According to the International Energy Agency, “2018 is the year of electricity” and global electricity supply “is being transformed by the rise of renewables”.
“Electricity has been the fastest growing element of final demand and is set to grow much faster than energy consumption as a whole over the next 25 years,” said Dr Fatih Birol, the IEA’s Executive Director.
Speaking yesterday at the launch in London of the IEA’s annual World Energy Outlook (WEO), Birol noted that the power sector now attracts more investment than oil and gas combined – a major shift for the energy market. And it also marks a similar shift for the IEA itself – for the first time, it devotes several chapters in the weighty WEO to electric power.
The WEO states that global electricity supply “is being transformed by the rise of renewables, putting electricity at the centre of the response to a range of environmental challenges”.
It stresses that “increasing digitalization of the global economy is going hand-in-hand with electrification, making the need for electricity for daily living more essential than ever. Electricity is increasingly the ‘fuel’ of choice for meeting the energy needs of households and companies.”
In what it calls its New Policies Scenario, the IEA forecasts that between now and 2040, nearly 90 per cent of electricity demand growth will be in developing countries, while demand in advanced economies will come on the back of policies promoting the electrification of mobility and heat.
And the IEA notes that the potential for further electrification from today “is huge”: 65 per cent of final energy use could technically be met by electricity – today’s figure is 19 per cent.
Birol also confirmed that for the first time, the total number of people with no access to electricity has fallen below 1 billion, driven in large part by the rural electrification efforts of the India government.
And this kind of government intervention will increase, predicts the IEA. It advises that governments will have a critical influence in the direction of the future energy system, far more so than in recent years.
“Over 70 per cent of global energy investments will be government-driven and as such the message is clear – the world’s energy destiny lies with government decisions,” said Dr Fatih Birol, the IEA’s Executive Director.
“Crafting the right policies and proper incentives will be critical to meeting our common goals of securing energy supplies, reducing carbon emissions, improving air quality in urban centres, and expanding basic access to energy in Africa and elsewhere.”
The WEO finds mixed signals on the pace and direction of change. Oil markets are “entering a period of renewed uncertainty and volatility, including a possible supply gap in the early 2020s”. Meanwhile, demand for natural gas is on the rise, “erasing talk of a glut, as China emerges as a giant consumer”.
The IEA notes that in power markets, “renewables have become the technology of choice, making up almost two-thirds of global capacity additions to 2040, thanks to falling costs and supportive government policies”.
Birol said that this “is transforming the global power mix”, and he forecast that the share of renewables in generation will rise to over 40 per cent by 2040, from 25 per cent today, even though coal remains the largest power source and gas remains the second-largest.
“This expansion brings major environmental benefits but also a new set of challenges that policy makers need to address quickly, he explained. “With higher variability in supplies, power systems will need to make flexibility the cornerstone of future electricity markets in order to keep the lights on.
“The issue is of growing urgency as countries around the world are quickly ramping up their share of solar PV and wind, and will require market reforms, grid investments, as well as improving demand-response technologies, such as smart meters and battery storage technologies.”