4 Energy supply
Status of the sector and development until 2030
Global energy demand continues to grow, but with regional differences. The annual average growth of global primary energy consumption was 1.4 % per year in the 1990–2004 period. This was lower than in the previous two decades due to the economic transition in Eastern Europe, the Caucasus and Central Asia, but energy consumption in that region is now moving upwards again (Figure TS.12) (high agreement, much evidence) [4.2.1].
Rapid growth in energy consumption per capita is occurring in many developing countries. Africa is the region with the lowest per capita consumption. Increasing prices of oil and gas compromise energy access, equity and sustainable development of the poorest countries and interfere with reaching poverty-reduction targets that, in turn, imply improved access to electricity, modern cooking and heating fuels and transportation (high agreement, much evidence) [4.2.4].
Total fossil fuel consumption has increased steadily during the past three decades. Consumption of nuclear energy has continued to grow, though at a slower rate than in the 1980s. Large hydro and geothermal energy are relatively static. Between 1970 and 2004, the share of fossil fuels dropped from 86% to 81%. Wind and solar are growing most rapidly, but from a very low base (Figure TS.13) (high agreement, much evidence) [4.2].
Most business-as-usual (BAU) scenarios point to continued growth of world population (although at lower rates than predicted decades ago) and GDP, leading to a significant growth in energy demand. High energy-demand growth rates in Asia (3.2% per year 1990–2004) are projected to continue and to be met mainly by fossil fuels (high agreement, much evidence) [4.2].
Absolute fossil fuel scarcity at the global level is not a significant factor in considering climate change mitigation. Conventional oil production will eventually peak, but it is uncertain exactly when and what the repercussions will be. The energy in conventional natural gas is more abundant than in conventional oil but, like oil, is not distributed evenly around the globe. In the future, lack of security of oil and gas supplies for consuming nations may drive a shift to coal, nuclear power and/or renewable energy. There is also a trend towards more efficient and convenient energy carriers (electricity, and liquid and gaseous fuels) instead of solids (high agreement, much evidence) [4.3.1].
In all regions of the world, emphasis on security of supply has grown since the Third Assessment Report (TAR). This is coupled with reduced investments in infrastructure, increased global demand, political instability in key areas and the threats of conflict, terrorism and extreme weather events. New energy infrastructure investments in developing countries and upgrades of capacity in developed countries opens a window of opportunity for exploiting the co-benefits of choices in the energy mix in order to lower GHG emissions from what they otherwise would be (high agreement, much evidence) [4.2.4; 4.1].
The conundrum for many governments has become how best to meet the ever growing demand for reliable energy services while limiting the economic costs to their constituents, ensuring energy security, reducing dependence on imported energy sources and minimizing emissions of the associated GHGs and other pollutants. Selection of energy-supply systems for each region of the world will depend on their development, existing infrastructure and the local comparative costs of the available energy resources (high agreement, much evidence) [4.1].
If fossil fuel prices remain high, demand may decrease temporarily until other hydrocarbon reserves in the form of oil sands, oil shales, coal-to-liquids, gas-to-liquids etc. become commercially viable. Should this happen, emissions will increase further as the carbon intensity increases, unless carbon dioxide capture and storage (CCS) is applied. Due to increased energy security concerns and recent increases in gas prices, there is growing interest in new, more efficient, coal-based power plants. A critical issue for future GHG emissions is how quickly new coal plants are going to be equipped with CCS technology, which will increase the costs of electricity. Whether building ‘capture ready’ plants is more cost-effective than retrofitting plants or building a new plant integrated with CCS depends on economic and technical assumptions. Continuing high fossil fuel prices may also trigger more nuclear and/or renewable energy, although price volatility will be a disincentive for investors. Concerns about safety, weapons proliferation and waste remain as constraints for nuclear power. Hydrogen may also eventually contribute as an energy carrier with low carbon emissions, dependent on the source of the hydrogen and the successful uptake of CCS for hydrogen production from coal or gas. Renewable energy must either be used in a distributed manner or will need to be concentrated to meet the intensive energy demands of cities and industries, because, unlike fossil fuel sources, the sources of renewable energy are widely distributed with low energy returns per exploited area (medium agreement, medium evidence) [4.3].
If energy demand continues to grow along the current trajectory, an improved infrastructure and conversion system will, by 2030, require a total cumulative investment of over US$2005 20 trillion (20 x 1012). For comparison, the total capital investment by the global energy industry is currently around 300 billion US$ per year (300 x 109) (medium agreement, medium evidence) [4.1].