The resurgence in oil and gas production from the United States, deep declines in the cost of renewables and growing electrification are changing the face of the global energy system and upending traditional ways of meeting energy demand, according to the World Energy Outlook 2017 of the IEA
A cleaner and more diversified energy mix in China is another major driver of this transformation, said the report released by the International Energy Agency.
Over the next 25 years, the world’s growing energy needs are met first by renewables and natural gas, as fast-declining costs turn solar power into the cheapest source of new electricity generation, the report said.
Global energy demand is 30% higher by 2040 – but still half as much as it would have been without efficiency improvements. The boom years for coal are over — in the absence of large-scale carbon capture, utilisation and storage — and rising oil demand slows down but is not reversed before 2040 even as electric-car sales rise steeply, it added.
The WEO-2017 said that over the next two decades the global energy system is being reshaped by four major forces: the United States is set to become the undisputed global oil and gas leader; renewables are being deployed rapidly thanks to falling costs; the share of electricity in the energy mix is growing; and China’s new economic strategy takes it on a cleaner growth mode, with implications for global energy markets.
Solar PV is set to lead capacity additions, pushed by deployment in China and India, meanwhile in the European Union, wind becomes the leading source of electricity soon after 2030.
“Solar is forging ahead in global power markets as it becomes the cheapest source of electricity generation in many places, including China and India,” said Dr Fatih Birol, the IEA’s executive director.
“Electric vehicles (EVs) are in the fast lane as a result of government support and declining battery costs but it is far too early to write the obituary of oil, as growth for trucks, aviation, petrochemicals, shipping and aviation keep pushing demand higher. The US becomes the undisputed leader for oil and gas production for decades, which represents a major upheaval for international market dynamics.”
According to the report, the shale oil and gas revolution in the United States continues thanks to the remarkable ability of producers to unlock new resources in a cost-effective way. By the mid-2020s, the United States is projected to become the world’s largest LNG exporter and a net oil exporter by the end of that decade.
This is having a major impact on oil and gas markets, challenging incumbent suppliers and provoking a major reorientation of global trade flows, with consumers in Asia accounting for more than 70% of global oil and gas imports by 2040. LNG from the United States is also accelerating a major structural shift towards a more flexible and globalized gas market, the report said.