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Power shortage risks by 2015, Ofgem warns

"Consumers need protection from price spikes as well as power cuts."
December 3, 2013
Future world energy demand driven by trends in developing countries

Source: U.S. Energy Information Administration, International Energy Outlook 2013

EIA's International Energy Outlook 2013 (IEO2013) projects that growth in world energy
use largely comes from countries outside of the Organization for Economic Cooperation
and Development (OECD). Energy use patterns for countries inside the OECD are
relatively stable between 2010 and 2040 as primary energy use is projected to grow by
0.5% per year, roughly the same rate as population growth in those countries. In non-
OECD countries, faster growing economies and changing habits in highly concentrated
populations drive significant increases in energy use.

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Energy use in non-OECD countries is projected to grow by 2.2% per year, and the
share of non-OECD energy use is expected to rise from 54% of total world energy use
in 2010 to 65% in 2040.
Between 2010 and 2040, IEO2013 shows that primary energy use per capita is
expected to change little from its 2010 level of 196 million British thermal units (MMBtu)
in the OECD but grows from 50 MMBtu to 73 MMBtu per capita in non-OECD countries.
India's energy use per capita is expected to grow during the period.

Source: U.S. Energy Information Administration, International Energy Outlook 2013

In 2040, the total gross domestic product (GDP), measured in purchasing power parity
(PPP), of non-OECD countries is projected to be much higher than the GDP of OECD
countries, but the amount of energy used per unit of GDP is virtually the same.
At the same time, the ratio of GDP relative to population remains much higher in
OECD countries. This higher GDP-to-population ratio allows citizens in OECD
countries to spend more resources on energy-consuming services that provide

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productivity, leisure, and comfort, and keeps energy consumption on a per capita basis
much higher in the OECD.
As the economies in the non-OECD countries continue to experience relatively fast
growth, those countries will also be able to spend more for energy-consuming services.
Power to the People:
The World Outlook for Electricity Investment
Electricity blackouts made news in Europe and North America not long ago.
Behind the headlines, too much of the world lives with blackouts everyday. About
one in four people still have no electricity.
How much will it cost to bring the needed power to more people?
Energy analysts are looking at the pace and price of progress - at a time when
electricity demand is rising ever higher.
Total investment required for the energy-supply infrastructure worldwide over the
period 2001-2030 is expected to amount to $16 trillion, or $550 billion a year.
This investment is needed to replace existing and future supply facilities that will be
exhausted or become obsolete during the projection period, as well as to expand
supply capacity to meet projected primary energy demand growth of 1.7% per year.
Electricity Market Trends
World electricity demand is projected to double between 2000 and 2030, growing at
an annual rate of 2.4% (see Table 1). This is faster than any other final energy
source. Electricity's share of total final energy consumption rises from 18% in 2000 to
22% in 2030. Electricity demand growth is strongest in developing countries, where
demand will climb by over 4% per year over the projection period, more than tripling
by 2030. Consequently, the developing countries' share of global electricity demand
jumps from 27% in 2000 to 43% in 2030.

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The next three decades will see a pronounced shift in the generation-fuel mix in
favour of gas and away from coal - the most widely used fuel today worldwide. The
role of nuclear power is also expected to decline markedly, because few reactors will
be built and some existing ones will be retired. Nuclear production is projected to
peak at the end of this decade and then decline gradually. Its share of global power
generation will, therefore, drop sharply from around

Power Sector Investment Needs
To meet the expected growth in electricity demand through 2030, cumulative
investment of $10 trillion in power-sector infrastructure will be needed - equivalent to
60% of total energy-sector investment. If the investments in the oil, gas and coal
industries that are needed to supply fuel to power stations are included, this share
reaches more than 70% and total power-sector investment over $11 trillion. That is
nearly three times higher in real terms than during the past thirty years. As demand
for electricity increases, investment needs will gradually rise, from $2.6 trillion in the
current decade to $3.9 trillion in 2021-2030.
The power sector in developing countries will require more than half of the global
investment, exceeding $5 trillion. Two-thirds must flow into developing Asia. China's
investment needs will be the largest in the world, approaching $2.


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India will need investment close to $700 billion, while East Asia and Latin America
each will need investments approaching $800 billion. The electricity industry in
OECD countries will need investment of around $4 trillion, while that in the transition
economies will need $700 billion of investment, more than half of it in Russia.
Generation is the largest single component of total power infrastructure
investment. Investment in new plants over the next thirty years will be more
than $4 trillion, accounting for 41% of the total. Most of this investment will go into
the development of gas and coal-fired power plants.

In OECD countries, where networks are more developed, most network investment
will be needed for refurbishment and replacement of existing equipment. In the
European Union, as in the rest of the OECD, investment in new power stations to
replace those built in the 1970s and 1980s will need to rise in the coming years (see
Figure 3). In developing countries, priority is often given to investment in generation,
but a growing share of capital will need to go to transmission and distribution in the
future.



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INTERNATIONAL ENERGY OUTLOOK 2013
World energy demand and economic outlook
Overview
In the IEO2013 Reference case, world energy consumption increases from 524
quadrillion Btu in 2010 to 630 quadrillion Btu in 2020 and 820 quadrillion Btu in 2040, a
30-year increase of 56 percent.
More than 85 percent of the increase in global energy demand from 2010 to 2040
occurs among the developing nations outside the Organization for Economic
Cooperation and Development (non-OECD), driven by strong economic growth and
expanding populations. In contrast, OECD member countries are, for the most part,
already more mature energy consumers, with slower anticipated economic growth and
little or no anticipated population growth.
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In contrast to the OECD nations, developing non-OECD economies, particularly in non-
OECD Asia, have led the global recovery from the 2008-2009 recession.

China and India have been among the world's fastest growing economies for the past
two decades.


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From 1990 to 2010, China's economy grew by an average of 10.4 percent per year and
India's by 6.4 percent per year. Although the two countries' economic growth remained
strong through the global recession, both slowed in 2012 to rates much lower than
analysts had predicted at the start of the year.

In 2012, real GDP in China increased by 7.2 percent, its lowest annual growth rate in 20
years. India's real GDP growth slowed to 5.5 percent in 2012.

Even with slower than average growth in China and India in the short-term, medium-
and long-term prospects for the two nations are good.

Since 1990, energy consumption in both countries as a share of total world energy use
has increased significantly; together, they accounted for about 10 percent of total world
energy consumption in 1990 and nearly 24 percent in 2010.
From 2010 to 2040, their combined energy use more than doubles in the Reference
case, and they account for 34 percent of projected total world energy consumption in
2040. China, which recently became the world's largest energy consumer, is projected
to consume more than twice as much energy as the United States in 2040 (Figure 13).



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Outlook for world energy consumption by source
Liquids consumption increases at an average annual rate of 0.9 percent from 2010 to
2040, whereas total energy demand increases by 1.5 percent per year. Nuclear power
and renewables are the fastest-growing sources of world energy, both increasing at an
average annual rate of 2.5 percent. Concerns about energy security, the impact of fossil
fuel emissions on the environment, and sustained high world oil prices support

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expanded use of nuclear power and renewable energy over the projection. Government
policies and incentives improve the prospects for non-fossil forms of energy in many
countries around the world in the outlook.



In 2040, liquid fuels, natural gas, and coal still supply more than three-fourths of total
world energy consumption. Petroleum and other liquid fuels remain the largest source of
energy, but their share of world marketed energy consumption declines from 34 percent
in 2010 to 28 percent in 2040.

On a worldwide basis, liquids consumption increases only in the industrial and
transportation sectors while declining in the buildings and electric power sectors. The
decrease in the use of liquid fuels in the residential, commercial, and power sectors is a
result of rising world oil prices, which result in switching from liquids to alternative fuels
where possible. In contrast, the use of liquids in the transportation sector continues to
increase despite rising prices. World liquids consumption for transportation grows by 1.1
percent per year from 2010 to 2040 and accounts for 63 percent of the total projected
net increment in liquid fuel use. The industrial sector accounts for the remainder of the
increase, growing by 1.2 percent per year over the course of the projection.

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In the IEO2013 Reference case, the world's total natural gas consumption increases by
1.7 percent per year on average, from 113 trillion cubic feet in 2010 to 132 trillion cubic
feet in 2020 and 185 trillion cubic feet in 2040.

Increasing supplies of natural gas, particularly from shale formations in the United
States and Canada, and eventually elsewhere as well, help to supply global markets. A
substantial portion of China's future natural gas production is projected to come from
tight gas, shale gas, and coal bed methane.



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Worldwide, hydroelectricity and wind are the two largest contributors to the increase in
global renewable electricity generation, with hydropower accounting for 52 percent of
the total increment and wind 28 percent.
The mix of the two renewable energy sources differs dramatically between the OECD
and non-OECD regions. In OECD nations, most economically exploitable hydroelectric
resources already have been developed. Except in a few casesnotably, Canada and
Turkeythere are few opportunities to expand large-scale hydroelectric power projects.
Instead, most renewable energy growth in OECD countries is expected to come from
non-hydro-electric sources, especially wind.

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OECD economies



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