International Energy Agency outlook open to question

The International Energy Agency (IEA) has called itself “the most authoritative global source of energy analysis and projections.”

That may once have been true, but in recent years it’s open to question, especially since the IEA has taken to painting theoretical “scenarios” of energy possibilities. They’re based on what the IEA calls “stated policy scenarios (STEPS).” And on other scenarios called Announced Pledges Scenario (APS) and Net Zero Emissions by 2050 Scenario (NZE).

These scenarios tend to look like this: If current government energy policies continue, then the outcome would be X; if governments keep all their climate promises, then Y would happen; if net-zero energy production actually comes about, then the result would be Z.

Here we go again, with the IEA’s latest World Energy Outlook. Among other things, it proposes that, after accounting for the new LNG supplies coming online soon (which would include the LNG Canada project at Kitimat) there may be no need for major new LNG projects in the near term.

But as Business in Vancouver notes: “That forecast is posited on countries living up to their climate action policies, such as net-zero by 2050 targets.”

The IEA gives Canadian LNG a special mention: “Qatar and the United States, which dominate today’s pipeline of new projects, look well-placed to develop more capacity in the long term. Canada and Argentina are also in a strong position to ramp up gas exports now that they are completing planned infrastructure to transport gas from inland fields to coastal terminals.”

Also from the IEA:

  • “After decades of the fossil fuel share of total energy supply hovering around 80%, it declines to 75% by 2030 and below 60% by 2050.”
  • “While global natural gas demand increases by about 250 bcm (billion cubic metres) from 2023 to a peak of 4,400 bcm in the late-2020s in the STEPS, global gas markets remain well supplied.”
  • “Existing LNG export capacity and new capacity under construction is sufficient to meet projected demand in the STEPS until 2040.”
  • “A wave of new LNG projects is set to add almost 50% to available export capacity by 2030. . . . This applies downward pressure on the price of LNG exports in the STEPS. The response to these price reductions is uncertain and could lead to global natural gas demand increasing faster than projected in the STEPS in order to clear available supply.”
  • “An increase of nearly 50% in global LNG export capacity is on the horizon, led by the United States and Qatar, but the prices that many suppliers need to recover their investments may not entice developing economies to switch to natural gas at scale: something has to give.”
  • “Around 270 billion cubic metres of annualised new LNG capacity has been approved and, if delivered according to announced schedules, is set to enter into operation over the period to 2030, a huge addition to global supply.
  • “Our scenarios indicate that demand for oil, natural gas and coal is set to peak by 2030, though oil use for aviation and petrochemicals increases to 2050 in the STEPS, natural gas demand remains robust in emerging market and developing economies, and the decline in coal use is relatively gradual.” (But at the same time the IEA says “In the STEPS, LNG demand grows by more than 2.5% per year to 2035.”)

We note other outlooks that disagree with the IEA, including consulting firm McKinsey’s latest Global Energy Perspective report.

It says the world will continue to need a lot of oil and gas through 2050 (rather than the IEA’s 2030) with energy demand growing between 11% and 18% by 2050.

“Fossil fuels, including oil, natural gas, and coal, are therefore projected to continue to play a role, albeit a moderating one, in the global energy system to 2050, meeting between 40 and 60 percent of global energy demand in 2050, depending on the scenario, down from 78 percent in 2023.”

We also note that the world’s population will increase by some two billion between now and 2050 – all of whom will require new energy capacity, much of it in Asia. As well, some 700 million people currently lack access to electricity and will require additional energy capacity.

And with the newly exploding demand for electricity, for electric vehicles and Artificial Intelligence (AI) computer centres, current forecasts of “peak gas” should be firmly questioned.

So should the IEA, says energy observer Doomberg.com: “Things started to take a noticeable shift when Turkish economist Fatih Birol ascended to the position of Executive Director of the IEA in 2015.

“Holding what is intended to be an energy-neutral role, Birol has been criticized for his overt support of renewable energy and his advocacy of a complete cessation of capital investment in traditional energy sources like coal, oil, and natural gas, openly stating in 2021 that ‘there is no need for investment in new fossil fuel supply.

“Concurrent with this pronounced shift to partiality is a decline in the IEA’s reputation for data quality among the global energy analysts who had previously relied on it.”

All that said, the IEA’s latest 397-page World Outlook is a fascinating and recommended read.

Two graphics from the IEA Outlook: 

IEA graphic: energy supply

IEA graphic: gas demand

Posted here 20 October 2024

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