IEA sees fossil fuel demand peaking by 2030
Against a 40% increase in clean energy investments since 2020, the International Energy Agency (IEA), in its World Energy Outlook 2023 (WEO2023) released October 24, now says demand for all fossil fuels – oil, natural gas and coal – will peak by 2030.
The IEA’s Stated Policies Scenario (STEPS), considered a baseline for the energy transition, suggests that the share of fossil fuels in the global energy mix – stubbornly “stuck” at about 80% for decades – will start to edge downward and reach 73% by 2030.
“A legacy of the global energy crisis may be to usher in the beginning of the end of the fossil fuel era: the momentum behind clean energy transitions is now sufficient for global demand for coal, oil and natural gas to all reach a high point before 2030 in the STEPS,” the IEA says in an executive summary of WEO2023.
Solar PV expansion and continued adoption of electric vehicles, the IEA says, is driving this latest stage of the transition: in 2020, one in 25 cars sold globally was electric; now the EV sales are one in five.
At the same time, more than 500 GW of renewable generation capacity is set to be added this year, a new record, while more than US$1bn/day is being spent on solar deployment, the IEA says.
While the IEA says the move to reduced fossil fuel use was an “important shift”, it cautioned that if demand for these fuels remains high – as has been the case for coal in recent years and as is the case for oil and gas in STEPS – the downward shift “is far from enough to reach global climate goals.”
Natural gas demand, which dipped to about 4,000bn m3 in 2020, is projected to remain at around 4,300bn m3 until 2030 before declining slowly to about 4,100bn m3 by 2050, according to chart data presented in the executive summary. Oil demand, which dropped to 90mn barrels/day in 2020, will reach 100mn barrels/day again in 2024 and hover at or just above that peak until 2030, when it will begin a slow and uneven decline to under 100mn barrels/day by 2050.
The IEA says the pace towards cleaner energy is being driven by supportive policies such as the Inflation Reduction Act in the US which it projects will lead to 50% of new US car registrations being electric in 2030 under STEPS, up from a 12% projection in WEO2021.
But projections for reduced fossil fuel demand, the IEA says, doesn’t mean an end to fossil fuel investments, only that the rationale for any increase in spending is diminished.
“Until this year, meeting projected demand in the STEPS implied an increase in oil and gas investment over the course of this decade, but a stronger clean energy outlook and lower projected fossil fuel demand means this is no longer the case,” the IEA says.