Perspectives from Around the World

Securing a Future Energy Supply in a Sustainable Manner

Executive Director, International Energy Agency

For TANAKA Nobuo's full bio,

On 23 June, for the third time in its history, the IEA announced that its member countries would release emergency stocks of oil. The release of 60 million barrels of oil for a period of one month was in response to the ongoing disruption of oil supplies from Libya, a problem whose effect has become more pronounced as it has continued. The normal seasonal increase in refiner demand expected over the summer will exacerbate the shortfall further. Greater tightness in the oil market threatens to undermine the fragile global economic recovery. The collective action by the 28 member countries is intended to help bridge the gap until sufficient additional oil from producing countries reaches global markets.

This action surprised the oil market, as the Libyan disruption was already going on for four months without IEA action. But we have expressed our concern several times during those months and with additional demand in the third quarter on the radar, for which we saw insufficient additional supply, we could no longer wait. So, we moved in a pre-emptive manner to ensure a soft landing for the global energy markets ahead. Of course, the IEA is ready to release more oil onto the market if necessary, and this release represents only a tiny fraction of overall strategic stock levels.

While mitigating the effects of short-term disruptions by taking emergency measures remains our central focus, the IEA continues to provide benchmark analysis on future energy outlooks and policy recommendations over the longer term. Our reports and analyses discuss the future energy landscape in terms of affordability, security and environmental sustainability. This task is complicated by uncertainties today such as a still-shaky economic recovery, a veritable revolution in unconventional gas production which has upended previous projections, the direction of climate change negotiations, policy choices in those emerging countries that account for the bulk of energy demand growth, political events in the Middle East and North Africa, and policy implications of the Fukushima nuclear incident. I would like to focus in this article on our latest findings on the implications of Fukushima, on whether we are entering a "golden age of gas," and on Japanese energy policy.

In the wake of Fukushima, we have been developing a lower-nuclear case, in which nuclear power's share of the total electricity mix drops from 14% to 10% by 2035. Initial findings show that a slowdown in nuclear power, coupled with disappointing climate-change negotiations at Copenhagen and Cancun, would make it practically impossible to limit emissions to a level concurrent with the long-term stabilization of the atmospheric concentration of greenhouse gases at 450 ppm. This is the level that, according to the IPCC, gives the world a 50% chance of limiting the global average temperature increase to 2 degrees Celsius.

To make up the slowdown of nuclear power, coal demand in 2035 would increase by 130 million tonnes of coal, which is roughly equivalent to the current level of Australian steam coal exports. Gas demand would rise by 80 billion cubic metres, roughly equivalent to the current gas production of Qatar. And additional generation from renewable sources would reach 460 terawatt-hours, or about five times the current generation from renewables in Germany. Prices of electricity will generally rise, energy security will suffer from less diversity in the energy mix and higher import dependence, and CO2 emissions will rise with increased use of fossil fuels. We could see an increase in the growth in emissions from power generation of about 30% by 2035 compared with our base-line New Policies Scenario. We already see countries, particularly in Europe, moving away from nuclear power and making up for the future shortfall with a substantial expansion of renewable energy technology deployment. However, in order to still meet climate-change targets, investments will be required in the fossil fuels sector as well. Germany will need to import an additional 16 billion cubic metres of gas to replace much of its coal-fired generation by the government's 2022 nuclear phase-out date.

This is only one contributor to an increasing role for gas and, as such, we have recently released the Golden Age of Gas Scenario. This one assumes a rapid increase in gas consumption due largely to low prices from the expansion of unconventional gas exploitation. In this context, global primary natural gas demand rises by around 600 billion cubic metres to 2035 compared to the reference case, increasing from 3.3 trillion cubic metres in 2010 to 5.1 trillion cubic metres in 2035, or over 50%. The combined effect of a strong increase in natural gas demand throughout the Outlook period, and a decline in global coal demand from around 2020 onwards, results in global demand for natural gas overtaking coal before 2030 to become the second-largest fuel in the primary energy mix, after oil. However, even if this scenario represents a "golden age" for gas, it may not be a "golden age" for sustainability. An increased share of gas in the global energy mix is far from enough on its own to put the world on a carbon emissions path consistent with a global temperature rise of no more than 2 degrees Celsius. Our analysis shows that emissions are only negligibly lower in the high-gas scenario, due to higher energy demand and the displacement of some renewables. Under low-nuclear power, high-gas, and indeed all our scenarios, electricity from renewable energy is vital. Neither of these recently developed scenarios changes the need for massive investments in low-carbon fuels and efficiency measures to achieve lower CO2 emissions.

How do we see Japan in the global energy scene, especially after the Fukushima event? The priority today is to bring the damaged Fukushima Dai-ichi plants to cold shut-down. Also, it is imperative that power shortages be avoided over the summer by engaging every power source available while shaving peak electricity demand. Once this critical stage is over, the government intends to conduct a drastic review of its energy policy, namely the Basic Energy Plan, in which nuclear power is highlighted as a key power source, supplying 50% of electricity by 2030. I truly hope that serious discussions take place before jumping to conclusions, duly taking into account the various elements of energy security, cost and environmental issues. Especially given Japan's limited energy resource endowments, moving away from nuclear power would result in an even heavier import dependency on fossil fuel. Promoting renewable energy is important, of course. Prime Minister Kan's commitment to increase the share of renewable energy in the generation mix to at least 20% by the earliest possible in the 2020s is an ambitious one, and exceeds the measures of the IEA's 450 ppm scenario. In terms of energy security, such decisions should be carefully implemented based on a strategic energy design. Crucial elements of that design must include stable and safe nuclear power supply and further grid interconnection at the national level, and perhaps even across East Asia. Moreover, we expect Japan to continue to provide global leadership in the areas of energy efficiency and low-carbon economy by developing the most innovative and cutting-edge technology in the energy and environmental fields. The IEA has consistently called for an "energy technology revolution" that would encompass energy efficiency, renewables, nuclear power, carbon capture and storage, as well as smart grid and electric vehicles to realize a secure and sustainable energy future. There is no silver bullet. While we see encouraging developments, we must further accelerate and lock in the revolution in all areas by designing a better and more innovative energy market in Japan. Certainly Japan should take advantage of its low-carbon technologies and cultivate business opportunities ahead.

July 2011
  1. IEA (International Energy Agency) (23 June, 2011), Press Release, IEA, Paris.
  2. IEA (2011), Special Report—Are We Entering a Golden Age of Gas?, IEA, Paris

July 1, 2011

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