Rising energy consumption complicates net zero.

AME forecasts global energy demand to increase by 6% in 2021 to 14,869Mtoe, more than offsetting the 3% contraction in 2020 and pushing demand 2.9% above 2019 levels. As economies and energy markets recover from the impact of the pandemic, the fundamental transition towards decarbonising energy systems will continue, and look to accelerate rapidly over the coming decades.

Growth in energy demand this year will be driven by renewable energy, with solar photovoltaic (PV) and thermal jumping 38% from 2020 to 142Mtoe, and wind increasing by 17% to 156Mtoe. Demand for geothermal energy is forecast to rise by 7% on-year to 111Mtoe, while nuclear output will increase by 9% on-year to 762Mtoe.

Demand for all fossil fuels has grown significantly in 2021. AME expects oil demand to rise by 4% on-year to 4,215Mtoe, but 5% below 2019 levels. Gas demand is forecast to increase by 5% on-year to 3,384Mtoe, surpassing 2019 level by 0.5%. Coal demand is expected to rise 9% on-year to 4,259Mtoe, 10% higher than 2019.

Population growth, urbanisation, rising incomes, and the enormous unmet demand for energy will all combine boost energy consumption over the next three decades, especially in fast-growing developing economies. Offsetting these drivers there is scope for increased efficiency, but over the last five decades, efficiency gains have nowhere fully offset rising energy demand, except in the wealthiest countries.

Given uncertainties about population growth, urbanisation, incomes, electrification and efficiency improvements, there is considerable uncertainty about the resulting rise in total energy consumption. AME forecasts global primary energy demand to increase by 10% by 2050 to 16,416Mtoe, from the level in 2021, underscoring the challenge of satisfying rising energy demand while simultaneously reducing net emissions to zero.

In 2020, carbon neutral energy sources (nuclear, hydro, geothermal, solar, wind and biofuels/waste) supplied 2,792Mtoe of primary energy, just 20% of primary energy consumption, according to AME data. By 2030, AME forecasts that these carbon neutral energy sources will account for a 29% share.

REACHING NET ZERO

To meet the ambition of net zero emissions while simultaneously satisfying growing demand for energy services, production from zero-emission sources would have to be scaled up 9-13 times in 30 years. Hydro and nuclear power production are unlikely to increase by anything like this amount, implying the need for even faster growth in wind, solar and other renewables.

The problem becomes more manageable if coal, oil and gas remain a significant part of the energy mix by coupling them with carbon capture and storage technology or other ways to offset their emissions. Even so, the implied deployment of zero-emissions energy technologies will be exceptionally difficult within the time frame.

In addition to the net zero target, global policymakers have committed themselves to ensuring universal access to affordable, reliable and modern energy services, as part of the United Nations Sustainable Development Goals. Across much of sub-Saharan Africa, as well as parts of Asia and Latin America, even the most basic energy needs for cooking and heating have still not been met. In urban areas, most households now have access to electricity, even in developing countries, but one-fifth of rural households worldwide still lack this basic service, according to the World Bank.

One-third of the world's population still relies on traditional cooking fuels such as wood, coal and kerosene, according to the World Health Organization. Household fuel combustion is responsible for significant indoor air pollution, contributes to poor outdoor air quality, and was one the world's leading causes of mortality before the Covid-19 pandemic. The WHO estimates household air pollution was responsible for almost 4m deaths in 2016.

Beyond satisfying basic needs, over time households in developing countries are likely to want to use more advanced energy services for lighting, heating, air-conditioning, television, computing and transport, including aviation.

In 2019, the average person in the advanced economies in the Organization for Economic Cooperation and Development (OECD) used more than three times as much energy as their counterparts in the rest of the world. But developing countries have been steadily closing the energy consumption gap, which has narrowed from 7:1 in 1969 and 6:1 in 1979 to 5:1 in 1989 and 4:1 in 2009.

If developing countries continue to close even part of the gap, the increase in primary energy use will be huge. Rising living standards and energy consumption in developing countries explain why most projections show big increases in global energy demand by 2050, even if energy efficiency can be improved.

In the IEA'S net zero by 2050 pathway, global energy demand is around 8% smaller than today, but it serves an economy more than twice as big and a population with 2bn more people. Almost 90% of electricity generation comes from renewable sources, with wind and solar PV together accounting for almost 70%. Most of the remainder comes from nuclear power.

New energy security challenges will emerge on the way to net zero by 2050 while longstanding ones will remain, even as the role of oil and gas diminishes. Growing energy security challenges that result from the increasing importance of electricity include the variability of supply from some renewables and cybersecurity risks. In addition, the rising dependence on critical minerals required for key clean energy technologies and infrastructure brings risks of price volatility and supply disruptions that could hinder the transition.