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Game Changers

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Game Changers

24th November 2017

By: Terence Creamer
Creamer Media Editor

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Without doubt, the problems at Eskom, together with the ongoing debate over nuclear, are making it extremely difficult for South Africans to pay proper attention to some of the game- changing shifts under way in global energy markets – ones that have real and far-reaching implications for this country.

Some of these mega trends are outlined in the World Energy Outlook 2017 publication, released by the International Energy Agency (IEA) in London last week. The publication presents a base case scenario that foresees the world’s growing energy needs over the coming decades being met increasingly by renewables and natural gas, rather than coal and oil. Global energy demand is projected to be 30% higher by 2040.

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Referred to as the ‘New Policies Scenario’, this base case anticipates that renewables will capture two-thirds of global investment in power plants to 2040, as they become the least-cost source of new generation for many countries. Since 2010, costs of new solar photovoltaics (PVs) have fallen by 70%, while wind costs have declined by 25%.

The publication projects that fast-declining costs will turn solar PV into the cheapest source of new electricity generation and further accelerate the technology’s deployment. Already in 2016, growth in solar PV capacity was greater than for any other form of generation.

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Renewable sources of energy, the scenario projects, will meet 40% of the increase in primary demand and their explosive growth in the power sector marks the end of the boom years for coal. Natural gas use, meanwhile, is projected to rise by 45% to 2040.

The outlook for coal, by contrast, is modelled to weak, particularly in the absence of large-scale carbon capture and storage.

The rapid deployment and falling costs of clean-energy technologies is held up in the World Energy Outlook 2017 as one of four large-scale shifts under way in the global energy system. The other three include a growing electrification of energy; a shift to a more services-orientated economy and a cleaner energy mix in China; and the resilience of shale gas and tight oil in the US.

Electricity is the rising force among worldwide end-uses of energy, making up 40% of the rise in final consumption to 2040 – the same share of growth that oil took for the last 25 years, the publication states. Fuel efficiency and rising vehicle electrification will bring a peak in oil used for passenger vehicles, even with a doubling of the car fleet to two-billion vehicles. However, other sectors will drive up oil demand to 105-million barrels a day by 2040.

There is no question that South Africa is not immune from these energy market developments. However, instead of assessing how to position the country and its energy industry to take advantage of these shifts, we are currently caught up with debates and processes that are undermining our ability to think strategically. That’s not to say that dealing with the rot at Eskom isn’t a priority. It most definitely is, and is arguably the most pressing issue facing both the sector and government’s financial sustainability.

At some point, though, policymakers and industry practitioners need to begin working together to understand the implications of the energy transition under way globally and to start strategising how best to manage the risk and maximise the opportunities. Failure to do so will surely mean that transition will manage us.

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