© OECD/IEA 2014 London 12
November 2014

© 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?

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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)

© 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

© OECD/IEA 2014 www.worldenergyoutlook.org email:
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