Efficient production and supply of energy and raw material resources are vital to attaining the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals (SDGs). Making resource development activities sustainable has emerged as a critical challenge. While the performance of energy and raw materials production has improved vastly in recent decades, there is widespread support among stakeholders for efforts to further improve its sustainability.
Having universally acceptable standards, guidelines and best practices in sustainable resource management thus has emerged as an essential requirement in the development and production of an array of resources such as petroleum, coal, gas, minerals, nuclear fuels, renewable energy, anthropogenic resources (from waste), and capture and storage of carbon dioxide.
Rapid urbanization and changing lifestyles will demand more energy and raw material resources, but concerns about climate change and general well-being will dictate what is acceptable and what is not. Investments will not be channelled solely based on commercial returns, but on what social and environmental benefits a project might bring.
Over 350 experts from 80 countries participated in UNECE’s 2018 Resource Management Week (23–27 April) and deliberated on the development of the global standard – the United Nations Framework Classification for Resources (UNFC). The experts recommended that an integrated resource management tool be developed.
The exchanges during the ninth session of the Expert Group on Resource Classification, which is tasked with development of UNFC, highlighted that the Sustainable Development Goals are not 17 independent, separate silos. Each goal touches the others. Take SDG#1 – No Poverty – as an example. This goal can be realized only if we have more energy (SDG#7), more resources available for industries to grow (SDG#8), and innovation and infrastructure to support that change (SDG#9). Projects that supply critical resources should demonstrate where they stand relative to the SDGs in order to attract investment and regulatory approval. Many countries and companies have started to recognize this change in perspective, but remain paralyzed at an operational level because there is a lack of globally accepted standards, guidelines and best practices.
“Strengthening UNFC to deliver on comprehensive resource management was recommended by the Expert Group, which is a tectonic shift”, said Scott Foster, Director of Sustainable Energy Division, UNECE. “It is clear that the resource management community is moving towards a paradigm of dare-to-do pro-activism in sustainable resource management.” The expert group will develop all the tools needed to assure sustainable production and consumption patterns for a broad swath of resources, with uniformity at one level, while recognizing sectoral, regional and country level differences in implementation.
For this reason, the meetings and workshops during the week discussed the implementation of UNFC in the European Union and Africa, as well as Russian Federation and China-focused approaches. The newly elected Bureau of the Expert Group includes representation from all regions. Special workshops focused on wide-ranging issues such as availability of raw materials from secondary resources – a key aspect of the circular economy. The workshops also considered waste valorization and critical raw materials, application of UNFC in Africa and redesigning uranium resource pathways among many other topics.
“The fact that the Expert Group remains committed to a phase shift resonated strongly during the week”, said Charlotte Griffiths, Chief, Industries Section, Sustainable Energy Division, UNECE. “Together with many other aspects that make resource management truly sustainable, the issue of gender, diversity and inclusiveness occupied a significant chunk of the discussions”.
Together with many deeply technical issues on food-energy-water security, when social net returns and the empowerment of women become criteria of resource classification and management, a new era is being inaugurated.
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Renewables offer G20 countries the best opportunity to achieve climate goals
The IPCC special report on the impacts of global warming of 1.5°C, released in October 2018, was unequivocal: urgent global action at an unprecedented scale and speed are needed if the world is going to avert catastrophic climate change. With only 12 years left to keep global temperature rise below 1.5% of pre-industrial levels, the immediate decarbonisation of the energy system must be pursued at every level.
Renewables are, in combination with energy efficiency, the key to uncoupling economic growth from an increase in emissions. The G20 group of countries, whose members represent nearly four-fifths of global energy consumption and a similar share of installed renewable power generation capacity, are well positioned to lead the global energy transformation. IRENA analysis estimates that G20 countries hold 75% of the global renewables deployment potential by 2030.
This imperative has been reflected prominently on the G20 agenda in the past few years, and a number of actions have been identified to accelerate deployment of renewables in G20 countries. In cooperation with the presidencies of Turkey, China, and Germany during the last three years, IRENA has provided targeted analysis and recommendations for energy discussions at the G20. At the first G20 Energy Ministers Meeting in October 2015, ministers adopted the G20 Toolkit of Voluntary Options for Renewable Energy Deployment, which presents a set of voluntary options for G20 countries to accelerate the scale-up of renewable energy. The International Renewable Energy Agency (IRENA) was tasked with being the central coordinator of the Toolkit’s implementation, in co-operation with other international organisations.
Argentina, in the context of its G20 Presidency in 2018, has asked IRENA to elaborate opportunities for the accelerated deployment of renewables, using a systemic and holistic approach, and to present relevant lessons learnt from implementing policy and investment frameworks. Building on this work, IRENA developed an overview of Opportunities to Accelerate Energy Transitions through Enhanced Deployment of Renewables. This analysis highlights that, while there has been significant progress, there is still room for further improvements to the regulatory, policy and institutional framework settings of the G20 countries.
Some of the key measures that are advancing the energy transformation include:
- Large-scale power generation installations are increasingly being supported by auctions with record breaking (low) prices and innovative policy design.
- Feed-in-tariffs have been successful in driving the solar PV and onshore wind sector in countries such as China, Indonesia, Germany and Japan.
- Fiscal and financial incentives have played a significant role in driving large-scale renewable deployment in several G20 countries.
- Biofuel mandates (especially in the EU-27) and fiscal incentives to advance electric vehicle use in the G20 are supporting an expansion of renewables in the transportation sector.
Overall, the experience with renewable energy policies in the G20 countries highlights the importance of stability and continuity in instilling investor confidence and attracting investment. To accelerate progress to levels required to keep global temperature rise below 1.5% of pre-industrial levels, a rapid and sustained increase in investment, backed by supportive policies and regulations, is required. In doing so, the countries of the G20 will have an opportunity to provide global leadership on the energy transformation while ensuring a sustainable future with energy accessible to all.
Crunching the numbers: Are we heading for an oil supply shock?
In the detailed energy model that underpins WEO 2018, new sources of oil supply steadily come online at the right time to meet changes in oil demand and keep the system in equilibrium. This smooth matching of supply and demand minimises oil price volatility, which is why our price trajectories in each scenario are smooth, and would likely be a desirable outcome for many of the world’s oil consumers (it could also be better in the long run for many of the world’s producers.
But commodity markets don’t work this way in practice. The oil price drop in 2014 led to multiple widespread impacts on markets, not least of which was that the number of new upstream projects approved for developments plummeted. With the rapid levels of oil demand growth seen in recent years, there are fears that supply could struggle to keep up, bringing with it the risk of damaging price spikes and increased volatility.
On the flip side, with shale production in the United States continuing to grow at record levels and increasing attention on executing upstream projects that can quickly bring oil to market, there are also arguments why a future oil supply “crunch” be safely ruled out. What does the WEO 2018 have to say on this matter?
Why invest in new supply?
The discussion about investment in oil projects typically focuses on the outlook for demand. But this is only a small part of the story – the main reason why new investment is required, in all our scenarios, is because supply at existing fields is constantly declining.
In the New Policies Scenario, there is a 7.5 mb/d increase in oil demand between 2017 and 2025. But without any future capital investment into existing fields or new fields, current sources of supply (including conventional crude oil, natural gas liquids, tight oil, extra-heavy oil and bitumen, processing gains etc.) would drop by over 45 mb/d over this period – this is known as the “natural decline” in supply. If there were to be continued investment into existing fields but still no new fields were brought online – known as the “observed decline”– then the loss of supply would be closer to 27.5 mb/d. A 35 mb/d supply-demand gap would therefore still need to be filled by investments in new fields in the New Policies Scenario in 2025 (there’s also a 26 mb/d gap in 2025 even in the demand-constrained world of the Sustainable Development Scenario).
Part of this 35 mb/d gap is filled by conventional projects already under development. There is also growth in conventional NGLs, extra-heavy oil and bitumen, tight oil in areas outside the United States, and other smaller increases elsewhere. In total these sources add around 11 mb/d new production between 2017 and 2025. Another portion of the gap would be filled by new conventional crude oil projects that have not yet been approved. Around 16 billion barrels of new conventional crude oil resources in new projects are approved each year in the New Policies Scenario between 2017 and 2025: these provide around 13 mb/d additional production in 2025.
This leaves around 11 mb/d. In the New Policies Scenario, this is filled by US shale liquids – also known as “tight liquids” – which includes tight crude oil, tight condensates and tight NGLs. Shale liquids production in the United States in 2017 was just over 7.5 mb/d. If investment were to have stopped in 2017, shale liquids production would have fallen by around 4 mb/d to 2025. However, we have seen that investment and production has actually soared over the course of 2018, and average production in 2018 is set to be close to 9.5 mb/d.
In the New Policies Scenario, shale liquids grow by another 5 mb/d to 2025 (i.e. total growth of 7 mb/d from 2017). So from 2017, and including the production to offset declines, US shale liquids provide the additional 11 mb/d production that is required to fill the remainder of the supply-demand gap. This would represent a huge increase in oil production: the growth between 2015 and 2025 would surpass the fastest rate of growth ever seen previously over a 10-year period (Saudi Arabia between 1967 and 1977).
If conventional investment doesn’t pick up…
It is worth looking in more detail at the assumption that 16 billion barrels resources are approved in new conventional crude oil projects each year from 2018 onwards. In the years since the oil price crash in 2014, the average annual level of resources approved has been closer to 8 billion. The volumes of conventional crude oil receiving development approval would therefore need to double from today’s levels, alongside robust growth in other sources of production, if there is to be a smooth matching of supply and demand in the New Policies Scenario.
What if this does not occur and annual conventional approvals remain at around today’s level? This would mean that some of the supply-demand “gap” would remain and another source would need to step into the breach. The most likely candidate to do so would likely be for US operators to increase tight liquids production at a much faster rate than is projected in the New Policies Scenario.
… then the US would need to add another ‘Russia’ to the global oil balance in 7 years.
In this case, US tight liquids production would need to grow by an additional 6 mb/d between now and 2025. Total growth in US tight liquids between 2018 and 2025 would therefore be around 11 mb/d: roughly equivalent to adding another “Russia” to the global oil balance over the next 7 years.
With a sufficiently large resource base – much larger than we assume in the New Policies Scenario – it could be possible for US tight liquids production to grow to more than 20 mb/d by 2025. However increasing production to this level would require a level of capital investment and a number of tight oil rigs that would far surpass the previous peaks in 2014. It would also rely on building multiple new distribution pipelines to avoid bottlenecks that could prevent or slow the transport of oil away from production areas.
What if demand were to follow a different trajectory?
In the Sustainable Development Scenario, with concerted action to reduce greenhouse gas emissions to meet the objectives of the Paris Agreement, demand peaks in the early 2020s and falls by 1 mb/d between 2017 and 2025. We do not yet see the policies in place or on the horizon that would lead to this outcome (if we did, they would be incorporated already in the New Policies Scenario), but it is of course possible that a lower demand trajectory also helps to avoid the risk of market tightening in the 2020s.
In the Sustainable Development Scenario, shale liquids, conventional NGLs and EHOB all grow from today’s levels in this scenario, albeit to a lesser extent than in the New Policies Scenario given a lower oil price. Filling the remainder of the gap would require approvals of around 8 billion barrels between now and 2025. This is very similar to the level seen over the past few years. This places the implications of “peak oil demand” in context. Even with a near-term peak and subsequent reduction in demand of around 1 mb/d by the mid-2020s, there remains a need to develop new upstream oil investments to fill the supply-demand gap.
Is nuclear energy essential for deep decarbonization?
The world is not on track to meet the target of the Paris Agreement to limit global warming to ‘well below’ 2°C. Participants at the Ninth International Forum of Energy for Sustainable Development (12-15 November 2018) in Kiev, Ukraine, deliberated on how nuclear energy could contribute to deep decarbonization. Today, some 450 nuclear power reactors in 30 countries provide about 11% of the world’s electricity. Nuclear energy is the world’s second largest source of low-carbon power, with about 30% of the total in 2015, and it displaces about 2 gigatonnes of CO2 every year.
Speaking at the Forum’s workshop on “Nuclear Energy and Sustainable Development: Role of nuclear in a decarbonized energy mix”, Ms. Yuliya Pidkomorna, Deputy Minister for Energy and Coal Industry, Ukraine observed that nuclear energy is the mainstay of energy infrastructure in Ukraine. Experts from Ukraine showcased nuclear energy’s contributions to the country’s achievement of the Sustainable Development Goals. Participants from United Kingdom and Canada presented national programmes in which nuclear energy contributes to deep decarbonization.
“A dialogue on the energy transition is incomplete without considering nuclear power”, said Mr. Scott Foster, Director, Sustainable Energy Division, UNECE in his opening remarks. “This is why the Forum has included nuclear energy on the agenda for the first time.”
Many countries have chosen to not pursue nuclear energy because they view that the risks of incidents or accidents at nuclear power stations are unacceptable. Other countries have determined that they will not be able to achieve their development objectives without deploying nuclear power. Many countries such as China, India and Russia are expanding their nuclear power base, while countries like Bangladesh, Belarus, Turkey and the United Arab Emirates are building nuclear power plants for the first time.
Advanced nuclear power systems incorporate passive safety features. Reducing costs through economies of scale and deployment of innovative small and medium reactors will have to be accelerated. Over fifty models of such reactors are under design and regulatory approval in different countries.
“Small and medium reactors are a possible game changer for nuclear power”, said David Shropshire, Section Head, Planning and Economic Studies, International Atomic Energy Agency. “They can be deployed by 2030 as a low carbon alternative, meet growing needs for potable water due to the climate change, and support remote and niche applications.”
“Today’s nuclear energy is the product of 60 years of innovation, supplying clean, affordable and reliable electricity on a major scale”, said Ms. Agneta Rising, Director-General, World Nuclear Association, summarizing the deliberations at the workshop. “To meet the growing demand for clean electricity, the global nuclear industry Harmony programme sets out a vision of 25% of global electricity supplied by nuclear by 2050 working alongside other low-carbon energy forms such as renewable energies.”
Deliberations on nuclear energy at the Forum intersected with discussions on renewable energy, energy efficiency, and fossil fuels and the need for finding the right mix suited for different regions and countries. Decarbonizing energy will require contributions from all low-carbon technologies.
The workshop was co-organized by World Nuclear Association and the International Atomic Energy Agency.
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