International Energy Agency release its World Energy Outlook Report 2022

The International Energy Agency (IAE) has released its annual Wold Energy Outlook Report 2022 at a time of the first global energy crisis.

According to the report, spot prices of natural gas have regularly exceeded USD250 per barrel of oil and this, coupled with high coal prices, have accounted for 90% of the upward pressure on electricity costs around the world.  With electrification being pursued globally, any upward pressure on electricity costs diverts money away from activities which will ultimately reduce carbon emissions and makes electrification more expensive and difficult.

The IEA views the energy crisis as "a reminder of the fragility and unsustainability of our current energy system".  It may be surprising to Europeans struggling with extremely high gas bills that the price of natural gas in certain parts of the US recently fell to 20 cents per MMBtu and then went negative (https://oilprice.com/Energy/Natural-Gas/Texas-Natural-Gas-Prices-Go-Negative.html), demonstrating the very unusual circumstances in energy markets around the world.

The report highlights the question of whether the energy crisis will catalyse further action or just serve as a setback to clean energy transition.  With countries like Japan providing major funding for nuclear, low-emission hydrogen and ammonia, and India aiming to reach 500 gigawatts of renewable energy by 2030, there is certainly a lot of positive moves being made.

Pleasingly, the report states that the "increase in renewable electricity generation is sufficiently fast to outpace growth in total electricity generation, driving down the contribution of fossil fuels for power." Even so, the shared of fossil fuels in the global energy supply is still anticipated to be 60% by 2050, and so fossil fuels are going to remain a key feature of the world's energy supply for the foreseeable future.  In addition, unless investment in non-fossil fuel energy is not accelerated, it will be necessary to invest more in oil and gas in order to avoid market volatility.

The IEA proposes a focus on affordable, secure transition based on resilient supply chains.  This echoes the call for more secure and resilient supply chains in the area of critical minerals, and also the call for secure hydrocarbon sources to stabilise and secure supply (https://warontherocks.com/2022/10/sustainable-aviation-fuel-investing-in-the-future/)  

It is clear that a great deal more investment is needed in the near future to secure the world's energy supplies and that there is no single solution or silver bullet that will solve all of the world's energy problems.  A mix of technologies is needed to reach the aim of Net Zero by 2050, including advancements in hydrogen, batteries and sustainable aviation fuels, and governments around the world need to act quickly to have any chance of reaching net zero by 2050.