Rapid Change Needed In Way We Supply, Use Energy

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This article first appeared on RenewEconomy
By Giles Parkinson and Sophie Vorrath

The International Energy Agency has painted a bleak picture of progress on the decarbonisation of the world’s energy systems, saying governments are not acting fast enough and the world shows few signs of being able to achieve the stated target of limiting global warming to a maximum average rise of 2°C.

In the third comprehensive assessment of clean energy technology, the IEA – a conservative organisation established by industrial companies in the 1970s in response to the oil crisis – says the way the world supplies and uses energy is clearly unsustainable.

“(It) threatens our security, health, economic prosperity and environment,” executive director Maria van der Hoeven writes in the report, Tracking Clean Energy Progress 2013, which was launched in India today. “We must change course before it is too late.”

Van der Hoeven says progress is not fast enough; glaring market failures are preventing adoption of clean energy solutions; considerable energy efficiency potential remains untapped; and policies must better address the energy system as a whole.

There was some good news. Progress in some renewable technologies were going according to the IEA’s plan to limit global warming at 2°C – its so-called “2D scenario”, with solar PV and onshore wind tracking well on technology costs (see graph below).


But that optimism only extends as far as 2020, by which time the IEA expects the share of renewables in global generation to rise to 28 per cent from 20 per cent. By 2050, its 2DS scenario requires around 57 per cent contribution from renewables, but other technologies were trailing badly. Wider deployment of concentrating solar power and offshore wind is needed, as well as enhanced RD&D for promising new technologies, such as ocean power. And new designs were needed for energy markets.

Elsewhere, the story is even bleaker. Carbon capture and storage had barely moved, and nuclear was also stuck at the starting gate following Fukushima. Indeed, the trajectory required of the world’s energy system on emissions had continued to flatline, as the graph below shows. To get to 4DS (which is what governments say they will do but have yet to implement), and to 2DS, which is the stated target, will require huge efforts.

The IEA launched a new index, the energy sector carbon intensity index (see graph below). The most striking thing about this index, the IEA noted, was that it had flatlined for the last 40 years, despite a big shift away from oil between 1975 and 1985 when there was a massive expansion of nuclear electricity capacity and a switch to natural gas.

The IEA said the ESCII dropped by only 5 per cent in that “decade of rapid change”, and had only changed by less than 1 per cent between 1990 and 2010, as improvements in renewable generation or lowered oil demand had been undermined by other developments such as the increased use of coal).

By 2020, the ESCII needs to break from its 40-year stable trend and decline by 5.7 per cent by 2020, by 43 per cent by 2035, and over 60 per cent by 2050.


This is how the IEA sums it up (see graph below): The world needs to spend $5 trillion on additional investment, but it is spending $19 trillion on business as usual. It is handing out $523 billion in fossil fuel subsidies, but only $88 billion in renewable energy subsidies. It needs a carbon price of  €50/tonne, but theEU only has one worth  €7/tonne. And the price of imported thermal coal is dropping.


The IEA says rapid and large-scale transition to a clean energy system requires action on an international scale; individual, isolated efforts will not bring about the required change. But it said that individual governments needed to give the private sector and financial community strong signals that they are committed to moving clean energy technologies into the mainstream. As part of this, governments should set “clear and ambitious” clean energy technology goals, underpinned by stringent and credible policies.


It wants governments to draw up strategic plans that support and guide long-term public and private energy infrastructure investment, and to take a long-term view, thinking beyond electoral cycles, so that technologies that facilitate the transformation of the energy system are put in place early. (In Australia, it is hard to disagree, although it seems a forlorn hope given the pre-election campaign rhetoric).

One of the bright spots it noted was in solar PV, where technology costs were falling rapidly. It noted that while utility-scale solar PV costs were still significantly higher than base-load generation from conventional fuels, they approach peak power prices in places with summer peak demand (e.g. due to air-conditioning needs) and unsubsidised fossil-fuel alternatives.

It said small-scale solar PV systems are more expensive, but mini-grid and off-grid applications are already competitive with alternatives in many cases. And it noted that grid-connected residential PV systems can achieve lower generation costs than retail electricity prices for households in countries with good solar resource and high retail prices.

Still, it noted that these generation costs may vary with the allocation of the fixed costs associated with grid connections. “With PV expanding in all world regions, the combination of decreasing capital costs and favourable financing is expected to further decrease generation costs,” it writes.

Another potentially bright spot noted was in electric vehicle deployment, with the IEA asserting that its 2DS target of 20 million EV sales by 2020 was achievable – and on track – as long as governments come to the party with favourable policies and there is and a significant drop in battery prices.

According to the report, the IEA’s 2DS target of 20 million EVs by 2020 means the rate of global sales growth must increase by 80 per cent per year.

“This represents a rapid market introduction for EVs, at 10 per cent of total light-duty vehicle sales by 2020,” says the report. “This progress to 2020 is essential to set EV deployment on course for a more substantial role in the post-2025 period: the 2DS assumes stronger displacement of conventional internal combustion engine (ICE) vehicles from the mid-2020s, with the EV share increasing sharply to half of new vehicles sales by 2050, together with fuel-cell vehicles.”

According to the report, we’re on the right track for the 2020 target: around 100,000 plug-in hybrid-electric vehicles (PHEVs) and full-battery electric vehicles (BEVs) were sold globally in 2012 – more than double (130%) the number sold in 2011, the first year of widespread market introduction.

But in order to maintain, or even build, on this momentum, the IEA warns that governments must continue and expand policies such as vehicle price incentives; including rebates or tax credits on vehicles, purchase subsidies, or exemptions from vehicle registration taxes or license fees. And EV battery prices, which have already halved over the past three years, must be cut by another 50 per cent.

The report says the ongoing cost reductions in battery development in 2012 had been “dramatic,” with prices dropping to around $US500-600/kWh by the end of the year. But the IEA estimates battery costs must be further reduced to around $US300/kWh to achieve cost parity with conventional cars, and to below $300/kWh to make EV ownership attractive enough to consumers to boost EV market penetration. “This last part of the cost curve is likely to be the hardest to scale,” says the report.


The IEA’s 2DS scenario has nuclear providing 16 per cent of energy requirements by 2020, with gas-fired generation rising to 24 per cent by 2025, but then easing – and relying on CCS – to maintain the carbon goals. It says coal-fired generation must peak by 2050, fall at least 10 per cent below current trajectories by 2020, and the remaining generators would have to reduce their emissions intensity by 90 per cent by 2050.


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Giles Parkinson

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.

Giles Parkinson has 596 posts and counting. See all posts by Giles Parkinson