How will global energy markets evolve to 2035?

| © OECD/IEA, 2011 |

Publihed link: www.worldenergyoutlook.org |

 Major events of the last year have had an impact on short- and medium-term energy trends, but have done little to quench the world’s increasing thirst for energy in the long term. The level and pattern of energy use worldwide varies markedly across the three scenarios in this year’s World Energy Outlook (WEO-2011), which differ according to assumptions about government policies on energy and climate change. The New Policies Scenario is the central scenario of WEO-2011. It assumes that recent government policy commitments are implemented in a cautious manner.

 In the New Policies Scenario, world primary demand for energy increases by one-third between 2010 and 2035 and energy-related CO2 emissions increase by 20%, following a trajectory consistent with a long-term rise in the average global temperature in excess of 3.5°C. A lower rate of global economic growth in the short term would make only a marginal difference to longer-term energy and climate trends.

 The dynamics of energy markets are determined more and more by the emerging economies. Over the next 25 years, 90% of the projected growth in global energy demand comes from non-OECD economies; China alone accounts for more than 30%, consolidating its position as the world’s largest energy consumer. In 2035, China consumes nearly 70% more energy than the United States, the second-largest consumer, even though, by then, per-capita energy consumption in China is still less than half the level in the United States. The rates of growth in energy consumption in India, Indonesia, Brazil and the Middle East are even faster than in China. Emerging economies also dominate the expansion of supply: the world will rely increasingly on OPEC oil production as it grows to reach more than half of the global total in 2035. Non-OECD countries account for more than 70% of global gas production in 2035,
focused in the largest existing gas producers, including Russia, the Caspian and Qatar.

 World demand grows for all energy sources. The share of fossil fuels in global primary energy consumption falls slightly from 81% in 2010 to 75% in 2035. Natural gas is the only fossil fuel to increase its share in the global mix over the period to 2035. Absolute growth in natural gas demand is similar to that of oil and coal combined. Oil demand increases by 15% and is driven by transport demand. Coal demand, dictated largely by emerging economies, increases for around the next ten years but then stabilises, ending around 17% higher than 2010.

 In the power sector, nuclear generation grows by about 70%, led by China, Korea and India. Renewable energy technologies, led by hydropower and wind, account for half of the new capacity installed to meet growing demand. Overall, modern renewables grow faster than any other energy form in relative terms, but in absolute terms total supply is still not close to the level of any single fossil fuel in 2035.

 Large-scale investment in future energy supply is needed. In the New Policies Scenario, $38 trillion in global investment in energy-supply infrastructure is required from 2011 to 2035, an average of $1.5 trillion per year. Two-thirds of this is required in non-OECD countries. The power sector claims nearly $17 trillion of the total investment. Oil and gas combined require nearly $20 trillion, increasing to reflect higher costs and a need for more upstream investment in the medium and long term. Coal and biofuels account for the remaining investment.

 The energy world becomes more inter-connected and more focused on Asia. More than half of world oil consumption is traded across regions in 2035, increasing by around 30% in absolute terms compared with today. Trade in natural gas nearly doubles, with gas from Russia and the Caspian region going increasingly to Asia. India becomes the largest coal importer by around 2020, but China remains the determining factor in global coal markets.

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