In this list
Agriculture | Coal | Electric Power | Energy Transition | Natural Gas | Oil

Electricity to emerge as the 'new oil' of the global energy system: IEA

Crude Oil | Natural Gas | Natural Gas (North America) | Upstream

Platts Upstream Indicator

Commodities | Crude Oil | Electric Power | Electric Power Electricity | Energy Natural Gas | Energy Transition | Natural Gas

Market Movers Europe, Dec 4-8: Oil markets weigh OPEC+ cuts, economic factors; power sector watches for cold weather

Oil | Energy Transition | Energy

APPEC 2024

Natural Gas | Oil & Gas | Crude Oil

US might reimpose sanctions on Venezuela following vote to annex Guyana territory

Energy | Oil | Crude Oil

Dated Brent Price Assessment

Electric Power | Energy Transition

Conversations at COP28

For full access to real-time updates, breaking news, analysis, pricing and data visualization subscribe today.

Subscribe Now

Electricity to emerge as the 'new oil' of the global energy system: IEA


Predicts race to secure future electricity supplies

Says climate policies should not interfere with geopolitics

No need for 'new long-lead time' oil, gas projects under net zero scenario

  • Author
  • Eklavya Gupte    Henry Edwardes-Evans
  • Editor
  • Haripriya Banerjee
  • Commodity
  • Agriculture Coal Electric Power Energy Transition Natural Gas Oil
  • Tags
  • Solar energy
  • Topic
  • Energy Transition Environment and Sustainability

The International Energy Agency urged governments Sept. 26 to keep geopolitics out of climate change talks while underlining the significance of electrification in the global pursuit of reaching net zero by 2050.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

In its updated 2023 Net Zero Roadmap, the IEA marginally softened its stance on upstream projects, saying no "no new long-lead-time upstream oil and gas projects" were needed. This compared to its first May 2021 net zero roadmap, which called for "no new oil and natural gas fields" in outright terms.

The report, which outlines IEA's Net Zero Emissions by 2050 (NZE) Scenario, also called for unified global efforts to help limit global warming to 1.5 degrees Celsius as world leaders come under pressure to accelerate national plans at the upcoming UN Climate Change Conference (COP28) in Dubai from Nov. 30 to Dec. 12.

"Strong international cooperation is crucial to success. Governments need to separate climate from geopolitics, given the scale of the challenge at hand," IEA Executive Director Fatih Birol said.

With oil prices back up near $100/b and demand likely to hit record levels in 2023 and grow again in 2024, climate change concerns have run into energy security considerations for policymakers.

That has been adding tension in the lead-up to COP28 hosted by the UAE, a core OPEC member that is expanding its crude production.

Nevertheless, Birol told reporters he was more optimistic today than two years ago.

"We see legitimate reasons to be hopeful because a new clean energy economy is emerging. While we see the path to 1.5 C narrowing, a spectacular increase in clean techs is keeping the door open," he said.

That was particularly the case for solar power, now the cheapest source of generation, and electric vehicles, with one in five cars sold now electric, up from one in 25 in 2021, Birol said.

Global investment in clean technology had increased 40% over two years to $1.8 trillion, versus fossil fuel investment of $1 trillion, he said.

"That $1.8 trillion, however, needs to grow to $4.5 trillion if we want to reach our net zero goals globally - a tall order."

The 'new oil'

With electricity poised to emerge as the "new oil" of the global energy system, investment in global power networks needed to accelerate, the IEA said.

"For all countries, speeding up permitting, extending and modernizing electricity grids, addressing supply chain bottlenecks, and securely integrating variable renewables are critical," it said.

The agency expects over 80% of emissions reductions needed by 2030 to be delivered by growing renewables, improving energy efficiency, cutting methane emissions and increasing electrification with available technologies.

"The hugely increased need for electricity system flexibility requires massive growth of battery energy storage and demand response; expanded, modernized and cybersecure transmission and distribution grids, and more dispatchable low-emissions capacity, including fossil fuel capacity with carbon capture, utilization and Storage (CCUS), hydropower, biomass, nuclear, and hydrogen and ammonia-based plants," the report said.

One of the key pathways to reaching net zero by 2050 will be the tripling of renewables capacity to 11,000 GW by 2030. This doubling of energy efficiency and the doubling of hydrogen production to 180 million mt/year by 2030 are among key objectives at COP28.

On Sept. 9, G20 nations agreed to support the tripling of renewables and acknowledged a $4 trillion/year need to accelerate investment in the energy transition.

Peak fossil fuel demand

The agency called for well-designed policies such as the early retirement or repurposing of coal-fired power plants, while noting that even without policy change, "coal, oil and gas may well peak before 2030 as a result of growth in clean energy technologies," Birol said.

It remained "a Hurculean task", however, to cut fossil fuel use by 25% by 2030 in order to stay on course with net zero by 2050.

"Nonetheless, continued investment is required in some existing oil and gas assets and already approved projects. Sequencing the increase in clean energy investment and the decline of fossil fuel supply investment is vital if damaging price spikes or supply gluts are to be avoided," the IEA said.

Similarly, global carbon dioxide emissions are expected to peak this decade, after rising to a record-high 36.8 billion mtCO2e in 2022.

Slow progress on hydrogen, CCUS

Not all transition sectors were outperforming expectation, with "slower technological and market development progress" seen to 2030 in carbon capture, utilization and storage, and clean hydrogen (see table).

Insufficient policy support and rising cost pressures were putting hydrogen projects at risk globally, the IEA said in its recent Global Hydrogen Review.

And while the global CCUS project pipeline was growing, deployment was minimal, expensive and still unproven at scale.

"We've not changed our view that CCS is important, but we’ve scaled back expectations," IEA chief technology officer Timor Gul told reporters.

"The pipeline is growing for sectors like cement but the momentum not enough. The report acts as a warning call for the CCS industry to move forward," Gul said.

CCUS plays a minor role in all but one of five climate scenarios produced by S&P Global Commodity Insights' analysts in August. (See chart)

Under a base case Inflections scenario, predicting a return to 2002 emission levels by 2050, electric power is the main driver of sectoral change, with CCS marginal throughout the period.

Even under a Green Rules scenario, which sees global emissions falling by more than half by 2050, it is the switch to renewables in the power sector that drives most change rather than implementation of CCS.

Only under an Accelerated CCS scenario, delivering net zero emissions by 2050, does the technology see many of 2022's largest emitters turn net-negative over the period, driven by convergence of high ETS prices, supported by elevated carbon taxes.

That scenario, however, is characterized by S&P Global analysts as "an extremely challenging, multidecadal process that requires extraordinary assumptions about change in energy use, technology and policy over the next three decades."