The Paris-based International Energy Agency (IEA) says today that the world is not on course for a sustainable energy future.
|Boats pulling away from BP's Shah Deniz Alpha platform in the Azerbaijan sector of the Caspian Sea Photo credit: BP|
The IEA, the energy watchdog for 26 industrialised countries including Ireland, says that its Energy Technology Perspectives: Scenarios & Strategies to 2050 report, which is published today, is in response to the Group of Eight (G8) leaders at their Gleneagles Summit in July 2005, and to the International Energy Agency's Energy Ministers, who called for the IEA to develop and advise on alternative scenarios and strategies aimed at a clean, clever and competitive energy future.
The IEA says that oil prices at historical highs raise concerns about the long-term balance of supply and demand. CO2 emissions have increased by more than 20% over the last decade. Indeed, if the future is in line with present trends as illustrated by the World Energy Outlook 2005 Reference Scenario, CO2 emissions and oil demand will continue to grow rapidly over the next 25 years. This is after taking account of energy efficiency gains and technological progress that can be expected under existing policies. Extending this outlook beyond 2030 shows that these worrisome trends are likely to get worse.
“Technologies can make a difference”, said Claude Mandil, Executive Director of the IEA today in Paris, presenting the key findings of the report. “A sustainable energy future is possible, but only if we act urgently and decisively to promote, develop and deploy a full mix of energy technologies – including improved energy efficiency, CO2 capture and storage (CCS), renewables and -- where acceptable -- nuclear energy. We have the means, now we need the will”, Mr. Mandil added.
Energy efficiency is essential to mitigate growth in energy demand and CO2 emissions
“Improved energy efficiency is an indispensable component of any policy mix”, said Mr. Mandil, “and it is available immediately”. Accelerating energy efficiency improvements alone can reduce the world’s energy demand in 2050 by an amount equivalent to almost half of today’s global energy consumption. To achieve this, however, “governments, in both OECD and non-OECD countries, must be willing to implement measures that encourage the investment in energy-efficient technologies“, Mr. Mandil added.
Decarbonising power generation is possible
Another key technology is the capture and storage of CO2 emitted from power-generation or industrial processes. The study points out that the early demonstration of CCS in full-scale power plants should be a high priority. “If we do not succeed in making CCS viable, the cost of mitigating CO2 emissions will be much higher”, Mr Mandil warned.
Deploying CCS, along with more renewables, more nuclear and more efficient use of natural gas and coal, can significantly decarbonise global electricity generation by 2050. “With the right policy incentives we think there is scope for renewables to quadruple by 2050 and for nuclear to gain a more important role in countries where it is acceptable”, Mr. Mandil stated.
Transport is key to reduce growth in oil demand
”Bio-fuels and more efficient vehicles can reduce the expected growth in oil demand for transport by almost 50%”, Mr. Mandil said. The reduction of transport fuel use is the main contributor to total savings of 42 mbpd of oil by 2050, equalling about half of today’s global oil consumption. “Hydrogen could also play an important role in the transport sector, but, for this, we need technological breakthroughs to reduce costs and major investments in infrastructure”. In a scenario that builds on the most optimistic assumptions, in which hydrogen fuel-cell vehicles achieve significant market share in 2050, CO2 emissions would be even lower than today and, more importantly, they would be set to decrease even further after 2050.
Substantial and urgent action is needed
The in-depth analysis shows how existing and emerging energy technologies can guide the world towards a more secure and sustainable energy future. “But this will require dynamic financial and policy efforts by both the public and the private sector and unprecedented co-operation between developed and developing nations. Selecting the least-cost technology solutions will be crucial”, Mr. Mandil said. For this reason, the IEA scenarios include only technologies that will have an estimated additional cost, when fully commercialised, of less than $25 per tonne of CO2 emission avoided. This is lower than the last twelve months’ average price of CO2 permits under the European Emissions Trading scheme.
“The task is urgent”, Mr Mandil stressed, “we have to act now to accelerate energy efficiency improvements, to deploy the most cost-effective available technologies, and to scale up R&D and demonstration efforts aimed at reducing the costs of advanced renewables, nuclear and CCS technologies. We also have to increase our focus on finding a solution that can ultimately decouple the transport sector from CO2 emissions and petroleum dependency”, Mr. Mandil concluded.
MORE DETAILED INFORMATION
In the Baseline Scenario prepared for the study, CO2 emissions will be almost two and a half times the current level by 2050. Surging transport demand will continue to put pressure on oil supply. The carbon intensity of the world's economy will increase due to greater reliance on coal for power generation – especially in rapidly expanding developing countries with domestic coal resources – and the increased use of coal in the production of liquid transport fuels.
The IEA says that this alarming outlook can be changed. The Accelerated Technology scenarios (ACTs) – that form the backbone of its report – demonstrate that by employing technologies that already exist or are under development, the world could be brought onto a much more sustainable energy path. The scenarios show how energy-related CO2 emissions can be returned to their current levels by 2050 and how the growth of oil demand can be moderated. They also show that by 2050, energy efficiency measures can reduce electricity demand by a third below the Baseline levels. Savings from liquid fuels would equal more than half of today's global oil consumption, offsetting about 56% of the growth in oil demand foreseen in the Baseline scenario.
The substantial changes demonstrated in the ACT scenarios are grounded in:
Strong energy efficiency gains in the transport, industry and buildings sectors.
Electricity supply becoming significantly decarbonised as the power-generation mix shifts towards nuclear power, renewables, natural gas and coal with CO2 capture and storage (CCS).
Increased use of biofuels for road transport.
Nevertheless, even in the ACT scenarios, fossil fuels still supply most of the world's energy in 2050. Demand for oil, coal (except in one scenario) and natural gas are all greater in 2050 than they are today. Investment in conventional energy sources will, therefore, remain essential.
In all five of the ACT scenarios, demand for energy services is assumed to grow rapidly, especially in developing countries. The scenarios do not imply that the growth in demand for energy services is constrained in developing or developed countries. Rather they show how this demand can be met more intelligently and with lower CO2 emissions through the implementation of a wide range of policies including increased research, development and demonstration (RD&D) efforts and deployment programmes, as well as economic incentives to advance the uptake of low-carbon technologies. The policies considered are the same across all five ACT scenarios. What varies are assumptions about how quickly energy efficiency gains can be achieved, about how quickly the cost of major technologies such as CCS, renewables and nuclear can be reduced, and about how soon these technologies can be made widely available. A sixth scenario, TECH Plus, illustrates the implications of making more optimistic assumptions on the rate of progress for renewables and nuclear electricity generation technologies, as well as for advanced biofuels and hydrogen fuel cells in the transport sector.
The IEA says that the costs of achieving a more sustainable energy future in the ACT scenarios are not disproportionate, but they will require substantial effort and investment by both the public and private sectors. None of the technologies required are expected – when fully commercialised – to have an incremental cost of more than $25 per tonne of avoided CO2 emissions in all countries, including developing countries. For comparison, this cost is less than the average price for CO2 permits under the European trading scheme over the first four months of 2006.
A price of $25 per tonne of CO2 would add about $ 0.02 per kWh to the cost of coal-fired electricity and about $0.07/litre ($ 0.28/gallon) to the cost of gasoline. The average cost per tonne CO2 emissions reduction for the whole technology portfolio, once all technologies are fully commercialised, is less than $25. However, there will be significant additional transitional costs related to
RD&D and deployment programmes to commercialise many of the technologies over the next couple of decades. The import price of oil will be lower, as reduced demand will put less pressure on more expensive supply options. This cost reduction may not be apparent to consumers, however, since most of it will be balanced by the increased cost of promoting low-carbon technologies.
The IEA says that there are large uncertainties when looking 50 years ahead. The ACT scenarios illustrate a range of possible outcomes based on assumptions that are more, or less, optimistic with regard to cost reductions achieved by technologies such as renewables, nuclear and CCS in power generation. Yet, despite all the uncertainties, two main conclusions from the analysis seem robust. First, technologies do exist that can make a difference over the next 10 to 50 years. Second, none of these technologies can make a sufficient difference on their own. Pursuing a portfolio of technologies will greatly reduce the risk and potentially the costs, if one or more technologies fail to make the expected progress.
Key technologies identified by the ACT scenarios that help build a portfolio for a sustainable energy future include:
Energy Efficiency in Buildings, Industry and Transport
Clean Coal and CO2 Capture and Storage Technologies
Electricity Generation from Natural Gas
Electricity Generation from Nuclear Power
Electricity Generation from Renewables
Biofuels and Hydrogen Fuel Cells in Road Transport
Implementing the ACT Scenarios: Policy Implications
The IEA says that implementing the ACT scenarios will require a transformation in the way power is generated; in the way homes, offices and factories are built and used; and in the technologies used for transport. In the end, it is the private sector that will have to deliver the changes required. But the market on its own will not always achieve the desired results. Governments have a major role to play in supporting innovative R&D and in helping new technologies to surmount some daunting barriers. Government, industry and consumers will have to work hard together.
Energy Efficiency Is Top Priority
The IEA says that Improving energy efficiency is often the cheapest, fastest and most environmentally friendly way to meet the world’s energy needs. Improved energy efficiency also reduces the need for investing in energy supply. Many energy efficiency measures are already economic and they will pay for themselves over their lifetime through reduced energy costs. But there are still major barriers to overcome. Consumers are often ill-informed. Few are concerned with energy efficiency when buying appliances, homes or cars. Even business management tends to give energy efficiency a low priority in decision making. There are also opportunities for energy efficiency that consumers never see because the manufacturers of refrigerators, televisions or cars do not always take full advantage of the technologies that exist to make their products more energy efficient. A wide range of policy instruments are available, including public information campaigns, non-binding guidelines, labels and targets, public-sector leadership in procurement, binding regulations, standards, and fiscal and other financial incentives.
Energy Efficiency Is Top Priority
Improving energy efficiency is often the cheapest, fastest and most environmentally friendly way to meet the world’s energy needs. Improved energy efficiency also reduces the need for investing in energy supply. Many energy efficiency measures are already economic and they will pay for themselves over their lifetime through reduced energy costs. But there are still major barriers to overcome. Consumers are often ill-informed. Few are concerned with energy efficiency when buying appliances, homes or cars. Even business management tends to give energy efficiency a low priority in decision making. There are also opportunities for energy efficiency that consumers never see because the manufacturers of refrigerators, televisions or cars do not always take full advantage of the technologies that exist to make their products more energy efficient. A wide range of policy instruments are available, including public information campaigns, non-binding guidelines, labels and targets, public-sector leadership in procurement, binding regulations, standards, and fiscal and other financial incentives.
Well-focused R&D Programmes Are Essential
The IEA says that there is an acute need to stabilise declining budgets for energy-related R&D and then increase them. More R&D in the private sector is critical. Some forward-looking companies are increasing their commitments, but this trend needs to continue and broaden. For technologies that are already commercial, the private sector is best
placed to tailor ongoing research and development to the market’s needs. Nevertheless, government–funded R&D will remain essential, especially for promising technologies that are not yet commercial. Government R&D budgets in IEA countries are well below the levels that they reached in response to the oil price shocks of the 1970s and have been static or in decline over the past decade.
Budgets for energy R&D and deployment programmes need to be reviewed if the results of the ACT scenarios are to be realised. Some of the areas with the greatest potential include advanced bio-fuels, hydrogen and fuel cells, energy storage and advanced renewables. There are also some interesting areas of basic science – especially bio-technologies, nano-technologies and materials – which could have far-reaching implications for energy in the long term.
International Energy Agency