International Energy Agency (IEA) has released the World Energy Outlook 2016 (WEO-2016) which foresees renewable energy, along with natural gas, as big winners in the race to meet energy demand growth until 2040.
A detailed analysis of the pledges made for the Paris Agreement on climate change finds that the era of fossil fuels appears far from over and underscores the challenge of reaching more ambitious climate goals, according to IEA.
Still, IEA states, government policies, as well as cost reductions across the energy sector, enable a doubling of both renewables, and of improvements in energy efficiency over the next 25 years.
Fatih Birol, IEA’s Executive Director, said: “We see clear winners for the next 25 years – natural gas but especially wind and solar – replacing the champion of the previous 25 years, coal. But there is no single story about the future of global energy: in practice, government policies will determine where we go from here.”
The electricity sector is the focus of many Paris pledges: nearly 60% of all new power generation capacity to 2040 in IEA’s main scenario comes from renewables and, by 2040, the majority of renewables-based generation is competitive without any subsidies, according to WEO-2016.
The report states that the implementation of the current international pledges, as part of the Paris Agreement which entered into force on November 4, will only slow down the projected rise in energy-related carbon emissions. This is far from enough to avoid the worst impact of climate change as it would only limit the rise in average global temperatures to 2.7°C by 2100, IEA said.
However, the path to 2°C can be achieved if policies to accelerate further low carbon technologies and energy efficiency are put in place across all sectors, according to IEA.
“Renewables make very large strides in coming decades but their gains remain largely confined to electricity generation,” said Birol. “The next frontier for the renewable story is to expand their use in the industrial, building and transportation sectors where enormous potential for growth exists.”
IEA’s World Energy Outlook 2016 predicts that natural gas will continue to expand its role while the shares of coal and oil fall back.
Global oil demand continues to grow until 2040, mostly because of the lack of easy alternatives to oil in road freight, aviation and petrochemicals, according to WEO-2016, while coal consumption barely grows in the next 25 years.
The gas market is also set for change, with the share of LNG overtaking pipelines and growing to more than half of the global long-distance gas trade.