The first of the WEC Talks, hosted by our Committee (World Energy Council Turkish National Committee), took place on December 20th, with Dr. Fatih BİROL, the Executive Director of the International Energy Agency.
BİROL shared some of the striking findings from the World Energy Outlook 2017, the International Energy Agency’s annual output, and the world’s best-selling energy book, with the audience. Four major structural changes have been identified in the World Energy Outlook 2017 report:
The US has taken very important steps to become an unrivalled leader in oil and gas production. The country is becoming an important exporter with shale gas and shale oil revolution.
Solar energy costs have fallen dramatically. The cost of solar has halved between 2014-2017, and a similar decline is expected to take place by 2020. Solar energy continues to become an increasingly profitable source of energy for countries.
It has been observed that China, the world’s largest energy consumer, is making a major shift in its economic and energy policies. With the slogan of “Making the sky blue again”, China has moved from bearing the brunt of the manual labour of the world and now stands as a country with a clean energy leadership.
Electrification is the future of energy. Electricity demand growth increased by 60%, as opposed to 30% of total energy demand growth.
These changes underscore the need for countries to readdress their canned approach when it comes to energy security, energy costs, and environmental. Shifts can also be observed in the roles assumed by global actors. While the Middle Eastern countries remain the world’s most important producers, they have also set out to become important consumers. On the other hand, while the United States is the world’s most important importer, it is also becoming an important energy exporter.
When it comes to energy sources, the acceleration of the growth of coal and oil is expected to continue to decelerate in the coming years. Observations point to the fact that the growth rate for natural gas will continue to be maintained, but that this growth will largely be sustained by the industry and heating rather than electricity generation. The biggest growth among resources is expected to take place in renewable energy and nuclear.
China had a central place in the World Energy Outlook 2017 report. Over the past decade, the entire growth in coal has stemmed from China, and the subsequent air pollution has pushed for restrictive regulations. China has become a remarkable destabiliser in natural gas markets, singlehandedly increasing LNG imports 40% in 2017. The country has also become the world’s number one solar, wind, nuclear energy and electric car country, and now produces 6 of the world’s 10 solar panels as the country that has made the most profit in the big race among the countries on energy technologies.
It is expected that in the next 20 years, China will grow to add a USA to its current capacity, and that similarly, India is expected to invest as much as Europe in the same period. Therefore, the decisions that are to be made in Beijing and New Delhi carries a vital importance for the rest of the world. Whichever technology or source these countries will prefer to invest, will shift the system’s course accordingly.
Electric cars were among the hottest topics. There are 2 million electric cars in the world. Out of the total 1 billion vehicles, a total of 1 million is in China. The International Energy Agency expects the number of electric cars to increase rapidly and expects to the total number to reach 300 million by 2040. As a result of electric cars and increasing efficiency in conventional vehicles, oil demand is expected to fall. Consequently, the widespread use of electric cars makes it risky for many countries’ economies to be based on a single product. However, oil demand of trucks, planes and petrochemical plants is expected to continue to increase. In 2017, 35% of the oil demand growth came just from trucks in Asia.
It is estimated in oil and natural gas the US production continue to increase rapidly and will pass Saudi Arabia in oil and Russia in natural gas. Over the next 6 years, the gap between US and Russian production is expected to rise to over 30%. Despite its decision to withdraw from the Paris Climate Treaty, the biggest emission reduction in the world in 2017 occurred in the United States. It is expected that this trend will continue with the increasing wind and solar energy and shale gas.
60% of the natural gas is transported through pipelines and 40% by LNG. The share of LNG is predicted to be increasing significantly. The majority of this growth is expected to come from USA, Australia, Canada and East Africa. New gas exporters, like America, Canada and Australia, will emerge and gas importers like Turkey will have more options in the import source. Even if these countries are not planning to import LNG, retaining this option will be an important trump to achieve better prices in their existing contracts. While the number of importer countries in 2000 was 5, it is expected that this number will reach 50 in 2020.
The Earth’s temperature will increase by 3 degrees, even if all of the Paris commitments are fulfilled despite not being obligatory. Paris’ target was to keep this increase in temperature at most at 2 degrees. The solution lies in (1) energy efficiency, (2) natural gas, (3) solar energy and (4) electric vehicles. These targets can be reached by increasing the normal investments by 15%.
Whichever country manages to out step others in energy storage will have gained a significant advantage.
Nuclear is anticipated to play an important role. The International Energy Agency evaluates Japan’s Prime Minister Abe’s decision to return to nuclear as an extremely positive development. IEA believes nuclear to be a very important factor for countries like Turkey whose electricity demand is growing and will continue to grow.
To summarize, the World Energy Outlook 2017 report has the following results:
- Developments in oil and natural gas in the US will affect everything and everything, including foreign policy.
- Because natural gas is a flexible fuel, it will be an important tool for the environment.
- China shook all energy markets in the past. It will shake it again with new energy technologies.
- Sustainable development requires an international cooperation on energy access and air pollution along with climate change.
- Electricity is expected to play a more important role. For the first time last year, electricity investments have surpassed oil and natural gas investments. Electricity should be considered interwoven with digitalization, and significant changes must be made in regulations, cyber security and similar fields.