NEW ENERGY TO PASS GAS WITHIN 6 YEARS – IEA

The International Energy Agency (IEA) is not made up of wild-eyed activists or treehuggers. It thinks about energy in global terms, in very big numbers and in very traditional (fossil fuel) terms. Its members surely wouldn’t care for the joke in today’s headline.

Yet look what the IEA says in its World Energy Outlook (WEO) 2008: New Energy will soon be mainstream energy, a bigger supplier of electricity to international power grids than natural gas, the 2nd biggest supplier of electricity after coal.

The cost of developing new coal and gas sources will become more expensive while the pricing of emissions and the technology breakthroughs in New Energy will make its price more competitive.

And not a minute too soon.

Nobuo Tanaka, Executive Director, IEA: “We cannot let the financial and economic crisis delay the policy action that is urgently needed to ensure secure energy supplies and to curtail rising emissions of greenhouse gases. We must usher in a global energy revolution by improving energy efficiency and increasing the deployment of low-carbon energy…”

Though not as enthusiastic as the October Greenpeace report finding New Energy can generate 30% of world power by 2030, IEA does foresee New Energy producing 23%.

Fastest expanding New Energy: Offshore wind, expected to grow 100-fold by 2030.

Overall cost of New Energy expansion: $26.3 trillion to 2030, $1 trillion/year, though the IEA report foresees a potential delay in development caused by the current financial crisis and credit squeeze.

Longer-term factors opposing New Energy expansion: Lack of adequate R&D, lack of spending for new transmission, regulations discouraging distributed generation and skepticism from Big Energy.

The IEA's conservative, Big Energy perspective is revealed by the report’s focus on oil and gas production. It points out that despite the coming New Energy expansion oil will remain the world’s main source of energy for the foreseeable future.

Nevertheless, there report's long-term conclusions about oil are unbiased: Oilfields are failing and production costs are rising.

Tanaka: “One thing is certain…while market imbalances will feed volatility, the era of cheap oil is over”.

The IEA report includes a remarkable and invaluable field-by-field analysis of the historical production trends of 800 oilfields. It shows unequivocally rising production decline rates from 6.7% today to 8.6% in 2030.

Tanaka: “Despite all the attention that is given to demand growth, decline rates are actually a far more important determinant of investment needs. Even if oil demand was to remain flat to 2030, 45 mb/d of gross capacity – roughly four times the current capacity of Saudi Arabia – would need to be built by 2030 just to offset the effect of oilfield decline…”

As reported previously, the IEA foresees the fall in oil supply leading to $100+/barrel prices by the middle of the coming decade and even higher prices by 2020. (See DETROIT'S BIG 3 AND THE IEA ON OIL PRICES)

The bad news in WEO 2008 is its discussion of the urgency of dealing with global climate change.

It describes the consequences of a business-as-usual scenario, with a global temperature increase of 11 degrees Fahrenheit, as catastrophic.

It analyzes scenarios for stabilising greenhouse gas (GhG) concentrations at 450 or 550 ppm of CO2-equivalent, the former holding the temperature increase to 5 degrees F. and the latter pushing temperature to 7 degrees F.

Both would be difficult to achieve (and neither offers certainty of avoiding catastrophe).

The 550 ppm scenario requires holding emissions to 33 gigatonnes in 2030, building the share of low-emissions energy from 2006’s 19% of world power to 26% in 2030 at a cost of $4.1 trillion, 0.2% of annual world GDP ($17 per person per year worldwide).

The cost, the IEA predicts, would be offset by fuel-cost savings of $7+ trillion.

The 450 ppm scenario will cost a lot more and cannot be done without the participation of the world’s developing economies.

Tanaka: “We would need concerted action from all major emitters. Our analysis shows that OECD countries alone cannot put the world onto a 450-ppm trajectory, even if they were to reduce their emissions to zero…”

450 ppm requires holding emissions to 26 gigatonnes in 2030, upping New Energy to 36% of world power and spending $9.3 trillion, 0.6% of annual world GDP.

Fuel-cost savings, $5.8 trillion, won’t fully pay for it. But avoiding the costs of catastrophe and protecting the world’s energy sources are in everybody’s best interests and should, according to the IEA, be of primary concern when the world’s nations next meet to lay plans.

Tanaka: “It is clear that the energy sector will have to play the central role in tackling climate change. The analysis set out in this Outlook will provide a solid basis for all countries seeking to negotiate a new global climate deal in Copenhagen.”

World Energy Outlook 2008 Graphs

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Renewables to top gas as power source by 2015: IEA
Nina Chestney (w/Gerard Wynn), November 12, 2008 (Reuters)
and
New Energy Realities – WEO Calls for Global Energy Revolution Despite Economic Crisis
12 November 2008 (IEA)

WHO
International Energy Agency (Nobuo Tanaka, Executive Director)

WHAT
The World Energy Outlook 2008 sees New Energy becoming the least costly world option, the only remedy for worsening climate change and the necessary choice as oil reserves drop.

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WHEN
- New Energy will overtake natural gas to become the second largest source of electricity after coal sometime between 2010 and 2015.
- World primary energy demand will grow 1.6% per year from 2006 to 2030.
- Oil demand will grow from 85 million barrels/day (mb/d) to 106 mb/d in 2030.
- The scenarios plotted describe ways to address global climate change after 2012.

WHERE
- IEA, based in Paris, is the energy adviser to 28 Organization of Economic Cooperation and Development (OECD) countries.
- China and India account for 50%+ of energy demand growth to 2030.
- The Middle East will be the next new demand center.
- Most increase in fossil fuel use will be in non-OECD countries.
- In the businwess-as-usual scenario, ¾ of the GhG emissions increase to 2030 comes from China, India and the Middle East and 97% comes from non-OECD countries.
- The scenarios plotted are for use at the 2009 UN Conference of the Parties in Copenhagen.

WHY
- The IEA report conclusions assume no new government policies.
- Business-as-usual foresees no global climate change deal at Copenhagen and a temperature rise of 11 degrees Fahrenheit, a “disastrous” outcome.
- A better outcome in the form of reduced GhGs and increased New Energy will come from penalties of $180 per ton on GhGs, compared to present ~$23/tonne EU ETS costs.
- World oil consumption is expected to be lower by 10 mb/d than predicted in the WEO 2007 due to the impact of the economic downturn, higher energy prices and new policy initiatives.
- Demand for coal rises more than any other fuel.
- New Energy growth is the biggest.
- Cities’ share of world energy consumption jumps from the present 2/3 to ¾ by 2030.
- Biofuel use is not expected to grow as rapidly as other New Energies because it competes with food crops for limited agricultural land.

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QUOTES
- World Energy Outlook 2008: "Renewables-based electricity generation is expected to grow substantially over the coming decades, benefiting from high fossil-fuel prices, declining investment costs and government support…"
- Nobuo Tanaka, Executive Director, IEA: “Current trends in energy supply and consumption are patently unsustainable – environmentally, economically and socially – they can and must be altered…Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6°C.”
- Nobuo Tanaka, Executive Director, IEA: “A sea change is underway in the upstream oil and gas industry with international oil companies facing dwindling opportunities to increase their reserves and production. In contrast, national companies are projected to account for about 80% of the increase of both oil and gas production to 2030…”