Does growth in North American oil supply herald a new era of abundance - or does turmoil in parts of the Middle East cloud the horizon? How much can energy efficiency close the competitiveness gap caused by differences in regional energy prices? What considerations should shape decision-making in countries using, pursuing or phasing out nuclear power? How close is the world to using up the available carbon budget, which cannot be exceeded if global warming is to be contained? How can sub-Saharan Africa's energy sector help to unlock a better life for its citizens?

1. © OECD/IEA 2014
London 12 November 2014

2. © 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?

3. © OECD/IEA 2014
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

4. © OECD/IEA 2014
United States holds a strong position on energy costs
Weighted average cost of energy paid by consumers
Economies face higher costs, but the pace of change varies: China overtakes the US, costs double in India & remain high in the European Union & Japan
United
States
500
1 000
1 500
2 000
European
Union
Japan
China
India
$/toe
2008
2013
2040

5. © OECD/IEA 2014
2013
2020
2030
2040
2015
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
2040
2015
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
in United States, Canada, Brazil & the Middle East

6. © OECD/IEA 2014
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
Sustained $80/barrel oil 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

7. © OECD/IEA 2014
Gas on the way to become first fuel, with role of LNG on the rise
Main sources of regional LNG supply
Share of LNG rises in global gas trade, pushed by a near-tripling in liquefaction sites: LNG brings more integrated & secure gas markets, but only limited relief on prices
Middle East
Australia
US & Canada
East Africa
Russia
North Africa
West Africa
Other
Middle East
Southeast Asia
West Africa
Australia
North Africa
Other
100
200
300
400
500
600
bcm
2012
2040

8. © OECD/IEA 2014
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 peak
2005: US coal demand peak
Chinese coal demand plateau
India: 2nd largest coal consumer by 2020
Other
India
China
United States
Europe

9. © OECD/IEA 2014
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
12 000
GW
Renewables
Nuclear
Oil
Gas
Coal

10. © OECD/IEA 2014
Renewables supply half of the growth in global power demand; wind & solar PV
Renewables-based power generation
and subsidies
Renewables overtake coal to become the leading source of power
Generation
Subsidies
Hydropower
Wind and solar PV
(right axis)
subsidies decline from 2030 as costs fall & recent higher-cost commitments expire
Generation
1 000
2 000
3 000
4 000
5 000
6 000
2013
2020
2040
2013
2030
2040
TWh
30
60
90
120
150
180
Billion dollars (2013)
210
2030
2020
7 000

11. © OECD/IEA 2014
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

12. © OECD/IEA 2014
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
2040
705 1971-2040: 705 thousand tonnes
United States
European
Union
Japan
China
Canada
Russia
Korea
India
Other
By 2040, almost 200 reactors are retired & the amount of spent fuel doubles

13. © OECD/IEA 2014
The entire global 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
Trillion dollars (2013)

14. © OECD/IEA 2014
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
Nuclear power can play a role in energy security & carbon abatement – but financing & public concerns are key issues
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

15. © OECD/IEA 2014
www.worldenergyoutlook.org email: weo@iea.org