IEA Forecasts Large Growth of Wind and Solar Energy by 2040

November 30, 2016

As a result of major transformations in the global energy system that will take place over the next decades, renewables and natural gas are the big winners in the race to meet energy demand growth until 2040, according to the latest edition of the World Energy Outlook, published by International Energy Agency (IEA).

IEA today presented the study in Stockholm, Sweden, and Berlin, Germany, at the request of the Federal Ministry of Economic Affairs and Energy.

A detailed analysis of the pledges made for the Paris Agreement on climate change finds that the era of fossil fuels appears far from over and 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 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, IEA says.

“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 Fatih Birol, the IEA’s executive director. “But there is no single story about the future of global energy: in practice, government policies will determine where we go from here.”

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.

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. 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 the report.

“Renewables make very large strides in coming decades but their gains remain largely confined to electricity generation,” Birol sad. “The next frontier for the renewable story is to expand their use in the industrial, building and transportation sectors where enormous potential for growth exists.”

The Paris Agreement, which entered into force on 4 November, is a major step forward in the fight against global warming, IEA said, but meeting more ambitious climate goals will be extremely challenging and require a step change in the pace of decarbonization and efficiency. Implementing current international pledges will only slow down the projected rise in energy-related carbon emissions from an average of 650 million tonnes per year since 2000 to around 150 million tonnes per year in 2040. While this is a significant achievement, it is far from enough to avoid the worst impact of climate change as it would only limit the rise in average global temperatures to 2.7°C by 2100. The path to 2°C is tough, but it can be achieved if policies to accelerate further low carbon technologies and energy efficiency are put in place across all sectors, according to IEA.

E.ON welcomed the forecast, saying the study foresees renewable energy sources forming the backbone of the new energy environment and thus strong growth in the company’s markets.

“We see the IEA forecast as a confirmation of our strategy of focusing entirely on the new energy world,” said Leonhard Birnbaum, Member of the E.ON Management Board, who also serves as European Chair of the World Energy Council.

Birnbaum expects rapid renewable energy growth will also increase the importance of energy grids as well. In addition to this, he expects renewable energy growth will grant electricity a significantly more important role in both the heating and transport sectors. New business models would thus arise for E.ON, which in turn would need to be intelligently linked using digital technology, the company said.

“Our businesses in energy networks and renewable energy customer solutions provide us with representation in key markets and leave us well positioned to shape the new energy environment,” Birnbaum emphasised.