The launch of the Energy Institute’s 74th Statistical Review of World Energy in late June began with a summary and analysis presented by Nick Wayth (reported last week; see links below). It then turned to the views of the experts who helped put it together. Their views ranged between comments about the current situation, and more specific focus on electrification and the continuing role of gas.   

KPMG’s Wafa Jafri emphasised a specific term to describe the energy transition today: disorderly. ‘We’re seeing growth in renewables being uneven across the globe. Fossil fuel mixes are changing. Infrastructure and policy are not keeping up with rising demand, especially the way that we’re changing the demand with the rise of AI. And we’re seeing climate targets slipping. In this disorderly transition, there isn’t a single playbook for success. We’ve seen businesses adapt regionally-tailored strategies with a focus on operational resilience. Energy portfolios that are able to flex with shifting policy, increasing costs and adapting to the infrastructure challenges are the ones that will be successful. What we’re seeing is that agility in this market matters most.’  

Kearney’s Romain Debarre also focused on the theme of change, especially as it plays out in the corporate world: ‘We are observing that energy markets are becoming increasingly localised. Each region has its own specific strategy and targets and development at the moment, because the drivers of the energy transition are very specific. Amid these evolutions, many energy companies are being reshaped. Looking at measures being taken, some are focusing on core business, and others have adopted a dual strategy. This is a big step change, and we will probably see the results in the next few years. There is a new mindset within these medium-to-large companies to focus on short-term profitability, delay or scale-back of mature renewables investment and riskier energy ventures. Also, they are developing strategic alliances to reinforce procurement strengths. For me, 2024 may well be seen as the beginning of a pattern shift with a renewed focus on resilience and risk hedging.’  

Electrification 

In reviewing the 2024 figures, EI President and Ørsted Vice-Chair Andy Brown highlighted progress in electrification: ‘[At the top of] the to-do list of decarbonisation is to electrify everything and do it efficiently. It’s a simple to do list, and you can say, well, we didn’t do too badly. There was a 16% increase in solar and wind; that’s not bad. There was 9% overall energy growth, and a 4% increase in electricity. Something’s happening there, but the efficiency bit isn’t. We didn’t put a number on that, but COP28 talked about 4% efficiency improvements a year as the target to 2030. In 2024, GDP growth was 3.3% and energy demand growth was 1.8%, so that doesn’t look like a 4% efficiency improvement. Perhaps if we had achieved that, we would have actually seen that total energy supply decrease, and CO₂ would probably have decreased as well. We aren’t driving energy efficiency, but if we were, we could be on the right track.’  

Responding to a question from the audience on this theme, EI CEO Nick Wayth shared a personal anecdote: ‘When I was kid, there was one light bulb in the kitchen. It might have been a really inefficient 60 Watt incandescent light bulb, but there was only one. Now there are almost 20; they’re all far more efficient, but they’re all on at the same time. That’s the Jevons paradox; the more efficient a supply of energy gets, the more of it you consume. To a degree. But I also think that driving electrification incentivises people to switch to heat pumps, and to EVs [electric vehicles], which, on a life cost basis, now are competing with the fossil equivalents. That drives investment in renewables, which cuts demand. So, I think there’s a real balance in all of this.’  

Debarre described electrification as one of the major trends of the year. However, that process makes demands of national electricity grids, he pointed out: ‘We are coming close to some boundaries of augmentation of the systems. Sometimes, when you reach 30% or 40% [renewables penetration] in some countries, you need to massively invest in optimisation. This includes AI, of course… there’s a lot of very deep transformation that will come and that we need. Electrification brings a lot of opportunities also for the economy, but brings in technologies that we hardly think about, [like] demand response, vehicle-to-grid, all these flexibility services that need to have a certain maturity of market to take off. And now is probably the moment.’  

At the same time, Jafri sounded a sceptical note about recent progress of electrification in Europe, which she characterised as a ‘reality check’ for the transition. She explained: ‘Nick Wayth has talked about how we’ve seen a record rise in electricity, followed by a record rise in renewables to meet that demand. However, most of that generation is coming from China. Europe, in contrast, is only increasing by about 7%, which is well below the global average. What we’re seeing behind this are rising costs, constraints in supply chains, rising financing costs because of interest rates, permitting and grid delays... The ambition in Europe, which has been absolutely brilliant, is proving harder to achieve from a delivery perspective.’  

Electrification also came through in another of Wayth’s responses to an audience question, this time about the role of green hydrogen as an energy carrier, particularly for hard-to-abate sectors. He said: ‘One of the words I didn’t say in the presentation is hydrogen. We talked about it last year. The numbers are so small compared to the 95mn tonnes of hydrogen we use each and every year from fossil sources. It [green hydrogen] is not relevant in terms of the transition at the moment… Within hard-to-abate sectors, there’s a merit order, and I think electrification is going to reach far further into the energy system… Electrification is going to be a dominant trend of the transition. It’s not going to fly planes anytime soon, but it’s going to get into industrial demand. It’s going to dominate ground transportation. It’s going to dominate heating and cooling globally.’  

Returning to decarbonisation of hard-to-abate sectors, he added: ‘And then I think there’s something about just getting clearer mechanisms on how we ensure we have the best solution for each of the problems. For example, Brazil uses huge amounts of biofuels in ground transportation. Actually, the logical thing to do would be to ask Brazil to electrify its ground transportation and take all that biofuel and put it somewhere else. That’s an easy thing to say, and difficult to enact, but we need to think about merit on a global basis, and then a regional basis and across different sectors.’  

‘In contrast to China, Europe’s renewables are only increasing by about 7%, which is well below the global average. What we’re seeing behind this are rising costs, constraints in supply chains, rising financing costs because of interest rates, permitting and grid delays... The ambition in Europe, which has been absolutely brilliant, is proving harder to achieve from a delivery perspective.’ – Wafa Jafiri, KPMG 

The role of gas 

One molecular fuel that seemed to gather unequivocal praise was natural gas.   

As for its benefits in substituting coal, Debarre was enthusiastic and considered that the switch from coal to gas was relatively easy, although methane emissions and gas leaks must be managed throughout the whole value chain. ‘The beauty of natural gas is that it’s a highly flexible molecule. We can store it now; we have the infrastructure... It’s absolutely necessary to have [now], because you need to manage the flexibility in the power system. You need to ensure security. So, there are lots of reasons why we need gas, and the good thing is we have more than 200 years of natural resources.’  

Andy Brown added: ‘If methane emissions are controlled, then gas is by far the cleanest fossil fuel. It grew by 2.5% [in 2024]. If you look at the IEA 2050 Outlook, or Bloomberg New Energy Finance, they show with current policies gas demand flat or growing to 2050. This is quite phenomenal in those scenarios. Should we be really scared about that? I’m not sure. And I think certainly if we look at 7% more gas in China and 13% more in India, we know that gas is displacing coal, so that’s a good thing. We should welcome that transition. 40% of the energy generation in the US is gas. We all know cheap shale gas drives that economy, but the US had a 4% reduction in coal consumption, so it’s also driving the economy effectively and decarbonising.’  

• Further reading: ‘Latest Statistical Review of World Energy signposts age of energy additions’. News story summarising the findings of the first complete look at global energy data for 2024.
• 'Are we heading towards doom or making progress? What the latest EI Statistical Review reveals’. In an overview and top-line analysis, Energy Institute Chief Executive Officer Nick Wayth pointed out at the launch event: ‘We are living through a period of immense transformation, but not in a linear or coordinated way.’  
• 'Energy for the developing world: trends and drivers from the Statistical Review of World Energy’. Energy Institute President Andy Brown reflects on the organisation’s statistical snapshot of global energy, with a particular focus on the needs of the developing world.