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Each year, GE brings an analyst to its Oil & Gas Annual Meeting to brief the audience on ongoing trends. This year, Keisuke Sadamori, Director for Energy Markets and Security, International Energy Agency (IEA), outlined the repercussions and realities stemming from the recent Paris climate agreement, expecting it to be one of the biggest drivers for the power and oil & gas sectors. The latest target: Converting to low-carbon by 2030 one quarter of the world’s energy.
Between 2008 and 2015, renewables have accounted for more than 50% of new additions onto the grid worldwide. This trend is likely to accelerate. Measures being taken to further reduce emissions include:
Efficiency improvement will play the largest role in reducing energy emissions. Steam boilers, for example, can expect to get a lot of attention from regulators. “Companies that do not anticipate stronger energy and climate policies risk being at a competitive disadvantage,” said Sadamori.
The IEA is committed to a radical adjustment of the overall energy mix. Today, oil accounts for 30% of total energy demand; oil, gas and coal together account for nearly 80%. Despite a regulatory onslaught across the world, the big picture will not change much in the coming decades.
By 2040, IEA predicts that fossil fuels will still supply 75% of energy demand, with the share of oil declining to 26%. The U.S., for example, will see a steady drop in oil consumption (Figure 1). This is already showing up in the U.S. rig count. While it had tripled between 2009 and 2011, the rig count has fallen by about 50% from its peak.
Figure 1: Oil demand by continent; Source:
IEA World Energy Outlook 2015[/caption]
Natural gas, on the other hand, should grow from being one-third lower than coal to being level with coal by 2040. Over that period, IEA sees a marginal increase in the share of nuclear energy and a 5% increase in renewables. The IEA expects natural gas demand to rise by about 1,600 billion cubic meters (bcm), to 5,160 bcm by 2040 — representing a 1.4% annual growth (Figure 2).
Figure 2: Global natural gas demand by sector, IEA[/caption]
The main driver of rising natural gas demand will be power generation, which should account for about 40% of the additional consumption, increasing by about 160 bcm to 590 bcm by 2040. In the Organization for Economic Development and Cooperation (OECD), natural gas could overtake coal as the single largest source of power generation by 2040.
From a geographical perspective, demand for natural gas will rise at a fast pace around most of the globe, with the exception of Europe. The biggest increases in natural gas consumption are expected in China and the Middle East (Figure 3).
Figure 3: Global Natural Gas Demand by Region, IEA[/caption]
In terms of prices, IEA sees renewable costs continuing to drop, dominating the power landscape in the coming years. “Renewables struggle to compete in the U.S. due to the price of gas, but they are largely cost competitive in the rest of the world,” said Sadamori. “Gas, being the least carbonintensive fossil fuel, will play an increasing role in the future, and Asia will be a key market for gas growth."
Coal prices, though, are predicted to continue to drop from now until 2020. During that time, coal demand will be flat or in decline in many areas of the world. However, its use will grow significantly in India and Southeast Asia.
“Backed by continued policy support, renewables are expected to overtake coal to become the largest global power source by 2030,” said Sadamori. “However, renewable growth alone is currently not enough to meet demand.”