The International Energy Agency (IEA) released on 10 November its 2009 edition of the World Energy Outlook (WEO). All the elements of the sustainable energy paradigm as it is discussed today are present. Similarly, the WEO underlines the same urgency to act towards a energy transition, energy being at the heart of the climate problem and the solution. Some new issues appear, which are summarised below.
The effects of the financial crisis - They were "dramatic", and will continue to impact the energy markets for a few years. But all financial and monetary stimulus plans included measures to promote clean energy. Indeed, the WEO argues that the financial crisis opened "an unprecedented, yet relatively narrow, window of opportunity" in favour of low carbon technologies. The recession helped reduce GHG emissions. The question is to know whether it will last.
Energy investments - The 2008 WEO already stressed the importance of energy investments. In 2009, the WEO relates the general fall in investments in both conventional and renewable energy sources, to the financial crisis. "Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious consequences for energy security, climate change and energy poverty" (p.43).
The novelty in the 2009 edition is that the WEO insists on the role of governments in "changing the mix of energy investment," independently from actions at household and business levels. Investment policies should be more regulated, either at national and/or international scales, to secure low-carbon options. Based on the level of regulatory and policy measures, the WEO distinguishes two possible scenarios: a Reference Scenario of business as usual; a 450 Scenario that aims to limit concentration of GHG to 450 parts per million of CO2-equivalent (ppm CO2-eq).
Security of energy supply - It remains a strong concern, for different reasons: non-OECD countries will increase their imports of oil; all regions are projected to increase their gas imports; the dominance of few producing countries (in particular Russia, and Middle-East countries) that could be tempted to take profit of their market power.
Low carbon energy revolution - Investment will be crucial for the realisation of the 450 Scenario. The latter "entails $10.5 trillion more investment in energy infrastructure and energy-related capital stock globally than in the Reference Scenario," 45% of which should be dedicated to the transport sector (p.47). New technologies will play a central role, and in particular carbon capture and storage (CCS), plug-in hybrids and electric vehicles. But new financing mechanisms are necessary. In the short term, nothing can replace government intervention, through financial stimulus, although private sector is projected to take over in the long run.
Natural gas - The 2008-2009 slowdown in international gas market will not last (expected drop by max. 3%). Whatever the scenario is, natural gas demand will increase, even more under the Reference Scenario, and mostly in non-OECD countries. Part of the gas demand in OECD countries would be progressively substituted by renewables and nuclear energy. Otherwise, the same concerns than in WEO 2008 on the difficulties in exploiting the huge remaining reserves are stated.
Unconventional natural gas deposits in the United States and in Canada have been a new factor during the last three years. These concern shale gas, deep gas, tight gas, coalbed methane, gas-containing shales, geopressurized zones, and finally Arctic and sub-sea hydrates. But, as for oil sands, environmental protection issues are a concern. "The high decline rates of unconventional gas will also require constant drilling and completion of new wells to maintain output" (p.50).
"La fée électricité" - All in all, power generation leads the increase in energy needs. "World electricity demand is projected to grow at an annual rate of 2.5% to 2030," 80% coming from non-OECD countries. Decarbonisation of the power sector is critical for emissions reduction, which vary according to the choice of scenario.
In the same time, "1.5 billion people still lack access to electricity - well over one-fifth of the world's population." (p.45) Access to modern energy is "a necessary condition for human development." Providing energy to poor regions are projected to involved "very modest" increase in primary energy demand and CO2 emissions.
The role of ASEAN countries - The WEO identifies developing Asian countries as the main responsible, followed by the Middle East, for world primary energy demand. The latter is projected to increase by 1.5% per year between 2007 and 2030, under the Reference Scenario (p.42). ASEAN countries will become key actors on the international energy markets.
Assessment
The effects of the financial crisis - They were "dramatic", and will continue to impact the energy markets for a few years. But all financial and monetary stimulus plans included measures to promote clean energy. Indeed, the WEO argues that the financial crisis opened "an unprecedented, yet relatively narrow, window of opportunity" in favour of low carbon technologies. The recession helped reduce GHG emissions. The question is to know whether it will last.
Energy investments - The 2008 WEO already stressed the importance of energy investments. In 2009, the WEO relates the general fall in investments in both conventional and renewable energy sources, to the financial crisis. "Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious consequences for energy security, climate change and energy poverty" (p.43).
The novelty in the 2009 edition is that the WEO insists on the role of governments in "changing the mix of energy investment," independently from actions at household and business levels. Investment policies should be more regulated, either at national and/or international scales, to secure low-carbon options. Based on the level of regulatory and policy measures, the WEO distinguishes two possible scenarios: a Reference Scenario of business as usual; a 450 Scenario that aims to limit concentration of GHG to 450 parts per million of CO2-equivalent (ppm CO2-eq).
Security of energy supply - It remains a strong concern, for different reasons: non-OECD countries will increase their imports of oil; all regions are projected to increase their gas imports; the dominance of few producing countries (in particular Russia, and Middle-East countries) that could be tempted to take profit of their market power.
Low carbon energy revolution - Investment will be crucial for the realisation of the 450 Scenario. The latter "entails $10.5 trillion more investment in energy infrastructure and energy-related capital stock globally than in the Reference Scenario," 45% of which should be dedicated to the transport sector (p.47). New technologies will play a central role, and in particular carbon capture and storage (CCS), plug-in hybrids and electric vehicles. But new financing mechanisms are necessary. In the short term, nothing can replace government intervention, through financial stimulus, although private sector is projected to take over in the long run.
Natural gas - The 2008-2009 slowdown in international gas market will not last (expected drop by max. 3%). Whatever the scenario is, natural gas demand will increase, even more under the Reference Scenario, and mostly in non-OECD countries. Part of the gas demand in OECD countries would be progressively substituted by renewables and nuclear energy. Otherwise, the same concerns than in WEO 2008 on the difficulties in exploiting the huge remaining reserves are stated.
Unconventional natural gas deposits in the United States and in Canada have been a new factor during the last three years. These concern shale gas, deep gas, tight gas, coalbed methane, gas-containing shales, geopressurized zones, and finally Arctic and sub-sea hydrates. But, as for oil sands, environmental protection issues are a concern. "The high decline rates of unconventional gas will also require constant drilling and completion of new wells to maintain output" (p.50).
"La fée électricité" - All in all, power generation leads the increase in energy needs. "World electricity demand is projected to grow at an annual rate of 2.5% to 2030," 80% coming from non-OECD countries. Decarbonisation of the power sector is critical for emissions reduction, which vary according to the choice of scenario.
In the same time, "1.5 billion people still lack access to electricity - well over one-fifth of the world's population." (p.45) Access to modern energy is "a necessary condition for human development." Providing energy to poor regions are projected to involved "very modest" increase in primary energy demand and CO2 emissions.
The role of ASEAN countries - The WEO identifies developing Asian countries as the main responsible, followed by the Middle East, for world primary energy demand. The latter is projected to increase by 1.5% per year between 2007 and 2030, under the Reference Scenario (p.42). ASEAN countries will become key actors on the international energy markets.
Assessment
The 2009 WEO insists in favour of a new international climate change agreement. International carbon market and international funding pools will play a central role in assisting developing countries in reducing GHG emissions. But by projecting an increase in energy demand from non-OECD countries, and, at the same time, a need for proactive regulation in favour of investments at national and international level, the WEO does not enable an easy international agreement on investment in clean energy. Indeed, this is "entirely a matter for negotiation." As already experienced under the climate change regime, many international law principles will be tested, and in particular how far go the principles of solidarity, equity and common but differentiated responsibilities.
The WEO also insists on the role of governments, at least in the short term. But what kind of government intervention is needed? Does it really mean "more regulation" or "smarter/better regulation"? The WEO does not answer that.
Picture: WEO 2009, IEA/OECD.
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