Energy clouds over Durban

The crisis over Italy’s government finances was not the only reason for world policy-makers to shift uneasily on their seats last week. Officials and ministers preparing for the Durban climate change conference starting on 28 November were given their own reason to worry.

The International Energy Agency’s authoritative World Energy Outlook for 2011 warned that countries are in danger of “locking in” a future that would see average temperatures rise by 3.5 degrees Centigrade, far above the two-degree increase considered the manageable limit.

Bleak calculations by the IEA, unveiled in London last week by chief economist Fatih Birol, showed world CO2 emissions rising according to its central “New Policies Scenario” from 28.8 gigatonnes in 2009 to 35.7Gt in 2030 and 36.4Gt in 2035. Total electricity generation is now expected to rise from 20,043TWh in 2009 to 33,417TWh in 2030 and 36,250TWh in 2035.

Looking further into the detail does not improve the picture. The IEA predicts that generation from coal will rise from 8,118TWh in 2009 to 12,035TWh in 2035 (some 33 per cent of the total), and that from gas from 4,299TWh to 7,923TWh, or 22 per cent of the total.

Worse still is the fact that the agency’s forecasts have become more bearish on emissions than they were a year ago. The coal generation forecast for 2035 is 794TWh higher than it predicted a year ago, while that for gas is 366TWh higher. Its prediction for nuclear generation, a low-carbon power source whatever its other drawbacks may be, is now 225TWh less for 2035 than the IEA predicted last year – so nuclear will only make up 13 per cent of the total, rather than 14 per cent.

Renewables do not get away unscathed either. The IEA predicts a near-tenfold increase in generation from non-hydro renewables, from 650TWh in 2009 to 5,582TWh in 2035, from 2 per cent to 15 per cent of the total. However in the 2010 report, it predicted that non-hydro renewables would make up 16 per cent of the total generation in 2035.

Maria van der Hoeven, the IEA’s new executive director, said: “Growth, prosperity and rising population will inevitably push up energy needs over the coming decades. But we cannot continue to rely on insecure and environmentally unsustainable uses of energy.”

Delegates gathering at Durban in just under a fortnight’s time will have van der Hoeven’s words ringing in their ears. But there are a few crumbs of comfort – the first being that it remains within the world’s power to craft a different energy future from the one painted by the IEA, as long as action is taken quickly.

The IEA also shows a “450 Scenario” in its World Economic Outlook – one based on the possibility that world leaders will adopt radical new policies to restrain energy use, and promote renewables. Under this scenario, CO2 emissions in 2035 are 21.6Gt, some 25 per cent below their level in 2009.

A second is that the IEA may be being a little too pessimistic, even if its main scenario is correct in terms of power demand and policy development. A major research report by Bloomberg New Energy Finance, published to clients last week, makes its own forecasts for renewable energy deployment to 2030, based on the company’s estimates for changes in technology costs and analysis of policy developments.

This report sees overall power consumption rising to 34,000TWh by 2030, close to the IEA’s 33,417TWh. But Bloomberg New Energy Finance sees non-hydro renewable accounting for 19 per cent of the total by that year, some four percentage points higher than the agency’s projection.

The differences are more striking by technology. The IEA expects 430GW of solar capacity to be installed by 2030, up from 23GW installed by 2009, while Bloomberg New Energy Finance projects solar capacity by 2030 of 1,137GW, nearly three times as much – the key factor behind this surge being relentless reductions in the costs of PV technology.

For onshore and offshore wind, the two organisations’ forecasts are much closer – the IEA at 921GW in 2030 and Bloomberg New Energy Finance at 1,340GW. For biomass and waste-to-energy, the agency’s forecast for 2030 is 193GW while the Bloomberg prediction is 270GW. For geothermal, the IEA is actually the more optimistic, penciling in 33GW against Bloomberg’s 28GW.

There might be a third reason for challenging the IEA’s central case forecast – its underlying economic assumption. The “New Policies Scenario” is based on average world economic growth between 2011 and 2035 of 3.5 per cent a year. If that assumption was half a percentage point too bullish per year, then world GDP would be 8.8 per cent lower than predicted by 2035, and projected CO2 emissions also significantly lower. If emissions moved in strict proportion to GDP, they would be around 3.2Gt lower in that year. Conversely, of course, if world GDP growth was greater than 3.5 per cent a year to 2035, emissions could be even higher than in the IEA’s projection.

Reproduced with the permission of Bloomberg New Energy Finance. For further information, see www.newenergyfinance.com

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