Today, the world is in the midst of the first truly global energy crisis, with impacts that will be felt for years to come. Russia’s unprovoked invasion of Ukraine in February has had far‐ reaching impacts on the global energy system, disrupting supply and demand patterns and fracturing long‐standing trading relationships. The crisis is affecting all countries, but at the International Energy Agency (IEA), we are particularly concerned about the effect it is having on the people who can least afford it. One of the striking findings in this year’s World Energy Outlook (WEO) is that the combination of the Covid pandemic and the current energy crisis means that 70 million people who recently gained access to electricity will likely lose the ability to afford that access – and 100 million people may no longer be able to cook with clean fuels, returning to unhealthy and unsafe means of cooking. That is a global tragedy. And it is not only an energy crisis with which wevare dealing: many countries also face a food security crisis and increasingly visible impacts ofvclimate change.
Moreover, there isscant evidence to support the notion that netzero emissions pledges have stifled traditional investmentsin supply, asthese pledges are not yet correlated with changes in fossil fuel spending. Most net zero emissions pledges are recent, and many have yet to be translated into specific plans and policy measures. Our analysis of fossil fuel investment in countries with netzero emissions pledges(68 countries plusthe European Union)showsthat they are at a similar level to where they were in 2016, and that changes in investment levels in those countries in recent years are not noticeably different from those that have taken place in countries without net zero emissions pledges (Figure 1.3).
Outlook for energy markets and security Today’s high energy prices and gloomy economic outlook lead to lower energy demand growth in the STEPS and APS, both in the near term and out to 2030, than in the WEO‐2021 (IEA, 2021a). Faced with market uncertainty and high prices, consumers are forgoing purchases and industry is scaling back production. Despite a strong economic rebound from the pandemic in 2021, the assumed rate of average annual GDP growth for the rest of the decade has been revised down slightly to 3.3% (see Chapter 2). Energy demand rises more slowly in both the STEPS and APS as a result, and the mixture of fuels used to meet this demand growth changes substantially from previous projections (Figure 1.8).
Background to the global energy crisis The historic plunge in global energy consumption in the early months of the Covid‐19 crisis in 2020 drove the prices of many fossil fuels to their lowest levels in decades. However, the price rebounds since mid‐2021 have been brutally quick (Figure 2.1). Oil prices that briefly moved into negative territory in 2020 have been back around or above USD 100/barrel. Coal prices have reached record levels. Spot natural gas prices in Europe have regularly been above USD 50 per million British thermal units (MBtu), more than double the crude oil price on an energy‐equivalent basis. Tight gas and coal markets have fed through into exceptionally high electricity prices in many markets. The global energy crisis has hurt households, industries and entire economies around the world, with the poorest and most vulnerable suffering particular hardship.
Thanks to electrification, improvements in energy efficiency and behavioural changes total energy supply declines by 10% between 2021 and 2030 even as the global economy grows by nearly a third. The annual rate of energy intensity improvement nearly triples as it rises to more than 4% per year. Unabated sources of supply decline by nearly a third, with unabated coal falling by nearly one‐half and unabated natural gas by more than one‐quarter by 2030. This contrasts with the NZE Scenario in the World Energy Outlook 2021 (WEO‐2021), in which natural gas held on to a largershare of the global energy mix for a little longer: the change reflects heightened energy security concerns around natural gas precipitated by Russia’s invasion of Ukraine. Oil also declines by around one‐ fifth to 2030 as a result of energy efficiency gains, behavioural change and increasing electrification in transport.
The global average CO₂ intensity of electricity generation declines in all scenarios from its level of 459 grammes of carbon dioxide per kilowatt‐hour (g CO2 /kWh) in 2021, falling by 2030 to 330 g CO2/kWh in the STEPS, 280 g CO2/kWh in the APS and 165 g CO2/kWh in the NZE Scenario. By 2050, the average intensity of electricity generation ranges from 160 g CO2/kWh in STEPS to slightly below zero in the NZE Scenario. However, countries start from different places in 2021 and their pathways vary. In general, the rapid growth of power systems in emerging market and developing economies and higher use of unabated coal result in an average CO2 intensity of electricity generation that is 70% higherthan the average in advanced economies (Figure 6.14). In advanced economies, while stated policies lead to significant reductionsin annual emissions, announced pledges lead to faster reductions, with the United States and the European Union reaching net zero emissions electricity by 2040, and Japan and Korea by 2050. A number of emerging market and developing economies have also pledged to reach net zero emissions, and this leads in the APS to deep reductions in the CO2 intensity of electricity by 2050 in Africa, China, India, Middle East and Southeast Asia.
The future uptake of low‐emissions hydrogen‐based liquid fuels depends crucially on finding ways to reduce production costs. Cheaper renewable energy and carbon capture, utilisation and storage (CCUS) will make a big difference, but dedicated projects are also needed to improve low‐emissions hydrogen and ammonia production technologies and to reduce efficiency losses across the value chain. There has been recent progress on this front. The largest power generation company in Japan, JERA, issued a tender in 2022 for up to 0.5 Mt of low‐emissions ammonia (around 5 thousand barrels of oil equivalent per day [kboe/d]) to replace 20% of the coal at a large power plant unit from 2027. Maersk, a leading shipping company, has commissioned 19 methanol‐fuelled container ships and it is studying how to ensure that the methanol they use is produced from sustainable biomass. In Germany, a 350 tonne per year plant for the production of synthetic kerosene opened in 2022 next to an existing synthetic methane plant and a source of CO2 from biogas upgrading.
In the APS, global coal trade falls by 25% to 2030 and by 60% to 2050. There is 470 Mtce of coal imported in 2050, mainly by countries with large distances between domestic production and consumption hubs and where differences in coal quality require domestic production to be supplemented with imports. Imports of coking coal in India increase by 40% to 2030 as it expands steel production. Indonesian exports drop by 30% to 2030 as the market for steam coal shrinks. Australia fares better, with coal exports falling by less than 20% to 2030, although its exports fall by about 50% between 2030 and 2050 as the use of clean energy technologies increases.
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