2016 marks continued shifts in energy markets

The year 2016 saw both traditional and newer sides of the energy market continuing to change as the world shifts towards a low carbon energy system, according to two large reports analysing energy developments last year.

The 2017 edition of the BP Statistical Review of World Energy, published on 13 June, described energy markets in 2016 both reacting to long-term changes and adapting to nearer-term price challenges. 

 The report clearly demonstrates the shift to slower growth in global energy demand, demand moving strongly towards the fast-growing developing economies of Asia, and a marked shift towards lower carbon fuels as renewable energy continues to grow strongly and coal use falls, writes Petroleum Review Editor Kim Jackson. At the same time, energy markets are adjusting to nearer-term challenges, with the oil market in particular adjusting in 2016 to the oversupply that has dominated it in recent years.

 In 2016 global energy demand was weak for the third consecutive year, growing by just 1% – around half the average growth rate of the past decade. Once again, almost all this growth came from developing economies, with China and India together accounting for half of all growth. Indian energy demand grew by 5.4%, a similar rate to that seen in recent years. Chinese energy demand, however, grew by 1.3%. This is close to the 1.2% rise in demand in 2015 and around a quarter of its 10-year average growth. Meanwhile, demand from developed OECD countries remained essentially flat (rising just 0.2%).

 Oil prices averaged $44 per barrel in 2016, down from $52 in 2015 – the lowest annual average price since 2004. The year’s low prices drove demand for oil higher by 1.6% while growth in production was limited to only 0.5% (or 0.4mn barrels per day) – the lowest increase since 2009. Global oil consumption grew by 1.6%, or 1.6mn barrels per day above the 10-year average rate for a second consecutive year. 

Meanwhile, global natural gas consumption rose by 1.5% in 2016, slower than the 10-year average rate of 2.3%. However, there were strong increases in gas consumption in Europe (up 6%), the Middle East (up 3.5%) and China (up 7.7%). Global natural gas production rose by only 0.3% – the weakest growth in gas output for 34 years, outside the financial crisis. 

The use of coal – the most carbon-intensive of the fossil fuels – fell steeply for a second year, down by 1.7% (or 53mn tonnes of oil equivalent), primarily due to falling demand from both the US and China. This decline brought coal’s share of primary energy production to 28.1%, its lowest share since 2004. World coal production fell by 6.2% (231mn toe), the largest annual decline on record. The falls in production were again driven by China and the US.

Renewables were once more the fastest growing of all energy sources, rising by 12%. Although providing only 4% of total primary energy, the growth in renewables represented almost a third of the total growth in energy demand in 2016. BP noted, as did the International Energy Agency and others, that global carbon emissions are estimated to have grown by only 0.1% – making 2016 the third consecutive year of flat or falling emissions. 

The strong year for renewables was also charted by the renewables association REN21, in its Renewables 2017 Global Status Report. The report mirrored similar analyses indicating that 2016 was record-breaking in terms of the amount of new capacity installed, and also that renewables are becoming the least-cost option for power grids worldwide.

According to REN21, 161 GW of renewable power was installed in 2016, increasing total global capacity by around 9% over 2015 – to over 2 TW. Solar PV accounted for around 47% of the capacity added, followed by wind power at 34% and hydropower at 15.5%, according to the report.

The report also notes recent deals in Denmark, Egypt, India, Mexico, Peru and the United Arab Emirates which saw renewable electricity being delivered at below $50 per MWh – below equivalent costs for fossil fuel and nuclear generating capacity in each of the countries. 

And elsewhere it notes that around 0.8 GW of new advanced (mainly battery) energy storage capacity came online, bringing the total at year-end to 6.4 GW.

Finally, a report from the International Renewable Energy Agency (IRENA) estimates that over 9.8mn people were employed in the renewable energy sector in 2016. The Renewable Energy and Jobs – Annual Review 2017, notes the increase from 7mn people employed in the sector in 2012.