These shifts come at a time when traditional distinctions between energy producers and consumers are being blurred and a new group of major developing countries, led by India, moves towards centre stage.
How these developments play out and interact is the story of this year’s Outlook.
Growing energy demand
In the New Policies Scenario, global energy needs rise more slowly than in the past but still expand by 30% between today and 2040. This is the equivalent of adding another China and India to today’s global demand.
A global economy growing at an average rate of 3.4% per year, a population that expands from 7.4 billion today to more than 9 billion in 2040, and a process of urbanisation that adds a city the size of Shanghai to the world’s urban population every four months are key forces that underpin our projections.
The largest contribution to demand growth – almost 30% – comes from India, whose share of global energy use rises to 11% by 2040 (still well below its 18% share in the anticipated global population).
Southeast Asia is another rising heavyweight in global energy, with demand growing at twice the pace of China. Overall, developing countries in Asia account for two-thirds of global energy growth, with the rest coming mainly from the Middle East, Africa and Latin America.
Renewables step up, coal strikes out
Compared with the past twenty-five years, the way that the world meets its growing energy needs changes dramatically in the New Policies Scenario, with the lead now taken by natural gas, by the rapid rise of renewables and by energy efficiency.
Improvements in efficiency play a huge role in taking the strain off the supply side: without them, the projected rise in final energy use would more than double. Renewable sources of energy meet 40% of the increase in primary demand and their explosive growth in the power sector marks the end of the boom years for coal.
Since 2000, coal-fired power generation capacity has grown by nearly 900 gigawatts (GW), but net additions from today to 2040 are only 400 GW and many of these are plants already under construction. In India, the share of coal in the power mix drops from three-quarters in 2016 to less than half in 2040. In the absence of large-scale carbon capture and storage, global coal consumption flatlines.
Oil demand continues to grow to 2040, albeit at a steadily decreasing pace. Natural gas use rises by 45% to 2040; with more limited room to expand in the power sector, industrial demand becomes the largest area for growth. The outlook for nuclear power has dimmed since last year’s Outlook, but China continues to lead a gradual rise in output, overtaking the United States by 2030 to become the largest producer of nuclear-based electricity.
Bright future for renewables
Renewables capture two-thirds of global investment in power plants to 2040 as they become, for many countries, the least-cost source of new generation.
Rapid deployment of solar photovoltaics (PV), led by China and India, helps solar become the largest source of low-carbon capacity by 2040, by which time the share of all renewables in total power generation reaches 40%.
In the European Union, renewables account for 80% of new capacity and wind power becomes the leading source of electricity soon after 2030, due to strong growth both onshore and offshore. Policies continue to support renewable electricity worldwide, increasingly through competitive auctions rather than feed-in tariffs, and the transformation of the power sector is amplified by millions of households, communities and businesses investing directly in distributed solar PV.
Growth in renewables is not confined to the power sector. The direct use of renewables to provide heat and mobility worldwide also doubles, albeit from a low base. In Brazil, the share of direct and indirect renewable use in final energy consumption rises from 39% today to 45% in 2040, compared with a global progression from 9% to 16% over the same period.