© OECD/IEA 2018

Dr Fatih BirolIEA Executive Director Brussels, 5 February 2019

© OECD/IEA 2018

Today’s energy context

Mixed signals about the pace & direction of change in global energy: Oil markets are entering a period of renewed uncertainty & volatility

Natural gas is on the rise: China’s rapid demand growth is erasing talk of a ‘gas glut’ Solar PV has the momentum while other key technologies & efficiency policies need a push

Our assessment points to energy-related CO2 emissions reaching a historic high in 2018

For the first time, the global population without access to electricity fell below 1 billion

Electricity is carrying great expectations, but questions remain over the extent of its reach in meeting demand & how the power systems of the future will operate

Policy makers need well-grounded insights about different possible futures & how they come about. The WEO provides two key scenarios:

New Policies Scenario Sustainable Development Scenario

© OECD/IEA 2018

2000

1 000 2 000 3 000 4 000

United States

European Union

China

Africa

India

Southeast Asia

Middle East

Mtoe

2001

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United States

European Union

China

Africa

India

Southeast Asia

Middle East

Mtoe

2002

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United States

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2003

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United States

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2004

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United States

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2005

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United States

European Union

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Africa

India

Middle East

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2006

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United States

China

European Union

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India

Middle East

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Mtoe

2007

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United States

China

European Union

Africa

India

Middle East

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Mtoe

2008

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United States

China

European Union

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India

Middle East

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Mtoe

2009

1 000 2 000 3 000 4 000

China

United States

European Union

Africa

India

Middle East

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Mtoe

2010

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China

United States

European Union

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Africa

Middle East

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Mtoe

2011

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2012

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2013

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2014

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2015

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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2016

1 000 2 000 3 000 4 000

China

United States

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India

Africa

Middle East

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Mtoe

2017

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2018

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2019

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2020

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

Southeast Asia

Mtoe

The new geography of energy

Energy demand

In 2000, more than 40% of global demand was in Europe & North America and some20% in developing economies in Asia. By 2040, this situation is completely reversed.

2021

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

Southeast Asia

Mtoe

2022

1 000 2 000 3 000 4 000

China

United States

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India

Africa

Middle East

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2023

1 000 2 000 3 000 4 000

China

United States

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India

Africa

Middle East

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2024

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2025

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

Southeast Asia

Mtoe

2026

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2027

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2028

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

Southeast Asia

Mtoe

2029

1 000 2 000 3 000 4 000

China

United States

European Union

India

Africa

Middle East

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Mtoe

2030

1 000 2 000 3 000 4 000

China

United States

India

European Union

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Middle East

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2031

1 000 2 000 3 000 4 000

China

United States

India

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Middle East

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Mtoe

2032

1 000 2 000 3 000 4 000

China

United States

India

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Middle East

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2033

1 000 2 000 3 000 4 000

China

United States

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2034

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2035

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2036

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China

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2037

1 000 2 000 3 000 4 000

China

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2038

1 000 2 000 3 000 4 000

China

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2039

1 000 2 000 3 000 4 000

China

United States

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European Union

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Middle East

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2040

1 000 2 000 3 000 4 000

China

United States

India

Africa

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2040

1 000 2 000 3 000 4 000

China

United States

India

Africa

European Union

Middle East

Southeast Asia

Mtoe

By 2040, this situation is completely reversed.

© OECD/IEA 2018

Oil

Advancedeconomies

Developingeconomies

Gas

Advancedeconomies

Developingeconomies

Fuelling the demand for energy

The increase in demand would be twice as large without continued improvementsin energy efficiency, a powerful tool to address energy security & sustainability concerns

Coal

Advancedeconomies

Developingeconomies

Change in global energy demand, 2017-2040

-600

-300

0

300

600

900

1 200

1 500Renewables & nuclear

Mtoe

Advancedeconomies

Developingeconomies

Rene

wab

les

Nuclear

Industry

Other

Power

Cars

Other

Petro-chemical

Cars

Power

Other

Power

© OECD/IEA 2018

Can US shale alone avoid a turbulent oil market?

Global oil outlook

Oil demand looks robust in the near term; if approvals of new conventional projects remain low, market stability would require continuous exceptional growth in US shale

65

70

75

80

85

90

95

100

105mb/d

Growth required from US shale

Growth from other sources(at current project approval rates)

Demand

2010 2015 2020 2025

Currently producing fields

© OECD/IEA 2018

Shares in long-distance gas trade, 2017

Pipeline

China – the emerging giant of gas demand

Developing countries in Asia – led by China – dominate the rise in long-distance gas trade;

Net gas imports in 2017

-100

0

100

200

300

400

ChinaEuropean Union

Japan & Korea

India Southeast Asia

bcm

Net gas imports in 2040

LNG

Shares in long-distance gas trade, 2040

more than 80% of the growth to 2040 comes in the form of LNG

© OECD/IEA 2018

Our energy destiny rests with governments

Total investment in energy supply to 2040:$42.3 trillion

More than 70% of the $2 trillion required each year in energy supply investment either comes from state-directed entities or receives a full or partial revenue guarantee

2018-2040 42.3 trillion dollars

Government-driven70%

Market-driven30%

© OECD/IEA 2018

Wind to become the largest power source in the European Union

Wind electricity generation in the EU more than triples to 1 100 TWh by 2040; the rapid increase of variable forms of generation calls for new approaches to system integration

5%

10%

15%

20%

25%

30%

35%

2017 2020 2025 2030 2035 2040

Coal

GasNuclear

Solar PV

Wind

Other renewables

Share of electricity generation by source in the European Union, 2017-40

© OECD/IEA 2018

All sources of flexibility needed

6

5

2

1

Mobilise existing power system flexibility

4

3

Targeted investment in flexibility needed

Flexibility: the cornerstone of tomorrow’s power systems

Phases of integration with variable renewables share, 2017

Higher shares of variable renewables raise flexibility needs and call for reforms to deliver investment in power plants, grids & energy storage, and unlock demand-side response

Integration phase

Wind and solar PV share of generation0% 10% 20% 30% 40% 50% 60%

India

China

United States

India

China

United States

European UnionEuropean Union

Germany

Germany

United Kingdom

United Kingdom

Phases of integration with variable renewables share, 2030

© OECD/IEA 2018

40

80

120

160

China Russia India

GW

2017

Two directions for nuclear power

Without policy changes

The contribution of nuclear power could decline substantially in leading markets,while large growth is coming, as China takes first position within a decade

40

80

120

160

UnitedStates

EuropeanUnion

Japan

Retirements from 20172040

GW

Growth markets

Additionsto 20402017

© OECD/IEA 2018

25

50

75

100

125

2015 2020 2030 2040

Oil demand(mb/d)

8

16

24

32

40

2015 2020 2030 2040

Energy-related CO2 emissions(Gt)

What if the future is electric?

Increased electrification leads to a peak in oil demand

Scenario:

Future is ElectricNew Policies

, avoids 2 million air pollution-related premature deaths, but does not necessarily lead to large CO2 emissions reductions

25

30

35

40

45

2015 2020 2030 2040

Electricity demand(thousand TWh)

20

© OECD/IEA 2018

Can we unlock a different energy future?

Global energy-related CO2 emissions

Coal plants make up one-third of CO2 emissions today and half are less than 15 years old; policies are needed to support CCUS, efficient operations and technology innovation

12

18

24

30

2017 2025 2030 2035 2040

Gt CO236

Sustainable Development Scenario

Coal-fired power plants

Increased roomto manoeuvre

6

New Policies Scenario

Existing and under constructionpower plants, factories, buildings etc.

© OECD/IEA 2018

Conclusions

The links between energy & geopolitics are strengthening & becoming more complex, a major factor in the outlook for energy security

A mismatch between robust oil demand in the near term & a shortfall in new projects risks a sharp tightening of oil markets in the 2020s

The rapid growth of electricity brings huge opportunities; but market designs need to deliver both electricity and flexibility to keep the lights on

There is no single solution to turn emissions around: renewables, efficiency & a host of innovative technologies, including storage, CCUS & hydrogen, are all required

The future pathway for energy is open: governments will determine where our energy destiny lies

© OECD/IEA 2018

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