The world is approaching the “era of electroenergy”, in which renewable sources will dominate instead of fossil fuels. Demand for oil and natural gas will stop growing by the end of the current decade, and their supply will increase. The spread of electric vehicles and rapid electricity consumption (primarily in China) will become the main drivers of electrification, and energy prices will fall due to the spread of renewables. Such conclusions are given in the updated report of the International Energy Agency on industry innovations that are changing the market - Energy Technology Perspectives 2024.

“Ukrainian Energy” got acquainted with the main conclusions of this study, which has gained considerable resonance in the expert community, and figured out how relevant the IEA’s expectations are for Ukraine.

New technological landscape

The markets for key energy transition technologies - solar panels, wind turbines, electric cars, batteries, electrolyzers and heat pumps - have almost quadrupled in size between 2015 and 2023, to $700 billion. Last year, global investment in this segment grew by 50%, totaling more than $235 billion.

However, the distribution of investment remains clearly skewed towards those low-carbon technologies that promise the greatest financial returns and/or receive the most government support: the production of solar panels, batteries and electric cars. At the same time, the importance of raw materials is growing: individual companies and entire countries have entered into a geopolitical race for control over aluminum production and the extraction of critical minerals that will ensure the development of sustainable energy.

A business worth hundreds of billions

Clean technologies will play an increasingly significant role in the transition to a low-carbon economy. If countries continue to adhere to current climate policies, the market for such technologies will almost double by 2035 and exceed $2 trillion. This means that within a decade the segment of “green” technologies will not yield to the average volume of the world oil market today, while the consumption of “black gold” itself will remain almost unchanged.

Global trade in clean technologies will also increase sharply. By 2035, its volume will increase at least threefold and reach $575 billion, beating the current level of the global LNG market by 50%.

Such a trend can completely reverse the dynamics of world trade: there will be a transition from importing fossil fuels to importing clean technologies. Geopolitical power will be gained by the countries that will produce them.

Provided that there is a long-term supply of energy equipment, the use of green technologies will not only increase the stability of energy supply, but also lead to greater efficiency in energy supply. The fact is that a single sea voyage of a large container ship loaded with solar modules can generate the same amount of electricity as 50 large LNG tankers of liquefied natural gas, or 100 large cargo ships of coal.

“In the history of energy, we have witnessed the coal age and the oil age. Now we are rapidly moving into the electricity age,” predicts Fatih Birol.

Buyers are gaining power

As countries compete for their role in the new economy, where low-carbon technologies will be key, three important policy areas – energy, industry and trade – will become increasingly interconnected. The long period of growth in electricity consumption, led by China, will tend to accelerate.

“In the second half of this decade, the world will enter a new energy market context, as the underlying balances of oil and gas weaken. Barring major geopolitical conflicts, we will enter an era where energy prices will experience significant downward pressure,” IEA Executive Director Fatih Birol said at the presentation.

This will be a turning point in the economy after a period when the sharp rise in energy prices due to Russia’s full-scale invasion of Ukraine in 2022 caused a powerful wave of inflation and global instability.

“The global landscape is now prepared for an energy market where buyers, not sellers, will have power,” said Fatih Birol.

Another significant innovation of the “green” economy is related to security. About half of the seaborne trade in clean energy technologies today passes through the Strait of Malacca, which connects the Indian and Pacific oceans. “While the implications for energy security may vary, this is significantly greater than the estimated 20% of fossil fuel trade that passes through the Strait of Hormuz,” the IEA analysts said.

What will happen to hydrocarbons

The IEA predicts that oil prices will continue to trade in the range of $75-80 per barrel, but provided that the OPEC cartel and its allies continue to restrain production. The agency confirmed its previous conclusions that demand for oil and natural gas will reach a plateau by the end of the current decade. Oil supplies will grow, but not from OPEC, but due to the further development of production in the United States, Brazil, Canada, Guyana.

Also on the horizon is a “new wave” of LNG projects, the operation of which will begin in Qatar, Oman, the United States. IEA economists expect that by 2030 the “significant addition” of capacity in this market will amount to about 270 billion cubic meters.

A cause for reflection

But there is no unanimous support in the energy industry for the IEA’s predictions that the fossil fuel industry is facing an inevitable decline. Among the oil companies, there are those that have reduced investments in renewable energy and returned to their traditional businesses. In particular, BP last month decided to review its business development strategy, focusing on consumer sentiment, and began by abandoning plans to reduce oil and gas production by 2030. Bloomberg notes that although the IEA's forecasts of low oil demand now look increasingly justified, some of the agency's past forecasts have not come true. For example, the expectation of a supply crisis a decade ago or forecasts that oil production in Russia would fall sharply after the invasion of Ukraine.

In 2024, a trend emerged among leading European automakers - they abandon the accelerated transition to electric drive of all their car models and predict that vehicles with internal combustion engines will be used longer than politicians promoting a "green lifestyle" seek. Such statements, for example, were made by Volkswagen, Audi, Mercedes, Volvo. The reasons for the change in mood are explained by insufficient consumer demand, the price of electric vehicles, limited charging infrastructure, and economic difficulties. Auto companies see the optimal solution that will combine the reduction of oil products and economic interests in the production of hybrid cars, which are equipped with both internal combustion engines and electric systems.

Ukraine in global energy trends

Expert Viktor Vidzigovsky, who has significant experience in the energy sector, in particular, in Kyivenergo and the Swiss ABB, calls the forecasts of IEA analysts "hopes and very bold dreams." "A truly real green transition is possible only with widespread electrification and a decrease in oil and coal consumption. All this will happen, but only in individual countries and very slowly. Humanity will have to live with natural gas for a very long time. A little less - with oil, and the world as a whole - also with coal. Most people live in poor countries, where coal consumption is still growing. Because it is actually currently the cheapest way to meet the growing demand for electricity. The spread of electric vehicles in the world has also slowed down,” the specialist noted in an interview with the Ukrainian Energy portal.

Speaking about the prospects of Ukraine, Viktor Vidzigovsky expressed doubt that our electricity market has the potential to become a “consumer market” when suppliers lose their power – as, for example, happened in Australia, where most solar power plants (SPPs) are built on the roofs of houses or industrial facilities. In Ukraine, the state has created incentives for such a large-scale development of SPPs that it has weakened the reliability and quality of the power system even before a full-scale invasion.

“We finally need to stop the uncontrolled construction of SPPs. There are already at least three times more of them than the power system can withstand. People are simply making money. And everything needs to be done wisely, and this wisdom should think about the common good, not personal,” said Viktor Vidzigovsky.

In order for Ukraine to have a “bright future” with sustainable energy supply, he considers the following technologies to be the best option. First, Ukraine needs to return to gas generation: build combined-cycle power plants with a high efficiency and highly maneuverable stations. Secondly, the modernization of power grids is of particular importance for the energy system. “It’s not just about wires and substations. It’s also about equipment that will help maintain the voltage level at all points in the network at any time,” the expert noted. Third, Ukraine needs to build solar power plants on reservoirs – “as is practiced all over the world.” Currently, “our country has a very large area of water surface and does not use it.” It is also necessary to develop the market for auxiliary services and build energy storage to balance the energy system. Steel production using carbon-free energy can also be useful here. This technology is not mentioned by analysts of the International Energy Agency in their flagship report. But it could be useful for Ukraine due to the availability of the necessary raw materials.

Evaluating the conclusions of the IEA report on the decline of the oil era, the director of the A-95 Consulting Company, Serhiy Kuyun, warned against too radical forecasts that could overturn the perception of the usual market, especially when it comes to the Ukrainian context.

“It is currently difficult to determine how electric cars will affect fuel consumption in Ukraine. The most significant factors are the war and the associated population movements, low solvency, etc.,” he said in an interview with Ukrainian Energy. But in any case, the expert noted, electromobility in our country is currently exclusively about passenger transport, which consumes relatively little fuel. Therefore, its impact on the overall demand for oil in the world “will be insignificant for a long time to come.”

It is also worth noting that the IEA report on the “green” transformation of energy appeared before it became known about Donald Trump’s victory in the US presidential election. One of the promises of the newly elected owner of the White House is a return to support for the American oil and gas industry, which will help increase production and the US share in the global market. In his last term, similar measures contributed to a decrease in world oil prices to $ 50 per barrel. Therefore, there is reason to believe that in the next reports the IEA will revise its forecasts towards a greater decline (instead of $ 75-80 per barrel now).

Svitlana Dolinchuk specially for "Ukrainian Energy"

Tags:renewable energy