World Energy Outlook 2022

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Context

• A Report titled “World Energy Outlook 2022” has been released by the IEA (International Energy Agency).

About

• The annual World Energy Outlook is the International Energy Agency's flagship publication, widely recognised as the most authoritative source for global energy projections and analysis. It appears every year since 1998.
• WEO presents detailed projections of energy demand, production, trade and investment, fuel by fuel and region by region.
• Its research and objective data offer crucial insights into the world’s energy demand and supply under various scenarios, as well as the implications for energy security, climatic goals, and economic growth.

The 2022 Report

India

• Talking specifically about India, the Report stated that the primary challenge for the country is going to be about meeting its rising electricity demand.
• It said India will have to find out ways to meet this increasing demand with renewables and nuclear on a scale that is large enough to reduce the use of “unabated coal‐fired generation”, which provides nearly three‐quarters of electricity supply currently.
• It revealed that India became the world’s second‐largest coal producer in 2021 (in energy terms), overtaking Australia and Indonesia. India plans to increase domestic production by more than 100 million tonnes of coal equivalent (Mtce) by 2025 from the current levels. At present, India accounts for just over 10 percent of global coal consumption, after China which accounts for 55 percent. Coal demand in India rose rapidly between 2010 and 2019, mainly as increases in electricity demand were largely met through coal‐fired power. Coal use in India dropped by 7 percent in 2020 due to the pandemic, but increased by 13 percent in 2021, therefore already surpassing the 2019 levels.
• India becomes the world’s most populous country by 2025 and, combined with the twin forces of urbanisation and industrialisation, this underpins rapid growth in energy demand, which rises by more than 3 percent per year in the stated policies scenario (STEPS) from 2021 to 2030. The Report sees the largest increase in energy demand of any country.

 

World

• Russia’s invasion of Ukraine has sparked a global energy crisis.
• Prices for spot purchases of natural gas have reached levels never seen before, regularly exceeding the equivalent of USD 250 for a barrel of oil. Coal prices have also hit record levels, while oil rose well above USD 100 per barrel in mid-2022 before falling back. High gas and coal prices account for 90% of the upward pressure on electricity costs around the world.
• The crisis has stoked inflationary pressures and created a looming risk of recession, as well as a huge USD 2 trillion windfall for fossil fuel producers above their 2021 net income.
• Higher energy prices are also increasing food insecurity in many developing economies, with the heaviest burden falling on poorer households where a larger share of income is spent on energy and food. Some 75 million people who recently gained access to electricity are likely to lose the ability to pay for it, meaning the total number of people worldwide without electricity access has started to rise. And almost 100 million people may be pushed back into reliance on firewood for cooking instead of cleaner, healthier solutions.

Measures being taken

• Faced with energy shortfalls and high prices, governments have so far committed well over USD 500 billion, mainly in advanced economies, to shield consumers from the immediate impacts. They have rushed to try and secure alternative fuel supplies and ensure adequate gas storage. Other short-term actions have included increasing oil- and coal-fired electricity generation, extending the lifetimes of some nuclear power plants, and accelerating the flow of new renewables projects. Demand-side measures have generally received less attention, but greater efficiency is an essential part of the short- and longer-term response.
• Alongside short-term measures, many governments are now taking longer-term steps: some seeking to increase or diversify oil and gas supply; many looking to accelerate structural change.

 

Assumptions on Government Policies

The three scenarios explored in this World Energy Outlook (WEO) are differentiated primarily by the assumptions made on government policies.

1. The Stated Policies Scenario (STEPS) shows the trajectory implied by today’s policy settings.
2. The Announced Pledges Scenario (APS) assumes that all aspirational targets announced by governments are met on time and in full, including their long-term net zero and energy access goals.
3. The Net Zero Emissions by 2050 (NZE) Scenario maps out a way to achieve a 1.5 °C stabilisation in the rise in global average temperatures, alongside universal access to modern energy by 2030.

 

Full achievement of all climate pledges would move the world towards safer ground, but there is still a large gap between today’s ambitions and a 1.5 °C stabilisation.

 

Suggestions made in the Report

• Growing deployment of solar and wind generation displace fossil fuels in the power sector, particularly coal.
• Production capacity for many key materials and technologies needs to be scaled up to align with net zero ambitions.
• Stronger policies will be essential to drive the huge increase in energy investment that is needed to reduce the risks of future price spikes and volatility.
• A new energy security paradigm is needed to ensure reliability and affordability while reducing emissions.

 

WEO provided many principles that can help guide policymakers through the period when declining fossil fuel and expanding clean energy systems co-exist, since both systems are required to function well during energy transitions in order to deliver the energy services needed by consumers.

• CO₂ emissions have increased in every year since the Paris COP in 2015, except in 2020. Delaying decisive action to reduce emissions sustainably could lead to significant economic and social costs.
• The structure of energy demand changes, with the importance of fossil fuels gradually declining, replaced by a growing share of renewable energy and increasing electrification. The transition to a low-carbon world requires a range of other energy sources and technologies, including low-carbon hydrogen, modern bioenergy, and carbon capture, use and storage (CCUS).
• The movement to a lower carbon energy system needs to be strengthened as it leads to a fundamental restructuring of global energy markets, with a more diversified energy mix, increased levels of competition, shifting economic rents, and a greater role for customer choice.
• Oil demand increases to above its pre-COVID-19 level before falling further out. Declines in oil demand are driven by the increasing efficiency and electrification of road transportation. Natural declines in existing hydrocarbon production imply continuing investment in new upstream oil and gas is required over the next 30 years.
• The use of natural gas is supported, at least for a period, by increasing demand in fast-growing emerging economies as they continue to industrialize and reduce their reliance on coal. Growth in liquefied natural gas can play a central role in increasing emerging markets’ access to natural gas.
• Wind and solar power expand rapidly, accounting for all or most of the increase in global power generation, underpinned by continuing falls in their costs and an increasing ability of power systems to integrate high concentrations of variable power sources. The growth in wind and solar power requires a substantial increase in the pace of investment in both new capacity and enabling technologies and infrastructure.
• The use of modern bioenergy need to be increased substantially, as it can provide a low-carbon alternative to fossil fuels in hard-to-abate sectors.
• CCUS can play a central role in supporting a low-carbon energy system: capturing emissions from industrial processes, providing a source of carbon dioxide removals, and abating emissions from fossil fuels.
• A range of carbon dioxide removals – including bioenergy combined with carbon capture and storage, natural climate solutions, and direct air capture with storage – may be needed for the world to achieve a deep and rapid decarbonization.
• It is essential to bring everyone on board, especially at a time when geopolitical fractures on energy and climate are all the more visible. This means redoubling efforts to ensure that a broad coalition of countries has a stake in the new energy economy. Today’s energy crisis makes it crystal clear why we need to press ahead.

 

IEA The International Energy Agency (IEA) is a Paris-based autonomous intergovernmental organisation, established in 1974, that provides policy recommendations, analysis and data on the entire global energy sector, with a recent focus on curbing carbon emissions and reaching global climate targets, including the Paris Agreement. The 31 member countries and 11 association countries of the IEA represent 75% of global energy demand. The IEA was set up under the framework of the Organisation for Economic Co-operation and Development (OECD) in the aftermath of the 1973 oil crisis to respond to physical disruptions in global oil supplies. India became an Associate member of IEA in March 2017.

 

https://www.iea.org/reports/world-energy-outlook-2022