Wouldn’t it be wonderful to be able to see into the future? Sadly, that ability, as of yet, is beyond us humans. However, from the electric power industry’s perspective the plethora of annual market reports forecasting the status of the sector in 10 or 20 years’ time are at least a good starting point, and in many cases help to steady the nerves in these uncertain times.

Arguably the most eagerly-awaited market forecast is the International Energy Agency’s annual World Energy Outlook. The International Energy Outlook, published annually by the Energy Information Administration, part of the US Department of Energy, is another well-respected publication, not to mention the regular reports and studies published by leading market analysts such as Capgemini, PricewaterhouseCooper and Ernst & Young.

The latest global forecast report on the energy sector comes from oil & gas giant ExxonMobil and was published at the end of January. The Outlook for Energy: A View to 2030 covers all areas of energy, but it does make the interesting point that “meeting the rapidly growing demand for electricity is one of the world’s biggest energy challenges” – a sentiment that few would argue with.

According to the report, global electricity demand will increase by more than 80 per cent through to 2030, driven primarily by rapid economic growth and higher living standards in non-OECD countries. The Asia-Pacific region is singled out as the main driver behind the demand growth, with China leading the pack.

ExxonMobil expects that electricity demand in non-OECD countries will exceed that of OECD countries within the next four or five years, with demand in Asia-Pacific reaching approximately one and a half times the combined level of North America and Europe by 2030.

The report also stresses the change that is likely to occur in the choice of fuels we use to produce our electricity.

Coal, which remains one of the most economical fuels, today produces 40 per cent of the world’s power. That, says ExxonMobil, will change in the coming years as governments introduce policies that associate a cost with carbon dioxide emissions in an effort to curb greenhouse gas emissions.

By 2030, coal’s share of the global market is expected to fall to 30 per cent. The impact, however, will be regional, with coal losing out to other fuels in Europe and the US, while remaining dominant in the Asia-Pacific region.

The demand for coal for power generation in Asia-Pacific is forecast to grow by 85 per cent between 2005 and 2030, although its market share is expected to drop from 70 per cent to 60 per cent, as countries in the region look to diversify into natural gas, nuclear and renewables.

The report briefly discusses carbon capture and storage, but ExxonMobil has the rather bleak view that, without any major cost reduction breakthroughs, such technologies will remain uncompetitive and will require continued government support through 2030, even with a carbon price of $60 per US ton.

In contrast, the oil & gas giant expects the demand for natural gas to generate electricity to rise by 85 per cent between 2005 and 2030, increasing its current market share of 20 per cent to 25 per cent by 2030.

This, says ExxonMobil, means that natural gas will be well-positioned to become the top source for electricity generation. The sceptics among us may argue that such a conclusion is not surprising when you consider ExxonMobil’s main business.

The report, however, is also positive about both nuclear and renewable energy, especially the former. It forecasts significant additions of nuclear capacity through 2030, i.e. a rise of 70 per cent. Similarly, renewable energies, such as wind and solar, are also expected to enjoy sharp capacity rises although from a much lower baseline.

One interesting point that ExxonMobil’s report makes is that ‘building’ capacity for power generation is not the same as ‘utilizing’ that capacity. So although in absolute terms installed wind capacity is forecast to outstrip nuclear by 2030, the intermittent nature of wind means that the utilization of that capacity will be lower.

ExxonMobil’s conclusions are in a similar vein to the findings of other forecast reports, and clearly support the growing consensus on where the global power generation sector is heading over the next 20 years, i.e. ensuring an affordable, low-carbon and secure electricity supply for everyone.

If you are interested in reading the report in full, you can download it from www.exxonmobil.com/corporate/files/news_pub_eo_2010.pdf

Kind regards,
Dr Heather Johnstone,
Chief Editor

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