It's international climate talk season, which means it's international climate report season. Amid a flurry of analyses ahead of negotiations set to take place in Egypt next month, the International Energy Agency dropped its annual World Energy Outlook.
This year's report is colored, like most everything else, by the war in Ukraine. Russia's invasion has completely upended the energy market, affecting everything from gas to critical mineral prices. With tension mounting between the U.S. and China, and oil production cuts by OPEC+, pressures on the energy system will only grow. Oh, and the whole "we need to address the climate crisis" thing. Yeah, that's also having an impact.
The IEA's report goes deep on all these underlying conditions and what they've wrought to date, as well as what the future could hold. Among that depth, these are three key themes that have emerged that could shape the climate tech landscape over the coming decade.
The world needs more clean power. A lot of it.
Electrifying everything will completely reshape demands on the power grid. The IEA found that up to 214 million new electric vehicles could hit the road by 2030. Heat pumps will play a more significant role in heating and cooling as they replace gas furnaces, spiking energy demand even higher. And green hydrogen is expected to emerge from a fledgling industry today into one that could consume as much electricity as all aluminum production used in 2010.
Beyond electrifying new technology, some places will become wealthy enough to access traditional tech like air conditioning. All of which is to say that, according to IEA estimates, the world will add up to 7,000 terawatt-hours of electricity demand by the end of the decade. In (somewhat) more relatable terms, that's equivalent to the current demand of the U.S. and Europe combined. Ensuring that we don't fry the planet will mean that the world not only needs to retire existing fossil fuel infrastructure and replace it with renewables — it'll need to go above and beyond.
Supply chains need to diversify
If the war has made one thing clear, it's that relying on a single country for anything is a danger. Russia has dramatically cut methane gas deliveries to the EU in retaliation for its support of Ukraine. The EU, meanwhile, has taken drastic measures to reduce gas demand as winter sets in, raising the risk of power shortages and high home-heating bills.
Gas is hardly the only supply chain concern. The IEA found that the critical mineral supply chain that's crucial for the energy transition is also dangerously concentrated. To take one example, just three countries produce 91% of the world's lithium. The IEA warned that the lack of diversification coupled with volatile (and largely rising) prices poses a serious geopolitical risk while also endangering battery and other technologies. Remember, we're going to need more batteries, wind turbines, and solar panels to meet rising electricity demand.
There are signs that countries that have largely ignored a diverse clean energy supply chain are suddenly paying attention. Notably, the U.S. has launched a slew of programs and incentives, including many as part of the Inflation Reduction Act to encourage a homegrown clean energy industry, from mining to manufacturing.
Net zero goals don't drive up energy prices
The grumbling that net zero goals and policies to reach them drove the huge uptick in energy prices seems to be unfounded; the report found that "there is scant evidence for this." Places with more power generated by renewables "correlated with lower electricity prices." Implementing policies that improve home energy efficiency through fairly mundane measures like installing heat pumps and improving insulation are also saving people money. In fact, the report warns governments are doing "far from enough" on the energy efficiency front to protect people where energy costs are rising.
Climate TRACE's data show emissions at the facility-level.Image: Climate TRACE