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Coal demand to remain flat to 2022, resulting in a decade of stagnation

MD Staff

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Global demand for coal should remain nearly flat between 2017 and 2022, resulting in a decade of stagnation for coal consumption, according to the International Energy Agency’s annual coal market report.

Global coal consumption fell 1.9% to 5,357 million tonnes of coal equivalent (Mtce) last year, the second year of decline, because of lower gas prices, a surge in renewables and improvements in energy efficiency, according to Coal 2017. Coal demand is down 4.2% over the last two years, nearly matching the two-year decline in the early 1990s, which remains the biggest recorded drop since the IEA started compiling statistics more than 40 years ago.

By 2022, global coal demand is expected to reach 5,530 Mtce, the same as the average of the last five-year period, and meaning that coal use will have had a decade-long period of stagnation.

The share of coal in the global energy mix is forecast to decline to 26% in 2022, from 27% in 2016 because of sluggish demand compared with other fuels. Although coal-fired power generation increases by 1.2% per year through 2016-22, its share of the power mix falls to just below 36% by 2022, which would be the lowest level since IEA statistics began.

“The energy system is evolving at a rapid pace all around us, with a more diversifying fuel mix, and the cost of technologies going down,” said Keisuke Sadamori, the International Energy Agency’s director for energy markets and security. “But while everything else is changing, global coal demand remains the same.”

Coal demand dropped in China, the United States and the European Union in 2016, but increased in India and across many parts of Southeast Asia, and shows no signs of slowing down. For instance, despite the rapid growth in renewables, Indian coal-fired power generation is expected to grow almost 4% a year through 2022.

While India will be increasingly important to global coal markets, China will remain the key driver. The potential for coal demand growth in China is limited, but the country’s supply-side reforms will be critical factors for coal prices in the coming years. Meanwhile, the European Union, accounting today for just 6% of global demand, is set to become an increasingly marginal player.

The IEA highlights that urgent action is needed to support Carbon Capture, Utilisation and Storage (CCUS) technologies, which made important strides last year but still lags far behind other low-carbon technologies. There is a broad agreement among energy leaders from both government and the industry that urgent action is needed to support CCUS, without which the climate challenge will be much more difficult to tackle.

This is why the IEA is working to give a new momentum to this essential technology, and is committed to pushing the global dialogue forward. In November 2017, it organised a global CCUS summit in Paris that was co-chaired by US Secretary of Energy Rick Perry and IEA Executive Director Dr Fatih Birol, bringing together more than 20 countries and CEOs of the world’s top energy companies to focus on this technology.

“This serves as a critical reminder why technologies like CCUS are so important, and why governments and companies need to step up their policy support and investments in that sector in order to meet global climate goals,” said Mr. Sadamori. “Indeed, without CCUS, coal use will be seriously constrained in the future.”

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Indonesia’s ‘Superheroines’ Empowered with Renewables

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Ibu Bekti, a Wonder Woman from Labuan Bajo, Indonesia. Photo credit: Kopernik

About a third of Indonesians, roughly 80 million people, live without electricity and many more with only unreliable access. In the country’s eastern Solor archipelago, a programme is looking to tackle this issue with an innovative approach, by empowering women with renewable solutions for rural and remote communities.

“In rural Indonesia, energy poverty affects men and women differently and there is a clear and important intersection between energy access and gender equality,” says Sergina Loncle, the Communications Manager at Kopernik, a non-profit organisation headquartered in Indonesia. “Although women have been traditionally restricted from access to information, assets and resources, in many cases they generally are the decision makers on energy issues at the household level, which makes the inter-linkages between energy and gender more pronounced.”

Kopernik believes that empowering women to become micro-social-entrepreneurs will help boost incomes and make clean energy technologies available in off-grid communities. To support this, the organisation launched Wonder Women, or in Indonesian, Ibu Inspirasi, which literally means inspirational women and mothers, says Loncle. The Wonder Women programme gives Indonesian women solar technologies on consignment and shares a margin on every sale — boosting the  ability of women to support their families, helping to reduce the problems associated with inadequate and dangerous energy technologies, and improving the quality of life within the community.

A Kopernik survey suggests the programme is working. Reports show that after 12 months 26% of ‘Wonder Women’ know how to run a business and 21% become more empowered within their families — taking on a greater role in household decision making. Almost half of the survey’s respondents perceived an improvement in their self-status and 19% have increased their empowerment within the community.

Women in the programme are inspirational figures in their villages as they help make clean energy technology available to friends, relatives and neighbours, explains Loncle. Wonder women often become a pillar of support and inspiration for other women in the village, encouraging them to join the programme or support other business ventures.

“I am grateful because people in my community now use affordable, clean energy technologies,” says Maria Nogo, a Wonder Woman in Larantuka, East Flores who has been a part of the programme since March 2015. “By becoming a Wonder Woman, besides saving money, I also have opportunities to introduce these technologies to the people in my community, so I can support them to have a better life.”

A better life with renewables

In its market analysis for Southeast Asia, IRENA supports the Wonder Women programme and advocates for the host of socioeconomic benefits renewables bring to Indonesia and the countries in its region. IRENA shows that renewable energy solutions can reduce fuel expenditures — which drains the limited resources of the poor — and decentralised renewable energy access can substantially reduce poverty by empowering individuals and communities to gain control over their energy supply and reduce their energy spending.

“Over 206,000 Indonesians are directly employed in the renewable energy sector, but there is growing body of evidence that renewable energy solutions support income generation and job creation beyond the energy supply chain,” says Rabia Ferroukhi, Head of IRENA’s Policy Unit and Deputy Director of its Knowledge, Policy and Finance Centre. She says renewables enable technologies that contribute to improved health, access to education, clean water and good nutrition, and can increase economic productivity.

To better assess the economic benefits of decentralised renewable energy in rural areas, poor urban communities, and remote islands of South East Asia, IRENA advises policy makers to look beyond the consumptive uses of energy (e.g. household lighting, cooking) and to also consider its productive uses.

“In remote and rural areas, like those found in Indonesia, renewables are not only the most cost-effective way to provide energy access, they’re a reliable way to support social services and economic development, and that’s a strong reason for governments in the region to support programmes like Wonder Women,” Ferroukhi adds.

IRENA

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Economic value of energy efficiency can drive reductions in global CO2 emissions

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Ambitious energy efficiency policies can keep global energy demand and energy-related carbon-dioxide (CO₂) emissions steady until 2050, according to a new report by the International Energy Agency. Perspectives for the Energy Transition: The Role of Energy Efficiency shows that despite a near-tripling of the world economy and a global population that increases by nearly 2.3 billion, end-use energy efficiency alone can deliver 35% of the cumulative CO₂ savings through 2050 required to meet global climate goals.

Global energy demand grew by 2.1% in 2017 according to IEA estimates, more than twice the growth rate in 2016. At the same time, global energy-related CO₂ emissions increased for the first time in three years, as improvements in global energy efficiency slowed down dramatically to 1.7%.

“Among all energy trends in 2017, the one that worries me the most is the slowdown in energy efficiency improvements,” said Dr Fatih Birol, Executive Director of the International Energy Agency. “The rate of improvement that we saw is around half of the rate that is required to meet clean energy transition goals.”

IEA analysis in Perspectives for the Energy Transition: The Role of Energy Efficiency demonstrates that on top of a wide range of benefits including cleaner air, energy security, productivity and trade balance improvements, there is a compelling economic case for energy efficiency. But, without further policy efforts, these benefits are unlikely to be realised as less than a third of global final energy demand is covered by efficiency standards today.

Realising the full potential of energy efficiency will require a step-change in investments on the demand side of the energy equation, rising to USD 1.7 trillion per year through 2050, the majority of which is for energy efficiency and the electrification of transport. On the supply side, the focus is on reallocating investments towards renewables and other low-carbon technologies such as nuclear and carbon capture, utilisation and storage.

While the scale of the demand-side investment required may appear challenging, fuel cost savings over the lifetime of most technologies are larger than the investment required, which implies a strong economic benefit that arises from energy efficiency investment. Although there are still many low-hanging fruits that can pay back their initial investment quickly, payback periods are often too long to attract investment from consumers and businesses. Effective policy frameworks are needed to overcome economic and non-economic barriers to energy efficiency and to incentivise adoption of more efficient technologies.

Perspectives for the Energy Transition: The Role of Energy Efficiency demonstrates a compelling economic case for energy efficiency as being essential to make the energy transition affordable, faster and more beneficial to all. The IEA recommends that governments adopt a strategic approach to energy efficiency, supported by well-designed efficiency policies and a strong focus on implementation and enforcement.

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Report: Powerful New Policy Options to Scale Up Renewables

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A new report by the International Renewable Energy Agency (IRENA), the International Energy Agency (IEA), and the Renewable Energy Policy Network for the 21st Century (REN21), Renewable Energy Policies in a Time of Transition, is an unprecedented collaboration that sheds new light on the policy barriers to increased deployment of renewables and provides a range of options for policymakers to scale-up their ambitions.

Since 2012, renewable energy has accounted for more than half of capacity additions in the global power sector. In 2017 alone a record-breaking 167 GW of renewables capacity was added worldwide. 146 million people are now served by off-grid renewable power, and many small island developing states are advancing rapidly towards targets of 100% renewables.

One of the main rationales behind the call for a higher share of renewables in the energy mix is the urgent threat posed by climate change. Of the 194 parties to the United Nations Framework Convention on Climate Change 145 referred to renewable energy in their nationally determined contributions (NDCs), and 109 included quantified renewable energy targets. Air pollution is also a pressing issue, with an estimated 7.3 million premature deaths per year attributable to household and outdoor air pollution. Energy security is another influencing factor, with small island states particularly affected by security issues and resilience in the face of natural disasters. Finally, countries looking to expand energy access in rural areas are increasingly turning to renewables as the most cost-effective, cleanest and most secure option.

But the pace of the energy transition needs to be substantially accelerated to meet decarbonisation and sustainable development objectives. As outlined in IRENA’s recently-released Global Energy Transformation: A Roadmap to 2050, to achieve the two-degree goal of the Paris target, the share of renewables in the primary global energy supply must increase from 15% today to 65% by 2050. Gains in the electricity sector must be matched in end-use sectors such as heating and transportation, which together account for 80% of global energy consumption.

Renewable Energy Policies in a Time of Transition provides policymakers with a comprehensive understanding of the diverse policy options to support an accelerated development of renewables across sectors, technologies, country contexts, energy market structures, and policy objectives, to scale up renewable energy deployment. An updated joint classification of renewable energy policies to illustrate the latest policy developments around the world.

Key areas of focus:

Heating and Cooling

Heating accounted for over 50% of total final energy consumption in 2015, with over 70% of that met by fossil fuels. To increase the use of renewables, a range of policy instruments are required. These include mandates and obligations, which can offer greater certainty of increased deployment; building codes, which implicitly support renewable heating and cooling from renewables by setting energy performance requirements; renewable heat and energy efficiency policies that are closely aligned to leverage synergies and accelerate the pace of transition; fiscal and financial incentives, which reduce the capital costs of renewables; and carbon or energy taxes, which provide important price signals and reduce externalities.

Transport

Transport is the second largest energy end‑use sector, accounting for 29% of total final energy consumption in 2015, and 64.7% of world oil consumption. With the exception of biofuels, there is little practical experience of fostering renewables in transport. Policies and planning should help overcome the immaturity or high cost of certain technologies, inadequate energy infrastructure, sustainability considerations and slow acceptance among users as new technologies and systems are introduced. They should also build improved understanding between decision makers in the energy and transport sectors, so as to enable integrated planning and policy design. Removal of fossil fuel subsidies is also essential, especially in shipping and aviation.

Power sector

Although the power sector consumed only about a fifth of total final energy consumption in 2015, it has received the most attention in terms of renewable energy support policy. Investments in the sector are largely driven by regulatory policies such as quotas and obligations and pricing instruments, supported by fiscal and financial incentives. Quotas and mandates cascade targets down to electricity producers and consumers, but require a robust framework to monitor and penalize non-compliance. Administratively set pricing policies (like feed-in tariffs and premiums) need to continuously adapt to changing market conditions and the falling cost of technology. Auctions are being increasingly adopted, given their ability for real-price discovery, and have resulted in a five-fold price reduction between 2010 and 2016, though auction design is crucial.

System integration

A number of countries and regions are reaching high penetrations of VRE in their power systems, and implementing policies to facilitate their system integration. Strategies for system integration of renewables are crucial to minimise negative impacts, maximize benefits and improve the cost effectiveness of the power system. As VRE shares grow in the power system, so do the challenges of system integration.

A wide range of policies have been adopted to support the growth of renewable energy around the world. The nature of those policies in a given country depends on the maturity of the sector, the particularities of the market segment, and wider socio-economic conditions. As this report shows, as deployment of renewable energy has grown and the sector has matured, policies must adapt and become more sophisticated to ensure the smooth integration of renewables into the wider energy system – including the end-use sectors – and a cost-effective and sustainable energy transition.

IRENA

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