Report Calls for Huge Investment in Energy Development
A total of $40 trillion would go to developing and maintaining energy supplies, with $8 trillion more being spent on energy efficiency, the organization said in the report.
And even that amount of investment would not eliminate many of the issues the industry faces. In fact, they could grow worse over the next two decades, according to the I.E.A., which was established in 1974 to promote energy security after the oil embargo by members of the Organization of the Petroleum Exporting Countries.
The I.E.A. report foresees what could be an erosion of the bargaining power of consumers. For instance, the organization predicts that the surge in supplies of oil and gas from shale rock in North America and elsewhere that have reduced the leverage of oil-producing countries are likely to “run out of steam in the 2020s.”
If so, that would put Middle East producers like Saudi Arabia, which dominate OPEC, back in the driver’s seat. And it is not clear that these countries will invest in new sources of supply in a timely way, creating the risk of a rise in oil prices of $15 a barrel by 2025, the report said.
The agency also warns that Europe, where the energy crystal ball is particularly cloudy, is not providing power companies and other investors with sufficient incentive to invest in new electric power facilities. “If this situation persists, the reliability of European electricity supply will be put at risk,” the energy agency warns.
It also says it foresees an evolution of the energy industry that “falls well short” of what is needed to put the brakes on carbon emissions that are widely blamed for climate change. The organization says that policies and market signals are not strong enough to encourage sufficient investment in low-carbon sources and energy efficiency.
But some analysts say the agency may be too pessimistic. For instance, the $6 trillion the agency predicts will be spent over the next two decades on renewable energy sources like wind and solar power is small compared with the $23 trillion forecast for fossil fuels but still a big number that is likely to encourage investors in low-carbon sources, says Samantha Smith, head of global climate change and energy at WWF, an environmental group.
The International Energy Agency has “been pretty bad at estimating the speed and scale of renewables,” Ms. Smith said.
The agency is holding out hope of a breakthrough at the United Nations climate conference in Paris in 2015 that can somehow shift huge amounts of investment toward renewable energy sources, like solar and wind, and to energy efficiency.
The announcement by the United States Environmental Protection Agency of proposed regulations meant to curb emissions from power plants by 30 percent from 2005 levels by 2030 are likely to add momentum to the effort to combat climate change.
“This of course sends a positive signal ahead of the Paris conference to finalize a new global climate agreement next year,” Connie Hedegaard, the top European official on climate change, said in a statement on Monday.
Forecasting in the energy industry is far from foolproof. To take one example, few if any analysts predicted the huge rise in North American oil and gas production that has occurred in recent years. The energy industry itself invested heavily in facilities to process imports of liquefied natural gas. Now some of those installations are being refitted to serve as export terminals.