Western Climate Mitigation Policies Increase Electricity Demand, Making It Harder to Slash Emissions

Worldwide demand for electricity is rising faster than expected, according to the International Energy Agency (IEA). Over the next decade, the world is expected to add the equivalent of Japan’s annual electricity demand to grids each year, driven by increasing power needs for new factories, electric vehicles, air-conditioners and data centers, according to the agency’s annual World Energy Outlook. The agency expects global electricity demand to be 6 percent higher in 2035 than it forecast last year.

The report, through its assumptions and forecasting methodology, concludes that countries are likely to build enough low-emissions power plants by the end of the decade — primarily solar, wind and nuclear power — to match the demand increase. It expects rapid growth in renewable energy that could result in coal, oil and natural gas use to peak this decade. To reach net zero carbon dioxide emissions by mid-century, however, the IEA says countries would need to build low-carbon electricity sources twice as fast as they are currently doing between now and 2035.

More than 560 gigawatts of renewable power capacity came on line worldwide last year. Around $2 trillion is expected to be invested in “clean” energy in 2024, almost double the amount invested in fossil fuels. But according to the IEA, for “clean” energy to continue growing at pace, much greater investment in new energy systems, especially in electricity grids and energy storage, are necessary. For every dollar spent on renewable power today, the agency says, 60 cents are spent on grids and storage, highlighting how essential supporting infrastructure is not keeping pace with “clean” energy transitions. According to the IEA, decarbonization of the electricity sector requires investment in grids and storage to increase even more quickly than “clean” generation, and the investment ratio to rebalance to 1:1.

Source: Reuters

Electricity demand has grown as societies grow more affluent and new usage demands have accelerated that growth. For instance, more people around the globe are buying air-conditioners and running them more often. In India, air-conditioning sales have doubled this year. Tech companies are building artificial intelligence (AI) data centers that are also increasing electricity usage. While data centers account for just 1 percent of global electricity demand, they are often concentrated in clusters and can strain local grids.

Electric vehicles promoted by mandates and subsidies have also added to electricity demand, which Elon Musk has said would by itself double electricity usage. In China, by the end of this year, half of all new cars sold are projected to be electric, and roughly 60 percent of plug-in vehicles sold there are cheaper than their gasoline-powered counterparts. China has few domestic oil and gas resources, having to import much of those commodities, and generates more than half of its electricity from coal, for which it has numerous reserves. China leads the world in coal production and consumption and in carbon dioxide emissions.

Previously, IEA expected that global consumption of coal would drop significantly by 2030 as wind and solar power expanded. But with electricity demand rising quickly in places like China and India, IEA now projects coal use to decline more slowly. Coal is still the world’s number one source of electric generation, despite Western nations turning their backs on it. In the United States, some utilities are extending the life of coal-fired power plants that had been scheduled for retirement to combat the increase in demand. Duke, for example, has extended its largest coal plant’s life another 3 years to 2038.

According to the IEA, global carbon-dioxide emissions are expected to drop 3 percent by 2030 under policies that nations are currently pursuing, far short of the 33 percent drop needed this decade to meet the ambitious climate goals that governments have agreed to at United Nations climate talks. That is because despite the fast renewable growth in the IEA forecast, wind and solar units generate only a quarter to a half of the capacity that fossil fuel or nuclear units can produce for the same rated capacity. Wind and solar power also require that transmission grids be upgraded as they are intermittent and weather-driven and often found far from demand centers that need the electricity they generate.

In China, which accounted for 60 percent of the world’s growth in wind and solar power last year, electric grids need significant upgrades to handle fluctuations in renewable output. In Europe, sales of electric heat pumps slowed sharply in the first half of this year as natural gas prices eased providing more affordable energy to heat homes. In the United States, a lack of transmission lines is hindering wind projects located far from demand centers where good wind resources are found. Permitting problems abound in the United States for all types of energy and for significant projects.

The IEA expects big changes in future fossil-fuel markets as it touts Western countries that want to end fossil fuel use that provided abundant and affordable energy and improved life styles. Nonetheless, it expects fossil energy to supply 75 percent of the world’s energy in 2030, down from 81 percent in 2023. It expects growing electric vehicle sales mandated by Western countries to cause global oil demand to plateau this decade.  Global oil demand peaks before 2030 at just less than 102 million barrels per day, and then falls back to 2023 levels of 99 million barrels per day by 2035.

The advent of liquefied natural gas and the increase in export terminals by the United States and Qatar, the agency believes, could result in a global “oversupply” of natural gas later this decade that could push down global energy prices, offering relief to countries that faced price spikes after Russia’s invasion of Ukraine. IEA forecasts an increase in demand for liquefied natural gas of 145 billion cubic meters between 2023 and 2030, but this would be outpaced by an increase in forecasted export capacity of around 270 billion cubic meters over the same period.

While fossil-fuel producing nations and others have cast doubt on the International Energy Agency’s prediction that oil and gas use would peak by 2030, the agency is sticking with that forecast, though it acknowledges there are plenty of uncertainties. Due to numerous elections worldwide this year and geopolitical tensions, the report said, “there is more near-term uncertainty than usual” over how global energy policies will evolve. This has been demonstrated by elections in Europe reflecting growing public concern over rapidly increasing energy prices, among other things.

Conclusion

Based on IEA’s assumptions regarding countries’ climate policies, its World Energy Outlook finds that low-emissions sources are set to generate more than half of the world’s electricity before 2030 – and demand for all three fossil fuels – coal, oil and gas – is projected to peak by the end of the decade. Electricity use has grown at twice the pace of overall energy demand over the last decade, with two-thirds of the global increase in electricity demand over the last ten years coming from China, where more than half of its electricity is generated from coal, making China the largest emitter of greenhouse gases. Lack of access to energy, however, remains the most fundamental inequity in today’s energy system, with 750 million people – predominantly in sub-Saharan Africa – without access to electricity and over 2 billion without clean cooking fuels. Climate change mitigation policies advocated by IEA will only exacerbate that problem.