Comparing the ET scenario with the same scenario in last year’s Energy Outlook, overall energy demand has been revised down only very slightly, less than 1% in 2040, but this masks larger revisions across different fuels, regions and sectors.
By fuel, the largest revision was an increase in renewable energy, up 9% (220 Mtoe) in 2040. This was offset by downward revisions to coal and nuclear – in part as renewables gained share relative to these fuels in the power sector – and to oil.
By region, the largest revision was to Chinese energy consumption, which is 7% (300 Mtoe) lower than in last year’s Outlook, reflecting the pace at which China is adjusting to a more sustainable pattern of economic growth.
Much of the revision in China’s energy demand is concentrated in industrial demand – which saw the biggest revision by sector – as China’s economy transitions away from energy-intensive industrial activities and improves the efficiency of remaining industries.
The revisions to the outlook for Chinese energy demand, and its implications for industrial demand and the growth of renewable energy, continue a series of revisions seen over the past five years – discussed below.
Comparing the ET scenario with the base case in the 2014 Energy Outlook helps to highlight some of the major developments and surprises over the past 5 years.
The most important factor driving revisions over the past 5 years has been the faster-than-anticipated pace of economic adjustment in China: rebalancing its economy away from energy-intensive industrial sectors and shifting to a cleaner, lower-carbon energy mix. These changes are most marked in the revisions to Chinese industrial and coal demand (-22% and -37% respectively in 2035).
The softer prospects for Chinese energy demand has led to a downgrading in overall energy demand (-4%), partially offset by upward revisions to other parts of developing Asia and Africa as some Chinese industrial production is relocated to lower-income countries.
The shift in China’s fuel mix directly accounts for roughly 80% of the downward revision to global coal consumption, and around a third of the upward revision to the outlook for renewables over the past 5 years. The overall impact on renewables is even greater since the quicker adoption of renewable energy in China helps to drive down the costs of wind and solar energy as they move down their learning curves more quickly, increasing the penetration of renewables in other parts of the world.
Comparing the Energy Outlook with long-run energy projections published by other organizations helps to highlight differences of view and areas of uncertainty. To aid comparison, the ET scenario is compared with external scenarios whose assumptions for policy, technology and social preferences are most similar.
There is a relatively narrow range of views about the growth of overall energy – varying between 0.9% and 1.3% p.a.. The ET scenario (1.2% p.a.) is just a touch above the sample average.
The growth of oil demand in the ET scenario (0.3% p.a.) is lower than any of the external forecasts, perhaps reflecting the extent of vehicle efficiency gains in the ET scenario. In contrast, the ET scenario points to slightly stronger growth of natural gas than the sample average.
The dispersion of views across the different projections – which is often an indicator of uncertainty – is greatest for renewables and nuclear energy. For renewables, this uncertainty stems from the difficulty of predicting future trends in policy support and technology. Much of the dispersion of views on nuclear may stem from different judgements about nuclear plant retirements. The ET scenario is towards the top of the range for prospects for renewables and towards the bottom for nuclear.
Although the range of views about the overall growth in primary energy is relatively narrow, there is greater dispersion concerning the prospects for individual countries and regions.
The ET scenario is relatively close to the sample average for energy demand growth in developed markets, such as North America, the EU and OECD Asia.
In contrast, for some fast developing regions, such as Africa and India, the ET scenario is materially above the range of other projections. This may partly stem from the assumption in the ET scenario that as China shifts towards a more services-based economy, much of the growth in industrial production over the Outlook will be located in lower-income countries and regions, including India, Other Asia and Africa.
A striking feature of the external projections is the extremely narrow range of views concerning the growth of Chinese energy demand, which varies from just 0.8-1.1% p.a.. This uniformity of views is particularly surprising given the changing energy needs of China as it adjusts to a more sustainable pattern of growth. This adjustment process has led to a series of downward revisions in the Outlook for Chinese energy demand in recent years.