The International Energy Agency (IEA) has released its latest report on world energy outlook for 2022, indicating there’s a need for investment in renewable energy business.
The global energy crisis sparked by Russia’s invasion of Ukraine is having far-reaching implications for households, businesses and entire economies.
High energy prices are causing a transfer of wealth from consumers to producers, back to the levels seen in 2014 for oil, but unprecedented for natural gas. High fuel prices account for 90 percent of the rise in the average costs of electricity generation, natural gas alone for more than 50 percent. The costs of renewables and carbon dioxide have played only a marginal role, underscoring that this is a crisis where energy transitions are the solution, rather than the problem.
Price and economic pressures mean that the number of people without access to modern energy is rising for the first time in a decade. Around 75 million people who recently gained access to electricity are likely to lose the ability to pay for it, and 100 million people may revert to the use of traditional biomass for cooking.
The crisis provides a short-term boost to demand for oil and coal as consumers scramble for alternatives to high priced gas. The lasting gains from the crisis accrue to low-emissions sources, mainly renewables, but also nuclear in some cases, alongside faster progress with efficiency and electrification, e.g. electric vehicles.
In the Stated Policies Scenario (STEPS), global energy demand growth of around 1 percent per year to 2030 is met in aggregate almost entirely by renewables. Emerging market and developing economies, such as India, see increases across a broader range of fuels and technologies, while the only sources to show growth in advanced economies to 2030 are low-emissions.
The cost advantages of mature clean energy technologies and the prospects for new ones, such as low-emissions hydrogen, are boosted by the Inflation Reduction Act in the United States, Europe’s increased push for clean energy, and other major new policies. The result is to turbo-charge the emerging global clean energy economy.
The STEPS in this Outlook is the first World Energy Outlook (WEO) scenario based on prevailing policy settings that sees a definitive peak in global demand for fossil fuels. Coal demand peaks in the next few years, natural gas demand reaches a plateau by the end of the decade, and oil demand reaches a high point in the mid-2030s before falling slightly. From 80 percent today – a level that has been constant for decades – the share of fossil fuels in the global energy mix falls to less than 75 percent by 2030 and to just above 60 percent by mid‑century. In the Announced Pledges Scenario (APS), the drive to meet climate pledges in full sends demand for all the fossil fuels into decline by 2030.
With the loss of its largest export market in Europe, Russia faces the prospect of a much-diminished role in international energy affairs. 2021 proves to be a high-water mark for Russian export flows. Its share of internationally traded gas, which stood at 30 percent in 2021, falls to 15 percent by 2030 in the STEPS and to 10 percent in the APS. Importers in China have been actively contracting for liquefied natural gas, and there is no room in China’s projected gas balance for another large-scale pipeline from Russia.
Energy-related CO2 emissions rebounded to 36.6 Gt in 2021, the largest ever annual rise in emissions. In the STEPS, they reach a plateau around 37 Gt before falling slowly to 32 Gt in 2050, a trajectory that would lead to a 2.5 °C rise in global average temperatures by 2100. This is around 1 °C lower than implied by the baseline trajectory prior to the Paris Agreement, indicating the progress that has been made since then. In the APS, emissions peak in the mid‑2020s and fall to 12 Gt in 2050, resulting in a projected global median temperature rise in 2100 of 1.7 °C. In the Net Zero Emissions by 2050 (NZE) Scenario, CO2 emissions fall to 23 Gt in 2030 and to zero in 2050, a trajectory consistent with limiting the temperature increase to less than 1.5 °C in 2100.
Planned increases in clean energy manufacturing capacity provide a leading indicator of the potential for rapid increases in deployment. In the case of heat pumps, current and planned manufacturing capacity is below the deployment levels projected in the APS. But announced global manufacturing capacity for electrolysers and solar PV modules in 2030 is sufficient not only to reach APS deployment levels but to go beyond them.
One point common to each scenario is the rising share of electricity in global final energy consumption. From 20 percent today, this increases in each scenario, reaching more than 50 percent by mid-century in the NZE Scenario. This is associated with a huge increase in global electricity demand – with the bulk of this growth coming from emerging market and developing economies – and the need for vigilance from policy makers to a range of risks to electricity security, in particular the ever increasing need for flexible operation of power systems.
IEA said s smooth and secure energy transition will require a major uptick in clean energy investment flows. Getting on track for the NZE Scenario will require a tripling in spending on clean energy and infrastructure to 2030, alongside a shift towards much higher investment in emerging market and developing economies.