The World Energy Outlook after the Financial Crisis

Presentation to the UNECE Committee on Sustainable Energy Geneva, 19 November 2009 Trevor Morgan Senior Economist International Energy Agency
OECD/IEA - 2009

The context
The worst economic slump since the 2nd World War & signs of recovery but how fast? An oil price collapse & then a rebound rising marginal costs point to higher prices in the longer term, but are current levels sustainable? A slump in energy investment due to the financial & economic crisis will it bounce back quickly enough to avert a supply squeeze later? Difficult negotiations on a post-2012 climate deal leading up to Copenhagen what is needed to avert catastrophic climate change?

OECD/IEA - 2009

How the crisis is affecting the energy sector & the environment
Financial crisis Economic recession

Reduced energy demand Reduced investment

Financing constraints and lower demand lead to lower investment and reduced capacity Lower income directly reduces demand for energy services in near term, but might discourage spending on more energyefficient equipment in long term

Impact on energy prices

Lower in short term as demand stalls, but could be higher in medium term if impact of lower investment outweighs impact of recession on demand

Environmental impact
lower emissions in short term, but less investment in low-carbon energy and more efficient technologies could push up emissions in long term

The financial crisis has hit both energy demand & supply, with uncertain medium- to longterm consequences for energy prices & the environment
OECD/IEA - 2009

The impact of the crisis on energy demand so far

Change in primary demand (preliminary data)
8% 6% 4% 2% 0% -2% -4% -6% Oil Gas Coal Electricity 2008 2009

Globally, primary energy demand is set to drop by around 2% in 2009 the first significant fall since 1981 with most of the fall occurring in OECD countries
OECD/IEA - 2009

Historical world electricity consumption

TWh

20 000 16 000 12 000 8 000 4 000

Global credit crunch Dot-com bubble burst Asian economic crisis Black Monday stock market crash US recession 2nd oil price shock 1st oil price shock End of World War II

0 1945 1950

1960

1970

1980

1990

2000

2009* * Estimate

The financial & economic crisis is expected to result in a 1.6% drop in electricity demand in 2009 the first fall of any kind since the end of the 2nd World War
OECD/IEA - 2009

Worldwide upstream oil & gas capital expenditures

Billion dollars 500

-19%
400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* * Budgeted spending

Global upstream spending (excluding acquisitions) is budgeted to fall by over $90 billion, or 19%, in 2009 the first fall in a decade
OECD/IEA - 2009

Global investment in new renewables-based power-generation assets

Billion dollars 90 80 70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008 2009* * Projected

Geothermal

-18%

Marine and small hydro Biomass Solar Wind

Renewables-based power investment is set to drop by almost one-fifth to under $70 billion in 2009, though the fall would have been close to 30% without economic stimulus spending
OECD/IEA - 2009

World primary energy demand by fuel in the Reference Scenario

Mtoe

18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 1980 1990 2000 2010 2020 2030

Other renewables Biomass Hydro Nuclear Gas Oil Coal WEO-2008 total

Global demand grows by 40% between 2007 and 2030, with 93% of the increase coming from non-OECD countries
OECD/IEA - 2009

Change in primary energy demand by fuel in the Reference Scenario, 2007-2030

China India Other Asia Middle East OECD Latin America Africa E. Europe/Eurasia - 500 0 500 1 000 1 500 2 000 Mtoe Coal Oil Gas Nuclear Hydro Other

The increase in Chinas demand for energy for coal in particular dwarfs that of all other countries & regions
OECD/IEA - 2009

Cumulative investment in energy-supply infrastructure in the Reference Scenario, 2008-2030

Total investment = $25.6 trillion (in year-2008 dollars)
14% Shipping & ports Transport Coal $0.7 trillion Biofuels 3% $0.2 trillion Oil 1% $5.9 trillion 23% Gas $5.1 trillion 20% LNG T&D 9% 33% Refining 4% 17%

86%

Mining

Upstream

79%

15% 33%

Transmission Distribution

Power $13.7 trillion 53%

52%

Generation

Upstream

58%

Just over half of all energy-investment needs to 2030 are needed in the power sector, mainly in non-OECD countries
OECD/IEA - 2009

Energy-related CO2 emissions by fuel and region in the Reference Scenario

Gt

45 40 35 30 25 20 15 10 5 0 1980 1990 2000 2010 2020 2030

International marine & aviation bunkers Non-OECD gas Non-OECD oil Non-OECD coal OECD gas OECD oil OECD coal

CO2 emissions are expected to fall by 3% in 2009 to less than 28 Gt, but then rebound to 40 Gt in 2030 in the Reference Scenario
OECD/IEA - 2009

World abatement of energy-related CO2 emissions in the 450 Scenario

Gt 42 40 38 OECD+ 36 34 32 30 28 26 2007 2010 OC 450 Scenario 2015 2020 2025 2030 3.8 Gt 13.8 Gt OME Renewables & biofuels Nuclear CCS 19% 13% 3% 23% 10% 10% Efficiency 65% 57% Reference Scenario World abatement by technology 2020 3.8 Gt 2030 13.8 Gt

Measures to boost energy efficiency account for most of the reduction in emissions through to 2030, with renewables & CCS playing a growing role in the longer term
OECD/IEA - 2009

Abatement of energy-related CO2 emissions in the 450 Scenario by key emitters, 2020
Gt 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0 China United States European Union India Russia Japan International carbon markets Cap & trade in power & industry sectors International sectoral standards in transport & industry National policies

China, the United States, the European Union, India, Russia & Japan account for almost three-quarters of the 3.8 Gt reduction in the 450 Scenario
OECD/IEA - 2009

World primary energy demand by fuel & scenario in 2030

Reference Scenario Coal Oil Gas Nuclear Renewables 0 1 000 2 000 +49% +33% 3 000 4 000 5 000 6 000 Mtoe -17% -47% -15% 450 Scenario

The share of fossil fuels in total primary energy demand in the 450 Scenario declines from 81% today to 68% in 2030, with gas remaining at close to todays levels of 20%
OECD/IEA - 2009

Additional investment in the 450 Scenario relative to the Reference Scenario

Billion dollars (2008) 1 200 1 000 800 600 400 200 0 2015 2020 2025 2030 Other Countries Other Major Economies OECD+

Financing in 2020
With OECD+ co-financing of 50% of non-OECD investment $ billion (2008) 400 300 200 100 0 OECD+ OECD+ Non-OECD Non-OECD

2020

The 450 Scenario sees $10.5 trillion of additional investment to the Reference Scenario, costing 0.5% of GDP in 2020 and 1.1% of GDP in 2030
OECD/IEA - 2009

Summary & conclusions

The financial crisis has halted the rise in global fossil-energy use, but its long-term upward path will resume soon on current policies Energy investment has fallen sharply, threatening supply shortfalls & a renewed price shock in the medium term Tackling climate change & enhancing energy security require a massive decarbonisation of the energy system A 450 path towards green growth would bring substantial benefits Natural gas can play a key role as a bridge to a cleaner energy future The challenge is enormous but it can and must be met

OECD/IEA - 2009

WEO will be back in 2010

In-depth analysis of prospects for renewables Analysis of the impact of fossil-energy subsidies (in support of G20) Special focus on the outlook for oil & gas in the Caspian region

OECD/IEA - 2009

Thank you
trevor.morgan@iea.org www.iea.org www.worldenergyoutlook.org

OECD/IEA - 2009