The momentum in clean energy sources amid growing electricity demand is "strong enough" to bring about a peak in demand for fossil fuels, including oil, by the end of the decade, as stated by the International Energy Agency (IEA) on Wednesday. Over the last decade, electricity consumption has surged at twice the rate of overall energy demand, predominantly driven by China, according to the agency's annual World Energy Outlook report.
This trend suggests that global electricity demand growth is set to accelerate even further in the forthcoming years. With clean energy integrating into the system at an "unprecedented" pace, low-emission sources are projected to account for over 50% of the world’s electricity by 2030. Consequently, the demand for all three fossil fuels—oil, coal, and gas—likely will peak by the decade's end. In the latter half of this decade, an abundant supply—or even surplus—of oil and natural gas could emerge, depending on the evolution of geopolitical tensions, leading to a significantly different energy landscape than what has been observed during the global energy crisis.
IEA Executive Director Fatih Birol emphasized this transition, stating, "It implies downward pressure on prices, providing some relief for consumers that have been hit hard by price spikes." Emerging and developing nations are at the forefront of a robust increase in energy services demand. The ongoing shift towards alternative energy sources indicates that the world economy can continue to grow without an increase in the consumption of oil, natural gas, or coal by the decade's end.
Recently, the IEA revised its global oil demand growth forecast for 2024, attributing the adjustment to weakness observed in China. This comes soon after the Organization of the Petroleum Exporting Countries (OPEC) also reduced its projections for 2024 and 2025. Birol noted that China’s solar power generation could potentially exceed current US electricity demand by the early 2030s.
Meanwhile, the increasing geopolitical conflict in the Middle East, along with the ongoing Russia-Ukraine war, highlights significant energy security risks outlined in the report. To address these challenges, there is a pressing need for "much greater" investment in new energy systems focused on clean energy, especially in the development of electricity grids and energy storage solutions.
The IEA remarked, "Today, for every dollar spent on renewable power, 60 cents go towards grids and storage, underscoring how essential supporting infrastructure is lagging behind clean energy transitions.".