For the first time, global demand for each of the fossil fuels shows a peak across all World Energy Outlook scenarios, with Russian exports, in particular, falling significantly as the world energy order is reshaped.
This is one of the key findings in the International Energy Agency’s (IEA) World Energy Outlook 2022 report (WEO), released amidst what has been hailed as the first truly global energy crisis.
Fossil fuel peak
For the first time ever, a WEO scenario based on today’s prevailing policy settings has global demand for every fossil fuel exhibiting a peak or plateau. In the Stated Policies Scenario, coal use falls back within the next few years, natural gas demand reaches a plateau by the end of the decade, and rising sales of electric vehicles (EVs) mean that oil demand levels off in the mid-2030s before ebbing slightly to mid-century.
This means that total demand for fossil fuels declines steadily from the mid-2020s to 2050 by an annual average roughly equivalent to the lifetime output of a large oil field.
The share of fossil fuels in the global energy mix in the Stated Policies Scenario falls from around 80% to just above 60% by 2050.
IEA’s executive director Fatih Birol said at the report launch, “It’s the first time since the Industrial Revolution that we will see a fossil fuel peak in the 2030s.”
Other key findings
- While energy markets remain extremely vulnerable, especially for natural gas, coal, and electricity, long terms actions from governments around the world are accelerating positive change. Examples are the US Inflation Reduction Act and Europe’s RePowerEU package.
- Supply chains for some key technologies – including solar PV and electrolyzers – are expanding at rates that support greater global ambition.
- In the case of electrolyzers for hydrogen production, the potential excess of capacity of all announced projects is around 50%.
- In the longer term, one of the effects of Russia’s recent actions is that the era of rapid growth in gas demand draws to a close. In the Stated Policies Scenario, the scenario that sees the highest gas use, global demand rises by less than 5% between 2021 and 2030 and then remains flat through to 2050. Momentum behind gas in developing economies has slowed, notably in South and Southeast Asia, putting a dent in the credentials of gas as a transition fuel.
Policies and investments
Stronger policies will be essential to drive the huge increase in energy investment that is needed to reduce the risks of future price spikes and volatility, according to this year’s WEO.
While clean energy investment rises above $2 trillion by 2030 in the States Policies Scenario, it would need to be above $4 trillion by the same date in the Net Zero Emissions by 2050 Scenario, highlighting the need to attract new investors to the energy sector.
And major international efforts are still urgently required to narrow the divide in clean energy investment levels between advanced economies and emerging and developing economies.
Synchronize scaling up a range of clean energy technologies with scaling back of fossil fuels.
Many companies and financial organizations have set goals and plans to scale down investment in fossil fuels. Much more emphasis is needed on their goals and plans for the scaling up of investment in clean energy technologies, and on what governments can do to incentivize this.
Sequencing is important: continuing investment in fossil fuels is needed to keep supply and demand in balance while energy transitions are in progress, but the extent of this requirement is entirely dependent on the speed at which clean energy investment scales up.
Manage the retirement and reuse of existing infrastructure carefully, bearing in mind that some of it will be essential for a secure journey to net zero emissions.
Some parts of the existing fossil fuel infrastructure perform functions that will remain critical for some time, even in very rapid energy transitions. For example, the importance of gas‐fired power for electricity security actually increases in many countries during energy transitions before falling – especially in systems with significant seasonal variations in demand. In the European Union, peak requirements for natural gas go up through to 2030 even though overall or aggregate demand goes down. Managing the decline in refinery capacity is also important: even in markets where internal combustion engine (ICE) vehicle sales are banned, oil demand for transport does not disappear immediately.
Unplanned or premature retirement of this infrastructure will have negative consequences for energy security and for jobs.
A new energy order
The report dispels the myth that the energy crisis has been caused by a shift to clean energy, but does emphasize that the current crisis situation will ultimately spur progress to a new, cleaner energy system.
“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” said Birol. “Even with today’s policy settings, the energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable, and more secure energy system.”
Commenting on this report in a statement, Sushil Purohit, president of Wärtsilä Energy and EVP of Wärtsilä said: ”Today’s IEA World Energy Outlook report demonstrates that we have reached a tipping point – now is the time to increase our ambition and accelerate towards net zero. From replacing inflexible coal‐fired power plants with agile balancing engines, to integrating more hydrogen and energy storage onto the grid, the pathway to net zero needs to prioritize flexible technologies that do not compete with renewables for the limelight. Like backing singers in the band, flexible solutions must support the star of the show – renewable energy.”
Originally published by Pamela Largue at Power Engineering International.
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Author: Renewable Energy World