The World Energy Outlook: What is the IEA Predicting?

About the report

Countless reports are produced every year, making it difficult for people and businesses to filter out the dross and mine the gold.

One report that is an essential part of end-of-year reading lists is the IEA's flagship World Energy Outlook.

It is regarded by many as the most authoritative global source of energy analysis and projections.

The IEA says: “It identifies and explores the biggest trends in energy demand and supply, as well as what they mean for energy security, emissions and economic development.”

This year’s Outlook comes amid escalating risks in the Middle East and heightened global geopolitical tensions.

It explores energy security issues that decision makers face as they attempt to accelerate clean energy transitions.

It says: “With rising investment in clean technologies and rapid growth in electricity demand, the WEO 2024 examines how far the world has come on its journey towards a safer and more sustainable energy system, and what more needs to be done to reach its climate goals.”

Explore the report with AI tool

Detailed reports can be difficult to digest. Which is why the IEA has worked with Microsoft to launch the World Energy Outlook GPT (WEO GPT).

The AI tool enables users to search the report and tailor research and enquiries to individuals interest.

Microsoft Chief Sustainability Officer Melanie Nakagawa said: “At Microsoft, we're working to harness the power of AI for sustainability. This includes building tools to empower individuals, organisations and communities to learn about the environment and take action.

“I'm excited to share that Microsoft partnered with the International Energy Agency to launch WEO GPT to help you explore IEA’s flagship annual report with a new AI-powered agent.

“This allows users to more easily find insights and dig into their analysis in new ways.”

The IEA said the tool “lets anyone curious about the report’s findings to more easily dig into its data, analysis and projections”.

What does the report tell us about global energy security?

The report points out that 2023 saw the immediate effects of the global energy crisis beginning to recede – but the risk of further disruptions is now “very high”.

It adds: “The experience of the last few years shows how quickly dependencies can turn into vulnerabilities; a lesson that applies also to clean energy supply chains that have high levels of market concentration.”

The report says:

• Markets for traditional fuels and for clean technologies are becoming more fragmented, with almost 200 trade measures affecting clean energy technologies introduced since 2020
• Fragility in today’s energy markets is a reminder of the ways that more efficient, cleaner energy systems can reduce energy security risks. A comprehensive approach to energy security needs to extend beyond traditional fuels to cover the secure transformation of the electricity sector and the resilience of clean energy supply chains
• Energy security and climate action are inextricably linked: extreme weather events, intensified by decades of high emissions, are already posing profound energy security risks.

Summarising a complex issue

The executive summary of the IEA report breaks it down into key conclusions:

Robust, independent analysis and data-driven insights are vital

Clean energy transitions have accelerated sharply in recent years, but there is more near-term uncertainty than usual over how these policies and strategies will evolve.

The report says: “Countries representing half of global energy demand are holding elections in 2024 and energy and climate issues have been prominent themes for voters that have been buffeted by high fuel and electricity prices, and by floods and heatwaves.

“Yet energy policies and climate targets, influential though they are, are not the only forces behind the continued rise of clean energy.”

It says there are strong cost drivers, as well as intense competition for leadership in clean energy sectors that are major sources of innovation, economic growth and employment.

“More than ever, the energy outlook is complex, multifaceted and defies a single view on how the future might unfold.”

Underlying market balances are easing, triggering intense competition between different fuels and technologies

The next phase in the journey to a safer and more sustainable energy system is marked by continued geopolitical hazards but also by a relatively abundant supply of multiple fuels and technologies.

IEA analysis finds:

• An overhang of oil and LNG supply during the second half of the 2020s
• A large surfeit of manufacturing capacity for some key clean energy technologies, notably for solar PV and batteries
• Downward pressure on prices and a period of increased competition among suppliers
• Clean technology costs are coming down, but maintaining and accelerating momentum behind their deployment in a lower fuel-price world is a different proposition.

It concludes that consumer choices and government policies will have “huge consequences” for the future of the energy sector and for tackling climate change.

How quickly will clean energy transitions unfold?

• Clean energy is entering the energy system at pace, including more than 560 gigawatts of new renewables capacity added in 2023
• Clean energy projects are approaching US$2tn each year, almost double the combined amount spent on new oil, gas and coal supply
• Costs for most clean technologies are resuming a downward trend 
• Renewable power generation capacity is predicted to rise from 4,250 GW today to nearly 10,000 GW in 2030
• Together with nuclear power, low-emissions sources are set to generate more than half of the world’s electricity before 2030.

China is outstanding

If you are looking for a nation to follow on the journey to a renewable future, look no further than China.

The IEA says: “China stands out: it accounted for 60% of the new renewable capacity added worldwide in 2023 – and China’s solar PV generation alone is on course to exceed, by the early 2030s, the total electricity demand of the United States today.”

However, it adds that there are “open questions” globally about how quickly and efficiently new renewable capacity can be integrated into power systems, and whether grid expansions and permitting times keep pace.

The report says: “Policy uncertainty and a high cost of capital are holding back clean energy projects in many developing economies.

“Recent clean energy trends in advanced economies present a mixed picture, with accelerations in some areas accompanied by slowdowns in others, including a large fall in heat pump sales in Europe in the first half of 2024.”

Other conclusions

• Clean energy momentum remains strong enough to bring a peak in demand for each of the fossil fuels by 2030

Demand for energy services is rising rapidly, but the continued progress of transitions means that, by the end of the decade, the global economy can continue to grow without using additional amounts of oil, natural gas or coal. Growth in clean energy and structural changes in the global economy, particularly in China, are starting to temper overall energy demand growth, “not least because a more electrified, renewables-rich system is inherently more efficient than one dominated by fossil fuel combustion”.

• The world has the need and the capacity to go much faster

Ample clean energy manufacturing capacity creates scope for faster transitions, but imbalances in today’s investment flows and clean energy supply chains will need to be addressed. Over the past five years, annual solar capacity additions quadrupled to 425 GW, but annual manufacturing capacity is set for a sixfold increase to more than 1,100 GW.

• Demand for electricity is taking off

Electricity use has grown at twice the pace of overall energy demand over the last decade, with two-thirds of the global increase in electricity demand over the last 10 years coming from China. Electricity demand growth is set to accelerate further in the years ahead. The projections for global electricity demand are 6%, or 2 200 terawatt-hours (TWh), higher in 2035 than in last year’s Outlook.

• Rising data centre electricity use

There are more than 11,000 data centres worldwide and they are often concentrated, meaning local effects on electricity markets can be substantial. However, data centres account for a relatively small share of overall electricity demand growth to 2030.

• The rise of electric mobility

The slowdown in oil demand growth is creating a significant overhang of supply. The report says: “China has been the engine of oil market growth in recent decades, but that engine is now switching over to electricity. EVs – many from Chinese manufacturers – are making inroads in a range of markets, although there is uncertainty over how fast their share will grow. EVs currently have a share of around 20% in new car sales worldwide, and this rises towards 50% by 2030.

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