Renewables and gas are set to replace coal by 2040. This is the finding of the latest World Energy Outlook (Weo), the annual report by the International Energy Agency (IEA) on global energy scenarios. The Agency has focused its attention on the themes of transition and energy security, energy access, investment and climate.

"For the next 25 years, we can clearly see the winners: natural gas, but above all wind and solar, which will replace coal — the 'champion' of the past 25 years," said Fatih Birol, the IEA's executive director, who believes it will be the policies adopted that will primarily determine the direction taken in the near future.

For the first time, the report examines the post-Paris Agreement energy scenario, with an analysis of the commitments made by individual countries — 190 to be precise — during Cop21.

Renewables grow, coal hits a stumbling block

By 2040, global energy demand will increase by 30 per cent, with consumption of all energy sources rising.

Renewables in particular will record the greatest increase, while natural gas will be the fossil fuel that grows the most, with consumption up by 50 per cent. Over the next 25 years, the growth in oil consumption will slow, though it will nonetheless reach 103 million barrels per day (mb/d) by 2040.

Coal has hit a stumbling block: its market has been severely undermined by concerns over its environmental impacts, and after the rapid expansion of recent decades its growth will come to an almost complete halt in the years ahead.

Who consumes the most?

Between now and 2040, energy demand among OECD countries will continue to fall, while it will grow in industrialising and urbanising countries such as India, South-East Asia and China, as well as parts of Africa, Latin America and the Middle East.

China and India will be the countries where solar photovoltaic will see the greatest expansion; but oil consumption will also continue to grow, and by 2035 developing Asian countries will consume more oil than the entire OECD area combined.

Millions of people without energy access

Despite many countries making considerable efforts to ensure universal energy access, by 2040 part of the world's population will still be unable to benefit from modern forms of energy. In 24 years' time, more than 500 million people — increasingly concentrated in the rural areas of sub-Saharan Africa — will have no access to electricity, a figure that remains very high even though it is down from the current 1.2 billion.

Around 1.8 billion people will continue to use solid biomass (wood) for cooking indoors, meaning continuous exposure to highly toxic fumes that are today responsible for 3.5 million premature deaths every year.

The renewables comeback

Many of the commitments made under the Paris Agreement focus on the electricity sector, and renewables will account for around 60 per cent of all new generation capacity by 2040, more than half of which will come from wind and solar. Intermittent renewables will be the leading source of generation in Europe by 2030, reaching that position five years later in China, the United States and India as well.

The development of renewables goes hand in hand with falling technology costs, and the majority of new installations will be competitive without any form of incentive. By 2040, the average cost of solar photovoltaic is expected to fall by 40–70 per cent and that of onshore wind by 10–25 per cent.

In China, solar subsidies will fall by 75 per cent by 2025, and in India photovoltaic installations will be competitive without any subsidy before 2030.

Currently, incentives for renewables amount to 150 billion dollars — 80 per cent in the electricity sector, 18 per cent in transport and around 1 per cent in heat generation.

The rise of electric mobility

In 2015, the global fleet of electric cars reached 1.3 million units, almost double the 2014 figure. The Agency estimates that by 2025 the number of electric vehicles will reach 30 million, rising to 150 million by 2040 and reducing oil demand by around 1.3 mb/d. For genuine market penetration to occur, the IEA considers that "the continued decline in battery costs and incentive policies — which at present are far from universally widespread — remain essential to encouraging consumers to choose electric vehicles over conventional ones." If these policies were strengthened and more widely adopted, by 2040 there could be as many as 715 million electric cars on the road, with a consequent reduction in oil demand of more than 6 mb/d.

The Paris Agreement is not enough to stay below 2°C

According to the IEA's analysis, although countries are on track to meet many of the targets set under the Paris Agreement, the process is sufficient to slow the projected growth in global energy-related CO2 emissions but not enough to keep the rise in global temperature below 2°C.

China will play a fundamental role: its industry will need to change its development model, sharply reducing its energy intensity, while at the same time cutting its use of coal and ensuring that almost all new installed capacity is of renewable origin.

The United States, the European Union and Japan, in addition to honouring the commitments made in Paris, will need to put in place serious energy efficiency policies in order to contain the average annual increase in global CO2 emissions to 160 million tonnes — a significant reduction compared with the average annual increase of 650 million tonnes observed since 2000.

The more ambitious the goal of limiting global warming, the faster the point must be reached at which net emissions equal zero. If we are to remain within 1.5°C of temperature rise, we will need to think about eliminating all net emissions between 2040 and 2060.

The energy–water nexus

The IEA foresees growing interdependence between energy and water in the coming decades, driven by the increasing water requirements of the energy sector and the energy demand of the water sector.

Water is an essential resource at every stage of energy production: the energy sector is responsible for 10 per cent of global water withdrawals, primarily for the operation of power plants and the production of fossil fuels and biofuels.

In 2014, 4 per cent of global electricity consumption was used to extract, distribute and treat water resources and wastewater; to this must be added 50 million tonnes of oil equivalent (toe) of thermal energy, primarily diesel used to power irrigation pumps and gas used in desalination plants.

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