Info!
UPDATED 1 Sept: The EI library in London is temporarily closed to the public, as a precautionary measure in light of the ongoing COVID-19 situation. The Knowledge Service will still be answering email queries via email , or via live chats during working hours (09:15-17:00 GMT). Our e-library is always open for members here: eLibrary , for full-text access to over 200 e-books and millions of articles. Thank you for your patience.

Strong policies and technology driving energy market change

Decorative image New

Today’s changing global energy markets underscore the importance of strong policies and a focus on developing technologies, says Fatih Birol, IEA Executive Director and recipient of the Energy Institute’s 2017 Melchett Award.*

Global energy markets are changing rapidly as world economies transition to a low carbon future. Energy consumption centres are shifting eastwards and, last year, global energy intensity fell by 2.1%, with renewables supplying half of global electricity demand growth.

Strong policies and a focus on developing technologies are driving these changing energy markets, according to Dr Fatih Birol HonFEI, Executive Director of the International Energy Agency (IEA), presenting the Energy Institute’s (EI) Melchett Lecture to 300 energy professionals, civil servants and journalists in London on 4 July 201

New dynamics

In his keynote lecture entitled ‘Global energy markets and environmental challenges: Today and tomorrow’, Dr Birol assessed a number of key energy trends. In terms of the outlook for energy demand and supply he said: ‘Over the last 25 years, energy demand has increased by almost 60%, with the lion’s share of this being met by fossil fuels. The biggest winner was coal. But looking forward 25 years to 2040, we see a new dynamic on the demand side and a new set of winners on supply. Growth in demand slows to 30%, as energy efficiency helps to bring down the amount of energy required to drive the global economy.’

On oil and gas he said: ‘The ongoing growth in US shale oil is triggering a deep transformation of oil industry dynamics.’ He noted that since 2010 US light tight oil (LTO) had delivered impressive growth, with the IEA expecting it to reach almost 4.5mn b/d in 2017, the largest oil production growth in oil history outside Saudi Arabia. He also noted that the growth in US LTO was different from production growth in all other regions, having resulted from technological and market progress rather than the discovery and deployment of huge oil resources 

He continued: ‘The shale revolution in the US is being followed by another gas revolution – this time driven by a wave of new LNG supply that will reshape gas markets and change the gas security equation.’ However, he noted that while this new wave of LNG supply, led by Australia and the US, will improve the ability of the system to react to potential demand or supply shocks, security of gas supply could not be taken for granted as it will face strong competition from coal in some markets and being squeezed by renewables in others. He believed the second natural gas revolution would have far-reaching implications for gas pricing and contracts.

More to be done

Despite positive moves to a low carbon future, the global transition to a cleaner energy system in not progressing as needed, warned Dr Birol, who noted that today’s share of fossil fuels in the global energy mix stands at 81% of the total – exactly the same as 30 years ago (albeit the oil/gas/coal balance has changed over the years).

He said that although the demand for oil is slowing down, no peak is currently in sight. He pointed out that despite the impact of a predicted doubling of the global car fleet to 2040 being kept in check by efficiency gains and the use of biofuels and electric vehicles, the maritime, freight, aviation and petrochemicals sectors would push total oil demand higher as they don’t have easy drop-in alternative options.

Dr Birol also stressed the need for more efficiency standards in the commercial transport sector, noting that although 40 countries worldwide have such standards for passenger cars, only four do so for trucks. He stated that: ‘Without further policy efforts, trucks will account for 40% of the oil demand growth to 2050 and 15% of the increase in global CO2 emissions.’

Furthermore, although the global electric car fleet passed 2mn in 2016, breaking records, sales growth actually slipped from 70% in 2015 to 40% in 2016, suggesting the boom may not last without sustained policy support. He also stressed the importance of keeping the numbers in perspective, with 2mn electric cars only representing 0.2% of the total car fleet.

Call for clean energy action

On the clean energy transition, Dr Birol observed promising signs but underscored the need for significant further effort. He noted that over the last three years, global emissions have remained flat – led by emission declines in the US and China – despite the global economy growing by just over 3%. ‘This is a cause for optimism, even if it is too soon to say that emissions have peaked,’ he said. ‘It is also a sign that market dynamics and technological improvements matter.’

He stressed that efficiency and renewables are key to global climate change mitigation, explaining that supply-side investment needs to be re-directed, not increased, while demand-side investment for energy efficiency, electrification and renewables need to ramp up significantly in order to help limit the global temperature rise to 2ºC. 

He also singled out the need to boost R&D to further improve the deployment prospects for clean energy technologies. He pointed out that R&D spend by the top three IT companies was higher than the total $37bn global spend on clean energy and electricity networks R&D in 2016. ‘Globally, R&D investment in clean energy by both governments and the private sector is too low,’ he said. ‘To support and encourage innovation and R&D efforts, the IEA is strengthening its role as a global hub for clean energy and energy efficiency.’

Dr Birol concluded his thought-provoking Melchett Lecture by stating: ‘Limiting the global temp rise to 2ºC will require an energy transition of exceptional scope, depth and speed.’

*The EI’s prestigious Melchett Award dates back to 1930, when it was instituted by The Rt Hon Sir Alfred Mond, who later became Lord Melchett and Chairman of ICI. It is presented to an individual for their outstanding contribution to the study or advancement of the science of fuel and energy.

A video of the Melchett Lecture can be found at https://www.energyinst.org/events/melchett-cadman


Photo: Dr Fatih Birol HonFEI, Executive Director of the International Energy Agency (IEA), presenting the Energy Institute’s (EI) Melchett Lecture on 4 July 2017

News Item details


Please login to save this item