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Renewables and Natural Gas Win

| Editor: Rosemarie Stahl

A possible shortfall in energy resources is one of the risks that have to be addressed when it comes to the transformation to renewable energy resources.
A possible shortfall in energy resources is one of the risks that have to be addressed when it comes to the transformation to renewable energy resources. (Photo: CC0 Public Domain)

As a result of major transformations in the global energy system that take place over the next decades, renewables and natural gas are the big winners in the race to meet energy demand growth until 2040. However, the era of fossil fuels is far from over.

The latest edition of the World Energy Outlook, the International Energy Agency’s flagship publication, a detailed analysis of the pledges made for the Paris Agreement on climate change, finds that the era of fossil fuels underscores the challenge of reaching more ambitious climate goals. Still, government policies, as well as cost reductions across the energy sector, enable a doubling of both renewables – subject of a special focus in this year’s Outlook – and of improvements in energy efficiency over the next 25 years. Natural gas continues to expand its role while the shares of coal and oil fall back.

“We see clear winners for the next 25 years – natural gas but especially wind and solar – replacing the champion of the previous 25 years, coal,” said the IEA's executive director, Dr Fatih Birol. “But there is no single story about the future of global energy: in practice, government policies will determine where we go from here.”

Global energy mix

This transformation of the global energy mix described in WEO-2016 means that risks to energy security also evolve. Traditional concerns related to oil and gas supply remain – and are reinforced by record falls in investment levels. The report shows that another year of lower upstream oil investment in 2017 would create a significant risk of a shortfall in new conventional supply within a few years.

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In the longer-term, investment in oil and gas remain essential to meet demand and replace declining production, but the growth in renewables and energy efficiency lessens the call on oil and gas imports in many countries. Increased LNG shipments also change how gas security is perceived. At the same time, the variable nature of renewables in power generation, especially wind and solar, entails a new focus on electricity security.

Oil demand and coal consumption

Global oil demand continues to grow until 2040, mostly because of the lack of easy alternatives to oil in road freight, aviation and petrochemicals, according to WEO-2016. However, oil demand from passenger cars declines even as the number of vehicles doubles in the next quarter century, thanks mainly to improvements in efficiency, but also biofuels and rising ownership of electric cars.

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EU Energy Policy

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11/30/2016 - As the EU settles on the outlines of a future common energy policy in its recently released ‘Winter Package’, Interest groups position themselves along the sidelines. While environmentalists criticise a „lack of vision on renewables“, the chemical industry welcomes the agenda. read...

Coal consumption barely grows in the next 25 years, as demand in China starts to fall back thanks to efforts to fight air pollution and diversify the fuel mix. The gas market is also changing, with the share of LNG overtaking pipelines and growing to more than half of the global long-distance gas trade, up from a quarter in 2000. In an already well-supplied market, new LNG from Australia, the United States and elsewhere triggers a shift to more competitive markets and changes in contractual terms and pricing.

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