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How we must build the electric future

The future, under construction. Photo by International Information Program via Flickr:

By Executive Director Maria van der Hoeven

28 April 2014

This column appears in the latest issue of IEA Energy: The Journal of the International Energy Agency:

Electricity is a driving force in the changing economic landscape. A “great electrification” is taking place as growth in emerging economies and changing technologies puts air conditioners, computers and much more at the disposal of billions. Such electronics offer access to a global economy and political space increasingly dominated or simply facilitated by information technology. In terms of mobility, electric vehicles ranging from luxury Teslas in California to ultra-cheap electric scooters in Kunming are becoming commonplace – whether for climate, pollution or economic reasons.

As a result of all this, electricity demand is expected to grow more than demand for any other final form of energy. The principal scenario of the IEA World Energy Outlook sees world electricity demand increasing by more than two-thirds from 2011 to 2035. Most of this incremental demand will come from non-OECD countries as emerging economies develop further. While power demand and poverty alleviation can form a virtuous cycle, this shift carries a high price tag. The global power sector will need USD 17 trillion in investment to meet this rising demand as well as replace ageing infrastructure in OECD member countries.

Tectonic shifts throughout the electricity system

It is not only how much electricity is consumed and who is consuming it that is changing, but also how it is generated. Coal’s share will fall from 41% to 33% in 2035, but it will remain the largest generation source. With gas holding at 22%, fossil fuels will still account for more than half of all generation – bad news for a low-carbon transition. Renewable energy will increase to 31% from 20%, but integrating high levels of variable sources such as wind and solar will be difficult in some markets. The greatest potential for renewable power will be in precisely those growing markets where demand is highest and integration of renewables most cost-competitive: the shift to cleaner power generation may owe more to economics than climate policy.

Against this dynamic backdrop, policy makers face new challenges in assuring reliable, affordable electricity supplies for their populations and their economies. At the IEA, we have taken a lead in recognising the potential risks and assessing potential responses. In 2011, energy ministers tasked the Agency with developing an Electricity Security Action Plan. This work is continuing but has already led to critical reports showing the best ways forward for aspects of the system ranging from the grid to regulation. One of our most recent books, The Power of Transformation: Wind, Sun and the Economics of Flexible Power Systems, is a critical analysis of how variable renewable energy can be effectively and economically integrated into both new and existing power systems. And the 2014 edition of our flagship technology report, Energy Technology Perspectives, focuses on electricity, gauging how greater electrification can unlock opportunities to enhance the energy system’s efficiency, security and reliability, reduce the cost of required infrastructure and further decarbonise overall energy supply.

The need for a systematic approach to the transformation

One thing our research and analysis make clear is that a more electrified future requires a change of perspective. As we enter the energy era where fossil fuels increasingly take a backseat to other sources of electricity, we must rethink how we incorporate new and developing elements. From renewables generation to transport based on electric motors, we have to drop the classical approach of adding new technology to an existing system. To achieve a cost-effective improvement in energy security and decarbonisation, we must instead first consider all available options and then transform the system as a whole. And the IEA works to determine and reveal just how to do that. With the analysis and recommendations you will find in the pages ahead, plus links to the full reports, we offer readers of IEA Energy and the rest of the world a preview not just of the benefits of a more electrified world but also the best way to build it.

This column by IEA Executive Director Maria van der Hoeven appears in the new issue of IEA Energy: The Journal of the International Energy Agency. The IEA produces IEA Energy, but analysis and views contained in the journal are those of individual IEA analysts and not necessarily those of the IEA Secretariat or IEA member countries, and are not to be construed as advice on any specific issue or situation. Click here to read the new and earlier issues of IEA Energy, and click here to send a request a free subscription.



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