Presentation to Press

The Future of Global Energy Markets: Implications for Security, Sustainability and Economic Growth

Dr. Fatih Birol, Executive Director, International Energy Agency Delft University of Technology, 20 March 2019 • 31 January 2019

 Mixed signals about the pace & direction of change in global energy: • North America has entered a new age of oil & gas wealth • 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  For the first time, 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.

Global energy-related CO2 emissions

Gt CO2 35

30 CO2 emissions 25 Increase in 2017

Energy demand 20002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040 United StatesChina

EuropeanUnited StatesUnionChina

European UnionChinaIndia

European UnionAfricaIndia

SoutheastMiddle AsiaEast

1 000 2 000 3 000 4 000 Mtoe

In 2000, more than 40% of global demand was in Europe & North America and some 20% in developing economies in Asia. By 2040, this situation is completely reversed.

Renewables & nuclear Gas Oil Coal Mtoe 1 500 Nuclear 1 200 Other 900

600 Power Other Petro- Other 300 chemical

Renewables Industry Cars Power 0 Cars Power -300

-600 Advanced Developing Advanced Developing Advanced Developing Advanced Developing economies economies economies economies economies economies economies economies

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

Total investment in energy supply to 2040: $42.3 trillion

Market-driven 30% 2018-2040 42.3 trillion dollars

Government-driven 70%

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

Change in total oil supply 2018-24

mb/d 4 Guyana 3 UAE Norway 2 US Iraq 1 Brazil 0 Iran -1 Venezuela -2

US expansion is 70% of global growth. Gains in Brazil, Iraq, Norway, the UAE and Guyana. Main declines in Iran and Venezuela.

Natural gas production growth for selected countries and regions, 2018-2025 200 bcm 150

100

-50 US Russia Middle East China Australia East Africa Europe

Domestic market Export market

The United States accounts for a third of growth in global natural gas production to 2025 & two-thirds of anticipated growth in LNG exports

Produced / contracted gas & additional import requirements in the EU, 2018-2025

500 bcm

400 Additional supply needed

300 LNG Caspian North Africa pipe 200 Russia pipe

100 Norway pipe EU-28 production 2018 2019 2020 2021 2022 2023 2024 2025 The European Union needs to find imports to cover one-third of its demand by 2025, due to sharp declines in the EU’s own production & the expiry of nearly 100 bcm of long-term gas import contracts

Announced wind and solar PV average auction prices by commissioning date

USD/MWh 180 160 Onshore wind 140 average auction 120 price 100 80 60 Solar PV average 40 auction price 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020

Technology progress and competition have driven down prices to record-low levels in countries with good renewable resources, transparent policies and well-designed auction schemes

Phases of integration with variable renewables share, 20172030

Integration phase

6 All sources of flexibility Germany 5 needed United Kingdom 4 Targeted European Union investment in European Union China Germany 3 flexibility needed United States India China United Kingdom 2 Mobilise existing India United States power system flexibility 1

0% 10% 20% 30% 40% 50% 60% Wind and solar PV share of generation

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

Without policy changes Growth markets

160 160

GW GW Retirements 120 from 2017 120 20172040 80 80

Additions 40 to 2040 40 2017

United European Japan China Russia India States Union

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

36 New Policies Scenario Gt CO2

24 Sustainable Development 18 Existing and under construction Increased room Scenario (Paris) power plants, factories, buildings etc. to manoeuvre 12

6 Coal-fired power plants

2017 2025 2030 2035 2040

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

Solar PV Lighting EVs Data centres Renewable Hydropower Onshore Offshore & networks Power wind wind

Nuclear Natural Cooling Appliances & Fuel Trucks/HDVs- Rail Cement power gas-fired equipment economy fuel economy power of LDVs

Chemicals Steel Aluminium Pulp & paper Energy Smart grids Hydrogen Bioenergy storage fuel cells

International Digitalisation Demand Ocean Coal-fired CCS in CSP Geothermal shipping response power power

Aviation Transport CCS in Renewable Heating Buildings biofuels Industry heat codes

Out of the 38 technologies included in Tracking Clean Energy Progress (TCEP) 2018, only 4 are on track, 23 need improvement and 11 are off track IEA 2019. All rights reserved. 14 Electrification success elsewhere, but sub-Saharan Africa still remains in the dark

Population without electricity access 2 500

Rest of World million 2 000 Sub-Saharan Africa

India 1 500 China

1 000

500

1985 2000 2017 2030

China was a remarkable success story for electrification, bringing access to hundreds of millions in record time; India achieved electricity access for all its villages in 2018; Today the challenge is concentrated in sub-Saharan Africa

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

• US emerges as the n.1 source of oil and gas growth in the next five years. Despite rapid deployment of electric vehicles, global oil demand shows no sign of peaking

• Electrification & digitalisation is creating new opportunities in the global energy system, but market designs need to deliver both electricity and flexibility to keep the lights on

• There is no single solution to our energy and climate challenges: 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