IEA sees the first early signs of an energy technology revolution underway across the globe but urges that much more needs to be done to achieve the necessary long-term CO2 cuts

“For several years, the IEA has been calling for an energy revolution to tackle climate change and enhance energy security and economic development. For the first time, we see early indications that such a revolution is under way,” said Nobuo Tanaka, Executive Director of the International Energy Agency (IEA). Presenting the new IEA study Energy Technology Perspectives (ETP) 2010 in Washington, he said “after sowing the seeds for such a revolution in our last edition in 2008 by demonstrating that greater reliance on low-carbon technologies can transform the way we produce and use energy, ETP 2010 now highlights the first ‘green shoots’ of what could become such a fundamental change”.

Global investment in renewable electricity generation, led by wind and solar, reached an all-time high of USD 112 billion in 2008 and remained broadly stable in 2009 despite the economic downturn. Many major car companies are adding hybrid and all-electric vehicles to their fleets. Expanded production of such vehicles combined with the purchase incentives available in many countries, could put more than 5 million such vehicles on the road in the next 10 years. In OECD countries, the rate of energy efficiency improvement has increased to almost 2% per year, more than double the rate seen in the 1990s. Funding for low-carbon energy research, development and demonstration (RD&D) has increased by one-third between 2005 and 2008, helping to reverse a declining trend that started in the early 1980s; with IEA countries and many other major economies aiming to double such investments by 2015.

ETP 2010 demonstrates that all these efforts are vital if we are successfully to limit climate change; but current developments are still fragmented and fragile, and the rate of progress is still far too low to prevent dangerous increases in global temperatures. “What we need is rapid, large-scale deployment of a portfolio of low-carbon technologies; we need a massive decarbonisation of the energy system, breaking the historical link between CO₂ emissions and economic output, and leading to a new age of electrification,” said Mr. Tanaka. Noting that 1.5 billion people still lack access to electricity, he stated “this adds tremendous urgency to electrification efforts worldwide.”

The ETP2010 Baseline scenario shows, that without new policies, fossil fuels will continue to provide most of the world’s energy needs, with energy-related CO₂ emissions almost doubling to 57 gigatonnes (Gt) by 2050. In contrast, the ETP2010 BLUE Map scenario charts a least-cost path for halving global energy-related CO₂ emissions by 2050 (compared to 2005 levels), consistent with a long-term temperature rise of 2 degrees C to 3 degrees C. It also shows how the transition to a low-carbon economy will enhance energy security and support economic development. Under this scenario, the global demand for oil, for gas and for coal in 2050 would all be lower than today, with world oil demand alone being 27% less than in 2007. For instance, oil demand in the United States and OECD Europe would drop by more than 60% and 50% respectively; in China oil demand would only increase to half the level seen in the Baseline scenario. Also, in the BLUE Map scenario, global oil demand would plateau around 2030-2035. This would mean less pressure on prices and reduced import dependency for many countries. “However,” Mr. Tanaka stressed “we should not forget that even with this low-carbon revolution, fossil fuels still account for 46% of primary energy demand in 2050, meaning that we still will need significant investment in these fields.

Top priorities for the near future

Increased energy efficiency will become the most important “fuel” of the future. Low-cost options for reducing actual consumption – many of which are already available – offer the greatest potential for cutting CO₂ emissions over the period to 2050. This will require that current rates of energy efficiency seen in OECD countries are replicated across the world and maintained over the next 40 years. Decarbonising the electricity sector, the second-largest source of emissions reductions, must involve dramatically increasing the shares of renewables and nuclear power, and adding carbon capture and storage (CCS) to plants that consume fossil fuels. By 2050, renewable electricity generation would need to represent almost half of electricity generation up from 18% today. More than 30 new nuclear power stations and 35 coal-fired plants fitted with CCS would be needed on average every year to 2050. A decarbonised electricity supply, combined with smarter grids, would then offer substantial opportunities to reduce CO₂ emissions in end-use sectors through increased electrification (for example, through the introduction of electric vehicles and efficient electric heat pumps). Under BLUE Map, by 2050, more than 50% of all light duty vehicle sales worldwide are either plug-in hybrid or all-electric vehicles.

Huge investment required, but will deliver high returns

The cost of achieving the “50% by 2050” goal of the BLUE Map scenario will be USD 46 trillion more than the Baseline scenario over the period to 2050. Most of this reflects additional spending by consumers on more efficient and low-carbon end-use equipment, particularly for vehicles. Yet importantly, ETP 2010 demonstrates that over the same period, very positive returns on investment could be achieved with fuel savings alone of USD 112 trillion, along with other economic, social and environmental benefits.

More effective models for technology diffusion

“Reducing CO₂ emissions will require a global effort; while OECD countries should take the lead, all major economies need to be involved,“ Mr. Tanaka stressed. ETP2010 shows that to achieve CO₂ emissions reductions at least-cost, OECD countries must reduce their emissions by 70-80% from today’s levels, non-OECD countries must also collectively make CO₂ reductions of around 30%. Accelerating the spread of low-carbon technologies across the world is therefore a critical challenge, particularly in the largest, fast-growing economies such as Brazil, China, India, the Russian Federation and South Africa. ETP 2010 shows that several emerging economies, led by China, are becoming major technology developers, manufacturers and exporters. “This shift is vital to ensuring a truly global energy technology revolution – a revolution that is crucial to economic development, energy security and environmental protection,” said Mr. Tanaka. “By providing concrete guidance, ETP 2010 aims to prompt broader engagement of all players and sectors, and achieve the necessary step-change in the rate of progress.”