Following the release by the International Energy Agency (IEA) of its 2024 World Energy Outlook (WEO), the Institute for Energy Economics and Financial Analysis (IEEFA) offers the following remarks. 

General points 

Amandine Denis-Ryan, CEO of IEEFA Australia 

“The IEA clearly identifies areas where too much investment is happening – such as in new coal and gas investments – and where too little investment is happening – such as in energy efficiency and methane emissions reduction.” 

“The IEA identifies the risk that oversized investments in fossil fuels will create a lose-lose situation – driving prices down to create demand to absorb supply increases, in a way that both slows down the energy transition globally, and delivers financial losses for producers.”

Electrification and energy efficiency 

Jay Gordon, Energy Finance Analyst for Australian electricity 

“This WEO highlights why a strong focus on energy efficiency is important – energy efficiency alone accounts for half of the emission reductions in the IEA’s net zero emissions (NZE) scenario by 2030. IEEFA’s research has found huge opportunities for the Australian government to tap into this potential and save consumers money by improving appliance standards.”

“The IEA has identified flexible demand will play a key role, as more consumers switch to electricity. This is already emerging as a key opportunity for Australia – for example, IEEFA’s research has looked at how flexible use of hot water systems can unlock lower costs for consumers.”

“Australia was one of 200 countries that pledged to double the rate of energy efficiency improvements by 2030 – the WEO confirms that meeting this pledge would lead to lower energy bills, less fuel poverty, more jobs, and a healthier environment. Improving efficiency standards and removing barriers to household energy upgrades would help Australia meet its pledge.”

“The IEA’s NZE emissions scenario finds no role for gas in buildings by 2050 globally. In Australia, our analysis identified that ending sales of gas appliances would be a minimum action needed to achieve this outcome, and would save consumers billions of dollars.”

“The IEA expects global heat pump sales to grow rapidly, as they are much cheaper to run than gas appliances in most markets. We are already seeing this in Australia: in NSW for example, annual sales of heat pump hot water systems more than quadrupled in 2023.”

Renewable Energy 

Johanna Bowyer, Lead Analyst for Australian Electricity 

“The IEA WEO has found that clean energy is entering the system at an unprecedented rate with a massive 560GW of new renewables capacity added globally in 2023.”

“The IEA found that clean energy investment is approaching two trillion US dollars per year – almost double the investment in new oil, coal and gas supply.”

“The IEA WEO underscores how renewables are set to be a key player in the coming years – with solar PV and wind now the cheapest electricity sources in most markets, renewables are set to make up four fifths of total capacity additions to 2030.”

“The IEA WEO has found there is abundant manufacturing capacity for clean energy technologies, notably solar PV and batteries. Existing solar PV manufacturing capacity allows for deployment almost three times higher than the installations seen in 2023, and battery manufacturing capacity far exceeds current demand. This plentiful supply will support downward pressure on solar PV and battery prices.”

“The IEA WEO shows that low-emissions electricity generation doubled in Australia between 2018 and 2023, leading to a signification reduction in the use of fossil-fuelled power sources.”

“Australia is currently at 39% renewables in the east coast grid, and aiming for 82% renewables by 2030. To reach this goal, significant acceleration is needed in large-scale wind and solar uptake, along with increase in the uptake of energy efficiency and distributed energy technologies like household batteries.”

“While clean power has momentum globally, the IEA report shows that faster uptake is needed to reach net zero by 2050.”

Gas and LNG 

Joshua Runciman, Lead Analyst for Australian Gas 

“The IEA WEO shows that current and under-construction LNG capacity will be sufficient to meet LNG demand until 2040 – even under a 2.4°C warming scenario. However, if countries meet their net zero and decarbonisation pledges, global LNG capacity will materially exceed supply, meaning no new LNG projects will be needed in coming years. Accelerated climate action would also see many LNG projects currently under construction fail to earn a return on capital.”

“The IEA anticipates a global LNG supply glut this decade, which will push down LNG prices and may risk LNG returns. Adding to this, about one-third of current LNG capacity under construction has not been contracted, meaning this LNG supply may be sold in spot markets, adding further downward pressure on spot prices”

“Global LNG growth is expected primarily in China, and South and Southeast Asia. However, LNG is relatively expensive and may struggle to compete with alternative fuels. The IEA finds for example that LNG would need to be around USD3-5 per MMBtu [million British thermal units] to displace coal in India, which is well below the costs of new LNG supply.”

“The IEA’s analysis shows there is considerable uncertainty about future LNG demand. Under accelerated climate action scenarios, LNG consumption is anticipated to fall rapidly from current levels.”

Coal

Anne-Louise Knight, Lead Analyst for Australian Coal 

“While the IEA’s latest WEO further clarifies coal’s declining role in electricity generation and steel production, coal companies operating in Australia are seeking to development additional thermal and coking coal production by applying for mine expansions and greenfield mine developments.” 

“The Australian Minister for the Environment and Water is out of sync with global energy and steel sector developments. The IEA has made it clear that no new coal mines or expansions are required to meet global energy demands, yet Australia has continued to approve new coal mine developments, with a significant number of applications remaining in the pipeline.” 

Iron and steel

Simon Nicholas, Lead Analyst for Global Steel

“The Australian coal industry keeps trying to maintain that the outlook for metallurgical coal used in steelmaking is strong. The new World Energy Outlook from the IEA doesn’t bear that out.

“Under its Stated Policies Scenario, the IEA highlights that coal use in steel and cement production will start to fall before the end of the decade in key industrial centres including China, Europe, the US, Japan and Korea.

“Overall coal demand for industry is already in decline under the Stated Policy Scenario and falls much faster in the IEA’s other scenarios. Similarly, the IEA finds that global metallurgical coal production is already in decline in all scenarios.

“Almost all Australian metallurgical coal is traded overseas. The IEA sees total global coal trade declining 25% by 2035 in the Stated Policy Scenario with much larger declines in the other scenarios. 

“All this questions the economic wisdom of opening up new metallurgical coal supply in a declining global market.”

Carbon capture and storage 

Amandine Denis-Ryan, CEO, IEEFA Australia 

“For the fourth consecutive year, the IEA revised their expectations down for the role that fossil fuels in combination with carbon capture and storage (CCS) will play in global energy supply under their Net Zero Emissions scenario, more than halving its contribution since 2021.”

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Contact details:

Amy Leiper - aleiper@ieefa.org | 0414 643 446