Blog

Energy Efficiency Lies at the Heart of Tomorrow’s Energy Market
Feb 10, 2015
Christelle Verstraeten
0 comments

As oil hovers between 40 and 50 dollars a barrel, headlines scream it’s a whole new world and the industry tries to wade through various reports we thought it would be interesting to underline a number of market fundamentals that continue to reign true. These predictions were published by the International Energy Agency last November in their World Energy Outlook (WEO) 2014.  It’s the Agency’s flagship publication and a reference for many in the energy sector.

Energy Landscape Overview

In general, global demand is still set to grow, by 37% in 2040, but at a slower path after 2025 mainly as a result from price and policy effects and structural shift of the economy towards services and lighter industrial sector.

At a regional level, energy consumption is expected to remain flat in the EU, Japan, and South Korea whilst Asia, Africa, the Middle East, Latin America and China should be the main driving forces. The global energy supply is expected to be made in equal share of oil, gas, coal and renewables sources.

Energy efficiency – the hidden fuel

The power sector is leading the transformation of the global energy scene with electricity being the fastest growing form of energy in all regions, estimated to almost double the current installed capacity in 2040. The global power mix will see a radical transformation between 2013 and 2040 with a decreased dependence on fossil fuels for electricity generation (mainly from coal and oil) and an almost tripling of the renewables sources. The transformation will require reforms of market design, electricity pricing policy, and technology deployment for power quality monitoring and services to guarantee power supply.

In this transition to low carbon systems and energy efficiency, the hidden fuel as quoted by the IEA is leveraged as an important tool to impact on the competitiveness of industries and regions. The IEA stresses that implementing economically viable energy efficiency measures across the economy would increase the demand for domestically produced goods (5%) and increase disposable household income (2%). In this context, energy efficiency solutions should be continuously supported by governments and adopted by a larger number of users.

On the road, to the east

While the energy consumption center is moving to the East led by China and India, the OECD countries will have to deploy innovative policy solutions to realize their de-carbonization targets and therefore transform their power system to accommodate a larger share of renewable sources. The US will still play a decisive role, with the large shale developments expected to impact local prices and consumption but also global markets for gas and implicitly for other commodities.

The real mystery lies in the future of China. Its economic development has experienced slow down. The government has imposed new legislation aimed at reducing emissions currently affecting some areas in China. A legislative proposal is expected to be released in 2015. But to what extent this will impact, in the longer term, the magnitude of China’s needs for energy is yet to be observed.

Leave a comment

Comments

Related Posts

Christelle Verstraeten

Christelle Verstraeten is seconded by GE Power Conversion to the International Energy Agency based in Paris. Her role there is to support the IEA in setting up policy recommendations for OECD countries on energy policy and for connecting with GE technology experts in order to share know-how and expertise.