IEA report warns of global energy crises, urges investments in renewables

The International Energy Agency's latest World Energy Outlook shows a series of grim predictions for the world's longterm energy security. If radical investments in increased efficiency, biofuels and other renewables are not made now, the world will be experiencing one crisis after another.

Using different scenarios, the report explores what may happen if governments don't act to cut dependence on fossil fuels. The "Business As Usual" scenario would be "dirty, insecure and expensive". It is based on the following projections:

• Global demand will swell 53% by 2030 to 116 million bpd, sending crude oil prices to more than US$100, and without proper investments even to US$130 a barrel
• Severe supply disruptions and resulting price shocks will be common
• Nearly three-quarters of the increased demand will come from China, India and other developing countries who take 70% of the increase for their account
  
• Global carbon dioxide emissions would jump 55 per cent from today's level if current trends continue; China is seen overtaking the U.S. as the world's biggest emitter of CO{-2} before 2010, earlier than previously expected. The magnitude of the effects of global climate change would be amplified.

But the IEA indicates that it is not too late for new government policies to create an alternative energy future which is clean, clever and competitive. "In response, urgent government action is required," the agency's executive director Claude Mandil said at the report's launch in London. "The key word is urgent."

Huge investment effort needed
Underinvestment in new energy supply is a looming risk. To meet demand, the world will need a cumulative investment in energy supply infrastructure of more than US$20-trillion (two times the entire size of the EU or US's GDP) over the next quarter century - much more than was previously estimated.

To meet the world’s thirst for oil, US$4,3 trillion will need to be invested in oilfields and refineries by 2030 and it is far from certain that this will happen. Resource nationalism, the trend of countries such as Venezuela and Russia to seek more cash and control from companies that work their oil and gas fields, is among the factors that may restrain investment.

But supposing the investments are made, then the clean, green, "Alternative Policy Scenario", in which biofuels play an important role, looks as follows:

• Global energy demand could be reduced by 10 per cent in 2030, limiting oil demand to 103 million bpd; improved efficiency of energy use contributes most to the energy savings
• Global carbon dioxide emissions would be cut by 16 per cent in the same time frame.
• Increased use of nuclear power and renewables also help reduce fossil fuel demand and emissions.
• Improved security, environmental protection and economic efficiency would result from the investments.

The role of biofuels and biomass
Of all the renewables, biomass and biofuels will play the most important role. Hydroenergy will contribute significantly, while solar, wind and geothermal have a minor effect. Suitable for use in the world's transport sector, biofuels will make the most significant contribution with output growing as much as 9% a year to a total of 7% of all transport fuels by 2030 under the "Alternative" scenario. The IEA sees Europe overtaking Brazil as the world's second-largest consuming region by the end of the current decade and may even surpass the US as the world's largest consumer and producer of biofuel by 2030:
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: oil :: coal :: renewables ::energy security :: IEA ::


Global farm land devoted to biofuel production to an area equivalent to all of Asia-Pacific’s members in the Organization for Economic Cooperation and Development, the IEA said in its World Energy Outlook 2006 report released on Tuesday.

"About 14 million hectares of land are now used for production of biofuels, equal to about 1% of the world’s currently available land," IEA said. "This has to rises to 2% in the reference scenario and 3.5% in the Alternative Policy Scenario."

The "Reference Scenario" assumes the absence of government action. In that case, the IEA projects biofuels will account for 4% of global road-fuel demand by 2030 and the amount of land needed for ethanol production will exceed the size of France and Spain.

The US, the EU and Brazil will account for the "bulk of the increase and remain the leading producers of biofuels," IEA said. "The share of biofuels in transport-fuel use remains far and away the highest in Brazil—the world’s lowest-cost producer of ethanol," it said.

There is less scope for reducing costs for biodiesel, according to IEA, which forecast costs will fall to just over 30 cents a liter from 50 cents in the US and to 40 from 60 cents in Europe. As so-called second-generation biofuels are developed, production costs "might eventually fall as low as $40 or $50 a barrel, making them competitive with conventional gasoline and diesel without subsidy," the agency said.

The Outlook also highlights the often underestimated energy needs for poor people in the developing countries. Traditional fuels such as wood and charcoal are widely used for cooking and heating in developing countries. This has serious negative implications for the environment and health – 1.6 million deaths per year are attributed to indoor air pollution by the World Health Organization. The chapter begins by underlining the seriousness of these problems and then provides qualitative and quantitative analysis of potential solutions. How many people use biomass for domestic cooking and heating in the world today? What trends would we see without policy intervention? How many people need to switch to sustainable biomass use or modern fuels in order to achieve the Millennium Development Goals? Finally, how much will it cost? With this last question in mind we consider innovative financing mechanisms and the chapter concludes by outlining implications for policy. The work will have input from WHO, UNFAO, UNEP, UNDP and others.



According to Mandil, nuclear energy has to be a part of the energy mix if we want to reach a long-term sustainable future," Mandil said in an interview in London. European countries are considering expanding nuclear power in order to meet goals to reduce carbon dioxide emissions, which contribute to global warming. But "nuclear is a difficult topic," he added, "a problem of public acceptance, history, psychology and politics."


China and coal
China, expected to rely increasingly on coal to satisfy energy demand for its growing economy, will overtake the U.S. in 2009 as the biggest emitter of carbon dioxide, the report said.

Coal produces more global warming gases than other energy forms because of its high carbon content. Efforts by European Union nations to limit emissions through a trading regime may be undermined unless other nations, and big coal users the U.S. and China, adopt similar policies.

Coal use is now accelerating, particularly in China and India, as power producers turn away from expensive natural gas, agency Chief Economist Fatih Birol said.

"Any future architecture on climate change will need China on board or it will be ineffective," Mandil said. China and India are "aware of their global responsibilities," he said, adding that western nations need "to convince them" that alternative policies can be adopted without sacrificing economic growth.

The agency was formed in 1974 to coordinate energy policy among the largest industrialized consuming nations in the wake of an Arab oil embargo that left long lines at U.S. gas stations. The report was partly a response to calls from leaders of the Group of Eight at meetings this year and last for advice on alternative energy strategies.

More information:
The IEA's World Energy Outlook website.

IEA: The World Energy Outlook 2006 Maps Out a Cleaner, Cleverer and More Competitive Energy Future - Nov. 7, 2006

Bloomberg: Bigger role for biofuels in transport - Nov. 8, 2006