The changing outlook for energy from now to 2040

The changing outlook for energy from now to 2040

Giancarlo Strocchia
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At the Eni headquarters in Rome, in the presence of Eni CEO Claudio Descalzi and Italian ministers Calenda (Economic Development) and Galletti (Environment), IEA Executive Director Fatih Birol outlined the contents of the World Energy Outlook 2017 report. The sector faces many upheavals in the years ahead, including the new-found role of the United States as energy exporter and widening access to energy for a billion people

The energy universe is inexorably interconnected. This was the opening premise of the presentation of World Energy Outlook 2017 delivered by International Energy Agency (IEA) Executive Director Fatih Birol. Speaking at the Eni headquarters in Rome on Friday, December 1, in the presence of Eni CEO Claudio Desclazi and Italian ministers Carlo Calenda (Economic Development) and Gian Luca Galletti (Environment), Birol started by underscoring that "No country is an energy island, what happens in one country affects another, and many countries will be affected by what is happening in Africa, the United States, China or India." And just as states are interconnected, said Birol, so are different energy sources, whose development is often interdependent. In terms of the energy outlook, Birol explained that the global energy markets must prepare themselves to face four major upheavals in the years to come. "The report - said Birol - found that America is becoming the undisputed global leader in oil and gas production, in terms of volume, for many years to come." A revolution, he pointed out, that the IEA had noted when it was still only a silent revolution. The U.S., he said, is on course for a momentous change if we consider that over the next 5 years, according to IEA forecasts, the United States will account for 80 percent of global oil growth.

Solar energy and renewables in pole position

The second upheaval from now until 2040 concerns renewables, and solar energy in particular. This energy source, explained the IEA’s Executive Director, is becoming the cheapest source of electricity generation, also due to the falling costs of production and related technologies. The IEA, he said, estimates that 80 percent of the world's future energy demand will be met by solar and wind power and natural gas. This also affects the issue of energy security. "Until now - explained Birol - when we talked about energy security, the first thing that came to our mind was oil security, but now, with the increasing share of solar and wind in our electricity markets, we see electricity security, for example, becoming another important issue." Interpreting these developments can be crucial for making investment decisions, concluded Biral, and those who are quickest in grasping the trend will achieve better market positioning and greater profitability.

The advance of China and India on the global stage

Two countries are taking the lead in terms of energy demand: China and India. Beijing is literally changing the global energy markets. Coal, which was previously of paramount importance, will be gradually replaced with other energy sources thereby reducing, hopefully to a significant degree, the greenhouse gases that are having such a devastating effect on the quality of China’s environment. A call to this effect, pointed out Birol, has come directly from President Xi Jinping, who, in his speech to the 19th National Congress of the Communist Party of China, urged "Chinese government officials to make the Chinese skies blue again." India is increasingly moving to the center stage of global energy affairs to sustain its fast-paced economic growth (7%), and has very strong energy policies aimed at widening access to electric power to 500 million Indians in the coming years.

Access to energy, help for over a billion people

The world is electrifying more and more. According to WEO 2017, electric power production will grow by 60% by 2040. There are currently 1.1 billion people in the world -mainly in India, Pakistan and Sub-Saharan Africa- who don't have access to electricity. While measures to fill this gap are being put in place in India, there are still many challenges to overcome, particularly in Africa. In this respect, said Birol, specific commitments will need to be undertaken to ensure that all countries contribute to resolving the problem of lack of access to electricity in some regions of the world in order to foster new development. With regards to the fight against Climate Change, Birol emphasized the key importance of combating the effects of CO2 emissions by increasing our reliance on gas, which is undergoing massive development with the prospects for LNG production, and by boosting the number of electric vehicles, including HGVs, fueled by renewables. Regarding the reduction in methane emissions, Birol congratulated the parties, including several large global energy companies, which recently signed agreements to address the methane issue.

Eni: transformation underway

According to Eni's CEO Claudio Descalzi, faced with the transformation lying before us, which is not cyclical but structural, we are not just called upon to change our product line but to transform it. We are required ”to make changes to a running vehicle’, he said, and over the next three years our strategy must look to the short, the very short, the medium and the long term. We have billions invested in infrastructure, said Descalzi, and the first step is to transform the hardware upstream of the chain. Descalzi also pointed out that Eni’s development strategy is focused on gas, which accounts for almost 70% of the company’s reserves. Within the framework of the LNG plan, added Descalzi, Eni’s production will exceed 10 million cubic meters of gas. The last strategic area for energy production is renewables, concluded Descalzi, particularly for Africa, where there is a persisting lack of access to electricity.

Italy's national energy strategy, phase-out of coal by 2025

Speaking at the presentation, Italy’s Minister for Economic Development Carlo Calenda pointed out that every transition process requires long timeframes. For this reason, he said, the Italian government has set short, medium and long term goals, as also reflected in its new National Energy Strategy (NES). One of its key goals, pointed out Calenda, is for Italy to phase out coal by 2025. In the transition process, he said, gas is viewed as a major energy source and, accordingly, the construction of a further regasification plant can be regarded as a reasonable way forward. The NES, explained Calenda, will be regularly reviewed based on international developments, new technologies and evolving national requirements. Italy’s Environment Minister Gian Luca Galletti stated that, with regards to the fight against climate change, Italy is one of the best positioned countries in Europe, and is virtuous at the global level. It will not be difficult for Italy to achieve the Paris objectives, said Galletti, as it has already done a great deal. The environment, he pointed out, has become a driver of Italy’s economic development. The issue today is how to manage the transition, he explained, adding that there have been some very positive experiences in recent years, and that strategies with environment-driven goals are being put in place.