This year’s edition of World Energy Outlook indicates that the world is set to enter a new energy market context in the coming years, marked by continued geopolitical hazards but also by a relatively abundant supply of multiple fuels and technologies. This includes an overhang of oil and LNG supply coming into view during the second half of the 2020s, alongside a large surfeit of manufacturing capacity for some key clean energy technologies, notably solar photovoltaics (PV) and batteries.

‘In the second half of this decade, the prospect of more ample – or even surplus – supplies of oil and natural gas, depending on how geopolitical tensions evolve, would move us into a very different energy world from the one we have experienced in recent years during the global energy crisis,’ comments Fatih Birol, Executive Director, IEA.  

‘It implies downward pressure on prices, providing some relief for consumers that have been hit hard by price spikes. The breathing space from fuel price pressures can provide policymakers with room to focus on stepping up investments in clean energy transitions and removing inefficient fossil fuel subsidies. This means government policies and consumer choices will have huge consequences for the future of the energy sector and for tackling climate change.’

Based on today’s policy settings, the report finds that low-emissions sources are set to generate more than half of the world’s electricity before 2030. Demand for all three fossil fuels – coal, oil and gas – is still projected to peak by the end of the decade. Clean energy is entering the energy system at an unprecedented rate, but deployment is far from uniform across technologies and markets.

In this context, the report also shows that the contours of a new, more electrified energy system are coming into focus as global electricity demand soars. Electricity use has grown at twice the pace of overall energy demand over the last decade, with two-thirds of the global increase in electricity demand over the last 10 years coming from China.

‘In energy history, we’ve witnessed the Age of Coal and the Age of Oil – and we’re now moving at speed into the Age of Electricity, which will define the global energy system going forward and increasingly be based on clean sources of electricity,’ Birol says.  

He continues: ‘As with many other global energy trends today, China is a major part of what is happening. Whether it’s investment, fossil fuel demand, electricity consumption, deployment of renewables, the market for electric vehicles (EVs), or clean technology manufacturing, we are now in a world where almost every energy story is essentially a China story. Just one example: China’s solar expansion is now proceeding at such a rate that, by the early 2030s – less than 10 years from now – China’s solar power generation alone could exceed the total electricity demand of the US today.’  

Global electricity demand growth is set to accelerate further in the years ahead. The amount equivalent to the entire demand of the country of Japan is to be added globally each year in a scenario based on today’s policy settings – and rising even more quickly in scenarios that meet national and global goals for achieving net zero emissions.

For clean energy to continue growing at pace, much greater investment in new energy systems, especially in electricity grids and energy storage, are necessary. The report outlines that today, for every US dollar spent on renewable power, 60 cents are spent on grids and storage, highlighting that essential supporting infrastructure is not keeping pace with clean energy transitions. Secure decarbonisation of the electricity sector requires investment in grids and storage to increase even more quickly than clean generation, and the investment ratio to rebalance to 1:1. Many power systems are currently vulnerable to an increase in extreme weather events, putting a premium on efforts to bolster their resilience and digital security.  

Despite growing momentum behind clean energy transitions, the world is still a long way from a trajectory aligned with its net zero goals. Decisions by governments, investors and consumers too often entrench the flaws in today’s energy system, rather than pushing it towards a cleaner and safer path, the report finds.  

According to the IEA, based on today’s policy settings, global CO₂ emissions are set to peak imminently, but the absence of a sharp decline after that means the world is on course for a rise of 2.4°C in global average temperatures by the end of the century, well above the Paris Agreement goal of limiting global warming to 1.5°C. The report underlines the inextricable links between risks of energy security and climate change. In many areas of the world, extreme weather events, intensified by decades of high emissions, are already posing profound challenges for the secure and reliable operation of energy systems, including increasingly severe heatwaves, droughts, floods and storms.

The report emphasises that a new energy system needs to be built to last, one that prioritises security, resilience and flexibility, and ensures that benefits of the new energy economy are shared and inclusive. In some regions of the world, high financing costs and project risks are limiting the spread of cost-competitive clean energy technologies to where they are needed most. This is especially the case in developing economies where these technologies can deliver the biggest returns for sustainable development and emissions reductions. Lack of access to energy remains the most fundamental inequity in today’s energy system, with 750 million people – predominantly in sub-Saharan Africa – without access to electricity and over 2 billion without clean cooking fuels, the report notes.