Middle East crisis may hasten shift to clean energy says IEA

Valeria Mongelli/Hans Lucas via Reuters Connect

• War raises questions about oil security
• Gas insecurity followed Ukraine invasion
• Renewables have grown at pace

The Israel-Gaza geopolitical crisis poses a new risk to oil markets and may accelerate the shift towards clean energy, according to analysts at the International Energy Agency.

“With the immediate geopolitical risks, it will be difficult to say that oil and gas represent safe and secure choices for consumers, for countries worldwide,” said Fatih Birol, IEA executive director.

The actual crisis comes “on top of the insecurity that we had in the natural gas markets about two years ago after the invasion of Ukraine by Russia, at that time the number one natural gas exporter of the world,” added Birol.

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Speaking at the presentation for the IEA’s latest annual World Energy Outlook report, Birol pointed out that energy security issues come at a time when climate change, driven by fossil fuel use, is becoming more and more pronounced. 

He added that clean and cost-effective energy technologies, which were not available even 10 years ago, could now replace fossil fuels: “We already have available solar, wind, electric cars, nuclear power, energy efficiency and many important clean energy technologies. We need to expand them strongly.

“The transition to clean energy is happening worldwide and is unstoppable. It’s not a question of ‘if’, it’s just a matter of ‘how soon’ – and the sooner, the better for all of us,” said Birol.

A growing share

Renewables’ share is expected to near 50 percent in the global electricity mix by 2030, up from around 30 percent today.

By the same year, the IEA anticipates a rapid rollout of electric cars.

Birol noted that two years ago only one out of 25 vehicles sold worldwide was electric: “In 2030, almost every second car sold worldwide will be electric.”

Investments in renewables will grow significantly, he believed, giving an example of offshore wind, where the investments will be three times higher than in new gas and coal-fired power plants by the end of the decade.

In the IEA’s stated policy scenario, the world is on track to spend well in excess of $2 trillion on clean energy each year by 2030.

Solar is an industry with hundreds of billions of dollars invested in capital. Globally, its size is already equivalent to nearly a quarter of the global car market, and is set to double, according to the IEA. By 2030, photovoltaic solar will generate more electricity than the entire US power system does currently.

Birol pointed out that the world will still need oil and gas investments.

“Advanced economies will use less fossil fuels, but emerging economies will continue to see those uses rising,” said Laura Cozzi, IEA’s chief energy modeller, adding that while India emerges as the largest clean energy growth centre, the Middle East will drive natural gas demand growth.

According to IEA, new liquefied natural gas projects will add more than 250 billion cubic metres per year of new capacity by 2030, mainly from Qatar and the US. That is nearly half of the current global LNG supply. 

Although world fossil fuel demand is set to peak by the end of the decade, on the back of China’s economic slowdown and shifts towards cleaner energy, the IEA projects that fossil fuel demand will remain “far too high”.

Their share in global energy supply has been stuck for decades at around 80 percent. It will decline to 73 percent by 2030.

Climate action

Meeting the Paris Agreement goal of limiting the rise of global temperatures to 1.5C will be tough without additional climate policies.

The IEA expects emissions to peak in 2025, but temperatures to continue to rise by 2.4C this century.

“Even if emissions peak in 2025 and start declining, we will break record temperatures year after year,” said Cozzi. 

These risks are worsening climate impacts after a year of record-breaking heat and undermining the security of the energy system, which was built for a cooler world with less extreme weather events.

“The only way to stop temperature from rising is to get emissions to net zero,” said Cozzi.

Countries will meet later this year at the upcoming United Nations climate conference, Cop28 in Dubai, and the IEA called for concerted action.

“Governments, companies, and investors need to get behind clean energy transitions rather than hindering them.”

In its report, the IEA proposed a global strategy for getting the world on track by 2030, which could also be used as a guidance for a successful Cop28.

The agency expects governments to agree on trebling the renewable capacity between now and 2030, doubling energy efficiency improvement, and reducing methane emissions by 75 percent. It also expects financial institutions to agree on financial mechanisms to support clean energy financing in developing countries.

“We would like to see governments in Dubai take measures for an orderly decline of fossil fuel use, including no new unabated coal plants to be built,” concluded Birol.