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IEA spotlights ‘deep rippling effect’ of electrification

Electricity is “the new oil” and the effect of increasing global electrification is having a “very deep rippling effect for the power sector”.

That was one of the highlights this morning at the launch of the International Energy Agency’s annual World Energy Outlook.

Laura Cozzi, head of the IEA’s Energy Demand Outlook Division, said: “We are seeing growing electrification happening throughout the energy sector ” electricity going into sectors that were confined to other fuels before: most notably, cars, but also heating and cooling.”

She said this “leads us to improved prospects for affordability, with cheaper energy sources available throughout the energy sector”.

And she stressed that “now, more than ever, there is a need to understand where the energy world is heading. Policymakers and industry alike need to understand how quickly this new transformation is going to go through every part of the energy scene.IEA spotlights 'deep rippling effect' of electrification

“It is like going to a play where you know the script very well, but suddenly the actors are changing their characters ” and you are surprised by some the changes that you are seeing.”

Cozzi said that in the move towards a world that is increasingly electrified, China and India were key players. To try to put some perspective on the scale of electricity growth in Asia, Cozzi said that in the next five years “India is going to add one European Union to its electricity sector ” China is adding one United States”.

“This is going to have major implications for all manufacturers, for the electricity future and for the future of global emissions.”

She said the choices that are going to be made in China and India “will have a major effect on the global energy sector in the next 25 years”.

Where is the demand coming from? Cozzi said that “increasingly it is cooling. The cooling needs of China and India combined are going to equivalent to half of the current electricity needs of the European Union.”

She said this was driven by small appliances like phones, laptops and tablets, large appliances, and increasingly, electric vehicles.

On electric vehicles, she presented some startling predictions. She said that the number of electric vehicles on the road globally would rise from the existing 2 million to 50 million by 2025 and nearly 300 million by 2040. “Spectacular growth,” she said.

In the World Energy Outlook ” which this year reaches its 40th edition ” the IEA highlights three other global trends alongside electrification: The US is the world number one in oil and gas; solar PV is on track to be the cheapest source of new electricity in many countries; and China is switching to a cleaner energy mix.

The IEA says that “these changes brighten the prospects for affordable, sustainable energy and require a reappraisal of approaches to energy security”.

It says there are “many possible pathways ahead” but warns there are also “many potential pitfalls if governments or industry misread the signs of change”.Laura Cozzi, head of the IEA's Energy Demand Outlook Division

On the US, Cozzi said: “We are seeing the US turning into the undisputed leader for oil and gas ” we have started to feel the effects of the shale revolution.”

But it is China that will exert a bigger influence on global energy and its markets. Cozzi said it was a “towering presence” and “when China moves, everything moves”. She said China was entering a new era of economic growth “and it’s a new era that has energy at the centre of it”.

“It’s an era in which quality is going to replace quantity and we are going to see how those changes in China are going to change the global energy sector going forward.”

She said: “China is the key” to the major global shift to clean energy. “In the past 25 years, China has been the key to understanding what is happening in global coal and oil markets: going forward, China is going to very much shape what is happening in gas and low carbon technologies.”

“There is a huge push from Chinese leaders to make their sky blue again and push towards cleaner fuel.”

Cozzi also highlighted a major energy shift in Africa, where “what we are seeing today is something quite extraordinary. We are seeing new business models being experimented with; with digitalization and digital finance being coupled with new solar and cheap batteries, providing electricity to many more people.”

She picked out Kenya and Ethiopia as being on track to provide “electricity access for all by 2030”.

Cozzi said there are “two main things we need to understand about the future energy sector. It is an energy sector that is much more efficient than today. We will use energy, but we will use it in a very efficiency way. Global energy demand is going to grow by 30 per cent ” but without energy efficiency measures, it would be 60 per cent.

“Globally, we are seeing very many shifts going on. Gas, in terms of global installed capacity, overtakes coal by 2030. This is because of the flexibility it offers in terms of working alongside renewables.”

She said nuclear was also growing, thanks again to China, which would become the global leader by 2030. But she said nuclear was facing difficulties in terms of financing the cost of new reactors, particularly in areas where there is cheaper gas.

In terms of capacity, she said “solar is going to be what coal has been in the past. Solar PV has become the cheapest form of electricity in India in less than 10 years. She said the same story would be seen in China by 2030 and added: “This is a major revolution.”