World Energy Outlook 2023 | International Energy Agency - IEA

IEA Report Summary:

The latest report by the IEA addresses the current state of the global energy crisis and significant developments in the energy sector. The report acknowledges that some immediate pressures from the global energy crisis have eased, but uncertainties persist in energy markets, geopolitics, and the global economy.

While fossil fuel prices have decreased from their 2022 peaks, the markets remain tense and volatile. Ongoing conflicts, particularly in Ukraine, coupled with the risk of prolonged conflicts in the Middle East, contribute to geopolitical instability and energy supply risks. The report highlights the importance of addressing climate change, as the global average surface temperature has already risen to approximately 1.2°C above pre-industrial levels, leading to heatwaves and extreme weather events. Furthermore, greenhouse gas emissions have not yet peaked.

Photo: A Solar Energy Aluminium Construction System

Amid this complex backdrop, there is hope in the emergence of a new clean energy economy, led by technologies such as solar PV and electric vehicles. Investment in clean energy has risen by 40% since 2020, with a strong economic case for mature clean energy technologies. Energy security is a significant factor, particularly for countries dependent on fuel imports, and there is a desire to create clean energy jobs and implement industrial strategies. While not all clean technologies are thriving, there are notable examples of an accelerating pace of change. In 2020, one in 25 cars sold was electric; by 2023, this figure has increased to one in five. The report predicts the addition of more than 500 gigawatts of renewable generation capacity in 2023, setting a new record, and emphasizes the substantial investments in solar deployment.

The IEA suggests that while limiting global warming to 1.5°C is challenging, it remains an open possibility. The report presents various scenarios, including the Stated Policies Scenario (STEPS) and Announced Pledges Scenario (APS), which consider different policy settings and targets. Meeting the objectives of the Net Zero Emissions by 2050 (NZE) Scenario requires additional progress. The report also addresses uncertainties in global energy trends, such as structural changes in China's economy and the pace of solar PV deployment.

The report highlights that there is a growing momentum behind transitioning away from fossil fuels, with coal, oil, and natural gas expected to peak in demand before 2030. However, more needs to be done to reach global climate goals. While there may not be an end to fossil fuel investment, the rationale for increasing such investment is diminishing. The critical step is to scale up investment in all aspects of a clean energy system, and there is a need to address obstacles, including high capital costs, limited fiscal support, and challenging business environments, particularly in emerging and developing economies.

The report underscores the differences in energy demand across economies at various stages of development. Emerging and developing economies have strong drivers for energy service demand, and there is a need to find low-emissions ways to meet this demand sustainably. Clean electrification, improved efficiency, and the adoption of lower- and zero-carbon fuels are essential for achieving national energy and climate targets. These actions have broad implications for future pathways, including significant reductions in carbon emissions.

Photo: Solar Module Cleaning Machine

The report also discusses the importance of strengthening supply chain resilience for clean energy technologies and critical minerals. While efforts are in place to improve supply chain resilience, they will take time to yield results. Investment in exploration and production for critical minerals is increasing globally, but concentration levels remain high, emphasizing the need for innovation, mineral substitution, and recycling to ease market pressures.

The key actions needed to reduce energy-related CO2 emissions include expanding renewable energy capacity, accelerating energy efficiency improvements, electrification, and reducing methane emissions. Innovative financing mechanisms and international support are crucial for clean energy investments, particularly in emerging and developing economies.

Collaboration among countries is essential to address energy and climate challenges, especially in these tense times. Governments need to safeguard cooperation on energy and climate by embracing a rules-based system of international trade, spurring innovation, and facilitating technology transfer. Without international cooperation, the chance to limit global temperature rise to 1.5°C will diminish, and the outlook for energy security will be perilous without interconnected and well-functioning energy markets.