International Energy Outlook 2004
World Energy and Economic Outlook
The IEO2004 projections indicate continued growth in world energy use, including large increases for the developing economies of Asia.>b? Energy resources are thought to be adequate to support the growth expected through 2025.
The International Energy Outlook 2004 (IEO2004) projects strong growth for worldwide energy demand over the 24-year projection period from 2001 to 2025. Total world consumption of marketed energy3 is expected to expand by 54 percent, from 404 quadrillion British thermal units (Btu) in 2001 to 623 quadrillion Btu in 2025 (Table 1 and Figure 12).
In the IEO2004 mid-term outlook, developing nations of the world are largely expected to account for the increment in world energy consumption. In particular, energy demand in the emerging economies of developing Asia, which include China and India, is projected to more than double over the next quarter century. In the developing world as a whole, primary energy consumption is projected to grow at an average annual rate of 2.7 percent between 2001 and 2025 (Figure 13). In contrast, in the industrialized world—with its more mature energy-consuming nations—energy use is expected to grow at a much slower rate of 1.2 percent per year over the same period, and in the transitional economies of Eastern Europe and the former Soviet Union (EE/FSU) growth in energy demand is projected to average 1.5 percent per year.
This chapter begins with an overview of the IEO2004 outlook for energy consumption by primary energy source. In addition, in order to give readers some perspective about the ways in which energy sources are currently used and how energy use may evolve in the future, a discussion of trends in energy consumption in the residential, commercial, and industrial sectors is also presented. The chapter continues with the outlook for world carbon dioxide emissions resulting from the combustion of fossil fuels. The next section of the chapter discusses of the macroeconomic forecast in the context of recent economic developments in key nations of the industrialized world, the EE/FSU region, and the developing world.
As with any set of forecasts, there is uncertainty associated with the IEO2004 energy projections. Consequently, the next section of the chapter looks at issues surrounding the forecast uncertainty, including a look at some of the elements that drive the IEO2004 projections, which can result in a fair amount of variation in a forecast. Alternative assumptions about economic growth and their impacts on the IEO2004 projections are considered, as well as the possible effects of future trends in energy intensity on the reference case projections.
Outlook for Primary Energy Consumption
The IEO2004 reference case projects increased consumption of all primary energy sources over the 24-year forecast horizon (Figure 14 and Appendix A, Table A2). With fossil fuel prices projected to remain relatively low, the costs of generating energy from other fuels are not expected to become competitive; as a result, much of the increment in future energy demand in the reference case is projected to be supplied by oil, natural gas, and coal. It is possible, however, that as environmental programs or government policies—particularly those designed to limit or reduce greenhouse gas emissions, such as the Kyoto Protocol4—are implemented, the outlook could change, and non-fossil fuels (including nuclear power and renewable energy sources such as hydroelectricity, geothermal, biomass, solar, and wind power) could become more attractive. The IEO2004 projections assume that government laws in place as of October 1, 2003, remain unchanged over the forecast horizon.
Oil is expected to remain the dominant energy fuel throughout the forecast period, with its share of total world energy consumption remaining unchanged at 39 percent through 2025. In the industrialized world, increases in oil use are projected primarily in the transportation sector, where there are currently no available fuels to compete significantly with oil products. The IEO2004 reference case projects declining oil use for electricity generation, with other fuels (especially natural gas) expected to provide more favorable alternatives to oil-fired generation.
In the developing world, oil consumption is projected to increase for all end uses. In some countries where non-marketed fuels have been widely used in the past (such as fuel wood for cooking and home heating), diesel generators (as well as distributed generators, such as solar photovoltaics) are now sometimes being used to dissuade rural populations from decimating surrounding forests and vegetation—most notably, in Sub-Saharan Africa, Central and South America, and Southeast Asia [1]. Because the infrastructure necessary to expand natural gas use has not been as widely established in the developing world as it has in the industrialized world, natural gas use is not expected to grow enough in the developing world to accommodate all of the increased demand for energy.
Natural gas is projected to be the fastest growing primary energy source worldwide, maintaining average growth of 2.2 percent annually over the 2001-2025 period. In comparison, 1.9-percent average annual growth rates are projected for oil and for renewables, 1.6-percent annual growth is projected for coal, and 0.6-percent annual growth is projected for nuclear power (on a Btu basis). Total world natural gas consumption is projected to rise from 90 trillion cubic feet in 2001 to 151 trillion cubic feet in 2025, as compared with the forecast of 176 trillion cubic feet in 2025 in EIA’s International Energy Outlook 2003 (Figure 15). The reduction is a result of a combination of factors, including slightly lower assumptions about worldwide economic growth in the forecast, a slower decline projected for nuclear power generation, which competes with natural gas in the electric power sector, and concerns about the long-term ability of natural gas producers to bring sufficient resources to market at prices competitive with those of other fossil fuels.
Natural gas is expected to remain an important supply source for new electric power generation in the forecast. It is seen as the desired option for electric power, given its efficiency relative to other energy sources and the fact that it burns more cleanly than either coal or oil, making it a more attractive choice for countries interested in reducing greenhouse gas emissions. In the United States, the industrial sector is expected to remain the largest end-use consumer of natural gas, growing by 1.4 percent per year on average, from 7.3 trillion cubic feet in 2001 to 10.3 trillion cubic feet in 2025. In the electric power sector, natural gas use is projected to increase by 1.9 percent per year, from 5.4 trillion cubic feet to 8.4 trillion cubic feet.
Coal use worldwide is projected to increase by 2.3 billion short tons between 2001 and 2025. Substantial declines in coal use are projected for Western Europe and Eastern Europe, where natural gas is increasingly being used to fuel new growth in electric power generation and for other uses in the industrial and building sectors. In the developing world, however, larger increases in coal use are projected for China and India, where coal supplies are plentiful. Together, China and India account for 85 percent of the projected rise in coal use in the developing world and 70 percent of the total world increment in coal demand over the forecast period.
Electricity generation is expected to nearly double between 2001 and 2025, from 13,290 billion kilowatthours to 23,702 billion kilowatthours. Strongest growth is projected for the countries of the developing world, where net electricity consumption rises by 3.5 percent per year in the IEO2004 reference case, compared with a projected average increase of 2.3 percent per year worldwide. Robust economic growth in many of the developing nations is expected to boost demand for electricity to run newly purchased home appliances for air conditioning, cooking, space and water heating, and refrigeration. For the industrialized world and the transitional economies of the EE/FSU, where electricity markets are more mature, more modest annual growth rates of 1.5 and 2.0 percent, respectively, are projected.
As noted above, natural gas is expected to be the fuel of choice for much of the new electricity generation capacity built over the next two decades. The natural gas share of total energy used to generate electricity increases from 18 percent in 2001 to 25 percent in 2025, at the expense of oil and nuclear power, both of which are expected to lose market share of the world’s electricity by 2025. The shares of hydroelectricity and other renewable energy resources, as well as that of coal use for electricity generation, are expected to remain fairly stable over the projection period.
Worldwide, consumption of electricity generated from nuclear power is expected to increase from 2,521 billion kilowatthours in 2001 to 2,906 billion kilowatthours in 2025. The nuclear power forecast is somewhat higher than in last year’s IEO. The prospects for nuclear power have been reassessed in light of the higher capacity utilization rates reported for many existing nuclear facilities and the expectation that fewer retirements of existing plants will occur than previously projected. Extensions of operating licenses (or the equivalent) for nuclear power plants are expected to be granted among the countries of the industrialized world and the EE/FSU, slowing the decline in nuclear generation. With higher projections for natural gas prices in the United States than have been expected in earlier years, no U.S. nuclear power units are retired in the reference case.
The world nuclear generation forecast also reflects revised prospects for new construction of nuclear plants in several countries, in terms of both earlier completion dates and the number of new units that may be constructed. In the IEO2004 reference case, world nuclear capacity is projected to rise from 353 gigawatts in 2001 to 407 gigawatts in 2015 before falling to 385 gigawatts in 2025 (Figure 16). In contrast, in last year’s IEO, world nuclear capacity was projected to rise to 393 gigawatts in 2015 and then fall to 366 gigawatts in 2025.
The highest growth in nuclear generation is expected for the developing world, where consumption of electricity from nuclear power is projected to increase by 4.1 percent per year between 2001 and 2025. Developing Asia, in particular, is expected to see the largest increment in installed nuclear generating capacity over the forecast, accounting for 95 percent of the total increase in nuclear power capacity for the developing world. Of the 44 gigawatts of additional installed nuclear generating capacity projected for developing Asia, 19 gigawatts is projected for China, 15 gigawatts for South Korea, and 6 gigawatts for India.
Consumption of electricity from hydropower and other renewable energy sources is projected to grow by 1.9 percent annually in the IEO2004 forecast. With fossil fuel prices projected to remain moderate in the reference case, renewable energy sources are not expected to be widely competitive, and the renewable share of total energy use is not expected to increase. Over the 2001-2025 forecast horizon, renewables maintain their share of total energy consumption at 8 percent. Moreover, despite the high rates of growth projected for alternative renewable energy sources—such as wind power in Western Europe and the United States—much of the growth in renewable energy sources is expected to result from large-scale hydroelectric power projects in the developing world, particularly among the nations of developing Asia. China, India, Malaysia, and Vietnam are already constructing or have plans to construct ambitious hydroelectric projects in the coming decades.
Energy End Use
One way of looking at the future of world energy markets is to consider trends in energy consumption at the end-use sector level. With the exception of the transportation sector, which is almost universally dominated by petroleum products (and is discussed separately in the chapter on “World Oil Markets”), the mix of energy use in the residential, commercial, and industrial sectors can vary widely from country to country, depending on a combination of regional factors, such as the availability of energy resources, the level of economic development, and political and social factors. Regional trends in energy end use are discussed below...
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