6.3 Global Energy Demand Forecasts
As discussed earlier, global energy demand is heavily dependent on demographic dynamics and changes in incomes. These factors, along with the exhaustible na- ture of fossil fuel, will drive a wedge between energy production and consumption.
World primary energy consumption is projected to grow by 1.6 % per annum during the period 2010–2030, adding 39 % to global consumption by 2030. Even so, the growth rate of energy consumption has decelerated over the past couple of decades and will continue to decline in the future. For instance, during the past decade glob- al energy consumption grew by 2.5 % per annum. However, it is expected to grow by 2 % per annum over the next decade and by 1.3 % per annum between 2020 and 2030.2 As a result, starting from 2025, total global energy production will lag behind global energy consumption by around 15 mtoe, and this figure will nearly double by the year 2030 (Fig. 6.4).
The mismatch between energy production and consumption will be largely caused by oil, which has already past its peak, but ongoing geopolitics will have a disruptive effect on supply. As Fig. 6.5 shows, global demand for oil had for long exceeded production, but the excess demand had amplified over the years and is projected to reach 208 mtoe by 2030.
Similarly, coal will also experience acute shortages despite the fact that there will also be a gradual shift away from it in favour of gas and non-fossil fuel as Fig. 6.6 suggests.
In essence, the emerging and developing economies (non-OECD countries) will be the main drivers of growth of energy consumption as the fuel mix gradually
2 According to BP’s 2012 World Energy Outlook 2030 based on a background paper prepared by Ruhl et al. (2012).
y = 137.71x - 483.04 R² = 0.6863
0 100 200 300 400 500 600 700 800 900 1000
4 4.5 5 5.5 6 6.5 7 7.5 8 8.5
Oil Consumpon (Mtoe)
Real GDP Growth Rate(%)
Fig. 6.3 Real gross domestic product (GDP) growth rate vs domestic oil consumption in Saudi Arabia. (Source: IMF (2012); BP (2012))
166 6 The Way Forward
shifts away from oil and coal in favour of gas and non-fossil fuel (Fig. 6.7). By 2030, it is projected that the energy consumption of the non-OECD countries will be nearly 70 % above the 2010 level, with the growth averaging 2.7 % annually (or 1.6 % per annum on a per capita basis). In terms of absolute consumption levels, the emerging economies outside the Organisation for Economic Cooperation and
-100 -50 0 50 100 150 200 250
1990 1995 2000 2005 2010 2015 2020 2025 2030
Gas Coal
Fig. 6.6 Excess demand for gas and coal (mtoe). (Source: BP (2012)) 23
13
40
-2
-114 -77
-116 -165
-208 -250 -200 -150 -100 -50 0 50 100
0 1000 2000 3000 4000 5000
1990 1995 2000 2005 2010 2015 2020 2025 2030
Oil Producon Oil Consumpon Balance (RHS) Fig. 6.5 Global oil production and consumption (mtoe). (Source: BP (2012))
-50 0 50 100 150 200 250
0 2000 4000 6000 8000 10000 12000 14000 16000 18000
1990 1995 2000 2005 2010 2015 2020 2025 2030
Energy Producon Energy Consumpon Balance (RHS)
Fig. 6.4 Global energy production and consumption (mtoe). (Source: Ruhl et al. (2012); BP (2012))
167 6.3 Global Energy Demand Forecasts
Development (OECD) area will account for 65 % of world energy consumption by the year 2030, compared with 54 % in 2010 (EIA, 2012; BP, 2012).3
In contrast, the energy consumption of the OECD countries (developed nations) in 2030 is projected to be only 4 % higher than in 2010, with the growth averag- ing 0.2 % per annum in 2030. OECD energy consumption per capita, however, is expected to continue its declining trend, at −0.2 % per annum during the period 2010–2030.4
It is noteworthy that despite the gradual shifts in energy mix over the coming de- cades, fossil fuel will still remain the most dominant type of energy. In particular, oil and coal will account for the bulk of energy consumption although the demand for non-conventional fuel will continue to increase (Fig. 6.8). Within the fossil fuel, the largest single fuel contribution to the projected growth in global energy will come from gas, which is expected to account for 31 % of the forecast growth in global energy. Overall, gas is projected to grow by 2.1 % per annum from 2010 to 2030, whilst oil will grow at the slowest pace of 0.7 % per annum.5
However, non-fossil fuels will experience the fastest growth due to the deter- mined efforts of the developed countries to substitute oil with alternative sources
3 There are a number of authoritative bodies that engage in periodic updates of global energy out- look, including the Paris-based International Energy Agency (IEA), the US Energy Information Administration (EIA), the Vienna-based Organization for Petroleum Exporting Countries (OPEC) and the UK-based British Petroleum (BP). Although estimates provided by these agencies slightly differ from time to time due to differences in assumptions used in forecasting models, the BP’s 2030 world energy outlook has benefitted from a highly acclaimed background paper whose model does not simply rely on trend extrapolation and is not constrained by any given policy scenario (Ruhl et al., 2012).
4 Calculated from information in Fig. 6.7.
5 Derived from data in Fig. 6.8.
4,680 4,610 5,526 5,393 5,757 5,450 6,141 5,694 6,569 5,756 3,656 3,521 4,042 3,916 6,138 6,358
8,459 8,832
10,435 10,979
0 2000 4000 6000 8000 10000 12000 14000 16000 18000
EIA BP EIA BP EIA BP EIA BP EIA BP
1990 2000 2010 2020 2030
Mtoe
OECD Non-OECD
Fig. 6.7 Total global energy consumption by region. (Source: EIA (2012); BP (2012))
168 6 The Way Forward
of energy. In particular, renewable energy will be the fastest growing fuel, which is expected to increase by an average annual growth rate of 8.2 % over the period 2010–2030 (Fig. 6.9).
It is projected that non-fossil fuel as a whole (renewable energy, nuclear and hydro) will account for 34 % of the global growth in energy consumption, and, for the first time, this aggregate non-fossil contribution is larger than the contribution of any single fossil fuel. This is not surprising because fuel substitution is the over- arching objective in the developed countries as they gradually explore alternative sources of energy to reduce dependence on fossil fuel from the oil-producing coun- tries, especially from the Middle East. In particular, renewable energy will substi- tute oil in transport and coal in power generation in the OECD countries, while gas is likely to gain at the expense of coal in power generation. These shifts are driven by a combination of the relatively high fuel prices, technological innovation and policy interventions.
In contrast, the emerging and developing countries will continue to see all types of fuels expanding. The economic development programmes of these countries will continue to create an appetite for energy that can only be met by expanding all fuels.
In fact, for many developing countries, securing affordable energy, regardless of its source, to underpin economic development is the imperative goal.
-5 0 5 10 15 20
2000 2005 2010 2015 2020 2025 2030
%
Liquids Natural Gas Coal
Nuclear Energy Hydroelectricity Renewables
Fig. 6.9 Average annual growth rates of energy consumption by type. (Source: Ruhl et al. (2012)) 0
1000 2000 3000 4000 5000
2010 2015 2020 2025 2030
mtoe
Liquids Natural Gas Coal Nuclear Energy Hydroelectricity Renewables Fig. 6.8 Global energy consumption by type of fuel. (Source: BP (2012))
169 6.3 Global Energy Demand Forecasts
6.3.1 Sectoral Assessment
The growth of energy consumption by sector is dominated by power generation, transportation and industry and will continue to be dominated by these sectors for the coming decades. Energy used to generate electricity remains the fastest growing sector, accounting for 57 % of the projected growth in primary energy consumption in 2030 compared to 54 % for 1990–2010.6 Indeed, the power sector is also the main driver of diversification of the fuel mix, with non-fossil fuels, led by renew- able energy, accounting for more than half of the growth. It is projected that world electricity demand is to grow more rapidly, at around 2.6 % per annum, than total energy over the next 20 years. Thus, efficiency gains in power generation mean that the fuel inputs are likely to grow less rapidly than power output, averaging 2.1 % per annum over the period 2010–2030.7 This means that even under the assumption of zero growth in oil demand globally, the Kingdom of Saudi Arabia still has to work hard to develop alternative energy resources internally to lessen oil consumption for local usage in electricity, water and transportation.
Coal is likely to remain the largest contributor to the growth of power fuels, ac- counting for 39 %, but non-fossil fuels are rapidly catching up. It is expected that, in aggregate, non-fossils such as nuclear, hydro and other renewables will contribute as much as coal. It is estimated that, by 2030, renewables will supply 11 % of the world electricity. The European Union (EU) leads the way, with 26 % of power coming from renewables by 2030, followed by the rest of the OECD with a lag, and then the developing countries increasing the share of renewables in power con- sumption. Thus, the growing role of non-fossil fuels becomes even clearer in the following decade to 2030, with 75 % of the growth coming from these sources and very little from coal. Thus, the rate at which renewables penetrate global energy markets bears remarkable similarity to the emergence of nuclear power in the 1970s and 1980s.
Industry leads the growth of final energy consumption, particularly in rapidly developing economies, accounting for 60 % of the projected growth of global final energy demand in 2030. The non-OECD nations are expected to account for around 6.5 mbpd of oil demand growth in industry, largely for petrochemicals.8
The transport sector is expected to exhibit the slowest growth in demand for energy, with the demand from the OECD bloc projected to decline due to energy diversification measures. Such measures are largely driven by policy which is fa- cilitated by technological progress and innovation, and energy efficiency develop- ments. In essence, biofuels are projected to account for 23 % of transport energy demand growth, while gas and electricity will account for 13 and 2 %, respectively, of the transport energy demand growth.9 However, environmentalists are sceptical
6 Based on data obtained from both the EIA (2012) and BP (2012).
7 Ibid.
8 Derived from data contained in BP’s 2012 World Energy Outlook for 2030.
9 Ibid.
170 6 The Way Forward about biofuels due to its dependence on burning food for energy, and, more impor- tantly, scarcity of food is a major concern for the whole globe.
Therefore, much of the growth in liquid (especially oil) demand in the transport sector over the next two decades is expected to come from non-OECD countries which are projected to account for 14 mbpd. In the case of the OECD countries, declines in oil consumption will be initially concentrated outside the transport sec- tor where gas and renewables could easily displace oil. Beyond 2015, however, improved engine efficiency is likely to play a key role in the fall in demand for oil in the transport sector of OECD countries. Renewables face a tougher challenge penetrating the transport fuel market, as only 7 % of world transport fuels will come from renewable sources by 2030 (BP 2012).