IEA releases World Energy Outlook 2022

The International Energy Agency (IEA) has released its annual World Energy Outlook for 2022. The report emphasised the global energy crisis as "a shock of unprecedented breadth and complexity", with Russia's invasion of Ukraine turning "a rapid economic recovery from the pandemic" into "full-blown energy turmoil", as Russia - the world's largest exporter of fossel fuels - is "severing one of the main arteries of global energy trade".
It also noted that prices for spot purchases of natural gas have reached levels never seen before, regularly exceeding the equivalent of $250 for a barrel of oil. Coal prices have hit record levels too - with high gas and coal prices accounting for 90% of the upward pressure on global electricity costs.
To offset shortfalls in Russian gas supply, Europe is set to import an extra 50 billion cubic metres (bcm) of liquefied natural gas (LNG) in 2022 compared with the previous year, the report said. This has been eased by lower demand from China, where gas use was held back by lockdowns and subdued economic growth, but higher European LNG demand has diverted gas away from other importers in Asia.
The crisis has "stoked inflationary pressures and created a looming risk of recession", as well as a huge $2 trillion windfall for fossil fuel producers above their 2021 net income. Food insecurity is an issue in many developing economies, with the burden falling upon the poorest households. The report said that some 75 million people who recently gained access to electricity are likely tolose the ability to pay for it.
The report also stated that governments (mainly in advance economies) have committed over $500bn so far, to protect consumers from immediate impacts. They have also rushed to attempt to secure alternative fuel supplies, and to ensure adequate gas storage.
Other short-term actions have included increasing oil- and coal-fired electricity generation, extending the lifetimes of some nuclear power plants, and accelerating the flow of new renewables projects. Demand-side measures have generally received less attention, but greater efficiency is an essential part of the short- and longer-term response.
A key question for the report is "whether the crisis will be a setback for clean energy transitions or will catalyse faster action". It said that climate policies and net zero commitments were blamed in some quarters for contributing to the run-up in energy prices, but argued there is little evidence for this. In the most affected regions, higher shares of renewables were correlated with lower electricity prices, and more efficient homes and electrified heat have provided an important buffer for some – but far from enough – consumers.
The World Energy Outlook explores three scenarios, differentiated primarily by the assumptions made on government policies. The report's Stated Policies Scenario (STEPS) shows the trajectory implied by today’s policy settings. The Announced Pledges Scenario (APS) assumes that all aspirational targets announced by governments are met on time and in full, including their long-term net zero and energy access goals. The Net Zero Emissions by 2050 (NZE) Scenario maps out a way to achieve a 1.5 °C stabilisation in the rise in global average temperatures, alongside universal access to modern energy by 2030.
The report said that new policies in major energy markets help drive annual clean energy investment to over $2 trillion by 2030 in the STEPS - a rise of over 50% from today. It sets out the economic arguments of cost-competitive and affordable clean technologies - as well as noting the importance of energy security.
"This alignment of economic, climate and security priorities has already started to move the dial towards a better outcome for the world’s people and for the planet," it said.
"Much more remains to be done, and as these efforts gather momentum, it is essential to bring everyone on board, especially at a time when geopolitical fractures on energy and climate are all the more visible.
"This means redoubling efforts to ensure that a broad coalition of countries has a stake in the new energy economy. The journey to a more secure and sustainable energy system may not be a smooth one. But today’s crisis makes it crystal clear why we need to press ahead."
Read the full report here.