OREANDA-NEWS. November 25, 2011. The International Energy Agency and SKOLKOVO Energy Centre have given Russia’s first World Energy Outlook 2011 presentation, which was open to the mass media and a wide range of experts. The campus of the Moscow School of Management SKOLKOVO hosted the presentation, and Maria van der Hoeven, executive director of IEA, presented the agency’s forecast. Grigory Vygon, director of SKOLKOVO Energy Centre, made some remarks representing the Russian point of view.

This year, IEA research concerned Russia’s energy future. Professionals from SKOLKOVO Energy Centre were actively involved in preparing the chapters of the WEO report that focused on Russia.

Regarding the future of global energy, the IEA experts’ main conclusion can be summarised as follows: the world is locked into its current developmental trajectory, which is heading for an unstable and unsustainable energy future. “Growth, prosperity, and a rising population will inevitably raise energy needs over the coming decades. But we cannot further rely on insecure and environmentally unsustainable consumption of energy,” Maria van der Hoeven said.

IEA experts believe that Russia must turn its attention to the rising demand for gas, where the country has the most to gain. Russia’s greatest tasks will be as follows: to ensure investment in a new generation of more expensive oil and gas fields, as well as to increase the energy efficiency of its economy. While the country remains a major supplier of fossil fuels to the traditional markets in Europe, a shift towards exports to the Chinese and Asian-Pacific markets is gaining momentum.

Grigory Vygon said: “Due to increasing competitiveness in the traditional, external markets, it is essential for Russia to step up its development of projects to export fuel to the East. Thus, there should be a priority on diversifying the markets as much as possible. Russia must absolutely avoid being tied to a single consumer. It is vital to create the appropriate tax incentives to make sure that Russia’s energy resources remain competitive. Russian energy security needs to remain the highest priority of the nation’s energy policy. Our country is already experiencing seasonal shortages of natural gas, winter diesel, jet fuel, and high-octane gasoline. To resolve these issues, we must immediately build new facilities for extracting gas and the secondary processing of oil.”

Another partial solution suggested by IEA experts to solve the problem of energy security would be to raise Russia’s own energy efficiency to the level of the OECD countries. This would enable the country to reduce its annual consumption of primary energy resources by almost a third, an amount roughly equal to the United Kingdom’s yearly energy demands. The potential savings in natural gas alone, around 180 billion cubic metres, is close to the volume of Russian net exports in 2010.

The IEA’s key conclusions were as follows:

In the New Strategies Scenario (the WEO Central Scenario), which assumes the government’s recent commitments will be pursued cautiously, primary energy sources demand will increase by a third between 2010 and 2035, and 90% of this growth will occur in non-OECD countries. China is enhancing its position as the world’s largest energy consumer. In 2035, it will use almost 70% more energy than the US (the country with the second highest energy consumption). Even so, per capita energy consumption in China is still less than half of that in the United States.

Fossil fuels account for a slightly decreasing proportion of all primary energy sources consumed globally, predicted to fall from 81% today to 75% in 2035. The percentage of renewable energy in the fuel-energy mix is forecast to increase from the 13% currently to 18% in 2035. That growth is supported by subsidies, which will increase from USD 64 billion in 2010 to USD 250 billion in 2035. This support, however, cannot be taken for granted in an era of great fiscal austerity. By comparison, in 2010, USD 409 billion was spent on subsidising fossil fuels.

The temporary pressure on the oil markets is easing due to slower economic growth and the expected re-emergence of Libyan crude on the market. However, the estimated average price of oil will remain high, nearing USD 120 a barrel in 2035 (at 2010 rates). Demand for oil will increase from 87 million barrels a day in 2010 to 99 million barrels in 2035. All of this net increase will come from the transportation sector in emerging countries. The total number of light vehicles will double, reaching almost 1.7 billion by 2035. There will be continuing developments in alternative automotive technology that will either use oil far more efficiently or not use it at all, but this technology needs time to reach the market and become cost-effective.

Consumption of coal, which has accounted for almost half of the growth in global demand for energy sources in recent decades, will increase by 65% by 2035. The future of coal is heavily dependent on energy policy, particularly in China, which consumes almost half of the world’s coal supplies. More efficient coal-powered electricity plants, as well as carbon capture and store technology (CCS), can improve coal’s long-term prospects, but the adoption of CCS technology is significantly complicated by regulatory, political, and technical barriers.

The events at the Fukushima Daiichi nuclear plant raised doubts about the future of nuclear energy. In the New Strategies Scenario, the share of nuclear energy is forecast to grow only slightly more slowly than was predicted last year, because most countries with nuclear energy development programmes have confirmed that they intend to continue these programmes. However, that situation may change because of the uncertainty in this issue. The Low Nuclear Case special research examines what would happen if the anticipated investments in the nuclear sector of the energy supply were cut by 50%. Although this would mean a more favourable climate for renewable energy sources, such a reduction in investment would create more expensive energy imports, which would heighten concerns about energy security, as well as complicate the battle against climate change and increase the associated costs.

The share of coal in the fuel-energy mix is increasing. Consumption of natural gas will be almost equal to that of coal.

In the New Strategies Scenario, total CO2 emissions in the next 25 years will be equal to three quarters of that in the last 110 years. Continuing on this course will lead to long-term increases of an average of more than 3.5 degrees Celsius in temperature. Unless we develop a new strategy, we will find ourselves on an even more dangerous path, leading to temperature increases of six degrees or more. Scenario 450, which was presented at WEO, examines opportunities for developing energy systems that are aimed at achieving the internationally accepted goals of limiting the long-term increase in the average global temperature to just 2 degrees. Four fifths of the total allowable CO2 emissions associated with energy use in 2035 are already locked into existing fixed assets (electricity plants, buildings, and factories). If decisive measures are not taken by 2017, the energy infrastructure that will be in place at that time will have already reached the cap for CO2 emissions that was established by Scenario 450 through to 2035.