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Published: Fri, November 18, 2016
Economy | By Melissa Porter

Renewables and gas tipped to do well over next 25 years


Speaking at a press conference in London to mark the launch of the IEA's World Energy Outlook 2016, Dr Fatih Birol, executive director of the IEA, said the evolution in shale gas in the United States has paved the way for the breakthrough in LNG, with expected projects in the USA and Australia to be followed by a second stream in Mozambique, Tanzania and Canada.

"Government policies will determine where we go from here", said Fatih Birol, the executive director of the agency.

Birol declined to discuss the effect on the group's projections of the election of Donald Trump, who has called climate change a hoax and pledged to abandon the Paris deal and to promote a revival of coal.

Oil demand is expected to grow while coal demand is expected to be stagnant over the next 25 years.

Renewables in particular have been branded the "growth story" of this year's energy outlook, with 60% of all new power generation capacity in 2040 coming from renewables.

Although those national pledges are likely to be met, according to the IEA's World Energy Outlook, widely regarded as the gold standard on energy research, this will only slow down the projected rise in carbon emissions from energy from an annual average of about 650m tonnes a year since 2000 to about 150m tonnes in 2040.

He said the drop-off in investment would be felt in a few years' time, when projects that never got off the ground due to the low oil price would otherwise have come to fruition.

Despite the challenges, the Canadian oil and natural gas sector will remain an investment magnet, attracting USD$1.1 trillion in its oil and gas sector over the next 24 years, with upstream oil and gas sector attracting around US$40 billion annually to 2040.

"But there is also a risk, if the power system is not well created to integrate a rising share of wind and solar, that the energy transition could become less efficient and more expensive as a result", the IEA said.

"The de-globalisation of the steam coal market hits exporters across the board, but those with low production costs and proximity to key importers in developing Asia, are slightly better off than exporters that have large market shares in the Atlantic basin".

The IEA said low prices, particularly over the last 12 months, has meant that the big companies are no longer investing in new sources of oil. Instead, the report's authors estimated, meeting the national commitments to reduce carbon dioxide emissions would still allow temperatures to rise 2.7 degrees Celsius by 2100.

Gas is forecast to overtake coal as the most used fossil fuel, with liquid natural gas (LNG) surging ahead of pipeline gas and taking more than half the long-distance gas trade.

"In our main scenario, this figure rises to more than 30 million by 2025 and exceeds 150 million in 2040, reducing 2040 oil demand by around 1.3 million barrels per day".

More information about the WEO is available here.

In its 450 scenario, where the world does take action to limit warming to 2°C, the use of thermal coal in India power stations is dramatically reduced - falling to 10 per cent of total generation from its current levels of 75 per cent. "The next frontier for the renewable story is to expand their use in the industrial, building and transportation sectors where enormous potential for growth exists".

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