IEA© OECD/IEA 2017

Global Energy Markets and Environment

Challenges: Today and Tomorrow

Fatih Birol, Executive Director, International Energy Agency

Melchett Award, Energy Institute, London 4 July 2017

© OECD/IEA 2017

A rapidly shifting energy landscape

Since 2010, efficiency measures have slowed down growth in global energy consumption .

Renewables and natural gas account for almost two-thirds of the growth.

Shares in growth in world energy demand

Coal

47%

Oil

16%

Gas

23%

Nuclear

2%

Renewables

12%

Coal

10%

Oil

27%

Gas

31%

Nuclear

0%

Renewables

32%

2000-2010 2010-2016

© OECD/IEA 2017

Differently from all other regions, US shale oil growth results from technological and market progress

rather than the discovery and deployment of huge oil resources

US shale the most successful story in the oil history outside Saudi Arabia

Largest production increases in the oil history

0

1

2

3

4

5

6

Saudi Arabia1985 - 1992

mb/d

US LTO2010 - 2017

Iran1966 - 1973

USSR1972 - 1979

Russia1999 - 2006

North Sea1976 - 1983

Iraq2009 - 2016

© OECD/IEA 2017

No peak yet in sight, but a slowdown in growth for oil demand

The global car fleet doubles, but efficiency gains, biofuels & electric cars reduce oil demand for passenger

cars; growth elsewhere pushes total demand higher

Change in oil demand by sector, 2015-2040

-3

0

3

6mb/d

Powergeneration

Buildings Passengercars

Maritime Freight Aviation Petrochemicals

© OECD/IEA 2017

On-track: Electric mobility is breaking records, but policy support remains critical

The global electric car fleet passed 2 million last year, but sales growth slipped from 70% in 2015

to 40% in 2016, suggesting the boom may not last without sustained policy support

Global electric car fleet

0

500

1 000

1 500

2 000

2010 2011 2012 2013 2014 2015 2016

Nu

mb

er o

f ve

hic

les

on

th

e ro

ad

(Th

ou

san

ds)

Others

Germany

France

United Kingdom

Netherlands

Norway

Japan

USA

China

© IEA 2017

PetrochemicalOther

Transport

70

75

80

85

90

95

Oil

dem

and

(m

b/d

)Trucks drive global oil demand

Trucks were responsible for nearly 40% of the growth in global oil demand since 2000; they are the

fastest growing source of oil demand, in particular for diesel.

2000 2015Increase by sector

Trucks

Cars

Other transport

© OECD/IEA 2017

Share of LNG in global gas trade

2015695 bcm

20401 150 bcm

2000525 bcm

LNG53%

PipelinePipeline

LNG40%

Pipeline

LNG26%

A 2nd natural gas revolution is changing the gas security equation

A wave of new LNG supply, led by Australia and the US will improve the ability of the system to react to

potential demand or supply shocks, but security of gas supply cannot be taken for granted

© OECD/IEA 2017

Global CO2 emissions flat for 3 years – an emerging trend?

IEA analysis shows that global CO2 emissions remained flat in 2016 for the third year in a row, even

though the global economy grew, led by emission declines in the US & China

5

10

15

20

25

30

35

1970 1975 1980 1985 1990 1995 2000 2005 2010 2014 2015 2016

Gt

Global energy-related CO2 emissions

© OECD/IEA 2017

Air pollution is a universal problem, especially in emerging economies

6.5 million premature deaths every year are caused by pollution from power plants, factories, cars and trucks

globally. Air pollution related health risks are largest in cities around the world.

Premature deaths due to air pollution

Low (0-50)

High (>100)Medium (50-100)

Deaths per 100 000 people

Source: World Health Organization

© OECD/IEA 2017

Supply-side investment needs to be re-directed, not increased; demand-side investment for energy efficiency, electrification & renewables needs to ramp up significantly.

Efficiency and renewables key to global climate change mitigation

Gt

18

22

26

30

34

38

2010 2020 2030 2040

Central Scenario

Efficiency

Renewables

CCSNuclearFuel switching

Other

2 °C Scenario

Global CO2 emissions reductions in the Central & 2 °C Scenario by technology

© OECD/IEA 2017

Better grids, more flexible power plants and storage & demand side response will be needed to

integrate larger shares of wind & solar in a secure and cost-effective way

0% 10% 20% 30% 40% 50% 60%

India

Chile

China

Canada

Japan

United States

Australia

United Kingdom

Italy

Germany

Spain

Denmark

% of wind andsolar in 2010

% of wind and solar

in 2016

Share of wind and solar in total electricity generation in selected countries

Wind & solar transforming the power sector: system integration is key

© OECD/IEA 2017

The potential of clean energy technology remains under-utilised

Recent progress in some clean energy areas is promising, but many technologies still need a strong

push to achieve their full potential and deliver a sustainable energy future

Energy storage Solar PV and onshore wind

Building construction

Nuclear Transport – Fuel economy of light-duty vehicles

Lighting, appliances and building equipment

Electric vehicles

Energy-intensive industrial processes

Transport biofuels

Carbon capture and storage More efficient coal-fired power

●Not on track ●Accelerated improvement needed ●On track

We've tracked a steady $37 billion/year of clean energy and electricity networks R&D spending, with

room for growth from the private sector. As a share of GDP, China now spends most on energy R&D

Global clean energy R&D funding needs a strong boost

Global R&D spendingon clean energy and electricity networks

Top 3 IT company R&D spenders

0

10

20

30

40

2012 2015

USD

(2

01

6)

bill

ion

Private Public

© OECD/IEA 2017

Closing remarks

• While a continued focus on oil security is essential, a broader approach to energy

security is needed to reflect changing nature of natural gas & electricity markets

• New oil market dynamics & subdued upstream investment are ushering in a

period of greater market volatility

• A wave of LNG is the catalyst for a second natural gas revolution, with far-

reaching implications for gas pricing & contracts

• The next chapter in the rise of renewables requires more work on systems

integration & expanding their use beyond the power sector

• Limiting the global temperature rise to 2°C would require an energy transition of

exceptional scope, depth & speed, including stronger R&D efforts