by Shane Henson — November 29, 2013—Renewable energy sources could account for nearly half of the increase in global power generation through 2035, according to the International Energy Agency’s (IEA) World Energy Outlook 2013 (WEO-2013). Wind energy and solar energy could make up 45% of that expansion in renewables.
Bringing together the latest data and policy developments, WEO-2013 provides projections of energy trends through to 2035, fuel by fuel, sector by sector, region by region, and scenario by scenario. The report presents a central scenario in which global energy demand rises by one-third in the period to 2035. The shift in global energy demand to Asia gathers speed, but China moves towards a back seat in the 2020s as India and countries in Southeast Asia take the lead in driving consumption higher.
The Middle East also moves to center stage as an energy consumer, becoming the world’s second-largest gas consumer by 2020 and third-largest oil consumer by 2030, redefining its role in global energy markets. Brazil, a special focus in WEO-2013, maintains one of the least carbon-intensive energy sectors in the world, despite experiencing an 80% increase in energy use to 2035 and moving into the top ranks of global oil producers.
Energy demand in OECD (Organisation for Economic Co-operation and Development) countries barely rises and by 2035 is less than half that of non-OECD countries. Low-carbon energy sources meet around 40% of the growth in global energy demand. In some regions, rapid expansion of wind and solar photovoltaic raises fundamental questions about the design of power markets and their ability to ensure adequate investment and long-term reliability, according to the report.
Availability and affordability of energy
The report also notes that the availability and affordability of energy is a critical element of economic well-being and, in many countries, also of industrial competitiveness. Natural gas in the United States currently trades at one-third of import prices to Europe and one-fifth of those to Japan. Average Japanese or European industrial consumers pay more than twice as much for electricity as their counterparts in the United States, and even China’s industry pays almost double the U.S. level.
In WEO-2013, large variations in energy prices persist through to 2035, affecting company strategies and investment decisions in energy-intensive industries. The United States sees its share of global exports of energy-intensive goods slightly increase to 2035, providing the clearest indication of the link between relatively low energy prices and the industrial outlook. By contrast, the European Union and Japan see their share of global exports decline—a combined loss of around one-third of their current share.
Energy efficiency
Among the options open to policy makers to mitigate the impact of high energy prices, the report highlights the importance of energy efficiency: two-thirds of the economic potential for energy efficiency is set to remain untapped in 2035 unless market barriers can be overcome. One such barrier is the pervasive nature of fossil-fuel subsidies, which incentivize wasteful consumption at a cost of $544 billion in 2012.
Accelerated movement toward a global gas market could also reduce price differentials between regions. Gas market and pricing reforms in the Asia-Pacific region and liquefied natural gas exports from North America can spur a loosening of the current contractual rigidity of internationally traded gas and its indexation to high oil prices.
Climate change
Action to reduce the impact of high energy prices does not mean diminishing efforts to address climate change, says the report. Energy-related carbon-dioxide emissions are projected to rise by 20% to 2035, leaving the world on track for a long-term average temperature increase of 3.6 °C, far above the internationally agreed 2 °C climate target. The report emphasizes the importance of carefully designed subsidies to renewables, which totaled $101 billion in 2012 and expand to $220 billion in 2035 to support the anticipated level of deployment.
