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Building a “Grand Coalition” to bridge the gap between energy and climate goals

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photo: IEA

Ministers and high-level representatives from COP host countries met at the International Energy Agency on Wednesday to review ways the energy sector can meet climate and other sustainability goals.

The speakers included Kwasi Kwarteng, the Minister for Business, Energy and Clean Growth of the United Kingdom, which holds the Presidency of the upcoming COP26 this year; Michał Kurtyka, Poland’s Minister of Climate and President of COP24; and Joan Groizard Payeras, Director-General of the Energy Agency at the Ministry for the Ecological Transition of Spain, which hosted the COP25.

Held at the IEA headquarters in Paris under the Agency’s “Big Ideas” speaker series, the conference was attended by Ambassadors and senior representatives from about 50 countries, industry executives, and representatives from financial and international organizations.

The conference took place a day after the IEA announced that global carbon emissions had stopped growing last year, defying common expectations that they would increase in 2019. The news provided a positive backdrop for the discussions, which were chaired by Dr Fatih Birol, the IEA’s Executive Director.

As part of its mandate as the leading global energy organization, the IEA is focusing on both energy security and global clean energy transitions, helping governments steer the energy sector towards international climate targets in a secure, sustainable and affordable manner. In his opening remarks, Dr Birol pointed out that the energy sector accounts for most of the global carbon emissions, and has a key role to play in global energy transitions.

“Without solving the challenge of the energy sector, we have no chance of solving our climate challenge,” Dr Birol said in his opening remarks. “We want 2019 to be remembered as the year of peaking global emissions and the 2020s as the decade of the decline in emissions. And the energy sector is ready to be part of the solution.”

As part of its commitment to bridging the gap between the energy sector and the climate goals, the Agency announced it would hold the IEA Clean Energy Transitions Summit on 9 July in Paris. This ministerial-level event will bring together key government ministers, CEOs, investors and other major stakeholders from around the world with the aim of accelerating the pace of change through ambitious and real world solutions.

The immediate aim will be to focus on concrete actions to reverse the growth in carbon emissions this decade, focusing on all the fuels and existing technologies that can help achieve that goal rapidly.

To support these objectives, the IEA will publish two major studies ahead of the summit. The first will be a World Energy Outlook Special Report that will map out how to cut global energy-related carbon emissions by one-third by 2030. The second will be the newest Energy Technology Perspectives report, which will focus on an energy sector pathway for reaching net-zero emissions, looking in detail into all technology opportunities that could help to reduce emissions in hard to abate sectors.

The IEA Clean Energy Transitions Summit will be preceded by the fifth edition of the Agency’s annual energy efficiency ministerial conference, which will also take place in Paris on 8 July, and will be an opportunity to review the findings of the IEA’s Global Commission for Urgent Action on Energy Efficiency.

“The debate around climate change is sometimes too heated and there is too much tension between the energy community and the climate change community,” said Dr Birol. “We think this debate needs to be taken in a cool-headed manner. This calls for a grand coalition that brings together all the stakeholders that have a genuine commitment to reducing emissions – governments, industry, financial institutions, international organizations and civil society. Without this grand coalition, it will be very difficult to address this challenge.”

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Surging electricity demand is putting power systems under strain around the world

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Global electricity demand surged in 2021, creating strains in major markets, pushing prices to unprecedented levels and driving the power sector’s emissions to a record high. Electricity is central to modern life and clean electricity is pivotal to energy transitions, but in the absence of faster structural change in the sector, rising demand over the next three years could result in additional market volatility and continued high emissions, according an IEA report released today.

Driven by the rapid economic rebound, and more extreme weather conditions than in 2020, including a colder than average winter, last year’s 6% rise in global electricity demand was the largest in percentage terms since 2010 when the world was recovering from the global financial crisis. In absolute terms, last year’s increase of over 1 500 terawatt-hours was the largest ever, according to the January 2022 edition of the IEA’s semi-annual Electricity Market Report.

The steep increase in demand outstripped the ability of sources of electricity supply to keep pace in some major markets, with shortages of natural gas and coal leading to volatile prices, demand destruction and negative effects on power generators, retailers and end users, notably in China, Europe and India. Around half of last year’s global growth in electricity demand took place in China, where demand grew by an estimated 10%. China and India suffered from power cuts at certain points in the second half of the year because of coal shortages.

“Sharp spikes in electricity prices in recent times have been causing hardship for many households and businesses around the world and risk becoming a driver of social and political tensions,” said IEA Executive Director Fatih Birol. “Policy makers should be taking action now to soften the impacts on the most vulnerable and to address the underlying causes. Higher investment in low-carbon energy technologies including renewables, energy efficiency and nuclear power – alongside an expansion of robust and smart electricity grids – can help us get out of today’s difficulties.”

The IEA’s price index for major wholesale electricity markets almost doubled compared with 2020 and was up 64% from the 2016-2020 average. In Europe, average wholesale electricity prices in the fourth quarter of 2021 were more than four times their 2015-2020 average.  Besides Europe, there were also sharp price increases in Japan and India, while they were more moderate in the United States where gas supplies were less perturbed.

Electricity produced from renewable sources grew by 6% in 2021, but it was not enough to keep up with galloping demand. Coal-fired generation grew by 9%, serving more than half of the increase in demand and reaching a new all-time peak as high natural gas prices led to gas-to-coal switching. Gas-fired generation grew by 2%, while nuclear increased by 3.5%, almost reaching its 2019 levels. In total, carbon dioxide (CO2) emissions from power generation rose by 7%, also reaching a record high, after having declined the two previous years.

“Emissions from electricity need to decline by 55% by 2030 to meet our Net Zero Emissions by 2050 Scenario, but in the absence of major policy action from governments, those emissions are set to remain around the same level for the next three years,” said Dr Birol. “Not only does this highlight how far off track we currently are from a pathway to net zero emissions by 2050, but it also underscores the massive changes needed for the electricity sector to fulfil its critical role in decarbonising the broader energy system.”

For 2022-2024, the report anticipates electricity demand growing 2.7% a year on average, although the Covid-19 pandemic and high energy prices bring some uncertainty to this outlook. Renewables are set to grow by 8% per year on average, serving more than 90% of net demand growth during this period. We expect nuclear-based generation to grow by 1% annually during the same period.

As a consequence of slowing electricity demand growth and significant renewables additions, fossil fuel-based generation is expected to stagnate in the coming years, with coal-fired generation falling slightly as phase-outs and declining competitiveness in the United States and Europe are balanced by growth in markets like China and India. Gas-fired generation is seen growing by around 1% a year.

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Canada’s bold policies can underpin a successful energy transition

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Canada has embarked on an ambitious transformation of its energy system, and clear policy signals will be important to expand energy sector investments in clean and sustainable energy sources, according to a policy review by the International Energy Agency.

Since the IEA’s last in-depth review in 2015, Canada has made a series of international and domestic climate change commitments, notably setting a target to cut greenhouse gas emissions by 40-45% from 2005 levels by 2030 and a commitment to reach net zero emissions by 2050.

To support those climate and energy targets, governments in Canada have in recent years worked on a number of policy measures, including an ambitious carbon-pricing system, a clean fuels standard, a commitment to phase out unabated coal-fired electricity by 2030, nuclear plant extensions, methane regulations in the oil and gas sector, energy efficiency programmes and measures to decarbonise the transport sector.

“Canada has shown impressive leadership, both at home and abroad, on clean and equitable energy transitions,” said IEA Executive Director Fatih Birol, who is launching the report today with Jonathan Wilkinson, Canada’s Minister of Natural Resources. “Canada’s wealth of clean electricity and its innovative spirit can help drive a secure and affordable transformation of its energy system and help realise its ambitious goals. Equally important, Canada’s efforts to reduce emissions – of both carbon dioxide and methane – from its oil and gas production can help ensure its continued place as a reliable supplier of energy to the world.”

Canada’s profile as a major producer, consumer and exporter of energy presents both challenges and opportunities for reaching the country’s enhanced targets. Energy makes up 10% of gross domestic product and is a major source of capital investment, export revenue and jobs. Moreover, Canada’s highly decentralised system of government means that close coordination between federal, provincial and territorial governments is essential for a successful energy transition.

“This report acknowledges Canada’s ambitious efforts and historic investments to develop pathways to achieve net-zero emissions by 2050 and ensure a transition that aligns with our shared objective of limiting global warming to 1.5 degrees Celsius, “ said Minister Wilkinson. “These are pathways that make the most sense for our people, our economy and our country and will also yield technology, products and know-how that can be exported and applied around the world.”                              

The IEA finds that emissions intensity from Canada’s oil and gas production has declined in recent years, but the sector remains a major source of greenhouse gases, accounting for about a quarter of the country’s GHG emissions. Along with strong action to curb methane emissions, improving the rate of energy technology innovation will be essential for the deep decarbonisation that is needed in oil and gas production, as well as in the transport and industry sectors. Canada is actively advancing innovation in a number of key fields, including carbon capture, utilisation and storage; clean hydrogen; and small modular nuclear reactors, with a view to serving as a supplier of energy and climate solutions to the world. The IEA notes that further federal support for research, development and demonstration would help accelerate progress towards these goals.

The IEA is also recommending that Canada’s federal government promote a comprehensive energy efficiency strategy in consultation with provinces and territories that sets clear targets for energy efficiency in the buildings, industry and transport sectors

The IEA report highlights that Canada’s electricity supply is among the cleanest in the world, with over 80% of supply coming from non-emitting sources, thanks to the dominance of hydro and the important role of nuclear. To further support the expansion of clean power and electrification, the report encourages increased interconnections among provinces and territories to ensure balanced decarbonisation progress across the country.

The IEA commends Canada on its efforts to advance a people-centred approach to its clean energy transition, including initiatives to promote diversity and inclusion in clean energy sectors; programmes to increase access to clean energy in northern, remote and Indigenous communities; and actions to enable just transitions for coal workers and their communities.

“Canada has laid out a comprehensive set of policy measures and investments across sectors to meet its climate targets, including a strong clean energy component to its Covid-19 economic recovery efforts,” said Dr Birol. “I hope this report will help Canada navigate its path toward economy-wide emissions reductions and a net zero future.” 

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Iran to add 10GW to renewable energy capacity

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Iranian Energy Ministry and some of the country’s private contractors signed memorandums of understanding (MOU) on Sunday for cooperation in the construction of renewable power plants to generate 10,000 megawatts (10 gigawatts) of electricity across the country.

The signing ceremony was attended by senior energy officials including Energy Minister Ali-Akbar Mehrabian and Head of Renewable Energy and Energy Efficiency Organization (SATBA) Mahmoud Kamani, IRIB reported.

The MOUs were signed following the Energy Ministry’s public call for the contribution of private companies in a project for developing renewable power plants in the country.

According to SATBA, after the ministry’s public call, so far 153 requests for the generation of 90,000 megawatts (MW) have been submitted to the ministry by private companies.

Speaking in the signing ceremony, Energy Minister Ali-Akbar Mehrabian said: “When the private sector invests in this industry [the renewables], the government is obliged to return the equivalent of the investment plus its interests to the investor.”

Mehrabian noted that the government has allocated over 30 trillion rials (about $101 million) for the development of renewables in the budget bill for the next Iranian calendar year (begins on March 21), saying that it is an unprecedented budget in this area.

Further in the ceremony, SATBA Head Kamani mentioned some of the Energy Ministry’s plans for the development of the country’s renewable energy industry, saying: “Export of renewable energy is a goal that has been targeted by the government.”

“Constructing renewable power plants for the cryptocurrency miners is also being seriously considered,” he added.

Back in December 2021, Kamani had announced plans to create 10,000 MW capacity of new renewable power plants across the country within the next four years.

He had put the current capacity of the country’s renewable power plants at 905 MW, saying that such power plants account only for one percent of the country’s total power generation capacity.

“Currently, 30 percent of the world’s electricity needs are provided by renewable energy sources, and some countries have even declared 2030 as the final year of using fossil fuels,” he said.

“We are far behind the global standards in the development of renewable energy,” he regretted.

Referring to another program for the development of renewable energies in the domestic sector, Kamani noted that to encourage households for constructing such power plants the Energy Ministry has announced that it will buy their surplus generated electricity at a guaranteed price.

He further pointed to the indigenization of the knowledge for the construction of the equipment used in renewable power plants as another priority of the Energy Ministry and SATBA, saying: “Currently, the construction of solar panels and wind power plants is completely indigenized, and we must strengthen our producers to finally become able to build all the required equipment from start to finish, in this regard, of course, some enterprises have announced their readiness.”

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