Global Energy Situation
The main feature of the global energy market in 2023 is uncertainty and instability. This instability stems not only from the ongoing energy crisis but also involves multiple challenges related to energy markets, geopolitics, and the global economy. Although the pressure of the global energy crisis has eased, the uncertainty in technology trends, geopolitical risks, and consumer behavior continues to impact the energy market. These factors make it more difficult to formulate resilient investment strategies for different scenarios. Decision-makers need to consider both long-term decarbonization goals and short-term economic return expectations, posing significant challenges for policy-making and energy strategy planning. The complexity and uncertainty of the global energy landscape require policymakers to adopt more flexible and diversified strategies to address the upcoming energy transition and climate change challenges.
Climate and Pollution Issues
The world currently faces severe climate change and environmental pollution issues. To maintain the global temperature rise within the 1.5°C target, a significant reduction in emissions is needed in the next decade. However, even in proactive energy transition scenarios, the significant reduction in carbon emissions is still not enough to control global warming within 1.5°C, with projected temperature increases between 1.6°C and 2.9°C. These estimates include non-CO2 emissions and consider assumptions of emissions from non-energy sectors such as agriculture, forestry, and waste. These findings highlight the urgency of addressing climate change and indicate the need for further action to tackle this global challenge.
Clean Energy Transition
According to recent reports and news, the development of clean energy technologies, especially solar photovoltaics and electric vehicles, is rapidly advancing, becoming a significant driver of global energy transformation. By 2030, renewable energy is expected to provide about 45% to 50% of the world’s electricity, and this proportion will reach 65% to 85% by 2050. In all scenarios, solar energy is the largest contributor to renewable energy, followed by wind. Despite the potential doubling or even tripling of demand, the rapid growth of renewable energy is expected to reduce emissions from power generation by 17% to 71%. However, the expansion of renewable energy also faces challenges, including supply chain issues and slow construction and permitting processes for power grids. The application of nuclear energy and carbon capture, utilization, and storage (CCUS) technologies may alleviate the pressure on the expansion of renewable energy, but this depends on the political environment and future cost developments.
According to the “World Energy Outlook 2023” and other related reports, the total demand for fossil fuels is expected to peak around 2030 in all energy transition scenarios. Although a significant decline in coal demand is anticipated, the demand for natural gas and oil is expected to grow in the next few years and remain a core part of the world’s energy mix for decades. Natural gas, in particular, is expected to increase in demand until 2040 due to its balancing role in renewable energy-based power generation, until battery technology is deployed on a large scale. As for oil, the total demand is expected to continue growing for much of this decade and then decline after 2030, but the extent of the decline varies across scenarios. For example, in the “Achieved Commitments” scenario, oil demand could be reduced by nearly half by 2050, mainly driven by the slowdown in the growth of the vehicle fleet, increased engine efficiency in road transport, and the continued electrification of transport.
Policies play a key role in accelerating the transition to clean energy and addressing the challenges of climate change and energy security. The energy and climate policies of countries are crucial for achieving decarbonization goals, including increasing clean energy investments in emerging and developing economies, improving energy efficiency, and reducing methane emissions from fossil fuel operations. The implementation of these policies will not only promote the development of clean energy technologies but also help reduce global energy-related carbon dioxide emissions. Additionally, the report proposes a series of global strategies aimed at achieving the 2030 climate goals, including tripling global renewable energy capacity, doubling the rate of energy efficiency improvements, and reducing 75% of methane emissions from fossil fuel operations. These strategies will form the basis for the success of the upcoming COP28 climate change conference.
Regional and Global Trends
The “World Energy Outlook 2023” report emphasizes that the global energy crisis has prompted many countries and regions, especially developed economies and China, to take new measures to accelerate the deployment of clean energy. These measures vary but generally aim to increase the share of renewable energy in power generation, incentivize electric vehicle sales, and improve energy efficiency. The energy needs of many emerging markets and developing economies are rapidly growing, requiring substantial new investments in energy infrastructure, ranging from
power generation and grids to electric vehicle charging stations. While the ambitions of these economies vary, there is a widespread recognition that clean energy technologies can provide cost-effective solutions for a range of development objectives. Some emerging markets and developing economies face difficulties in obtaining financing, where concessional funding plays a role, as demonstrated by initiatives such as the “Just Energy Transition Partnerships.” Moreover, some countries have adopted policies to encourage the diversification of supply chains for clean energy technologies, including policies to promote clean energy technology manufacturing, such as the Inflation Reduction Act in the United States, the Net Zero Industry Act in the European Union, and the Production Linked Incentives scheme in India.
Future Projections and Scenarios
The global energy world is expected to undergo significant changes by 2030. This change is mainly due to the rapid development of clean energy technologies, such as solar, wind, electric vehicles, and heat pumps. These technologies are transforming the way we power factories, vehicles, home appliances, and heating systems. By 2030, the number of electric vehicles on the roads worldwide is expected to increase nearly tenfold; solar photovoltaics will generate more electricity than the current entire U.S. power system; the share of renewable energy in the global electricity mix will approach 50%, up from about 30% currently. Additionally, the sales of heat pumps and other electric heating systems will exceed fossil fuel boilers; investments in new offshore wind projects will be three times those in new coal and gas-fired power plants.
These increases are based on the current policy settings of countries. If countries fully and timely realize their national energy and climate commitments, the progress of clean energy will be faster. However, even more robust measures will still be needed to achieve the goal of limiting global warming to 1.5°C. Under today’s policy settings, global energy-related carbon dioxide emissions are expected to peak by 2025. These trends and forecasts indicate that, even within the existing policy framework, achieving global climate goals remains a significant challenge.
Reference : World Energy Outlook 2023