Surprise! Not. The 2016 IEA World Energy Outlook shows continued growth in global energy demand, although slowing over time largely because of improved energy efficiency and energy intensity in many countries. This is a logical and natural causal relationship between continuing economic growth (albeit modest at an assumed 3.4% per year), a rising world population, and slow but inevitable technology change. Primary energy demand falls steadily in advanced industrial countries, in contrast to significant growth in emerging and developing economies. By 2040, the advanced economies represent only 28% of total worldwide energy demand. Of the balance, China and India make up almost half. By 2020, India surpasses China in the rate of demand growth, but China will still account for 23% of global energy use in 2040. In total, North America drives 15% of global energy demand in 2040, but the United States takes 80% of that share (12%). Canada and Mexico together represent 3%.
Figure 1: Percent of Total Primary Energy Demand by Region, 2040 (New Policies Scenario)
As always, the IEA presents three scenarios for future energy consumption (see Figure 2). The Current Scenario is based on existing energy use patterns, with no changes to the policy paths in effect as of 2016. The IEA also lays out two other scenarios that incorporate future climate-related policy changes. The “New Policies” scenario represents fulfillment of commitments made in the country-by-country Nationally Determined Contributions embedded in the December 2015 Paris Agreement. The “450 Scenario,” constrained by a 2oC increase in the global temperature target, implements more aggressive greenhouse gas emission reduction policies.
Importantly, under no scenario are fossil fuels remotely expunged from use. In fact, they still represent 75% of primary energy demand in 2040 under both the Current and New Policies scenarios, and about 2/3 of demand under the 450 Scenario. Overall, the IEA’s updated global energy outlook is consistent with the conclusions in the IEA’s 2015 assessment, reviewed here.
Figure 2: Percent Global Energy Demand in 2040 by Fuel Type
Figure 3 shows the gains and losses by fuel type across the scenarios. Of note is the increasing role of renewables in all possible future outcomes. Nuclear and bioenergy also fare well, while coal and oil experience low growth in the Current and New Policies Scenarios and dwindling use in the 450 Scenario — meaning a reallocation of capital and replacement of existing fossil fuel energy infrastructure with non-carbon sources of energy, substantial investments in energy efficiency (particularly in electricity generation), and transformation of the transportation sector.
Surprisingly, the IEA does not asses the spatial requirements for bioenergy with power densities less than 50 watts/square meter of land, compared to fossil fuels of 1000 watts/square meter and higher — a significant disadvantage despite fewer emissions with the former, given the increasing challenges in accessing land and resources worldwide.
Figure 3: Percent Change between 2025 and 2040 by Fuel Type for Each Scenario
Current investment in the global energy sector is pegged at ~$1.8 trillion per year, or $44 trillion between 2017 and 2040. Sixty percent of this capital is targeted at carbon sources, with the balance allocated to non-carbon sources and energy efficiency. The 450 Scenario has daunting and likely unattainable investment requirements. The IEA suggests world-wide industrial power sector energy efficiency focused on motors and motor-driven devices requires a cumulative $300 billion of added capital by 2040 in the 450 Scenario, resulting in only a 5% reduction in electricity demand. At the same time, the challenging policy conversation about power market design and electricity security is relevant again, as it is estimated that every incremental unit of renewable electricity requires 40% more capacity compared to the last time market restructuring occurred (1990 to 2010). Building any kind of energy project at any cost, let alone idle but at-the-ready capacity, is sure to be a difficult proposition in many countries, including Canada.
At the same time, CO2 emissions seem to have stalled since 2015. The question is whether this a short-term blip brought on by changes to oil markets, or a possible sustained pathway. Regardless, the trajectory of greenhouse gas emissions is now a fully embedded consideration in all global energy developments. Unfortunately, even in 2040, under any scenario, at least half a billion people in the world will still lack access to electricity, while 1.8 billion will still be cooking with solid biomass.
Some like to think there is an energy revolution at hand, and it is easy to understand why when viewed against the remarkable gains made by renewables, on a percentage basis, particularly, in the electricity sector. But a closer look indicates that what is happening in the global energy domain mainly involves, first, improved energy efficiency, second a swap out of old end-of-life facilities, and third, new non-carbon energy source additions. Looking at Figure 2 and Table 1, it is clear the difference between the 2040 Current and New Policies Scenarios is the movement of 5% from fossil fuels to other fuels — 2% to renewables, 1% to bioenergy and 2% to nuclear. Energy efficiency takes care of the bulk of change in the difference between the 450 and the Current and New Policies Scenarios, and therefore the increases in other forms of energy must be replacement, spread almost equally across non-carbon sources, except hydro, or so the data tells us.
|Table 1: Total Primary Global Energy Demand by Scenario (Mtoe)
|New Policies 2025
|New Policies 2040
|Difference within Scenarios
The mostly likely future is somewhere between the Current and New Policies Scenarios, and probably closer to the former than the latter. Regardless, this means countries like Canada, with an existing robust and diverse energy sector (see here), are well positioned to supply the world with both resources and know-how. We have the oil, gas, and uranium the world needs, now and for the foreseeable future. We have the engineering expertise and the experience building large infrastructure in challenging geographies and climates, and we are at the forefront of developing new technologies in oil and gas as well as energy efficiency and small renewables. The future is not all or nothing. Like all things, diversity is key. Canada must be careful not to hobble itself with ill conceived and poorly designed energy policies that could ultimately shortchange our economy by limiting options and foreclosing energy development opportunities.