IEA: RENEWABLES TO CLOSE IN ON COAL BY 2035

Tamar Hallerman
GHG Monitor
11/16/12

Coal will continue to remain the backbone of the world’s electricity system over the next several decades but renewables will close in as the power source of choice by 2035, according to the International Energy Agency. However, in the most recent edition of its annual World Energy Outlook (WEO), the multi-national organization said the projection hinges on the continuation of subsidies for still fledging technologies such as wind and solar. “Renewables become the world’s second-largest source of power generation by 2015 (roughly half that of coal) and, by 2035, they approach coal as the primary source of global electricity,” the report says, estimating that by 2035 renewables will likely be the source of roughly one-third of the world’s total electricity output.

The WEO makes projections about the world’s future energy system through 2035 based on various assumptions and creates three scenarios that differ based on the severity of carbon mitigation policies adopted globally. While this year’s report predicts bright futures for natural gas, oil and renewables under all scenarios, IEA says the future for coal could vary greatly depending on policy decisions and the availability of affordable lower-emissions alternatives and technologies like carbon capture and storage. The report notes the large impact that large developing countries like China and India will have in driving growth for coal. Under one scenario, IEA said it expects that the two nations will likely drive three-quarters of coal demand growth coming from developing nations through 2035. While China has undergone an unparalleled boom in coal capacity construction in recent years, IEA estimates that its demand for coal will likely peak around 2020 and remain steady through 2035. India is expected to overtake the U.S. as the world’s second largest user of coal by 2025, IEA says in the report, while coal output in the world’s developed countries is expected to decline.

Fossil Fuels Will Continue to Dominate

Despite the decline of coal and boost in the deployment renewables, IEA says that fossil fuels will continue to dominate the world’s electricity sectors, largely carried by large increases in natural gas and oil production. The organization says that while fossil sources accounted for 81 percent of the fuel mix in 2010, they could account for anywhere between 63 to 80 percent of capacity depending on the types of policies adopted by nations. The report highlights that through the production of fossil fuels, particularly natural gas from shale and oil, the U.S. could be largely energy independent by 2035. The report expects the future of natural gas globally in the coming decades to be “bright,” despite regional differences. It expects a demand increase of 50 percent above currently levels by 2035, roughly have of production to come from unconventional sources, mostly in the U.S., Australia and China. IEA highlighted the difference of subsidies devoted to fossil fuels compared to renewables—while the former netted $523 billion in subsidies globally in 2011, renewables received only $88 billion last year. The group estimated that in order to catch up, renewables would need to receive the equivalent of $4.8 trillion in subsidies through 2035.

The report underscores the importance of CCS as a key mitigation option for the CO2 emissions generated from the combustion of those fossil fuels, but acknowledges the technology’s uncertain future given its slowed pace of deployment. “It could prove to be critical to the prospects for coal use in many regions, while in the longer term it is also likely to be critical to the prospects for natural gas and energy-intensive industries globally,” the report says.