© OECD/IEA 2014
Dr. Fatih BIROL
IEA Chief Economist
Brussels, 14 January 2015

© OECD/IEA 2014
Signs of stress in the global energy system
 Current calm in markets should not disguise difficult road ahead
 Turmoil in the Middle East raises doubts over future oil balance
 Resurgent debate over the security of gas supply to Europe
 Mixed signals in run-up to crucial climate summit in Paris in 2015
 Global CO2 emissions still rising, with most emitters on an upward path
 At $550 billion, fossil fuel subsidies over four-times those to renewables
 Increasing emphasis on energy efficiency starting to bring results
 Will change in global energy be led by policies, or driven by events?

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Changing dynamics of global demand
Energy demand by region
As China slows, then India, Southeast Asia, the Middle East and parts of Africa &
Latin America take over as the engines of global energy demand growth.
2 000
4 000
6 000
8 000
10 000
1990 2000 2010 2020 2030 2040
Mtoe
OECD
Rest of world
China
China
Rest of world
OECD

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Rich in resources
In the last 5 years, almost 30% of global oil & discoveries were in sub-Saharan Africa;
Hydro
Wind
Oil
Oil
Oil
OilGas
Gas
Oil
Coal
Gas
Fossil fuels
Solar
the region has vast untapped renewables potential, notably hydropower & solar

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Power sector investment, regional cooperation & improved management of
resources & revenues are three pillars of a brighter sub-Saharan energy future
Less than 50%
More than 50%
Share of population with
access to electricity:
Rich in resources, but poor in supply
2012 2020 2025 2030 2035 2040
200
400
600
800
Million
Population without electricity

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2013 2020 2030 20402015
Instability in the Middle East
a major risk to oil markets
Oil production growth
The short-term picture of a well-supplied market should not obscure future risks as
demand rises to 104 mb/d & reliance grows on Iraq & the rest of the Middle East
+5
+10
+15
-5
2013 2020 2030 20402015
Net decline in output from other producers
Increase to 2040: 14 mb/d
mb/d
Increase to 2040:
14 mb/d
Middle East
Brazil
Canada
United States
& reliance grows on Iraq & the rest of the Middle East
in United States, Canada, Brazil & the Middle East

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Looking ahead on the oil price
 Against a backdrop of weaker demand, buoyant supply in North
America has brought prices down – but can it keep them down?
 Lower prices are starting to curtail upstream spending plans, with
implications for future supply
 Over time, squeezed cash flow would constrain the capacity of
North America & Brazil to act as engines of global supply growth
 Current oil price levels could provide some breathing space to
major oil importers, boosting demand & GDP
 It would also accelerate reliance on low-cost producers in the
Middle East, some of which face major investment challenges

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India
World
Global coal demand leveling off
Global coal demand by key region
Global coal demand growth slows rapidly due to more stringent environmental
policies, underlining the importance of high-efficiency plant & CCS to coal’s future
1 000
2 000
3 000
4 000
5 000
6 000
7 000
1980 1990 2000 2010 2020 2030 2040
Mtce
1987: European coal demand peak2005: US coal demand peak
Chinese coal demand plateau
India: 2nd largest coal
consumer by 2020
Other
India
China
United States
Europe

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Retirements add to the investment
challenge in the power sector
Power capacity by source, 2013-2040
Despite limited demand growth, OECD countries account for
one-third of capacity additions – to compensate for retirements & to decarbonise
2013
Retirements Additions
2040
2 000
4 000
6 000
8 000
10 000
12 000GW
Renewables
Nuclear
Oil
Gas
Coal

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Renewables supply half of the growth in global power demand; wind & solar PV
Renewables-based power generation
Renewables overtake coal to become
the leading source of power
Hydropower
Generation
wind & solar PV
subsidies decline from 2030 as costs fall & recent higher-cost commitments expire
Wind and solar PV
1 000
2 000
3 000
4 000
5 000
6 000
2013 2020 2040 2013 2030 2040
TWh
2030 2020
7 000

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Nuclear capacity grows by 60%, but no
nuclear renaissance in sight
Net capacity change in key regions, 2013-2040
By 2040, an expanded nuclear fleet has saved almost 4 years of current CO2 emissions
& for some countries has improved energy security & balances of energy trade
-20 0 20 40 60 80 100 120 140
European Union
Japan
United States
Russia
India
China
GW

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50
100
150
200
1990 2000 2010 2020 2030 2040
GW
2013
Nuclear power: public concerns
must be heard and addressed
Retirements of nuclear power capacity
1990-2040
Key public concerns include plant operation, decommissioning & waste management;
Spent nuclear fuel
European Union United States Japan Others
38% of today’s
capacity to retire
by 2040
1971-2012
350 thousand tonnes
1971-2040
705 thousand tonnes
1971-2040: 705 thousand tonnes
United States
European
Union
JapanChina
Canada
Russia Korea
India
Other
By 2040, almost 200 reactors are retired & the amount of spent fuel doubles& the amount of spent fuel doubles

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The entire global CO2 budget to 2100 is used up by 2040 – Paris must send a strong
signal for increasing low-carbon investment four times beyond current levels
The 2 °C goal – last chance in Paris?
World CO2 budget for 2 °C
~2300 Gt
25%
50%
75%
100%
Share of budget used
in Central Scenario
1900-2012
2012-2040
Average annual low-carbon
investment, 2014-2040
Central
Scenario
For 2°C
target
2013
CCS
Nuclear
Renewables
Efficiency
The entire global CO2 budget to 2100 is used up by 2040
0.5
1.0
1.5
2.0
Trilliondollars(2013)

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Navigating a stormy energy future
 Geopolitical & market uncertainties are set to propel energy
security high up the global energy agenda
 Volatility in the Middle East raises short-term doubts on
investment & spells trouble for future oil supply
 Without clear direction from Paris in 2015, the world is set for
warming well beyond the 2 °C goal
 Far-sighted government policies are essential to steer the global
energy system on to a safer course
 Reconciling competitiveness, the imperatives of energy security
and climate change will be critical for European policy-makers
in 2015