The IEA lays out possible green energy scenarios

Renewables continue their victorious march, fossil fuel markets keep on flinching and once again energy security and future demand are central issues of everyone’s concern. Although things might seem clear on the surface, it has been a turbulent year for the global energy sector, which has been preparing itself for major changes in the upcoming decades.

And nobody knows this better than experts at the International Energy Agency (IEA) who have just published  their new World Energy Outlook 2018 report. The flagship publication looks into how diverse technologies, fuel types and political choices can lead to totally different futures and what it will take to create a sustainable energy system by 2040.

In power markets, renewables are again one the rise. Declining costs and government subsidies can help them get two-thirds of added global capacity before 2040, raising their share to 40% from today’s 25%. According to the projections, coal will remain the largest source and gas the second-largest, while the report scenarios also heavily rely on negative emissions, a technology that has yet to prove its actual potential. 

All this will not make climate activists happy: many of them would want to see 100% renewables by 2050. Meanwhile, IEA projections are famous for underestimating the potential of solar, which means there might be more room for renewables in the future than the report suggests. 

Another major challenge is growing energy demand. Under one of the scenarios energy demand is expected to grow by over 25% by 2040, requiring more than $2 trillion of investments per year. Still, electricity markets are among leaders in the field due to increasing demands of the digital economy, EVs and other new technologies.

Electricity is one of the key focus topics of the publication, showing that increasing electrification will lead to a peak in oil demand by 2030. But the impact of transformation will be negligible if the switch to renewables and low-carbon technologies won’t speed up. Meanwhile, a more diverse energy mix will make flexibility the key to effective electricity markets. Demands-response technologies, extended storage, smart meters and smart grid:  all these will need major investments if we want the transition to be smooth. 

Considering the scope of the challenges, governments should actively participate in creating sustainable energy systems in all future scenarios. “Our analysis shows that over 70% of global energy investments will be government-driven,” says Dr Fatih Birol, the IEA’s executive director. “Crafting the right policies and proper incentives will be critical to meeting our common goals of securing energy supplies, reducing carbon emissions, improving air quality in urban centers, and expanding basic access to energy in Africa and elsewhere.”

The IEA’s most optimistic Sustainable Development Scenario suggests that meeting climate targets and universal access goals is possible only if CO2 emissions from energy peak by 2020 and then steadily decline, which is in line with another recent report. A large share of emissions linked to energy infrastructure is, however, firmly locked in, particularly in Asia, where coal plants are much younger than their counterparts in Europe and the US. This might be one of the hardest challenges for decarbonization in the following decades. 

According to Dr. Birol, “all current and under-construction energy infrastructure around the world – such as power plants, refineries, cars and trucks, industrial boilers, and home heaters – … will account for some 95% of all emissions permitted under international climate targets in coming decades.” This means that if we are serious about the Paris targets, investments into sustainable energy need to become a systematic global preference, while the transformation will require “unprecedented global political and economic effort.”