The IEA World Energy Outlook 2024 has been published. The report maps how far the world has come on the road to a safer and more sustainable energy system, and the Critical choices facing governments and consumers. Clean energy will meet almost all of the energy demand growth in total between 2023 and 2035. Electricity demand is growing much faster than total energy demand, driven by air conditioning, electric mobility and data centres. CO2 emissions will peak soon but need to decline rapidly: how consumer choices and government policies play out will have huge implications for energy markets and for our planet. Specifically for the EU, the report notes that average system costs have been higher than elsewhere in recent years, but that clean energy transitions offer opportunities to close the gap.
"If we want to reach net-zero emissions by 2050 to limit global warming to 1.5 degrees Celsius, the use of renewables must grow by an average of 5% per year until 2050."
Interpretation of the figures
Richard Brakenhoff, Sector Specialist Safety & Health and IRBC at NedZero, explains the figures:
"If we want to reach net-zero emissions by 2050 to limit global warming to 1.5 degrees Celsius, the use of renewables must grow by an average of 5% per year until 2050.
At the same time, fossil fuel consumption must be reduced by almost 6% annually.
The total demand for energy must also be reduced slightly, while the world population will increase by 25%.
So far, short-term projections still foresee higher use of oil and gas in the coming years, d.w.z. dat we need to step up our efforts very quickly if we want to limit global warming.
To achieve this, the use of electricity must increase. Currently, 20% of the total energy consists of electricity. This should increase to more than 50% by 2050.
A huge challenge, but not impossible when the world takes immediate action."
Demand for electricity
Renewables are leading the expansion of electricity generation, with enough speed to meet all increases in demand in total. There is scope to go even faster: current solar production capacity hovers around 1,100 GW per year, which could potentially increase the rollout by almost three times what it will be in 2023.
Demand for electricity is growing much faster than total energy demand, thanks to existing applications, notably cooling, and new applications such as electric mobility and data centers.
Despite regional differences, clean energy will account for virtually all energy demand growth in total between 2023 and 2035, leading to an overall peak in demand for all three fossil fuels before 2030.
Geopolitical tensions
The escalating conflict in the Middle East and Russia's ongoing war in Ukraine underscore the continuing risks to energy security facing the world.
Some of the immediate effects of the global energy crisis began to abate in 2023, but the risk of further disruptions is now very high. The experience of recent years, the report says, shows how quickly dependencies can turn into vulnerabilities. This also applies to clean energy supply chains with a high degree of market concentration.
Markets for traditional fuels and clean technologies are becoming increasingly fragmented: since 2020, nearly 200 trade measures affecting clean energy technologies have been introduced globally – most of them restrictive – compared to 40 in the previous five-year period.
More uncertainty about clean energy policy
Clean energy transitions have accelerated significantly in recent years, driven by government policies and industrial strategies, but there is more uncertainty than usual in the near term about how these policies and strategies will evolve.
Countries representing half of global energy demand are holding elections in 2024, and energy and climate issues are prominent themes for voters who have been battered by high fuel and electricity prices and by floods and heat waves.
In all our scenarios, growth in global energy demand slows thanks to efficiency gains, electrification and a rapid roll-out of renewables.
More than ever, the energy outlook is complex and multifaceted and there is no single vision for how it will develop in the future.
Investments needed
To ensure that clean energy continues to grow at a rapid pace, much greater investment in new energy systems is needed, particularly in electricity grids and energy storage. Today, for every dollar spent on renewable energy, 60 cents is spent on grids and storage, highlighting how critical supporting infrastructure is not keeping pace with the clean energy transition. Safely decarbonizing the electricity sector will require that investment in grids and storage grow even faster than clean generation, and that the investment ratio be rebalanced to 1:1. Many energy systems are currently vulnerable to increased extreme weather events, making efforts to strengthen their resilience and digital security paramount.
Netzero still far away
Despite the growing momentum behind the clean energy transition, the world is still far from a trajectory aligned with net zero targets. The IEA estimates that emissions will peak soon but must decline rapidly: how consumer choices and government policies play out will have huge implications for energy markets and for our planet.
Decisions by governments, investors and consumers too often entrench the flaws in the current energy system, rather than pushing it towards a cleaner and safer path, the report finds. Reflecting the uncertainties in today’s energy world , WEO-2024 includes a sensitivity analysis on how quickly renewables and electric mobility could grow, how quickly demand for LNG could rise, and how heat waves, efficiency policies and the rise of artificial intelligence (AI) could affect electricity demand in the future.
Under current policy settings, global carbon dioxide emissions will peak soon, but the lack of a sharp decline thereafter means the world is on track for a 2.4°C rise in global average temperatures by the end of the century, well above the Paris Agreement target of limiting global warming to 1.5°C.
The report highlights the inextricable links between energy security risks and climate change. In many parts of the world, extreme weather events, exacerbated by decades of high emissions, are already posing major challenges to the safe and reliable operation of energy systems, including increasingly severe heat waves, droughts, floods and storms.
New energy system needed
A new energy system must be built to last, the WEO-2024 stresses, one that prioritizes security, resilience and flexibility, and ensures that the benefits of the new energy economy are shared and inclusive.
In some regions of the world, high financing costs and project risks limit the deployment of cost-competitive clean energy technologies to where they are needed most. This is particularly the case in emerging economies where these technologies can deliver the greatest returns for sustainable development and emissions reductions. Lack of access to energy remains the most fundamental inequity in the current energy system, with 750 million people – mostly in sub-Saharan Africa – without access to electricity and more than 2 billion without clean cooking fuels.
Production of clean energy
The expansion of production capacity for many clean energy technologies has been much larger than the increase in clean energy technology deployment, contributing to the large decline in clean energy technology prices in recent years. For wind, existing capacity and announced projects would deliver just over 60% of the 2030 deployment levels in the BEN scenario (IEA, 2024b).
Production capacity is highly concentrated geographically. Thanks to its supportive industrial policy, China has a very large share of existing production capacity for solar energy, wind energy, heat pumps, electrolysis plants and battery components.
Although the project pipeline is expanding rapidly globally, a large proportion of planned projects are being developed in regions where most capacity is already located, with China accounting for around 90% of announced capacity additions by 2030. The overall level of geographic concentration in the manufacturing sector will therefore remain high even if all announced projects come to fruition.
Critical mineral markets have been turbulent in 2023, with many materials experiencing a sharp decline in price. These lower prices have contributed to lower costs for clean technology. In the case of nickel, for example, three-quarters of the operational or potential projects at risk in the current price environment are outside the top three producing countries. This will further concentrate supply among the largest suppliers.
Electricity prices EU
Average system costs have been higher in the European Union than elsewhere in recent years, but clean energy transitions offer opportunities to close the gap, IEA says.
The higher costs, the report says, are a result of the European Union's early efforts to develop low-emission electricity sources, and in particular its work to pioneer the large-scale deployment of wind and PV in the 2010s, at a time when they were emerging technologies and relatively expensive compared to today.
The clean energy transition offers EU Member States the opportunity to reduce their average electricity system costs. By continuing to shift from coal- and gas-fired power plants to low-emission electricity sources, the total costs of the EU electricity system could be reduced by around 12% by 2035. Additional decarbonisation efforts under the APS and the achievement of the REPowerEU objectives could reduce system costs by a further five percentage points. The investments needed for renewables and grid development are high, but the unit costs of electricity for the grid component are comparable to those in other parts of the world, and investments in renewables are necessary to reduce future electricity costs and greenhouse gas emissions. The accelerated transition leads to a faster decline in electricity costs.
Average electricity system costs are not the same as end-user electricity prices, and one of the challenges of the energy transition is to ensure that reductions in electricity system costs are reflected in consumer tariffs. Reforms in electricity market design and the use of instruments such as long-term contracts, including contracts for difference or power purchase agreements, can help align electricity prices with system costs.
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