By Sebastine Obasi
Major transformations in the global energy system that may take place over the next decades, indicate that renewable energy and natural gas would be the big winners in the race to meet energy demand growth until 2040, the latest edition of the World Energy Outlook, the International Energy Agency’s flagship publication, said.
But a detailed analysis of the pledges made at the Paris Agreement on climate change indicated that the era of fossil fuels appears far from over and underscores the challenge of reaching more ambitious climate goals.
Still, government policies, as well as cost reductions across the energy sector, enable a doubling of both renewable, subject of a special focus in this year’s Outlook – and of improvements in energy efficiency over the next 25 years.
The report also indicates that natural gas will continue to expand its role while the shares of coal and oil will fall back.
“We see clear winners for the next 25 years, natural gas but especially wind and solar, replacing the champion of the previous 25 years, coal, but there is no single story about the future of global energy: in practice, government policies will determine where we go from here,” Dr. Fatih Birol, IEA’s Executive Director said.
The report shows that another year of lower upstream oil investment in 2017 would create a significant risk of a shortfall in new conventional supply within a few years.
In the longer-term, investment in oil and gas remain essential to meet demand and replace declining production, but the growth in renewables and energy efficiency lessens the call on oil and gas imports in many countries. Increased Liquefied Natural Gas shipments also change how gas security is perceived. At the same time, the variable nature of renewables in power generation, especially wind and solar, entails a new focus on electricity security.
“We are entering a period of greater oil price volatility. “If oil prices rise in the short term, then shale producers can react quite quickly to put more oil on the market, producing a see-saw movement. And if we continue to see subdued investments in new conventional oil projects, this could have profound consequences in the longer term,” Birol said.