Clean energy investment may hit $2 trillion a year by 2030: IEA

Wind turbines photographed off the coast of Wales. Clean energy investment could be on course to exceed $2 trillion per year by 2030, according to the International Energy Agency.

Ben Birchall | PA Images | Getty Images

Clean energy investment could be on course to exceed $2 trillion per year by 2030, an increase of over 50% compared to today, according to analysis from the International Energy Agency.

The projection is found within the Paris-based organization’s World Energy Outlook 2022, which was published on Thursday morning.

It’s based on the IEA’s Stated Policies Scenario, which factors in what it calls “the latest policy settings worldwide.”

Despite this increase, the IEA repeated its assertion that clean energy investment would still need to hit over $4 trillion by 2030 in its Net Zero Emissions by 2050 Scenario.

This, the IEA’s report said, highlighted “the need to attract new investors to the energy sector.”

The shadow of 2015’s Paris Agreement looms large over the IEA’s report.

The landmark accord aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.”

Cutting human-made carbon dioxide emissions to net-zero by 2050 is seen as crucial when it comes to meeting the 1.5 degrees Celsius target.

The newest edition of the World Energy Outlook comes at a time of significant uncertainty and volatility in global energy markets.

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According to Fatih Birol, the IEA’s executive director, the changes taking place appear to be seismic ones.

“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” he said. “Even with today’s policy settings, the energy world is shifting dramatically before our eyes.”

Birol added, “Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system.”

Peak demand for coal, gas and oil?

In a statement accompanying the report’s release, the IEA said its Stated Policies Scenario had “global demand for every fossil fuel exhibiting a peak or plateau.”

Under this outlook, “coal use falls back within the next few years, natural gas demand reaches a plateau by the end of the decade, and rising sales of electric vehicles … mean that oil demand levels off in the mid-2030s before ebbing slightly to mid-century.”

The IEA’s statement also noted, however, that there was a huge amount of work to be done in order to keep global warming to 1.5 degrees Celsius.

Under its Stated Policies Scenario, fossil fuels’ share in the planet’s energy mix would be a little over 60% by the middle of this century.

“Global CO2 emissions fall back slowly from a high point of 37 billion tonnes per year to 32 billion tonnes by 2050,” it added.

“This would be associated with a rise of around 2.5 °C in global average temperatures by 2100, far from enough to avoid severe climate change impacts.”

The above echoes a separate report published by U.N. Climate Change this week.

In an announcement Wednesday, the U.N. said that “the combined climate pledges of 193 Parties under the Paris Agreement could put the world on track for around 2.5 degrees Celsius of warming by the end of the century.” 

U.N. Climate Change said its new report also showed that countries’ pledges, as they stand now, would see emissions jump by 10.6% by the year 2030, compared to levels in 2010.

The U.N.’s analysis comes ahead of next month’s COP27 climate change summit in Sharm el-Sheikh, Egypt.

Electric vehicle (EV) sales set to hit an all-time high in 2022, IEA says

Tesla electric cars photographed in Germany on March 21, 2022. According to the International Energy Agency, electric vehicle sales are on course to hit an “all-time high” this year.

Sean Gallup | Getty Images News | Getty Images

Electric vehicle sales are on course to hit an all-time high this year, but more work is needed in other sectors to put the planet on course for net-zero emissions by 2050, according to the International Energy Agency.

In an announcement accompanying its Tracking Clean Energy Progress update, the IEA said there had been “encouraging signs of progress across a number of sectors” but cautioned that “stronger efforts” were required to put the world “on track to reach net zero emissions” by the middle of this century.

The TCEP, which is published yearly, looked at 55 parts of the energy system. Focusing on 2021, it analyzed these components’ progression when it came to hitting “key medium-term milestones by the end of this decade,” as laid out in the Paris-based organization’s net-zero pathway.

On the EV front, the IEA said global sales had doubled in 2021 to represent nearly 9% of the car market. Looking forward, 2022 was “expected to see another all-time high for electric vehicle sales, lifting them to 13% of total light duty vehicle sales globally.”

The IEA has previously stated that electric vehicle sales hit 6.6 million in 2021. In the first quarter of 2022, EV sales came to 2 million, a 75% increase compared to the first three months of 2021.

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The IEA said both EVs and lighting — where more than 50% of the worldwide market is now using LED tech — were “fully on track for their 2030 milestones” in its net-zero by 2050 scenario.

Despite the outlook for EVs, the IEA separately noted that they were “not yet a global phenomenon. Sales in developing and emerging countries have been slow due to higher purchase costs and a lack of charging infrastructure availability.”

Overall, the rest of the picture is a more challenging one. The IEA noted that 23 areas were “not on track” with a further 30 deemed as needing more effort.

“Areas not on track include improving the energy efficiency of building designs, developing clean and efficient district heating, phasing out coal-fired power generation, eliminating methane flaring, shifting aviation and shipping to cleaner fuels, and making cement, chemical and steel production cleaner,” the IEA said.

The shadow of 2015’s Paris Agreement looms large over the IEA’s report. Described by the United Nations as a “legally binding international treaty on climate change,” the accord aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.”

Cutting human-made carbon dioxide emissions to net-zero by 2050 is seen as crucial when it comes to meeting the 1.5 degrees Celsius target.

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In a statement issued Thursday the IEA’s executive director, Fatih Birol, appeared cautiously optimistic. “There are more signs than ever that the new global energy economy is advancing strongly,” he said.

“This reaffirms my belief that today’s global energy crisis can be a turning point towards a cleaner, more affordable and more secure energy system,” he added.

“But this new IEA analysis shows the need for greater and sustained efforts across a range of technologies and sectors to ensure the world can meet its energy and climate goals.”

The IEA’s report comes at a time when the debate and discussion about climate goals and the future of energy has become increasingly fierce.

This week, the U.N. secretary general said developed economies should impose an extra tax on the profits of fossil fuel firms, with the funds diverted to countries affected by climate change and households struggling with the cost-of-living crisis.

In a wide-ranging address to the U.N. General Assembly in New York, Antonio Guterres described the fossil fuel industry as “feasting on hundreds of billions of dollars in subsidies and windfall profits while households’ budgets shrink and our planet burns.”

Russian and Chinese designs in 87% of new nuclear reactors: IEA Chief

A visitor (R) learns about huaneng’s high-temperature gas-cooled reactor model at the China International Nuclear Power Industry and Equipment Exhibition 2021 in Yantai, Shandong Province, China, Oct. 19, 2021.

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Nuclear power could be a dominant player in the next-generation clean energy landscape, but that will require concerted action and focus from governments and private industry that is not happening right now, according to the head of the International Energy Agency (IEA).

In the meantime, Russia and China are dominating the space. Since 2017, 87% of the new reactors which have broken ground use Russian and Chinese designs, IEA Executive Director Fatih Birol said in a statement on Thursday. The IEA is an intergovernmental organization based in Paris, and was launched in 1974 in the wake of the oil crisis.

“Advanced economies have lost market leadership, as 27 out of 31 reactors that started construction since 2017 are Russian or Chinese designs,” Birol said.

There’s a big opportunity for nuclear power to become a major component of global energy markets as the world wakes up to the effects of climate change, since nuclear power generation does not emit any of the greenhouse gasses that cause global warming. Also, the war in Ukraine has contributed to a run-up in fossil fuel prices, making nuclear power more economically attractive.

“In today’s context of the global energy crisis, skyrocketing fossil fuel prices, energy security challenges and ambitious climate commitments, I believe nuclear power has a unique opportunity to stage a comeback,” Birol said.

“However, a new era for nuclear power is by no means guaranteed,” he added.

Governments need to implement policies to “ensure safe and sustainable operation of nuclear plants for years to come,” Birol said, and they will need to invest in new technologies.

He also warned that for advanced economies to catch up with Chinese and Russian nuclear operations, companies have to become better at delivering nuclear construction projects on time and on budget.

“The nuclear industry must quickly address the issues of cost overruns and project delays that have bedevilled the construction of new plants in advanced economies,” Birol said.

In the United States, the construction of the third and fourth reactors at the Vogtle plant in Georgia have become a prime example of the inability of the nuclear industry to execute efficiently.

Aging reactors

There are nuclear power reactors in 32 countries, and 63% of the energy generating capacity of that global fleet of nuclear reactors is from plants that are at least three decades old. That’s because most of the nuclear power construction was a response to the 1970s oil shocks, according to the IEA.

Cooling towers at the Dampierre-en-Burly nuclear power plant, operated by Electricite de France SA (EDF), in Dampierre-en-Burly, France, on Tuesday, May 3, 2022. EDF’s falling nuclear production, combined with Russia’s invasion of Ukraine, is exacerbating Europe’s energy crisis as France is traditionally a net exporter of electricity.

Bloomberg | Bloomberg | Getty Images

That existing fleet of nuclear reactors in advanced economies specifically will shrink by a third without intervention, which the IEA admits often requires “substantial investment.”

In the United States, the federal government is in the process of implementing a $6 billion program to prop up existing nuclear power plants that are struggling to stay open because of financial hardship, the Department of Energy says. The program is paid for with money that was included in President Biden’s Bipartisan Infrastructure Law.

On Thursday, the Department of Energy amended its requirements for applying for the funds and extended the deadline by 60 days to Sept. 6. The new rules will make it more possible “to keep the reactors online that sustain local economies and today provide our nation’s single largest source of carbon-free electricity,” Kathryn Huff, Assistant Secretary for Nuclear Energy at the Department of Energy said in a statement about the rule change.

Since 2013, 13 commercial nuclear reactors in the United States have closed early, the Department of Energy said.

In the IEA’s plan for the world to reach net zero emissions by 2050, the amount of nuclear power generation has to double between 2020 and 2050. While nuclear is a critical part of IEA’s plan for a global decarbonized energy future, that future is “dominated” by renewables, like wind and solar energy. By 2050, the IEA has nuclear contributing 8% of total global power.

The IEA’s plan for nuclear energy includes nuclear power technologies that are not yet available at scale, like small modular reactors (SMRs), which generate about a third the energy generation of a conventional power plant.

“The lower cost, smaller size and reduced project risks of SMRs may improve social acceptance and attract private investment,” the IEA said, and Canada, France, the United Kingdom and the United States are supporting the development of this small modular reactor technology.

oil prices jump, IEA calls for cut in energy usage

Gas prices in Westchester are above six dollars as prices at the pump continue to rise across the Southland on Sunday, March 13, 2022 in Los Angeles, CA.

Jason Armond | Los Angeles Times | Getty Images

Oil prices jumped even higher on Monday after Russia-Ukraine talks appeared to yield no sign of progress, and markets continued to fret over tight supply — sparking a call by the International Energy Agency to reduce oil demand.

Crude futures were up more than 3% on Monday morning during Asia trading — international benchmark Brent crude was at  $111.46, and U.S. futures at $108.25.

Oil prices have been volatile in recent weeks – soaring to record highs in March before tumbling more than 20% last week to touch below $100. They jumped again in the latter half of last week to rise above that level.

In a note on Monday, Mizuho Bank said two factors were pushing oil prices higher: lingering Russia-Ukraine uncertainty as well as hopes that China’s latest Covid impact could be less dire than anticipated amid expectations of easing restrictions. The key hub of Shenzhen partially opened up Friday, as five districts were allowed to restart work and resume public transportation, Reuters reported.

Ukrainian and Russian officials have met intermittently for peace talks, which have so far failed to progress to key concessions. Still, Ukrainian President Volodymyr Zelenksyy has called for another round of talks with Moscow.

“If these attempts fail, that would mean that this is a third world war,” Zelenskyy told CNN’s Fareed Zakaria in an interview that aired Sunday morning.

“The breakdown of peace talks between Russia and Ukraine saw crude oil prices extend their rebound on Friday,” ANZ Research analysts Brian Martin and Daniel Hynes wrote in a Monday note. “However, it failed to offset the losses earlier in the week, with Brent crude ending down more than 4%.”

The industry’s apparent inability to fill any potential gap has seen calls for consumption to be reduced.

Brian Martin and Daniel Hynes

ANZ Research

Meanwhile, tight supply continued to worry markets, sparking a call by the International Energy Agency (IEA) on Friday for “emergency measures” to reduce oil usage.

The Russia-Ukraine war has led to worries over supply disruptions as a result of U.S. sanctions on Russian oil and gas. The U.K. and European Union also said they would phase out Russian fossil fuels. Russia supplied 11% of global oil consumption and 17% of global gas consumption in 2021, and as much as 40% of Western European gas consumption in the same period, according to statistics from Goldman Sachs.

European Union governments are set to meet U.S. President Joe Biden this week as the EU considers an oil embargo on Russia over the unprovoked invasion of Ukraine.

The Commonwealth Bank of Australia warned Monday that oil prices have fallen below recent peaks because markets are still largely pricing oil by “assessing the likelihood of a diplomatic solution to the Ukraine conflict.”

“Physical shortages, linked to current sanctions on Russia, though will eventually play a more dominant role in oil price determination,” said Vivek Dhar, the bank’s director of energy commodities research, in a note.

“The industry’s apparent inability to fill any potential gap has seen calls for consumption to be reduced,” the ANZ Research analysts said.

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OPEC+ in its latest report showed some producers are still falling short of their supply quotas, with Reuters citing sources who said that the alliance missed its targets by more than 1 million barrels a day.

In a 10-point plan, the IEA’s suggestions to reduce oil demand included reducing speed limits for vehicles, working from home for up to three days a week, and avoiding air travel for business.

“We estimate that the full implementation of these measures in advanced economies alone can cut oil demand by 2.7 million barrels a day within the next four months, relative to current levels,” the IEA said Friday.

How Europe can reduce dependence on Russian gas, according to IEA

Wind turbines and solar panels in fields in the Seine-Maritime department of Normandy, France, on Monday, Jan. 24, 2022. Photographer: Nathan Laine/Bloomberg via Getty Images

Bloomberg | Bloomberg | Getty Images Photographer: Nathan Laine/Bloomberg via Getty Images

Europe’s dependence on natural gas from Russia has given Vladimir Putin leverage over the European Union, making it hard to impose energy sanctions on the country as punishment for its invasion of Ukraine.

Turning off the spigot to Russian natural gas is going to be hard to do quickly, though. That’s both because the EU is so dependent on it, and because the EU has committed to limit its greenhouse gas emissions.

The EU imported 155 billion cubic meters of natural gas from Russia in 2021, which was almost half (45%) of the gas the EU imported and almost 40% of the total amount of gas it used. Switching from burning natural gas to burning coal is a quick fix that is technically possible, but it’s not going to help the EU achieve its climate goals.

The International Energy Agency (IEA), an energy policy organization with members from 31 national governments, believes it has a better way.

The organization recently released a plan for Europe to reduce its dependence on Russian natural gas by one-third in one year while still adhering to the European Green Deal, an EU agreement to reduce net greenhouse gas emissions by at least 55% from 1990 levels by 2030.

The IEA’s drawdown, aptly named “A 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas,” is a collection of actions that will diversify Europe’s energy supply, accelerate its move towards renewables and focus on energy efficiency.

“Nobody is under any illusions anymore. Russia’s use of its natural gas resources as an economic and political weapon show Europe needs to act quickly to be ready to face considerable uncertainty over Russian gas supplies next winter,” IEA Executive Director Fatih Birol said in a written statement announcing the plan.

Here’s a summary of the ten recommendations:

Do not renew gas supply contracts with Russia. Currently, the European Union has a contract with Gazprom, a Russian majority state-owned multinational energy corporation, for more than 15 billion cubic meters of gas imports per year. That contract is due to expire at the end of 2022. The EU should let that and other gas import contracts expire.

Replace expired natural gas from Russia with new natural gas contracts from other sources. Domestic production of natural gas and imports from non-Russian sources, including from Azerbaijan and Norway, are set to increase over the coming year by as much as 10 billion cubic meters compared to 2021, which will help matters. However, the IEA also says EU should increase its importing of liquid natural gas (LNG), which is natural gas that has been cooled to a liquid state at about -260° Fahrenheit so it can more easily be transported in ships or trucks.

The IEA also recommends the EU increase its up biogas and biomethane supply, but those supply chains take time to grow. So, too, with supply chains of low-carbon “green” hydrogen made by with electrolysis.

Store more gas. Storing gas gives any region a buffer of security in the case of changing seasons, extreme events or in this case, war. The IEA would have working storage capacity filled at 90% by October 1 to keep homes warm during the winter.

Accelerate deployment of renewables, like wind and solar. In 2022, the EU is expected to see a 15% increase in its power delivered from renewables compared to 2021 due to aggressive additions of new solar and wind facilities and favorable weather patterns. The IEA recommends accelerating renewable projects in progress by addressing delays in permitting. This would require more administrative workers, clearly communicating between various permitting offices, setting clear deadlines and making applications digital.

Keep existing nuclear open and operate bioenergy plants at full scale. Some of the existing nuclear reactors in Europe were taken offline in 2021 for maintenance and safety checks, but when those power plants get back online in 2022, that will add to the EU’s clean energy generation. Nuclear power plants, once they are built, generate energy without emitting any greenhouse gases. Also, commercial levels of nuclear power are expected to begin at Finland’s new nuclear plant in 2022, which will support the EU’s energy goals.

A small handful of nuclear power reactors were set to be taken offline in 2022 and 2023, but if those reactors stay operational, that would decrease the EU’s demand for Russian natural gas.

Also, bioenergy power plants which operated at only 50% capacity should be fueled fully and operated to their capacity.

Protect vulnerable customers. When energy prices soar, energy companies do well, but customers can struggle badly. The EU should be prepared to support low-income customers’ pay for their high energy bills. One way to account for the current high-energy-price market is to put temporary taxes on excessively high profits from energy companies and use that collected money to pay for energy bills for low-income customers.

Accelerate the replacement of gas boilers with heat pumps. The IEA calls for the EU to accelerate its rate of replacing gas furnaces with heat pumps in homes.

Doubling the installation rate of heat pumps in homes would cost the EU $16.3 billion (15 billion euros) and it would save another 2 billion cubic meters of gas within the first year. It would be ideal, the IEA says, to simultaneously increase energy efficiency projects within homes.

Accelerate energy efficiency programs for buildings and industrial facilities. Currently, about 1% of the EU’s buildings are retrofitted to be more energy efficient each year. Improving energy efficiency of buildings works but it is slow going. To maximize impact here, the EU should focus on improving the energy efficiency of the least energy efficient homes and non-residential buildings.

Also, the IEA suggests accelerating the installation of smart thermostats to reduce energy demand. Adoption could be accelerated by providing subsidies to households to install one, for example.

Ask the public to turn down their heating. Most buildings are almost 72 degrees Fahrenheit on average in the EU, and asking consumers to turn down their thermostat by 1.8 degree Fahrenheit, or 1 degree Celsius, has the potential to reduce demand for gas by 10 billion cubic meters.

Increase low-emissions grid reliability mechanisms. The IEA recommends that the EU focus on adding flexibility to the power grid both in terms of being resilient through seasonal shifts and in being able to handle short-term demand spikes. Currently, the EU manages the ebbs and flows in the energy grid demand with stored natural gas.

Improving grid reliability and flexibility in the future will depend on a diverse portfolio of responses, including both battery technology and other large scale, longer-term energy storage technologies. Some low-carbon gases made within the EU such as biomethane, low-carbon hydrogen and synthetic methane can be part of improving reliability of the grid, but they won’t be sufficient.

It’s worth noting, the IEA’s plan pales in the comparison to news of another plan reportedly coming from the EU on Tuesday that would slash Russian imports of natural gas by 80% in the coming year.

Renewable power installations set for record year: IEA

Wind turbines and solar panels in Kayseri, Turkey.

temizyurek | E+ | Getty Images

The world is set to add nearly 290 gigawatts of renewable power capacity this year, according to the International Energy Agency, with the Paris-based organization expecting 2021 to “set a fresh all-time record for new installations.”

Published on Wednesday, the IEA’s Renewables Market Report forecasts that the planet’s renewable electricity capacity will jump to more than 4,800 GW by the year 2026, an increase of over 60% compared to levels in 2020.

Capacity refers to the maximum amount of energy that installations can produce, not what they’re necessarily generating.

China is set to be the main driver of renewable capacity growth over the coming years, according to the IEA, with Europe, the U.S. and India following on behind.

Looking at the bigger picture, the IEA said renewables were expected to account for “almost 95% of the increase in global power capacity through 2026.”

“We have revised up our forecast from a year earlier,” the report said, “as stronger policy support and ambitious climate targets announced for COP26 outweigh the current record commodity prices that have increased the costs of building new wind and solar PV installations.”

Solar PV refers to solar photovoltaic, a way of directly converting light from the sun into electricity.

The IEA’s executive director, Fatih Birol, said 2021’s record renewable electricity additions were “yet another sign that a new global energy economy is emerging.”

“The high commodity and energy prices we are seeing today pose new challenges for the renewable industry, but elevated fossil fuel prices also make renewables even more competitive,” Birol said.

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While the headline figures from Wednesday’s report appear promising, a multitude of headwinds have the potential to buffet the sector going forward.

The IEA’s report acknowledged this, noting that renewables faced a “range of policy uncertainties and implementation challenges.” These included issues connected to everything from permitting and financing to grid integration and social acceptance.  

“Current increases in commodity prices have put upward pressure on investment costs, while the availability of raw materials and rising electricity prices in some markets pose additional challenges for wind and solar PV manufacturers in the short term,” the IEA said.

Nevertheless, the effects of “volatile commodity prices on demand” were seen as being limited, with high prices for fossil fuels further boosting the competitiveness of both solar PV and wind.

When it comes to net-zero goals, the picture is perhaps even more challenging.

While capacity additions for renewables are on course to “grow faster than ever in the next five years” this would not be enough to meet the IEA’s scenario for net-zero emissions by 2050.

Even the IEA’s “accelerated case,” in which governments tackle challenges related to regulation, policy and implementation would not be enough.

“Annual capacity growth under the IEA Net Zero Scenario during 2021-2026 needs to be 80% faster than in our accelerated case, implying that governments need to not only address policy and implementation challenges, but also to increase their ambition,” the report said.

This sobering tone echoes previous statements from the IEA. In October, it claimed that clean energy progress remained “far too slow to put global emissions into sustained decline towards net zero.”

In a sign of how much work needs to be done, the IEA’s World Energy Outlook described how a “rapid but uneven economic recovery from last year’s Covid‐induced recession” had put significant strains on the energy system. This had sparked “sharp price rises in natural gas, coal and electricity markets.”

“For all the advances being made by renewables and electric mobility, 2021 is seeing a large rebound in coal and oil use,” the report continued. “Largely for this reason, it is also seeing the second‐largest annual increase in CO2 emissions in history.”

 

IEA chief criticizes artificial tightness in energy markets

Petroleum pump jacks are pictured in the Kern River oil field in Bakersfield, California.

Jonathan Alcorn | Reuters

The head of the world’s leading energy authority has said that some countries had failed to adopt a helpful position to calm soaring oil and gas prices, criticizing “artificial tightness” in energy markets.

“[A] factor I would like to underline that caused these high prices is the position some of the major oil and gas suppliers, and some of the countries did not take, in our view, a helpful position in this context,” Fatih Birol, executive director of the International Energy Agency, said Wednesday during a press webinar.

“In fact, some of the key strains in today’s markets may be considered as artificial tightness … because in oil markets today we see close to 6 million barrels per day of spare production capacity lies with the key producers, OPEC+ countries.”

His comments come as energy analysts assess the effectiveness of a U.S.-led pledge to release oil from strategic reserves to stymie surging fuel prices.

In the first such move of its kind, President Joe Biden announced a coordinated release of oil between the U.S., India, China, Japan, South Korea and the U.K.

The U.S. will release 50 million barrels from the Strategic Petroleum Reserve. Of that total, 32 million barrels will be an exchange over the next several months, while 18 million barrels will be an acceleration of a previously authorized sale.

OPEC and non-OPEC producers, an influential group often referred to as OPEC+, have repeatedly dismissed U.S. calls to increase supply and ease prices in recent months.

Birol said the IEA recognized the announcement made by the U.S. parallel with other countries, acknowledging surging oil prices had placed a burden on consumers around the world.

“It also puts additional pressure on inflation in a period where economic recovery remains uneven and still faces a number of risks,” he added.

Birol said he wanted to make clear that this was not a collective response from the IEA, however. The Paris-based energy agency only acts to tap energy stocks in case of a major supply disruption, he said.

‘A new and unchartered price war’

“The world’s biggest consumers of oil have pledged an unprecedented and relatively sizeable release of strategic reserves onto the market to quell high oil prices amid pandemic recovery.”

Rystad Energy said that if the oil set to be released from the U.S., China, India, Japan, South Korea and the U.K. started as early as mid-December, it could be enough to outpace crude demand as soon as next month.

“This begs the question of just how strategic the timing is from Biden, Xi and others if fundamental reprieve is already just around the corner in 1Q22,” Dickson said.

“The release may be a case of too much, too late, as the oil market was tightest and needed supply relief in September,” she added.

— CNBC’s Pippa Stevens contributed to this report.

IEA sees a potential reprieve as U.S. production rises

Petroleum pump jacks are pictured in the Kern River oil field in Bakersfield, California.

Jonathan Alcorn | Reuters

LONDON — The International Energy Agency said on Tuesday that soaring oil prices could soon turn lower as the U.S. leads a rebound in global supply.

Oil prices have soared above $80 a barrel over the last few weeks, hitting their highest level in seven years, as demand outstripped supply. The momentum behind the price rally has even tempted some forecasters to predict a return to $100-a-barrel oil, although not everyone shares this view.

“The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon,” the IEA said in its closely watched monthly report.

“Contrary to hopes expressed in Glasgow at COP26 this is not because demand is declining, but rather due to rising oil supplies.”

Demand for oil is also strengthening because of robust gasoline consumption and increasing international travel as more countries re-open their borders, the influential energy agency said.

Higher oil prices, weaker industrial activity and an alarming resurgence of Covid-19 infections in Europe, however, will likely temper price rises, the group added.

International benchmark Brent crude futures traded at $82.78 a barrel on Tuesday morning in London, up around 0.9%, while U.S. West Texas Intermediate futures stood at $81.48, over 0.7% higher.

The IEA kept its forecast for oil demand growth largely unchanged from last month at 5.5 million barrels per day for 2021 and 3.4 million barrels per day for 2022.

Supply boost

On the supply side, the group said it expected a rise of 1.5 million barrels per day in global oil output in the final three months of the year, with the U.S. alone accounting for 400,000 barrels of this growth.

OPEC kingpin Saudi Arabia and non-OPEC leader Russia are each set to account for 330,000 barrels per day of the increase, in line with their OPEC+ targets. By December, Saudi Arabia and Russia are each set to pump over 10 million barrels per day for the first time since April last year, the IEA said.

The energy agency revised its global oil supply forecast 330,000 barrels per day higher for the fourth quarter to reach 99.2 million barrels per day by year-end. That’s up 6.4 million barrels per day year-on-year.

The U.S. is forecast to account for 60% of non-OPEC+ supply gains next year, now forecast at 1.9 million barrels per day, although the country is not expected to return to pre-Covid levels until the end of 2022.

The IEA said that while stronger oil prices had prompted some U.S. producers to ratchet up production, the same could not be said for OPEC+.

The energy alliance decided to keep production policy steady in early November, raising output 400,000 bpd, defying pressure from major consumers for a higher increase to help cool the market.

The oil producer group is set to meet again on Dec. 2.

IEA warns of volatile energy markets ahead

Steam rises from the cooling towers of the Lippendorf power plant south of Leipzig, Germany.

picture alliance | picture alliance | Getty Images

Energy prices around the world are at record highs as a power crunch hits Europe and Asia — and the International Energy Agency warned Wednesday that volatility is here to stay.

In its annual , the Paris-based agency said the world is underinvesting now for future energy consumption, which will make the transition to net-zero emissions unstable. 

“There is a looming risk of more turbulence for global energy markets,” Fatih Birol, IEA’s executive director, said in a statement. “We are not investing enough to meet… future energy needs, and the uncertainties are setting the stage for a volatile period ahead.”

The report pointed to policy and demand uncertainties, among other things, as reasons behind the current underinvestment. 

As events in 2021 show, consumers are vulnerable when prices rise sharply.

World Energy Outlook 2021

International Energy Agency

The perils of an energy complex that’s mismatched on the supply and demand side is playing out now as the global economic recovery from Covid-19 continues. Energy demand has jumped as businesses reopen and consumers return to pre-pandemic activities, but supply has remained tight with producers reluctant to bring new production online.

Oil prices are up more than 60% for 2021 after plunging to record lows in April 2020, while U.S. natural gas prices have more than doubled this year. In Europe, spot natural gas prices hit an all-time high this fall, while coal prices are also rising amid preparations for the winter heating season.

Higher fuel costs will be passed along to consumers and businesses, potentially hitting the economic recovery.

“As events in 2021 show, consumers are vulnerable when prices rise sharply,” the report said. “Volatility and price shocks cannot be discounted during the transition.”

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The World Energy Outlook report outlines three possible scenarios ahead, in order to try and understand what the energy system will look like decades from now.

  1. Stated Policies Scenario: based on policies that have already been implemented;
  2. Announced Pledges Scenario: factors in targets that have been made but not yet reached. In this scenario, demand for fossil fuels peaks by 2025;
  3. Net Zero Emissions by 2050: factors in what needs to be done to limit global warming to 1.5 degrees Celsius above pre-industrial levels.

The report noted that for the first time in its projections, oil demand is seen declining in each scenario, but the pace varies greatly. This in turn creates challenges for energy producers.

“If the supply side moves away from oil or gas before the world’s consumers do, then the world could face periods of market tightness and volatility,” the report said. “Alternatively, if companies misread the speed of change and over‐invest, then these assets risk under‐performing or becoming stranded.”

Clear signals and direction from policy makers are essential. If the road ahead is paved only with good intentions, then it will be a bumpy ride indeed.

International Energy Agency

In order to reach net-zero emissions by 2050, clean energy spending needs to hit $4 trillion annually by the end of this decade, according to IEA. While the figure seems large, the report noted that emissions can drop by 40% using technologies that pay for themselves, such as improving efficiency and limiting gas leaks.

Still, the majority — or 70% — of the money will need to come from private developers, consumers and Wall Street. 

The report added that the scale of investment needed creates “huge economic opportunities” for clean energy technologies including wind turbines, solar panels, lithium-ion batteries, electrolyzers and fuel cells. All told, IEA said the market for these green technologies will hit $1 trillion annually by 2050, which is equivalent to the current size of the oil market. 

“Clear signals and direction from policy makers are essential. If the road ahead is paved only with good intentions, then it will be a bumpy ride indeed,” the report said. 

CO2 emissions will hit record levels in 2023, IEA says

Power plant

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Only a small chunk of governments’ recovery spending in response to the Covid-19 pandemic has been allocated to clean energy measures, according to the International Energy Agency, with the Paris-based organization forecasting that carbon dioxide emissions will hit record levels in 2023.

Published on Tuesday, the IEA’s analysis notes that, as of the second quarter of this year, the world’s governments had set aside roughly $380 billion for “energy-related sustainable recovery measures.” This represents approximately 2% of recovery spending, it said. 

In a statement issued alongside its analysis, the IEA laid out a stark picture of just how much work needed to be done in order for climate related targets to be met.

“The sums of money, both public and private, being mobilised worldwide by recovery plans fall well short of what is needed to reach international climate goals,” it said. 

These shortfalls were “particularly pronounced in emerging and developing economies, many of which face particular financing challenges,” it added. 

Looking ahead, the Paris-based organization estimated that, under current spending plans, the planet’s carbon dioxide emissions would be on course to hit record levels in 2023 and continue to grow in the ensuing years. There was, its analysis claimed, “no clear peak in sight.”

Commenting on the findings, Fatih Birol, the IEA’s executive director, said: “Since the Covid-19 crisis erupted, many governments may have talked about the importance of building back better for a cleaner future, but many of them are yet to put their money where their mouth is.”

“Despite increased climate ambitions, the amount of economic recovery funds being spent on clean energy is just a small sliver of the total,” he added.

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The IEA’s analysis and projections are based on its Sustainable Recovery Tracker, which was launched on Tuesday and “monitors government spending allocated to sustainable recoveries.”

The tracker takes this information and then uses it to estimate “how much this spending boosts overall clean energy investment and to what degree this affects the trajectory of global CO2 emissions.”

For his part, Birol said governments needed to “increase spending and policy action rapidly to meet the commitments they made in Paris in 2015 — including the vital provision of financing by advanced economies to the developing world.

“But they must then go even further,” he added, “by leading clean energy investment and deployment to much greater heights beyond the recovery period in order to shift the world onto a pathway to net-zero emissions by 2050, which is narrow but still achievable — if we act now.”

Birol’s reference to the Paris Agreement is notable but unsurprising. The shadow of the accord, which aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels,” looms large over discussions about net-zero goals.

Cutting human-made carbon dioxide emissions to net-zero by 2050 is seen as crucial when it comes to meeting the 1.5 degrees Celsius target.

The new findings from the IEA come after it said the planet’s demand for electricity was set for a strong rebound this year and next after dropping by approximately 1% in 2020.

Released last week, its Electricity Market Report forecasts that global electricity demand will jump by nearly 5% in 2021 and 4% in 2022, as economies around the world look to recover from the effects of the pandemic.

The report notes that although electricity generation from renewables “continues to grow strongly” it can’t keep up with increasing demand.

Renewables were, the intergovernmental organization noted, “expected to be able to serve only around half of the projected growth in global demand in 2021 and 2022.”

At the other end of the spectrum, electricity generation based on fossil fuels was “set to cover 45% of additional demand in 2021 and 40% in 2022.”

Indeed, the reality on the ground shows just how big a challenge achieving climate-related goals will be in the years ahead.

Energy companies are still discovering new oil fields, for example, while in countries such as the U.S., fossil fuels continue to play a significant role in electricity production.

At the global level, the IEA’s research published last week expects coal-fired electricity generation to rise “by almost 5% in 2021 and a further 3% in 2022, after having declined by 4.6% in 2020.”

“As a result, coal-fired electricity generation is set to exceed pre-pandemic levels in 2021 and reach an all-time high in 2022,” it adds.