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World industry outlook
Energy
July 2018
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Energy 1
Contents
2 World energy outlook
4 Key forecasts
5 Oil and gas
11 Coal
13 Electricity
15 Nuclear
17 Alternative energy
World Industry Outlooks from The Economist Intelligence Unit
The Economist Intelligence Unit's World Industry Outlooks provide forecasts for
six key industries: automotive; consumer goods and retail; energy; financial
services; healthcare; and telecommunications. Updated every three months by our
global industry chiefs, they are divided into sub-sectors, outlining current
developments and future trends in each.
At the core of the reports are our industry data, which are drawn from the most
reliable sources available and then forecast out five years using the expertise of
100 in-house editors and economists, and a global network of more than 600
contributors. From this we derive industry forecasts for the 60 biggest economies
worldwide, which are amalgamated to provide our global and regional forecasts.
The data and forecasts are constantly monitored by both our country analysts and
our industry chiefs to ensure that they accurately reflect economic trends, new
legislation, technology and market factors that are likely to have an impact on each
industry in the future. Our analysts then provide commentary to outline the
implications of these trends for companies in each industry, as well as providing
additional data and analysis on key industry players, market segmentation, and
trends in consumption and production.
World industry outlook July 2018 www.eiu.com © The Economist Intelligence Unit Limited 2018
2 Energy
World energy outlook

(Forecast closing date: July 27th 2018)
Energy consumption, international comparison

(m tonnes oil equivalent)
2015 a 2016 a 2017 b 2018 B 2019 b 2020 b 2021 b 2022 b
China 2,973 3,031 3,094 3,153 3,209 3,255 3,294 3,339
US 2,188 2,159 2,175 2,188 2,207 2,228 2,251 2,271
India 851 883 903 931 954 978 1,005 1,034
Russia 710 721 738 755 773 792 811 831
Japan 430 424 425 424 424 422 422 421
Germany 308 312 313 314 314 315 311 310
World aggregate 12,495 12,666 12,895 13,111 13,349 13,557 13,788 14,033
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.
Sources: The Economist Intelligence Unit; International Energy Agency © OECD/IEA 2018 IEA statistics, www.iea.org/statistics; Licence: www.iea.org/t&c.
We expect energy demand growth to The Economist Intelligence Unit expects energy demand to increase at an
average 1.7% a year in 2018-22, with average annual rate of 1.7% during the forecast period (2018-22), with
renewables outpacing oil and gas. consumption growth for renewables growing faster than for natural gas and oil.
We also expect a slight average annual reduction in coal consumption in the
forecast period. The fastest expansion in demand will be for renewable energy,
especially solar and wind power, consumption of which is expected to increase
by an annual average of over 13% per year between 2018 and 2022.
Energy consumption growth will be driven mainly by developing economies
outside the OECD, especially in Asia. China will continue to provide much of
the momentum and will remain the largest consumer of energy, followed by
the US. However, compared with the previous decade, the rate of Chinese
energy consumption growth will moderate, while US demand will grow only
slightly. In India energy demand growth will be relatively strong, although
slightly slower than in 2013-17, and this emerging Asian economy will maintain
its place as the third largest energy consumer. Meanwhile growth in Japan and
Germany will be essentially flat until 2020, and growth in Russia will be
modest.
Demand for oil will be particularly Oil. The two regions that will show the strongest growth in demand for oil will
strong in Asia and the Middle East be Asia and the Middle East. Although during the forecast period the growth in
these regions will be a little below historical levels, it will compare favourably
with anaemic growth among most OECD economies over the next four years.
As a result we maintain our view that global oil demand growth will be driven
by emerging, non-OECD economies, especially China. Overall, global oil
demand will grow strongly between 2018-22.
On the supply side, the rebound in oil prices has stimulated a turnaround in US
oil production to growth since 2017, and this will continue during the forecast
period. In June, OPEC producers agreed to relax output to return to the
production level set in November 2016, as technically the group is in over
compliance with the level set nearly two years ago. Russia, in co-operation with
OPEC, will also relax output. We expect strong growth in oil production over
the forecast period to keep up with growing demand.
Energy 3
LNG exports from the mainland US Gas. Additional liquefied natural gas (LNG) supplies from the US and Australia
will gain momentum will enter the market over the forecast period. Lower oil-indexed prices for LNG
have deterred the sanctioning of new LNG export projects, although signs are
that with LNG demand rebounding, some projects may be sanctioned in the
longer term. Australia is now second-largest exporter of LNG, and following the
recent lifting of the moratorium on production from the North Field, Qatar
announced a 30% increase in its LNG capacity by the middle of the next
decade. We expect growth in natural gas demand during the forecast period at a
rate faster than demand for oil and coal, reflecting solid growth for this lower
carbon fossil fuel. The main drivers for this, apart from economic growth, will
be a shift from coal to gas in power generation and, in the longer term, greater
use of natural gas as a transport fuel (especially for ships, trucks and buses), and
higher industrial use. There will also be fuel switching from oil to gas for
heating in the buildings sector in many advanced economies. The drivers for
gas demand growth will be the US and China.
India's coal output will rise Coal. Coal demand will struggle during the forecast period. Economic
considerably in2018-22. expansion in emerging economies, especially India, is keeping consumption up
in some non-OECD economies, but we expect continued falls in demand in
industrialised economies. We forecast that coal consumption will fall slightly to
3,585 mtoe in 2022. Coal's share of the US power generation mix will also
remain well below the 50% it had in 2005, despite efforts by the incoming
Trump administration to reverse the structural decline in US coal demand (in
2017 it had fallen to below 30% of generation and we do not expect this to
rebound significantly). Since coal will retain its role as a major fuel in most
large economies, significant coal producers, such as China, India, Australia,
South Africa and Indonesia, are expected to maintain significant levels of
output. However, owing to subdued demand, production will increase only
very slightly during the forecast period. India, which has an import
replacement strategy, will see its output increase considerably between 2018
and 2022.
Global electricity demand will be driven Electricity. Electricity consumption is forecast to grow relatively strongly
by non-OECD countries between 2018 and 2022. Overall, electricity consumption will rise from just
over 22,955 TWh in 2018 to 25,111 TWh in 2022. Electricity capacity is forecast to
grow from 6,702 GW in 2018 to 7,564 GW in 2022. We also forecast a total
increase in global electricity generation of 9.7% during that time. The two main
features of our electricity forecast are that growth in generation and
consumption will be focused in non-OECD emerging regions, while generation
from natural gas and renewables will expand faster than other sources of
power (especially coal and oil).
Half of all reactors under construction Nuclear. We forecast that global nuclear energy consumption will increase from
are in China 707 mtoe in 2018 to 781 mtoe in 2022. Nuclear capacity will grow from 409 GWe
to 433 GWe, with the total number of reactor units rising to 475 in 2022 from 458
in 2018. The bulk of this expansion will occur in just a few countries: nearly
one-half of the nuclear reactors currently being constructed are located in
China; India's nuclear capacity will also expand substantially, as will that of
South Korea and Russia. We expect China to have 63 reactors by 2022, up from
46 in 2018. In India the number of reactors will grow from 25 to 29 over the
4 Energy
same period, while in Russia it will rise from 37 to 40. Two Asian countries,
South Korea and Taiwan, have announced phase-outs of nuclear power,
although this will not occur until after the forecast period. Capacity will
continue to fall in Germany, as the country proceeds with its nuclear phase out
by 2022, while in Japan generation of nuclear power will make only a
modest comeback.
Renewables continue to grow rapidly, Alternative energy. Renewable energy will be the fastest-growing source of
although investment growth is slowing energy during the forecast period. However, in terms of share of energy con-
sumption and generation, renewables will still play a relatively minor role even
in 2022. Nevertheless, growth in absolute terms will continue to be impressive.
Consumption of solar/wind/other will grow from 206 mtoe in 2018 to 334 mtoe
in 2022, an increase of more than 50%. The largest consumer of renewable
energy is the electricity sector, and in most major economies power generation
from renewables is growing rapidly. This is due to rapidly falling costs of
deployment, policy drivers such as feed-in tariffs and other subsidies, targets
that mandate a guaranteed share of renewables usage, and emissions-cutting
policies such as carbon pricing and carbon trading. We forecast that global
power generation from non-hydro renewables will expand rapidly between
2018 and 2022, driven mainly by growth in generation from solar and wind
power. In particular, solar generation will grow by 70%, and wind power by
40%, over the forecast period.
Key forecasts
• Energy consumption in the 69 countries covered by our forecast will increase
from 13,111 mtoe in 2018 to 14,033 mtoe by 2022.
• Consumption of natural gas will grow faster than that of oil and coal. By 2022
gas consumption will reach 3,357 mtoe, with an annual average growth rate of
2.6% between 2018 and 2022, while oil consumption will reach 4,272 mtoe,
with an average annual growth rate of 1.9%.
• Coal consumption will fall to 3,585 mtoe by the end of the forecast period
decreasing by an annual average of just 0.8% between 2018 and 2022.
• Consumption of renewable energy will grow very strongly in absolute terms.
Hydropower will increase to 369 mtoe, geothermal energy to 97 mtoe, and
solar and wind combined to 334 mtoe. Combustible renewables will remain
the biggest form of renewable energy, with consumption reaching 1,240 mtoe
by 2022.
• Consumption of nuclear energy will grow modestly, to 781 mtoe by 2022.
Nearly one-half of the nuclear reactors currently being constructed are located
in China; India's nuclear capacity will also expand substantially.
• Global electricity consumption will increase to 25,111 TWh, up from
22,955 TWh in 2017, reflecting an increase in electricity requirements of 9%
during the forecast period.
Energy 5
Oil and gas

Oil and natural gas consumption
2015 a 2016 a 2017 b 2018 b 2019 b 2020 b 2021 b 2022 b
Oil
Consumption (mtoe) 3,747 3,812 3,883 3,954 4,031 4,107 4,187 4,272
Fuel product consumption
Gasoline ('000 b/d) 23,953 24,191 24,142 24,155 24,265 24,350 24,445 24,610
Distillates ('000 b/d) 32,559 33,010 33,525 34,086 34,756 35,368 36,048 36,784
Natural gas
Consumption (mtoe) 2,791 2,870 2,946 3,022 3,102 3,181 3,269 3,357
Non-OECD economies will drive Oil demand. We forecast strong growth in oil consumption for the forecast
global demand for energy period 2018-2022, averaging 1.9% per year, higher than average annual growth of
1.2% in the previous five year period. The stronger global economy, lower oil
prices (until recently), a halt to declining consumption in high income
economies, and continued strong demand in emerging markets have all
contributed to a relatively robust growth rate. Despite the more recent rise in oil
prices, we expect these factors to continue to drive oil demand throughout the
forecast period. Demand will be driven by non-OECD economies, particularly
emerging markets, which will benefit from stronger economic growth,
enhanced market penetration of vehicles, and rising per-capita incomes.
However, a number of factors will combine to limit oil demand growth in
OECD economies: structural factors, such as better vehicle fuel efficiency and
already saturated auto markets; an increase in the number of electric vehicles
(EVs); higher public transport participation rates; fuel switching from oil to gas
for heating in buildings and in marine transport; and oil-fired generation
continuing to be phased out. Nevertheless, we do not expect global oil
consumption to peak during the forecast period, something that will more
likely occur a few decades from now. Furthermore, while global sales of EVs are
rising dramatically in absolute terms, their market share is still small. We
therefore do not expect them to reduce total oil consumption worldwide until
the second half of the next decade.
Oil demand in OECD economies in Western Europe slightly increased in 2017,
and this slight growth is expected to continue in 2018-19 but will give way to a
decline in 2020-22. Overall, we expect an annual average decline of just less
than 0.1% in Western Europe in 2018-22. Among the region's three major
economies, we expect oil consumption to be flat in the UK and Germany, but
to fall by an annual average of over 2% in France. Demand for oil in Europe
generally, however, will be buoyed by stronger growth in East and Central
Europe, where we expect average annual growth of 1.4% between 2018 and
2022. Russia, in particular, can expect annual demand growth of over 2% during
the forecast period.
The transport sector will continue to In the US, oil demand growth has been mainly underpinned by strongly rising
fuel US oil demand petrol demand from vehicles, driven by lower retail fuel prices. The more recent
rise in crude oil prices, however, has tempered some of this growth. Following
6 Energy
estimated growth of o.8% in 2017, we expect average annual growth in the US

of 0.7% over 2018-22. For North American oil consumption overall, we also
expect growth of around 0.7% during the same period.
The Trump administration may relax the more stringent fuel economy standards
implemented by the preceding government of Barack Obama. This may lead to
higher petrol consumption if prices stay low, but has not yet been factored into
our forecast. According to Reuters, in May the US Department of Transportation
submitted a proposal to the White House that recommended freezing fuel
economy standards at 2020 levels until 2026, a recommendation which would
also bar the state of California from setting stricter standards than that set by the
federal government. Should the Trump administration succeed in weakening
the rules, set by the Obama administration in 2011, we may see a boost in oil
consumption in the late stages of the forecast period and beyond, but the extent
of this increase will depend on the level of oil prices over this period.
In China, oil-consumption growth between 2018 and 2022 will be slower than
in 2013-17, with growth slowing to an annual average of 4.1% from 4.6%. An
expected moderation in economic growth and a decline in the oil intensity of
GDP will weigh on China's oil demand during the forecast period, and in
particular consumption of petrol until 2021 will grow more slowly. Although
China will still account for a significant share of global oil consumption, the
slower growth in its requirements will have bearish implications for global oil
demand growth overall. The government aims to improve fuel efficiency and
environmental standards—especially in the transport sector, with incentives for
NEVs. However, the policy impact on oil demand is modest throughout the
forecast period.
Stronger performers for oil demand between 2018 and 2022 in the Asian region
will also include India, Indonesia, Pakistan, the Philippines and Vietnam, driven
mainly by stronger economic growth as well as rising per capita incomes and
vehicle sales. In India, we expect average annual growth of 3.5%between 2018
and 2022, although this will be lower than growth of 5.5% between 2013 and 2017.
Oil demand will remain strong in Similarly, Saudi Arabia has experienced strong oil consumption growth in
Middle East and Asia recent years but is forecast to show lower rates of expansion during the forecast
period. We expect growth of around 2.6% between 2018 and 2022, down from
an annual average of 3.8% between 2013 and 2017. The kingdom now consumes
more oil than any European economy, with the power sector driving much of
the growth. However, we expect to see a shift to natural gas for power
generation, which will slow the rate of oil demand growth further. Another
factor slowing growth will be the winding back of fuel subsidies as the
kingdom faces fiscal pressure from oil prices. Furthermore, Saudi Arabia is
seeking to diversify from its dependence on oil, as well as liberalise its
economy, as evidenced by its plans to sell a 5% share of Saudi Aramco in a
public listing, but the impact of these measures will not be seen until after the
forecast period. In addition, other Middle Eastern oil exporters are seeking to
phase out expensive fuel subsidies as they prepare for a prolonged period of
lower oil export revenue amid still relatively strong energy consumption
growth. For the Middle East and North Africa region overall we forecast average
annual growth of 2.8% between 2018 and 2022.
Energy 7
US shale oil: signs of revival Oil supply. OPEC and a key non-OPEC producer, Russia, agreed in June 2018 to
raise production back to the target level under the November 2016 supply-cut
agreement, which would imply an increase in output of around 1m b/d. The
decision to raise production volumes mainly reflects OPEC's effort to prevent
further dwindling of global oil stockpiles (which would result in longer-term
price volatility and therefore act as a deterrent to exploration investment by
upstream oil and gas companies). OPEC is expected to begin to gradually
unwind the production-cutting agreement in 2019, after a further tightening of
global oil stockpiles in the second half of 2018.
US president Donald Trump's decision to withdraw the US from the Iranian
nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), and
to re-impose sanctions designed to prevent Iran from exporting oil, from
November 2018, will also have an impact on Iran's oil supply, and perhaps
partly explains Saudi Arabia's willingness to increase output to provide calm in
the oil market. Iran, however, will be able to maintain access to some markets,
including China and India, which will prevent a sharp fall in exports, while
US officials also hinted in July that they might consider waivers for countries
still seeking to purchase Iranian oil (if at a lower level). Adding to supply
uncertainty is the uncertain production outlook for Venezuela due to the
ongoing political crisis preventing a recovery in the country's hydrocarbons
sector.
Although US total liquids production fell year on year in 2016 from 2015, it
rebounded strongly in 2017, and we expect continued growth throughout the
forecast period. The continued recovery in oil prices in the first half of 2018 has
returned a number of shale projects to profitability—particularly in the low-cost
Permian Basin—which has given strength to total US output. The US will remain
the largest producer of liquids during the forecast period, exceeding output from
other oil heavyweights such as Saudi Arabia and Russia.
The victory of Donald Trump in the November 2016 US presidential election
has raised hopes for the US oil and gas industry. The Republican president has
promised to ease regulations that he claimed were holding back drilling, and it
is likely that oversight by federal agencies such as the Environmental Protection
Agency (EPA) will be eased. So far the Trump administration has relaxed federal
rules on offshore drilling and in the Arctic. The Keystone XL pipeline project
has also been approved, although it still remains to be seen whether the link
will actually be built. We have not yet factored in the impact of a Trump
administration on US domestic oil production performance, which will become
clearer over the next few years. Nevertheless it is likely that production trends
will be influenced more by market factors, such as price, than by the relaxation
of federal regulations. Many of the regulations affecting drilling are anyway
imposed at the state level, while greater drilling activity on federal lands would
not have a noticeable impact on total domestic supply.
OPEC faces challenges in managing OPEC had extended its output cutting strategy until March 2018, although due
the market to higher prices and concerns about falling stock levels the group in June
decided to expand output. We expect Saudi Arabia’s total liquids production
(crude oil and natural gas liquids—NGLs) to remain above 12m b/d between
2018 and 2022, reaching 12.5m b/d by the end of the forecast period. Among
8 Energy
other OPEC states, Iraq is expected to show a notable increase in production

throughout the period, achieving combined crude oil and NGL production of
nearly 4.6m b/d by 2022. Overall, we forecast that total liquids production will
reach 98.7m b/d by 2022, up from 92.7m b/d in 2018, reflecting annual growth
of over 1m b/d throughout the forecast period.
Oil and natural gas supply

2015 a 2016 a 2017 b 2018 b 2019 b 2020 b 2021 b 2022 b
Total oil production ('000 b/d)c 91,439 91,582 91,675 92,670 93,907 95,883 97,229 98,746
Natural gas production (mtoe) 2,756 2,784 2,885 2,965 3,047 3,129 3,210 3,292
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Includes crude oil and natural gas liquids.
Gas demand will grow faster than Gas demand. We forecast demand growth for natural gas to average 2.6%
demand for coal and oil between 2018 and 2022, up from 1.8% in the previous forecast period. The main
drivers for global gas demand, apart from economic growth, will be a shift from
coal to gas in power generation and, in the longer term, greater use of natural
gas as a transport fuel (especially for ships, trucks and buses). There will also be
fuel switching from oil to gas for heating in the buildings sector in many
advanced economies. Demand from the transport sector, however, is more
likely to make a noticeable impact only until after 2021, when LNG, compressed
natural gas (CNG) and liquefied petroleum gas (LPG) assume a greater role. In
the nearer term, growing demand from the electricity sector will be the stronger
driver of gas consumption growth, spurred mainly by China. Petrochemicals
and other energy-intensive industries in the US will also be strong sources of
demand for natural gas in the industrial sector, driven by lower prices brought
about by the boom in shale gas production.
In the US, natural gas consumption will continue to expand at a consistent rate
of around 2.2% per year, driven by higher demand from the electric power
sector and growth in industrial and residential consumption. Natural gas
demand in the power sector has made strong gains, largely at the expense of
coal, as lower natural gas prices have made it cost-competitive with coal. We
expect this scenario to continue throughout the forecast period, incrementally
increasing the share of natural gas in the US power mix. Future retirements of
coal-fired power capacity will also boost demand for gas in the power sector
(along with renewables) during the forecast period. Our forecast for growth in
the US between 2018 and 2022 will be slightly higher compared with the
previous forecast period (2%). Overall, provided that natural gas prices do not
increase more sharply, we expect total gas demand in the US (especially from
the industrial sector) to remain healthy during the forecast period.
China's annual gas demand growth China, where natural gas currently accounts for around 5% of total energy
will average 12% consumption, is forecast to grow by an annual average of 6.5% between 2018
and 2022. This will be driven by policies designed to spur the replacement of
coal with gas for power generation and heating in the residential sector, for
both environmental and economic reasons: China aims to meet 10% of its
energy consumption with natural gas by 2020. Although the target is unlikely to
be reached (we forecast it to reach 6.5% by that year), its ambitious nature reflects
the priority that Chinese officials place on promoting gas at the expense of
Energy 9
more carbon-intensive coal. As a result, over the forecast period we expect

natural gas (in addition to renewables) to take up a greater share of power
generation in China, while state policy will continue to replace coal with gas for
residential heating purposes. In 2017 China became the second-largest LNG
importer in the world, behind only Japan, reflecting the greater role natural gas
is playing in meeting China's energy needs. For the Asia-Australasia region
overall we forecast growth in natural gas consumption of over 3.6% between
2018 and 2022, with Indonesia, Malaysia, and the Philippines particularly strong
performers in the region for gas demand growth; in contrast we expect gas
consumption in Japan to grow by just 1% annually.
Demand will be strong in the Middle Gas consumption growth will also be strong in the Middle East and is expected
East; less so in Europe to average nearly 3% a year between 2018 and 2022. Saudi Arabia will continue
its shift towards natural gas usage, especially in power generation. This is aimed
at avoiding wasteful oil usage in the power sector, thus freeing up domestic oil
to generate valuable export income. Growth will also be strong in Egypt, and
in Iran.
In western Europe, meanwhile, gas consumption will grow more strongly in the
UK, Germany, Spain and Denmark, although regional growth will average only
1% a year in 2018-22, with growth decelerating from 2019. In sub-Saharan Africa
growth will be relatively strong, averaging 2.6% between the 2018 and 2022.
Gas supply. In February 2016 the US mainland began exporting LNG, with a
tanker making a delivery to Brazil from Cheniere's Sabine Pass terminal in the
Gulf of Mexico. US LNG exports have steadily grown since then, reaching over
700,000 million cubic feet in all of 2017. The largest importers of this new LNG
were Mexico, South Korea, and China, while smaller volumes were exported to
European buyers (Spain, Turkey and Italy) and some even found its way to the
Middle East (the UAE and Kuwait). Currently there is the one LNG export
terminal currently operating, Cheniere's Sabine Pass project, but a further five
projects are expected to become operational by 2019. According to the EIA this
would lift the US' LNG export capacity to over 9bn cu ft per day by the end of
this decade.
More Australian LNG will come online Another source of LNG supply during the forecast period will be Australia. It
over the forecast period has 60m t/y of LNG capacity in operation already, with a further 26.6m t/y
under construction (all of which is expected to become operational by 2020).
As a result by the end of the forecast period Australia could have the largest
LNG capacity in the world, exceeding that of Qatar and the US. However,
owing to the fall in Asian natural gas prices and competitive supply pressure
from the US, further capacity additions beyond this level are unlikely. Projects
already under construction are guaranteed by long term oil-indexed supply
contracts with Asian buyers, so will go ahead as planned. However, the
collapse in oil prices has placed downward pressure on oil-indexed LNG prices,
and this, together with softened Asian demand for natural gas, will result in
proposed projects that have not yet reached the final investment decision (FID)
stage being delayed. The less favourable market conditions have also
contributed to the cancellation of proposed LNG projects in Canada.
10 Energy
Qatar has lifted its 12-year moratorium on producing additional gas at its North
Field in the Persian Gulf, which has been the prime source of its LNG exports.
The decision was soon followed by the announcement that Qatar would
increase its LNG capacity by 30% by the middle of the next decade, which
would mean that it would keep its position as the largest LNG exporter, fending
off Australia's challenge. The bid by Qatar reflects its effort to maintain market
share in the face of emerging competition from both Australia and the US.
The Trump administration is friendlier The world's major gas producers will steadily increase their output throughout
towards the fossil fuel industry the forecast period. In particular, the US will see continued growth in gas
output between 2018 and 2022, although at a slower rate than in the previous
five years. We expect US natural gas production to reach 694 mtoe by 2022.
Lower Henry Hub natural gas prices in the US, which are expected to average
around US$3/MMBtu until at least 2019, will be the main reason for slower
growth during the forecast period. The Trump administration is decidedly
friendlier towards the fossil fuel industry than its predecessor. However, we do
not anticipate that this will lead to a marked increase in natural gas output, for
the same reasons concerning the impact on US shale oil production. Still, shale
gas production has been resilient in the low price environment, driving total
production increases overall. We expect output to remain healthy during the
forecast period and beyond.
In terms of significant increases in natural gas production elsewhere, we expect
strong growth in Saudi Arabia, driven by the country's intent to switch from oil
to gas in power generation. Our forecast is that gas output in Saudi Arabia will
reach 127 mtoe by 2022. Russia's production will also increase as it attempts to
construct new export routes to Europe that avoid Ukraine. Its most controversial
proposal is the Nordstream 2 pipeline, which would pump additional gas
directly to Germany from Russia through the Baltic Sea, although the project
was criticized in July by US President Donald Trump for making Germany too
dependent on Russian energy exports. Although legislation passed in the US
gives its president the right to sanction companies involved in the project, we
do not believe that this will impact Russia's rate of gas production growth
during the forecast period (which we expect to reach 567,000 ktoe by the end of
the forecast period). Russia also plans to connect to south-eastern European
markets via the Turkstream pipeline, which Gazprom is reportedly preparing to
begin building. It is important to note, however, that Nordstream 2 and the
Turkstream pipelines are projects more designed to redirect existing Russian gas
supplies to Europe than to facilitate substantial additional exports overall. Due
to growing LNG exports, Australia will also see its production continue to
increase between 2018 and 2022. Australia already exports more natural gas
than is consumed by the domestic market.
Energy 11
Coal
Coal consumption and supply
2015 a 2016 a 2017 b 2018 b 2019 b 2020 b 2021 b 2022 b
Coal consumption (mtoe) 3,784 3,731 3,740 3,715 3,697 3,649 3,618 3,585
Coal production (mtoe) 3,809 3,713 3,734 3,747 3,762 3,777 3,793 3,809
Coal demand. Coal demand will slightly fall during the forecast period.
Economic expansion in emerging economies, especially China and India, is still
relatively strong, providing a strong basis for continued growth in coal use, but
demand for this fuel will struggle in Europe and North America during the
forecast period. We forecast that coal consumption will fall to 3,585 mtoe by
2022 from 3,715 mtoe in 2018, reflecting an annual average reduction of 0.9%.
The outlook for US coal demand is poor China accounts for nearly 50% of global coal consumption and by 2022 this
while China will also see demand fall share will have barely shrunk. It relies on coal to generate nearly 80% of its
power, although natural gas and renewables will assume a greater share of the
power mix over time. Moreover, a structural shift in the Chinese economy is
under way from investment-driven to consumption-driven growth. This implies
lower activity in energy-intensive industries such as steelmaking, which are
heavy users of coal. Furthermore, efforts to cap carbon emissions and reduce
the carbon intensity of the Chinese economy will also limit coal demand
growth. For the forecast period we expect a 1.3% decline in China's annual
average coal consumption, suggesting that China's coal consumption may have
peaked, or that a peak is near (despite an increase in actual consumption in
2017). China plans to cap coal consumption by 2020, and in late 2016 Chinese
officials announced a cap on coal-fired capacity (although capacity is still being
built utilisation rates of plants are falling, suggesting the expansion is creating
redundant infrastructure). While we believe that China's demand for coal is
nearing a peak, it is doing so at a very high level, and China will be a key
global consumer of coal for many years to come.
In India's case, coal consumption is expected to grow by an annual average of
over 2.8% between 2018 and 2022. This represents a slowing of consumption
growth from just over 5% between 2013-17. India has been consuming more
coal than the US since 2015. Rising electricity demand—coal accounts for more
than 60% of India's installed power capacity—and expansion of the steel
industry are expected to drive growth in consumption during the forecast
period. The Indian government has an "all of the above" strategy to electricity
supply, which includes aggressive promotion of solar and wind power
(including ambitious policy targets for solar and wind power capacity). This
will not prevent fairly steady growth in coal demand, however, at least in the
short to medium term, especially for power generation.
In the US, coal demand is set to decline by an annual average of 1.4% during
2018-22. Burgeoning output of natural gas and stricter environmental rules will
continue to erode coal's dominance as a source of power generation in the US
over the longer term, although in the short to medium term the decline in coal
consumption will be arrested by a modest rebound in natural gas prices and
12 Energy
the abandonment by Mr Trump's government of the Clean Power Plan. Coal

has lost ground since the start of the decade and in 2016 generation from gas
has exceeded that from coal, a situation that is unlikely to change during the
forecast period. The Trump administration is investigating the option of
intervening into the US electricity market in a way that would guarantee the
purchase of electricity from struggling coal and nuclear plants, but we have not
yet factored this into our forecast, as it has not become policy yet. Competition
from natural gas and the spread of renewables will continue to make the power
sector a difficult market for coal producers, especially as electricity demand
remains flat. Moreover, utilities continue to announce the retirement of coal
capacity, making a sharp reversal of the decline in coal consumption very
unlikely. Meanwhile in Canada, where coal accounts for around 9% of
generation, the Trudeau government has announced that coal-fired power will
be phased out by 2030, and in Canada we expect coal consumption to fall by
an annual rate of over 2% between 2018 and 2022.
Europe's coal mini-boom is over In Europe, coal's affordability compared with natural gas and renewables will
contend with the EU's commitment to reduce emissions. However, we estimate
that in Western Europe specifically coal faces an outlook of continued decline.
Indeed coal usage for power generation in Europe fell in the previous forecast
period (2013-17), owing to stagnant electricity demand, competition from
renewables and the impact of EU air quality directives aimed at curbing
pollution from power plants. In 2017 coal fell to a record low in terms of its
share of power generation in the EU, to just over 20%. This was mainly driven
by the continued fall in coal generation in the UK, which in 2017 fell to a record
low of below 10% of power generation.
We forecast that coal consumption in Western Europe will fall by an annual
average of 3.1% over 2018-22. In the UK in particular coal plants will continue to
be retired, while France has announced that it will phase out coal-fired power
by 2023 (it has two coal plants in operation accounting for 2% of the country's
generation). Although a small consumer of coal, Finland has also announced a
phase-out by 2030. In Germany coal generation fell in the first half of 2018
compared with the year-earlier period, dropping to well below 40% of total
generation according to industry estimates. Germany's new coalition
government has appointed a task force to investigate an end year for coal-fired
power in the country, which will report to the government by the end of 2018,
however we do not expect this to impact Germany's coal generation during the
forecast period, as it is likely that the end date for coal set will not be until the
very long term.
We expect supply growth to be weak, Coal supply. Since coal will maintain its role as a major fuel in most large
although Russia will expand output economies, significant coal producers such as China, India, Australia, South
Africa, Colombia and Indonesia are expected to maintain significant levels of
output. However, production will stay broadly flat throughout the forecast
period, growing only very marginally to 3,809 ktoe by 2022 from 3,747 mtoe in
2018. Australia, Indonesia, Colombia and South Africa will remain key
exporters, focusing on markets in Asia. In the US, depressed domestic demand
will continue to force US coal exporters to look to export markets such as
Europe and Asia instead. Russia will also increase output, being a major
Energy 13
exporter of coal to European markets. Most regions will experience little change
in production over the forecast period, except in western Europe where we
expect it to decline considerably.
In the US, promoting the interests of the coal industry featured prominently
during Mr Trump's 2016 election campaign. His administration will aim to bring
about a turnaround in production, but will be met with mixed results. Coal
production will only increase marginally during the forecast period as domestic
demand for coal remains weak over the next four years. Given the continued
retirement of coal capacity, the major source of coal demand is likely to remain
weak over the long term. Demand for US coal has grown among export
markets, but even if this is sustained this will not be enough to facilitate strong
growth in output over the forecast period. Exports account for less than 10% of
US coal production, with the domestic market, mainly from the electric power
sector, accounting for the other 90%.
China, meanwhile, has sought to cut back on coal production capacity to slash
excess supply, but sharp increases in prices in output more recently has led to
production cutting efforts being relaxed. Over the forecast period we expect
China's coal production to remain about the same, similar to the US. In the
longer term we believe that coal output will remain quite stable on a year to
year basis and will be at 1,850 mtoe by 2022, very little changed from 2018.
India's coal output is strong butChina India is a bright spot for coal production, however. Coal output growth is likely
has slashed excess supply to be above the global average, increasing by nearly 8% in total in 2018-22. This
will be driven by continued growth in domestic demand for coal, especially in
the power sector, and efforts by the Indian government to restrict dependence
on imports by prioritising local production. Exporters such as Australia,
Colombia, South Africa, Russia and Indonesia are expected to marginally
increase production, but we expect slight falls in output in Germany and Poland
as coal consumption in these countries stagnates. Hard coal production in
Germany is on the verge of being completely phased out, while the new
socialist government in Spain will be seeking to balance further cuts in local
output with ensuring that economic dislocation is kept to a minimum. Coal
production in several Eastern European economies will remain fairly stable
throughout the forecast period.
Electricity
Electricity consumption and supply
2015 a 2016 a 2017 b 2018 b 2019 b 2020 b 2021 b 2022 b
Total consumption (twh) 21,551 21,983 22,465 22,955 23,453 23,970 24,532 25,111
Total capacity (gwe) 6,002 6,256 6,488 6,702 6,928 7,146 7,352 7,564
Combustible fuels (gwe)c 3,788 3,860 3,922 3,971 4,024 4,068 4,107 4,146
Nuclear (gwe) 385 400 400 409 422 428 429 433
Hydro (gwe) 1,125 1,153 1,179 1,204 1,233 1,266 1,295 1,323
Non-hydro renewables (gwe) 701 843 986 1,118 1,249 1,384 1,521 1,663
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Coal, natural gas, oil combustible renewables and waste.
14 Energy
Electricity consumption is forecast to grow by an annual average of 2.3% in

2018-22, while electricity consumption will rise from just over 22,955 TWh to
25,111 TWh. Electricity capacity is forecast to grow from 6,702 GWe in 2018 to
7,564 GWe in 2022. The two main features of our electricity forecast are that
growth in generation and consumption will be focused in non-OECD emerging
regions, while generation from natural gas and renewables will expand faster
than other sources of power, such as coal.
We expect fast growth in Asia, the Although average annual growth in global electricity consumption will be
Middle East and Africa short of 3% during the forecast period, expansion will be much faster in Asia,
the Middle East and Sub-Saharan Africa than in Europe and North America.
This reflects faster rates of economic growth, industrialisation in emerging
economies, higher incomes and energy consumption per head and improving
access to the grid in poorer regions, all of which stimulate higher rates of
growth in power demand. In the Middle East and North Africa we forecast
growth of 3.1% between 2018 and 2022, with average annual growth of 2.4% in
Saudi Arabia, 5% in Egypt and 2.8% in Iran. Strong growth will also occur in
Oman, which is expected to experience annual growth of over 3% between
2018 and 2022.
Electricity consumption will also be strong in Sub-Saharan Africa, with growth
of 2.6%. In Nigeria, however, average annual growth will be much higher, at
6.5%, during the forecast period, while in South Africa it will be below the
regional average, at just below 1%.
Among major Asian economies we forecast average annual growth of 3.7% in
China, 3.8% in India and 3.8% in Indonesia between 2018 and 2022. In these
economies we generally forecast lower rates of growth than in 2013-17, owing
mainly to slower economic growth. However, other ASEAN economies will
also continue to show strong growth between 2018 and 2022, especially
Malaysia and the Philippines. For Asia-Australasia overall we expect growth of
3% during the forecast period.
Conversely, growth in electricity consumption will be slower among developed
economies in western Europe and North America, owing to lower rates of
economic growth, little change in energy consumption, more efficient
economic activity and growth in less energy intensive sectors of the economy
(such as services). We forecast average annual growth of just 0.6% in western
Europe and 0.5% in North America between 2018 and 2022. In Latin America
average annual growth will be 3.1%. The only country in Europe expected to
show robust electricity consumption growth during the forecast period will be
Turkey, with an average annual expansion of 3.7% between 2018 and 2022.
Coal-fired capacity will fall by0.9% over Other important trends will be slow growth in coal-fired generation and
the five years. particularly fast growth for renewables and, to a lesser extent, natural gas. We
forecast a slight contraction in global coal-fired power generation of 0.9% in
total between 2018 and 2022. Although growth in coal-fired power generation
in India will slow markedly during the forecast period, other Asian markets,
such as India, the Philippines, Vietnam and Thailand, will grow significantly. By
contrast, we expect to see a slight fall in coal-fired power generation in North
America. In western Europe and eastern and central Europe coal generation
Energy 15
will also fall between 2018 and 2022. In these regions little growth in electricity
consumption, competition from renewables, and anti-carbon pollution
regulations will began to take their toll. In the UK, in particular, coal-fired
capacity is being phased out, while expansion in other markets such as
Germany has stalled. We also expect continued retirement of coal-fired capacity
in the US, and falling coal generation in Canada. By 2022 we expect coal to
account for 33% of total global generation, down from 37% in 2018.
Natural-gas-fired power generation will fare better than coal between 2018 and
2022, and will grow by around 9% during that period. As a lower carbon fuel
than coal, natural gas is being promoted in several countries for use in the
power sector, such as in China, although shifting from coal to gas has been
more successful where gas has been more price-competitive, especially in the
US. In western Europe there has been a modest rebound in gas-fired generation
in recent years, largely due to the fall in natural gas prices (tracking the fall in oil
prices owing to oil indexation). We expect this to continue for the rest of this
decade. We also expect significant growth in other regions, especially in Asia-
Australasia and the Middle East. In Asia growth in demand for power will spur
rising consumption of natural gas for electricity. In the Middle East several
countries are undergoing switching from oil to gas in the power sector, largely
to free up domestic oil for export, a more lucrative use.
In terms of electricity capacity, we expect to see a significant increase in the
capacity of non-hydro renewables, of over 49%, during the forecast period. This
compares to capacity growth of combustible fuels (including oil, gas and coal), a
category expected to grow modestly during the forecast period. Hydro power
and nuclear power will remain stable throughout the forecast period. In total,
we expect electricity capacity to increase to 7,564 GW by 2022 from 6,702 GW
in 2018.
Nuclear
Nuclear consumption and supply
2015 a 2016 A 2017 b 2018 b 2019 b 2020 b 2021 b 2022 b
Total nuclear energy consumption (mtoe) 669 685 685 707 734 752 765 781
Total nuclear energy capacity (gwe) 385 400 400 409 422 428 429 433
We forecast that global nuclear energy consumption will increase from

707 mtoe in 2018 to 781 mtoe in 2022. Nuclear capacity will grow from 409 GWe
to 433 GWe, with the total number of reactor units rising to 475 in 2022 from 458
in 2018. The bulk of this expansion will occur in just a few countries: nearly
one-half of the nuclear reactors currently being constructed are located in
China; India's nuclear capacity will also expand substantially, as will that of
South Korea and Russia. We expect China to have 63 units by 2022, up from 46
in 2018. In India the number of units will grow from 25 to 29 over the same
period, while in Russia it will rise from 33 to 40. Two Asian countries, South
Korea and Taiwan, have announced phase-outs of nuclear power, although we
do not expect this to impact nuclear capacity in either country over the forecast
period. Beyond this period, however, some plants are likely to close as these
16 Energy
countries promote renewables and natural gas over nuclear and coal. For
emerging economies, however, nuclear power is a viable way to provide zero-
carbon electricity, despite the significant costs of building new reactors. Given
the growth in power demand expected in India and China, especially, the
building of nuclear capacity will serve to reduce reliance on fossil fuel imports.
Yet very few new reactors are expected to be built other than in China, India
and Russia during the forecast period.
Prospects for nuclear power in Europe In Europe and North America the story is very different. We forecast that the
and North America are subdued number of units in western Europe will fall from 113 to 106, with consumption
of nuclear energy declining by an annual average of 1.6%. There will be 21
nuclear reactor units in east and central Europe by 2022, just one more than are
operating in 2018. The US will still have the largest number of reactors,
although its stock will remain stable, with 98 units by 2022 (up from 96 in 2018).
Germany is committed to phasing out nuclear power completely by 2022 (by
2021 there will be just three units in operation) and Switzerland is scheduled
will shut down its reactors by 2034. The steady reduction in reactor numbers in
Germany will drive the fall in western Europe's consumption of nuclear power
during the forecast period. In France, the new government has stated it will
honour existing national policy to reduce nuclear capacity, although the timing
of closures of specific plants has yet to be determined. France has a policy to
cut the share of nuclear of its power mix from 75% to 50% by 2025, but we have
not adjusted our estimate of France's nuclear reactors in operation until more
detailed plans of how any phase out will be achieved are known. In the UK,
construction of the Hinckley nuclear plant will go ahead, but it will not be
operating until 2023 at the earliest. The high cost of its construction has cast
doubts on the project and it has met with delays. A start-up date of 2023 is
considerably later than originally planned.
Japan will begin nuclear restarts We expect that the restarting of Japan's nuclear reactors will be slow, with
potentially around 15 reactors in operation by 2022 (with another 20 reactors
not de-commissioned but not yet operating). However, the proportion of total
electricity production accounted for by nuclear power plants by 2022 will be far
smaller than before the Fukushima disaster of 2011. There are plans to build
new nuclear reactors, mostly to replace some of those either being or expected
to be decommissioned, but it is unlikely that any new capacity will be brought
on line before 2021 (rather some capacity that has been taken offline will restart
operations). We forecast that total nuclear generation in Japan will reach
73,000 GWh in 2022.
Energy 17
Alternative energy
Alternatives consumption and supply
2015 a 2016 a 2017 b 2018 b 2019 b 2020 b 2021 b 2022 b
Consumption (mtoe)
Hydro 306 314 321 329 338 348 359 369
Geothermal 63 72 77 81 86 90 94 97
Solar/wind/other 125 151 179 206 233 263 295 334
Combustible renewables and waste 1,007 1,025 1,058 1,092 1,128 1,164 1,201 1,240
Capacity (gwe)
Hydro 1,125 1,153 1,179 1,204 1,233 1,266 1,295 1,323
Non-hydro renewables 701 843 986 1,118 1,249 1,384 1,521 1,663
Renewable energy will be the fastest-growing source of energy during the

forecast period. However, in terms of their share of energy consumption and
generation, renewables will still play a relatively minor role in 2022.
Consumption of solar/wind/other will grow from 206 mtoe in 2018 to 334 mtoe
in 2022, an increase of 62%. Hydro power consumption will increase to 369
mtoe in 2022 from 329 mtoe, while combustible renewables and waste will
grow to 1,240 mtoe at the end of the forecast period.
The largest consumer of renewable energy is the electricity sector, and in most
major economies power generation from renewables is growing rapidly. This is
due to policy drivers such as feed-in tariffs and other subsidies, targets that
mandate a guaranteed share of renewables usage, and emissions-cutting
policies such as carbon pricing and carbon trading. We forecast that global
generation from non-hydro renewables will increase by around 56% between
2018 and 2022, driven mainly by growth in generation from solar and wind
power. Solar generation will nearly double between 2018 and 2022, while wind
power generation will increase by 50%.
The growth in non-hydro renewable sources of power generation will be
driven in no small measure by China, where generation will increase by over
50% between 2018 and 2022. Growth will be strong across the Asian region as
well, where total generation from non-hydro renewables will increase by 60%.
Renewable energy generation will be driven by China's desire to lower the
carbon intensity of the energy system and reduce the amount of coal usage in
electricity generation. In India non-hydro renewables generation will also grow
strongly, nearly doubling between 2018 and 2022. India is developing more
ambitious targets for adding renewables capacity, with a government minister
stating that 40GW of solar and wind power could be added annually over the
next ten years.
Renewables will continue to In addition, we expect strong growth in renewable generation in western
make gains in Europe Europe. Renewable energy consumption will be driven by national level
policies to increase the share of renewables in the energy mix, especially in
Germany, and by EU-wide mandates to reduce the carbon intensity of the
energy system. The UK and Denmark will also see increased deployment of
offshore wind, boosting renewables consumption in those countries, while
18 Energy
France seeks to replace nuclear power with renewables (although this is more
likely to occur after this forecast period). In 2014 the EU set a non-mandatory
target that renewables should supply 27% of energy consumption by 2030. This
target formed part of the EU's Climate and Energy Package, which also targets a
40% cut in emissions from 1990 levels by 2030 and improvements in energy
efficiency. In western Europe as a whole, generation from renewables is
expected to expand by 45% between 2018 and 2022. There will also be growth
in east and central Europe, but not as dramatically. Some countries, such as
Poland, have attempted to slow the growth in wind power capacity to maintain
the dominance of coal. Overall we forecast growth of 15% in east and central
Europe between 2018 and 2022.
We also still expect healthy growth in renewables generation in the US during
the forecast period, despite Mr Trump's stated misgivings about green energy.
US Congress has maintained tax credits for wind and solar, and even though a
tariff imposed on imported solar panels has been implemented, the outlook for
solar is somewhat bullish. In fact several states in the mid-west where usage of
wind power is increasing are Republican-controlled and fully support this form
of energy. Overall, in North America we expect an increase in non-hydro
renewables generation of 43% between 2018-22.
Although the Trump administration has signalled its intent to withdraw from
the Paris Agreement, this cannot formally occur at the earliest until 2020 (the
agreement is already "in force" and the earliest the US can notify the UN of
withdrawal is 2019; full withdrawal does not take effect until twelve months
after that notification). As a result our forecasts for renewables do not factor in
the withdrawal of the US from the Paris agreement. Overall, we forecast growth
in solar generation of 70% between 2018 and 2022, and of 41% for wind
generation over the same period. Non-hydro-renewables generation will also
increase rapidly in absolute terms in the Middle East and North Africa,
albeit from a low base, and increase by around 50% between 2018 and 2022 in
Latin America.

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World industry outlook

Symbols for tables

World Industry Outlooks from The Economist Intelligence Unit

World energy outlook

Energy consumption, international comparison

Oil and gas

estimated growth of o.8% in 2017, we expect average annual growth in the US

other OPEC states, Iraq is expected to show a notable increase in production

Oil and natural gas supply

more carbon-intensive coal. As a result, over the forecast period we expect

the abandonment by Mr Trump's government of the Clean Power Plan. Coal

Electricity consumption is forecast to grow by an annual average of 2.3% in

We forecast that global nuclear energy consumption will increase from

Renewable energy will be the fastest-growing source of energy during the

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