World Energy Outlook 2022

Outlook for energy demand

The current energy crisis is reshaping previously well-established demand trends. Industries exposed to global prices are facing real threats of rationing and are curbing their production. Consumers are adjusting their patterns of energy use in response to high prices and, in some cases, emergency demand reduction campaigns. Policy responses vary, but in many instances they include determined efforts to accelerate clean energy investment. This means an even stronger push for renewables in the power sector and faster electrification of industrial processes, vehicles and heating.1 As many of the solutions to the current crisis coincide with those needed to meet global climate goals, the crisis may end up being seen in retrospect as marking a critical turning point in the drive for both energy security and emissions reductions.

Key findings

  • A gloomy economic outlook leads to lower projections of energy demand growth in this Outlook than in last year’s edition. High energy prices, heightened energy security concerns and strengthened climate policies are putting an end to a decade of rapid progression for natural gas; its annual demand growth slows to 0.4% from now to 2030 in the Stated Policies Scenario (STEPS), down from 2.3% from 2010 to 2019. Coal sees a temporary surge in demand in some regions from the power and industry sectors in response to increases in natural gas prices, but efforts to reduce emissions soon put coal into decline again, ending the decade with demand 9% lower than today. Renewables, notably solar PV and wind, gain the most ground of any energy source this decade, accounting for 43% of electricity generation worldwide in 2030, up from 28% today. Oil demand rises 0.8% per year to 2030, but peaks soon after at around 103 million barrels per day as electric vehicles (EVs) and efficiency gains undermine its prospects.
  • The tone for accelerated clean energy development this decade in advanced economies is being set by new policy packages and government plans and targets, notably those set out in: Inflation Reduction Act (United States); RePowerEU plan and Fit for 55 package (European Union); Climate Change Bill (Australia); and GX Green Transformation (Japan). While not all national energy and emissions targets are reached in the STEPS, advanced economies still see declining demand for all fossil fuels by 2030 – a first in the STEPS. However, these measures take time to roll out. Short-term actions are needed to reduce dependency on fossil fuel imports this winter, especially in Europe, which includes an important role for consumers in terms of behaviour change. In emerging market and developing economies, demand for fossil fuel rises more slowly than in previous versions of the STEPS, notably for natural gas in Asia. The slowdown in fossil fuel demand growth is led by China, where slowing economic growth and policy efforts lead to a peak in emissions during this decade.
  • In the Announced Pledges Scenario (APS), fossil fuel use declines further by 2030 than in the STEPS on the assumption that countries meet their national net zero emissions pledges, including those announced by India and Indonesia since the World Energy Outlook 2021 (WEO-2021). All sectors accelerate progress on electrification and energy efficiency compared to the STEPS, with notable acceleration of EVs and electric heating in the transport and buildings sectors. Renewables meanwhile rise rapidly in the power sector and account for nearly 50% of electricity generation by 2030. These outcomes require end-users to spend more upfront in the APS on efficient and low-emissions equipment, but the cost of this equipment declines faster in the APS than in the STEPS due to economies of scale.
  • Energy-related emissions in the STEPS continue to increase in the next two years before starting to decline in the mid-2020s. They fall to 36.2 gigatonnes of carbon dioxide (Gt CO2) in 2030 – slightly below current levels. In the APS, they are down further to 31.5 Gt CO2 by 2030 as governments take early and ambitious action with the aim of delivering significant reductions in emissions in this decade, together with improvements in air quality. The private sector plays an important role in the APS, with almost 800 companies pledged to reach net zero emissions, including through sector-wide initiatives for steel, cement, aviation and shipping. However, even the actions in the APS are well short of what is needed in the Net Zero Emissions by 2050 (NZE) Scenario.
  • In the developing world, high prices and inflation are slowing progress towards universal access to modern energy. The number of people without electricity is likely to rise in 2022 for the first time in decades. Setbacks in sub-Saharan Africa threaten to erase nearly all the progress made there since 2013. Meanwhile surging prices for liquefied petroleum gas (LPG) may drive up to 100 million people that use it for cooking to revert to traditional fuels. These headwinds mean that the projected number of people without access in 2030 is higher in the STEPS this year than it was in the WEO-2021. The APS projects more progress, but achieving all relevant country-level access targets still only gets halfway to universal access for both electricity and clean cooking by 2030. Full achievement of universal access by 2030 will require more ambitious targets, effective implementation measures and higher levels of investment.
  • Around 5 billion people live today in areas with substantial needs for space cooling. However, only one-third of households have an air conditioner, mostly in advanced economies. By 2050, climate change and population growth increase the number of people with substantial cooling needs to 7 billion. Electricity demand for space cooling approaches 5 200 terawatt-hours (TWh) in the STEPS as the number of air conditioners rises from the current 1.5 billion to 4.4 billion by 2050, with 90% of the increase in emerging market and developing economies. Growth in demand is cut by more than 50% in the APS as a result of determined efforts to improve the efficiency of air conditioners and with the use of passive cooling measures in buildings.
  • Peak oil demand moves forward from the mid-2030s in the STEPS to the mid-2020s in the APS, largely as a result of the faster adoption of EVs. In the APS, EVs account for over 35% of global car sales by 2030, and for more than 50% of sales in China, the European Union and the United States. As a result, the electric car market in 2030 is six-times its size in 2021. This reflects targets to phase out internal combustion engine (ICE) vehicles in 36 countries as well as plans by major manufacturers to pivot to EV production.


References

  1. The Future of Heat Pumps, a forthcoming World Energy Outlook Special Report will be published in late 2022.

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