Dr Fatih Birol WEO 2018 Turkey Launch Presentation

Dr Fatih Birol IEA Executive Director Istanbul, Turkey 20 December 2018

 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  Growing disconnect between climate goals and energy-market trends  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.

Global energy-related CO2 emissions

Gt CO2 35

30 CO2 emissions 25 Increase in 2017

Global CO2 emissions are on the rise in 2018; Even in advanced economies – where they had been flat for 5 years – emissions are set to increase in 2018

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. ByBy 2040,2040, thisthis situationsituation isis completelycompletely reversed.reversed. © OECD/IEA 2018 Fuelling the demand for energy

Change in global energy demand, 2017-2040 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

Global oil outlook

mb/d 105 Demand 100

95 Growth required from US shale 90

85 80 Growth from other sources 75 (at current project approval rates) 70 Currently producing fields 65 2010 2015 2020 2025

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

Net gas imports in 20172040 Shares in long-distance bcm 400 gas trade, 20172040

300

200

100 Pipeline LNG

-100 European Japan China India Southeast Union & Korea Asia Developing countries in Asia – led by China – dominate the rise in long-distance gas trade; more than 80% of the growth to 2040 comes in the form of LNG © OECD/IEA 2018 One planet, two coal worlds

Coal demand in select countries, 2017 and 2023

Mtce 3 000 2017

2 500 2023

2 000

1 500

1 000

500

United European Japan China India Southeast States Union and Korea Asia India and southeast Asia will lead coal demand growth while it will continue to decline in Europe and United States

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

Phases of integration with variable renewables share, 20172030

Integration phase 6 All sources of flexibility needed Germany 5 Italy United Kingdom 4 Targeted investment European Union in flexibility needed Italy China Germany 3 European Union UnitedUnited States KingdomIndia China 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

Electricity demand Oil demand Energy-related CO2 emissions (thousand TWh) (mb/d) (Gt) 45 125 40

40 100 32 Scenario: 35 75 24 New Policies Future is Electric 30 50 16

25 25 8

20 2015 2020 2030 2040 2015 2020 2030 2040 2015 2020 2030 2040

Increased electrification leads to a peak in oil demand, avoids 2 million air pollution-

related premature deaths, but does not necessarily lead to large CO2 emissions reductions © OECD/IEA 2018 Can we unlock a different energy future?

Global energy-related CO2 emissions

36 Base Scenario Gt CO2

18 Existing and under construction Increased room Paris Agreement power plants, factories, buildings etc. to manoeuvre 12

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

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

 New dynamics in the oil demand and supply balance lead to unprecedented volatility in oil markets

 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