IEA PREDICTS OIL PRICE HIKE, POWER USE DROP AND NEW ENERGY COMING ON STRONG

International Energy Agency warns that investment cutbacks could lead to oil price spikes
Emma Vandore, May 22, 2009 (AP via LA Times)
and
Renewables Global Status Report: Energy Transformation Continues Despite Economic Slowdown
13 May 2009, (Renewable Energy Policy Network for the 21st Century)

SUMMARY
In the Renewables Global Status Report from The Renewable Energy Policy Network for the 21st Century (REN21), statistics showed the world’s transition to New Energy continued at an rapid pace in 2008. Shortly after the release of REN21 report on New Energy, the International Energy Agency (IEA) released advance information from its annual energy report revealing 2 crucial predictions: (1) Present world oil supply is not adequate meet demand and that will drive oil prices higher, threatening the fragile economic recovery; and (2) world demand for electricity will fall off for the first time since 1945, when record-keeping began, and that exposes the severity of the international recession.

The IEA was a “lead topical” research source for the REN21 report so both reports come from the same, or at least similar, data bases.

Oil supplies will be, the IEA’s latest report indicates, inadequate to meet demand because production was cut in oil-producing nations in response to the financial downturn and exploration and production (e&p) was ratcheted down. More than $170 billion of planned e&p projects, $100 billion in 2009, were cancelled or postponed due to tight financing.

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The total result of curtailed e&p is equal to removing 2 million barrels of oil per day from the world’s supply and the same as delaying 4.2 million barrels per day of future supply for the next 18 months. Further e&p cutbacks are expected.

The oil price, which had fallen from last summer’s high of $147 per barrel to the high $30s per barrel in January 2009, has been edging back up and is now in the low $60s per barrel. If the economic recovery continues and demand rebounds, especially demand in the emerging BRIC (Brazil, Russia, India and China) economies, the price of oil will almost certainly continue to rise.

The IEA also predicted world electricity consumption will fall in 2009 (3.5%) for the first time since 1945 (when records were first kept). Member nations in the Organization for Economic Co-operation and Development (OECD) – the developed economies – are expected to cumulatively reduce consumption 5%. China's power use will drop 2%. Russia's consumption will drop 10%.

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Finally, the IEA indicated it will call for stimulus spending for New Energy development.

Even without a push for spending from the IEA, world New Energy capacity (excluding old hydropower) grew to 280,000 megawatts in 2008, a 16% increase from 2007’s 240,000 megawatt total. The increase is an indication of rising awareness on the part of policymakers around the world that the right kind of supportive policies drive growth: With 8 countries added to the total in 2008, 73 countries now have national New Energy targets.

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COMMENTARY
There is good news in the REN21 and IEA reports for New Energy advocates. The 2 key drivers underlying world New Energy growth appear to be (1) climate change and (2) energy security. Neither is lessening in significance, which means New Energy's growth will continue.

Though the IEA sees only an indication of the global recession in the predicted levels of reduced electricity consumption, there could be good news in the new numbers if they are also an indication of more Energy Efficiency implementation around the world, producing improved energy intensity. China, the U.S. and the EU have shown better intensity numbers.

The fact that now even the IEA is recommending spending for New Energy is an indication of how inevitable the transition to a New Energy economy has become.

Indications: Among other numbers showing world New Energy growth, solar heating capacity increased 15%, biodiesel and ethanol production increased 34% and, for the first time, more power from New Energy sources than from conventional sources was added in both the U.S. and the EU.

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Indications: China and India now have national New Energy policies. India announced a plan last year with a solar PV program that led to a potential $18 billion in new manufacturing investment. China announced higher national targets early in 2009 after doubling its wind capacity in 2008.

Indications: New Energy was less affected by the financial downturn than most business sectors in 2008. New investment for the year internationally was up 16% to US $120 billion.

Indications: 160 publicly traded New Energy companies around the world had a market capitalization more than $100 million in August 2008.

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Highlights of the REN21 report:

In wind:
(1) World wind capacity grew 29% to reach 121 gigawatts, more than twice what it was 2005.
(2) China doubled its wind capacity in 2008 (for the 5th year in a row) to 12 gigawatts, passing its 2010 10-gigawatt target 2 years ahead of schedule.

In solar:
(1) Grid-connected solar PV capacity jumped 70% to 13 gigawatts and remained the fastest growing New Energy generation source.
(2) Spain became #1 in new PV capacity with 2.6 gigawatts of new grid-tied installations.
(3) The solar power plant industry’s growth was dramatic, heralding big numbers of installed capacity in the near future.
(4) Germany’s solar hot water system growth rose to record levels with over 200,000 installations.

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In geothermal:
(1) With the U.S. leading the way, installed geothermal capacity passed the 10 gigawatt mark in 2008.
(2) 76 countries now have direct geothermal energy (ground source heat pump) capacities.

In policy:
(1) Australia targetted 45 terawatt-hours (TWh) of New Energy electricity by 2020.
(2) Brazil set gradually rising targets through 2030 to up its present 46% of New Energy fuel and 87% of New Energy electricity (mostly hydro).
(3) India increased its New Energy target for 2012 to 14 gigawatts.
(4) Japan set new targets of 14 gigawatts of solar PV by 2020 and 53 gigawatts by 2030.
(5) The EU approved the goal of getting 20% of its power from New Energy sources by 2020 (with a specific target for each member state).
(6) 73 countries now have some kind of New Energy policy.
(7) First-time national feed-in tariffs (FiTs) were adopted in at least 5 countries (Kenya, the Philippines, Poland, South Africa, Ukraine).
(8) Several hundred cities and local governments around the world are planning or implementing New Energy policies and programs linked to emissions reduction.

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QUOTES
- Fatih Birol, chief economist, IEA: "If there is a rebound in demand [for oil] with a reduction of investments on the supply side, we may have difficulties… [oil prices will be] significantly higher than today…It's bad news for the economy which is still very, very fragile."
- Birol, on the anticipated drop in electricity demand: "If you want to measure the health of an economy, you look at the electricity consumption… In the last 65 years we had so many things: we had the first oil price shock, the second oil price shock, Asian financial crisis, U.S. recession — electricity has never ever gone down. In 2009 for the first time it will go down. It shows how serious the recession is."

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- Mohamed El-Ashry, chairman, REN21: “This fourth edition of REN21’s renewable energy report comes in the midst of an historic and global economic crisis…[but] there is much in the report for optimism… The recent growth of the sector has surpassed all predictions, even those made by the industry itself…”
- El-Ashry, on the need for more supportive New Energy policies: “…[N]ow is not the time to relax policies that support a global, expanding renewable energy sector. By maintaining – and expanding – these policies, governments, industry and society will reap substantial economic and environmental rewards when the economic rebound requires energy markets to meet rapidly increasing demand”.