According to the International Energy Agency’s (IEA) flagship World Energy Outlook (WEO) 2023 report, demand for fossil fuels, including coal, oil and natural gas, is expected to peak this decade under the current policy setting. According to the current policy scenario, the rapid growth of clean energy technologies and structural economic and geopolitical changes will dramatically change the energy system in the coming years.
The IEA’s WEO report examines and analyzes the main trends in the energy market, providing multi-decade forecasts for energy investments and developments under three scenarios: the Stated Policies Scenario (STEPS), based on existing government policies; The Announced Pledges Scenario (APS), which assumes that governments’ ambitious goals will be achieved, and; The Net Zero Emissions by 2050 Scenario (NZE), which encapsulates the necessary energy market transformation required to achieve the global goal of achieving net zero emissions by 2050.
While last year’s WEO report found evidence that responses to Russia’s war in Ukraine led to accelerated investments toward energy independence and the clean energy transition, the new report points to a further acceleration of investments in clean energy and a shift away from fossil fuels. . Under the current policy-based STEPS scenario, the IEA predicts that global energy investment will increase to $3.2 trillion in 2030, up from $2.8 trillion in 2023, with clean energy investment reaching 2.1 will reach $1 trillion and account for the entire increase, while fossil fuel investment will decline slightly for the first time to $1.1 trillion.
The report points to a major shift in the global energy system in the STEPS scenario by the end of the decade, with clean energy technologies becoming significantly more prominent, including having almost ten times as many electric vehicles on the road worldwide, the share of renewable energy sources in the electricity production mix increases from 30% to 50%, and electric heating systems such as heat pumps start to surpass sales of fossil fuel boilers by 2030.
In addition to geopolitical and economic changes, recent policy changes have also contributed to brighter clean energy prospects. For example, the US Inflation Reduction Act has increased the IEA’s forecast that US car registrations will be 50% electric by 2030, up from a 12% forecast just two years ago.
However, despite the improved prospects for clean energy, the report notes that the STEPS scenario still falls far short of the changes needed to achieve the goal of limiting global warming to 1.5°C, and in instead leads to a temperature increase of 2.4 °C, a slight decrease compared to 2.5 °C in last year’s STEPS scenario. While the report notes that a 1.5°C path remains possible, it remains very difficult, with clean energy investments expected to reach $4.2 trillion in 2030 under the NZE scenario, doubling in advanced economies and China, and almost five times higher than today. levels in emerging and developed economies.
One of the key variables affecting the energy system prospects examined in the report is the impact of ongoing and forecast changes in China. While China is responsible for almost two-thirds of the increase in global oil consumption over the past decade, and remains the dominant player in the coal market, the report examines the impact of a slowdown in the build-out of the country’s physical infrastructure and reduced economic growth. reducing demand for energy-intensive industries such as steel and cement. In addition to significant investments in clean energy capacity, these changes lead to predictions of a peak in energy demand in China around the middle of the decade, and reductions in China’s fossil fuel demand and emissions.
The report also explores the possibility that solar energy could make a much greater contribution to the clean energy transition, noting that while global annual solar capacity could reach 1,200 GW by 2030, only 500 GW is expected to be deployed under the STEPS scenario. According to the IEA analysis, increasing capacity utilization to just 70% of expected capacity would have a major impact on clean energy prospects, bringing deployment levels to those needed in the Net Zero scenario. However, accommodating this level of solar energy would require significant investments in areas such as networking and storage.
IEA Executive Director Fatih Birol said:
“The transition to clean energy is taking place worldwide and cannot be stopped. It’s not a matter of ‘if’, it’s just a matter of ‘how soon’ – and the sooner, the better for all of us. Governments, companies and investors must support the transition to clean energy rather than hinder it. Tremendous benefits will be delivered, including new industrial opportunities and jobs, greater energy security, cleaner air, universal access to energy and a safer climate for all. Considering the ongoing tensions and volatility in today’s traditional energy markets, claims that oil and gas are safe or secure choices for the world’s energy and climate future appear weaker than ever.”
click here to access the IEA’s World Energy Outlook 2023 report.