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Middle East Iran Jordan Saudi Arabia United Arab Emirates 22 | 28Th NovEmbEr - 4Th DEcEmbEr 2014 | UTILITY WEEK Finance & Investment Market view R ecent global energy policy news has been dominated by the tentative agree- ment between the US and China to reduce their pollution levels. They are the world's two largest polluters, accounting for around 40 per cent of global carbon dioxide emissions. The US is planning a cut of over 25 per cent by 2025, while China expects emissions to peak in 2030 and fall thereaer. Although these pledges are distinctly long-term, they will be central to the debates at next year's pivotal United Nations Climate Change Conference in Paris. Elsewhere, the International Energy Agen- cy's (IEA) newly published World Energy Out- look 2014 provides several key messages for stakeholders in the energy game. Inevitably, it gave considerable space to the sagging price of oil – Brent Crude is down to around $80 a barrel – and the extent to which this is likely to be a tempo- rary trend. Aer all, it was only recently that oil was consistently trading at well over $100 a barrel. The IEA's chief economist, Fatih Birol, drew particular attention to many uncertain- ties affecting the oil price, all the more so given the political and economic turmoil in several Middle Eastern countries. Undertaking some crystal-ball gazing, Birol concluded that "you may see prices spike around 2020 if investments in the Mid- dle East, especially in Iraq, don't take place". Not surprisingly, Birol highlighted the Middle East – home to several Opec mem- bers, including Saudi Arabia – as the key to new oil investment. He also spoke of "major problems" if new capacity was not brought forward. Importantly, over the last two years, sev- eral oil majors have cut back their upstream investment budgets, notably Exxon Mobil, Shell and BP, as they seek to become more cash-generative. Importantly, too, leading US shale oil pro- ducers will be adversely affected by the low oil price. For many, it makes their operations barely profitable. The IEA also identified gas security as a major issue for Europe, particularly with many countries being very dependent on Russian gas being shipped via Ukraine where political instability abounds. With regard to liquefied natural gas (LNG), the IEA was far more upbeat, project- ing substantially higher output over the next two decades. While the Middle East will be pivotal, Australian LNG output is set to rise sharply. The US, Canada, East Africa and Russia are also forecast to expand their LNG operations. Even though the IEA has concluded that some progress is being made in achiev- ing greater energy efficiency, it forecasts an increase in global electricity generation capacity from c6,000GW today to just below 11,000GW by 2040. China is expected to lead the rise in elec- tricity demand for the next two decades, along with various third world countries, while demand from nations of the OECD (Organisation for Economic Co-opera- tion and Development) is predicted to be broadly flat. Capacity investments In terms of the new capacity coming on stream – not just to meet higher demand but also to replace plants being retired – the IEA expects that renewable generation will be substantially expanded. Much of this new renewable capacity will be either windfarms or solar powered gen- eration. By 2040, the IEA anticipates global renewable generation capacity of well over 3,000GW, compared with below 1,000GW currently. Interestingly, too, the IEA seems con- fident that by 2030 both these generation sources will be operating on a significantly lower cost base and, consequently, will need much reduced subsidies. The IEA also believes that gas-fired plant will play a key role in providing new capac- ity. Clearly, the availability of cheap gas deals will be crucial. This year's IEA World Energy Outlook included an extensive section on nuclear energy prospects around the globe. While there will be a sea-change in nuclear capac- ity in China, and eventually perhaps in India and Russia, the IEA is far less confident that this trend will be replicated elsewhere. It anticipates almost 40 per cent of today's nuclear capacity being retired by 2040, with European Union nuclear power capacity due to decline sharply over the period. It is a scenario that prompted a nerv- ous response from the World Nuclear Asso- ciation, whose director general Agneta Rising commented: "The IEA's central sce- nario [described as the New Policies Sce- nario] would set us on a path of a dangerous increase in global temperatures." She continued: "We must act to switch to cleaner and more affordable energy sources. Nuclear is a cost-effective way of producing reliable low-carbon electricity on a large scale and must form an increasing part of the world's energy supply if we are to get serious about addressing climate change." Contributing to the challenges of bringing new nuclear generation online, especially in the US and Europe, the IEA noted major problems with nuclear waste management and disposal practices. Current procedures IEA's world view Nigel Hawkins summarises the International Energy Agency's expectations for global energy trends out to 2040, including gloomy news for EU gas security and nuclear power. Mexico STaTuS oF nuclear power proGrammeS, 2013 total capacity (GW) Existing: 392 Under construction: 76 nuclear power Current users: new plants under construction Current users: no new plants under construction First plant(s) under construction Considering introduction Phasing out Prohibited Albania Austria Belarus Belgium Bulgaria Croatia Czech Rep. Finland France FYR Macedonia Germany Ireland Lithuania Netherlands Poland Romania Slovakia Slovenia Spain Sweden Switzerland UK europe Canada 14 US 105 6.2