© OECD/IEA 2014

London 12 November 2014

© OECD/IEA 2014

Signs of stress in the global energy system

Current calm in markets should not disguise difficult road ahead

Turmoil in the Middle East raises doubts over future oil balance

Resurgent debate over the security of gas supply to Europe

Mixed signals in run-up to crucial climate summit in Paris in 2015

Global CO2 emissions still rising, with most emitters on an upward path

At $550 billion, fossil fuel subsidies over four-times those to renewables

Increasing emphasis on energy efficiency starting to bring results

Will change in global energy be led by policies, or driven by events?

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Changing dynamics of global demand

Energy demand by region

As China slows, then India, Southeast Asia, the Middle East and parts of Africa & Latin America take over as the engines of global energy demand growth.

2 000

4 000

6 000

8 000

10 000

1990 2000 2010 2020 2030 2040

Mtoe

OECD

Rest of world

China

China

Rest of world

OECD

© OECD/IEA 2014

United States holds a strong position on energy costs

Weighted average cost of energy paid by consumers

Economies face higher costs, but the pace of change varies: China overtakes the US, costs double in India & remain high in the European Union & Japan

United States

500

1 000

1 500

2 000

European Union

Japan China India

$/toe

2008

2013

2040

© OECD/IEA 2014

2013 2020 2030 2040 2015

Instability in the Middle East a major risk to oil markets

Oil production growth

The short-term picture of a well-supplied market should not obscure future risks as demand rises to 104 mb/d & reliance grows on Iraq & the rest of the Middle East

+5

+10

+15

-5

2013 2020 2030 2040 2015

Net decline in output from other producers

Increase to 2040: 14 mb/d

mb/d

Increase to 2040: 14 mb/d

Middle East

Brazil

Canada United States

& reliance grows on Iraq & the rest of the Middle East

in United States, Canada, Brazil & the Middle East

© OECD/IEA 2014

Looking ahead on the oil price

Against a backdrop of weaker demand, buoyant supply in North America has brought prices down – but can it keep them down?

Lower prices are starting to curtail upstream spending plans, with implications for future supply

Over time, squeezed cash flow would constrain the capacity of North America & Brazil to act as engines of global supply growth

Sustained $80/barrel oil could provide some breathing space to major oil importers, boosting demand & GDP

It would also accelerate reliance on low-cost producers in the Middle East, some of which face major investment challenges

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Gas on the way to become first fuel, with role of LNG on the rise

Main sources of regional LNG supply

Share of LNG rises in global gas trade, pushed by a near-tripling in liquefaction sites: LNG brings more integrated & secure gas markets, but only limited relief on prices

Middle East

Australia

US & Canada

East Africa

Russia

North Africa West Africa

Other

Middle East

Southeast Asia

West Africa Australia

North Africa Other

100

200

300

400

500

600 bcm

2012 2040

© OECD/IEA 2014

India

World

Global coal demand leveling off

Global coal demand by key region

Global coal demand growth slows rapidly due to more stringent environmental policies, underlining the importance of high-efficiency plant & CCS to coal’s future

1 000

2 000

3 000

4 000

5 000

6 000

7 000

1980 1990 2000 2010 2020 2030 2040

Mtce

1987: European coal demand peak 2005: US coal demand peak

Chinese coal demand plateau

India: 2nd largest coal consumer by 2020

Other

India

China

United States Europe

© OECD/IEA 2014

Retirements add to the investment challenge in the power sector

Power capacity by source, 2013-2040

Despite limited demand growth, OECD countries account for one-third of capacity additions – to compensate for retirements & to decarbonise

2013

Retirements Additions

2040

2 000

4 000

6 000

8 000

10 000

12 000 GW

Renewables

Nuclear

Oil

Gas

Coal

© OECD/IEA 2014

Renewables supply half of the growth in global power demand; wind & solar PV

Renewables-based power generation and subsidies

Renewables overtake coal to become the leading source of power

Generation

Subsidies

Hydropower

Wind and solar PV

(right axis)

wind & solar PV subsidies decline from 2030 as costs fall & recent higher-cost commitments expire

Generation

1 000

2 000

3 000

4 000

5 000

6 000

2013 2020 2040 2013 2030 2040

TWh

30

60

90

120

150

180

Bill

ion

do

llars

(2

01

3) 210

2030 2020

7 000

© OECD/IEA 2014

Nuclear capacity grows by 60%, but no nuclear renaissance in sight

Net capacity change in key regions, 2013-2040

By 2040, an expanded nuclear fleet has saved almost 4 years of current CO2 emissions & for some countries has improved energy security & balances of energy trade

-20 0 20 40 60 80 100 120 140

European Union

Japan

United States

Russia

India

China

GW

© OECD/IEA 2014

50

100

150

200

1990 2000 2010 2020 2030 2040

GW

2013

Nuclear power: public concerns must be heard and addressed

Retirements of nuclear power capacity 1990-2040

Key public concerns include plant operation, decommissioning & waste management;

Spent nuclear fuel

European Union United States Japan Others

38% of today’s capacity to retire

by 2040

1971-2012

350 thousand tonnes 1971-2040

705 thousand tonnes

1971-2040: 705 thousand tonnes

United States European

Union

Japan China

Can

ada Russia Korea

Ind

ia

Other

By 2040, almost 200 reactors are retired & the amount of spent fuel doubles

& the amount of spent fuel doubles

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The entire global CO2 budget to 2100 is used up by 2040 – Paris must send a strong signal for increasing low-carbon investment four times beyond current levels

The 2 °C goal – last chance in Paris?

World CO2 budget for 2 °C ~2300 Gt

25%

50%

75%

100%

Share of budget used in Central Scenario

1900-2012

2012-2040

Average annual low-carbon investment, 2014-2040

Central Scenario

For 2°C target

2013

CCS

Nuclear

Renewables

Efficiency

The entire global CO2 budget to 2100 is used up by 2040

0.5

1.0

1.5

2.0

Trill

ion

do

llars

(2

01

3)

© OECD/IEA 2014

Navigating a stormy energy future

Geopolitical & market uncertainties are set to propel energy security high up the global energy agenda

Volatility in the Middle East raises short-term doubts on investment & spells trouble for future oil supply

Nuclear power can play a role in energy security & carbon

abatement – but financing & public concerns are key issues

Without clear direction from Paris in 2015, the world is set for warming well beyond the 2 °C goal

Far-sighted government policies are essential to steer the global energy system on to a safer course

© OECD/IEA 2014

www.worldenergyoutlook.org email: weo@iea.org