario requires 15% additional investment to 2040; twothirds of energy supply investment are needed for electricity generation & networks© OECD/IEA 2017

The digital transformation of the energy system

Pre-digital energy systems are defined by unidirectional flows and distinct roles,
digital technologies enable a multi-directional and highly integrated energy system© OECD/IEA 2018

Providing system flexibility from the demand side
Uncontrolled demand process, no system optimisation

5040

GW

30201002448

Uncontrolled demand profile

GW

1000
© OECD/IEA 2018

Providing system flexibility from the demand side
5040

GW

30201002448

Optimised demand profile

GW

1000
© OECD/IEA 2018

Providing system flexibility from the demand side
Optimised demand process

System peak reduction

5040GW3020Reduced net load ramping
Use coincident with PV output

1002448

Optimised demand profile

GW

1000© OECD/IEA 2018

Smart demand responseResidential sector

1 billion households and11 billion smart appliances
could actively participate ininterconnected electricity
systems
Demand response programs – in buildings, industry and transport - could provide 185 GW of flexibility,and avoid USD 270 billion of investment in new electricity infrastructure© OECD/IEA 2018

Conclusions
 The oil & gas boom in the United States is shaking up the established order, with majorimplications for markets, trade flows, investment & energy security

 The versatility of natural gas means that it is well placed to grow, but it cannot afford

price spikes or uncertainty over methane leaks

 China continues to shape global trends, but in new ways as its “energy revolution”

drives cost reductions for a wide range of clean energy technologies

 Our strategy for sustainable energy shows that concerted action to address climatechange is fully compatible with global goals on universal access & air quality

 Electrification & digitalisation are the future for many parts of the global energy system,

creating new opportunities but also risks that policy makers have to address – WEO
2018 will focus on electricity© OECD/IEA 2017

iea.org/weo© OECD/IEA 2017