The International Energy Agency (IEA) has recently published the latest edition of the World Energy Outlook, the first report after the Paris Agreement on climate change issued on November 4th. It reports that renewables and natural gas will become the ‘the big winners’ in the race to meet growing energy demand within the next 25 years.
“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,” said Dr Fatih Birol, the IEA’s executive director.
Under the Paris agreement, countries have committed to keeping temperature rises to well below 2C and pursue efforts to limit them to 1.5C. In order to meet the temperature goals, the world will need to achieve net zero emissions by the second half of the 21st century, requiring serious commitments from leading economies. The development of renewable energy will have an important part to play in turning the tide on climate change.
In one of the possible scenarios, almost 60% of the power capacity used globally will be supplied by clean energy in the future (mostly wind and solar), resulting in a cost-competitive sector that would no longer rely on subsidies to grow. In this scenario, growth in demand for oil will gradually decrease and coal expansion is expected to slow down to a half by 2040, even as energy consumption is expected to rise to 30% during that period. In recent years, China has in fact begun to decrease significantly its demand for coal due to new efforts to combat air pollution and diversify the fuel mix.
Among the clean energy sources, rapid growth is expected for solar PV, whose average costs will drop between 40-70% and wind energy, a sector that will experience a decrease in cost of between 10 – 25%. China and India are countries where solar PV records the highest growth.
Many of the commitments made in Paris focus on the renewable energy sector. Among the leading economies, the United States, European Union and Japan seem to be able to achieve their climate commitments, although it will be crucial to developing further improvements in energy efficiency.
“Renewables make very large strides in coming decades but their gains remain largely confined to electricity generation,” said Birol. “The next frontier for the renewable story is to expand their use in the industrial, building and transportation sectors where an enormous potential for growth exists.’’
On a global level, we are entering a period of major volatility. Oil demand for passenger cars is projected to decrease even as the number of vehicles will double in the next quarter century, mainly due to improvements in efficiency, but also because of the increase in the use of biofuels and the demand in selling electric cars.
Read more about the topic and access the report here.