Is The IEA Too Optimistic About The Energy Transition?

By Irina Slav, a writer with more than a decade covering the oil and gas industry. Originally published at

In its latest World Energy Outlook, the International Energy Agency stated that thanks to the energy crisis rattling the world right now, demand for fossil fuels would peak, speeding up the transition to renewable energy. But is this just a case of wishful thinking?

The IEA—for the first time ever—sees this happening—across all of the scenarios it devised for its forecast. According to even the Stated Policy Scenario—usually the most conservative of the scenarios—demand for fossil fuels would begin permanently declining in the mid-2020s “by an annual average roughly equivalent to the lifetime output of a large oil field.”

Coal will be the first to go—and in just a few short years from now. Following that comes the end of natural gas, which will plateau by 2030. Oil, meanwhile, should be squeezed out by the influx of electric vehicles.

But will it, really?

The energy crisis that began last year in Europe with short gas supplies fully unfolded this year after Russia slashed exports of the commodity to the EU. This disruption has pushed demand for fossil fuels higher than it was before the pandemic.

At the time, BP was forecasting that peak oil had already occurred in 2019. According to the oil major, oil demand would never again return to 2019 levels. On to of that, everyone who’s anyone in forecasts said that coal demand would never grow globally again, and gas would be a bridge fuel to the renewable energy future. Then gas started getting demonized along with oil as dirty and inappropriate. But that was then—before the crisis.

Now, coal demand has risen because of the gas squeeze in Europe, with countries reopening mothballed coal-powered plants, boosting oil production, and even converting gas-fired power plants to coal for the winter.

Politicians—along with the IEA—seem to believe that this is a short-term demand boost that will expire the moment gas markets return to normal. The problem with this belief is that gas markets will not return to normal in a week or even a month. In fact, it is unlikely that gas markets in Europe will ever return to normal because normal means getting 40 percent of the EU’s gas from Russia.

With new U.S. LNG supply slow to come online and replace the lost Russian pipeline flows, we could see strong coal demand for a few more years. And then China and India, and other Asian economies will continue using coal because it will remain cheaper than gas, especially liquefied gas, whose price has been driven sky-high by thirsty European buyers.

On the subject of oil demand, the IEA appears to believe that EVs will kill it beginning in the mid-2030s. Yet this would necessitate the production, sale, and use of many millions of EVs, which is far from certain because of the looming shortages in the metal and mineral world.

Warnings about copper supply have been coming from the mining industry and from analysts for months now. Trafigura was the latest to add its voice to them, saying earlier this month that global copper stocks had fallen to dangerously low levels, equal to about 4.9 days of global consumption. By the end of the year, Trafigura said at an FT event, this will be reduced to 2.7 days.

“It is not accidental that the EU has decided to bring forward the target of doubling its solar capacity from 2030 to 2025. All that requires a lot of copper,” Kostas Bintas, Trafigura co-head of metals and minerals trading, said.

“Look at electric vehicles everywhere, [the numbers on the road] are surprising to the upside. That’s a lot of copper too. As a result, we’ve been drawing down stocks throughout this very difficult year.”

What all these warnings are suggesting is pretty simple: there may not be enough raw materials for all the EVs—and solar farms and wind parks—that need to be sold to kill oil demand and usher in the renewable energy future.

According to the IEA, the transition is a matter of energy security, and the war in Ukraine has highlighted that and would likely act as a catalyst for a quicker transition. Indeed, the more locally produced energy a country has, the more secure it is. The problem is that the forms of renewable energy chosen to drive the transition are not very good at providing energy security.

The latest to make that clear was Goldman Sachs’ Jeffrey Currie, who told CNBC this week that some $3.8 trillion was invested in renewables over the past decade, and this massive investment only moved the share of fossil fuels in the global energy mix from 82 percent to 81 percent.

Now, Currie went on to note, this share might well be back at 82 percent because of the energy squeeze that has spurred more coal consumption. He also pointed out that the investments in renewables have been in capacity, but the capacity utilization factor of wind and solar installations tends to be quite low. This is what prevents wind and solar from providing the energy security the IEA’s Fatih Birol was talking about.

The International Energy Agency has become quite notorious in the past few years as a champion for the energy transition rather than an energy agency open to all forms of energy. Its emphasis on the transition needing to happen as fast as it can and it having zero causal links with the energy crisis has drawn some skepticism, most notably after the publication of its Road Map to Net Zero.

At the time, Saudi Arabia’s energy minister mocked the plan calling it “La La Land.” Interestingly, since the publication of the road map, demand for fossil fuels has indeed increased and has prompted the IEA itself to call for more investment in them after saying in the road map that we had no more need to invest in additional oil and gas production.

Like that road map, this latest WEO might go down in history as the latest IEA installment of wishful thinking rather than a reflection of any remotely plausible reality.

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  1. PlutoniumKun

    The IEA has consistently over stated projections for fossil fuel demand and has a long record of underestimating renewable roll-out, particularly solar. There is no good reason that their history of erring on the side of oil, gas and nuclear (because thats who supplies most of their data) has changed.

    If renewables were hitting a commodities crunch, we’d see spikes in the price of copper and rising futures. In fact, what we see is the opposite – dropping prices on fears of recession.

      1. PlutoniumKun

        Copper 5 year futures are at their long term average. I’m not a market watcher, so I can’t comment from a position of expertise, but I see no evidence from people who actually mine or trade copper that they see a huge long term increase in price. The copper industry also disagrees that there will be a supply crunch. While renewables require significantly more copper than at present, other uses (not least Chinese investment in basic electricity and water infrastructure) is dropping and is almost certainly well past its peak. Significantly more copper is used in construction (mostly plumbing) than in transport/electricity. Probably the single biggest user of copper the past decade or so is just wiring for Chinese home construction. Thats now at an end.

        So many of these articles seem to me to sourced from the power industry and others trying to talk up its book and talk down renewables.

      2. Dave in Austin

        Copper prices are very cyclical and few want to hold inventories of refined copper. The problem will be made much worse by the recent increase in the cost of money which makes it even more expensive to hold inventories. Also, many producer sell forward contracts on much of the production, so price increases often don’t show up for a year or two.

        The mid-term production/consumption numbers indicate a supply crunch is coming and states like Chile have a century of history to tell them “Don’t increase production too much, it leads to price crashes.”

        The only countervailing force is China. Rapid industrialization takes a huge amount of copper. But then much of the copper in buildings and vehicles eventually gets recycled.

      1. LawnDart

        That thread offers great insight on copper production and the massive energy inputs required to do this– thanks for the find.

        1. The Rev Kev

          Not my find but another reader here who linked to it a coupla days ago. Turns out that the bean-counters don’t know any of this stuff. They had one job and they failed at it. And yet it was in their title.

          1. Alex Cox

            That is an instructive and terrifying thread. The author writes, “I directly challenge analysts calculating lifecycle impacts of wind-solar-batteries to account for the fossil fuel and carbon impacts expended in producing new cathode copper.” I wonder if anyone will accept his challenge.

            Meanwhile I just saw a new Bolivian film, UTAMA, set in an Altiplano village which is running out of water. It’s a drama and a very good one, but the problem is real, and the actors are all non-professional, local people speaking Quechua. Its unspoken subtext is that lithium mining will wipe all these villagers out.

            The only solution I can see is the Cuban one. Keep all our old gas and diesel cars and trucks on the road for the next fifty or sixty years, and stop making new ones. Forget the “clean energy transition”, a corporate and political fantasy which will fail – after it kills all those villagers and their llamas.

      2. PlutoniumKun

        Seriously guys? You are quoting a lawyer who is a nuclear proponent on the technical aspects of renewable manufacture? His statement that there aren’t full life cycle analyses of copper usage is a giveaway. The energy inputs required in copper are very well known, as for all the most common metals. There is a vast literature on the LCA’s (Life Cycle analysis) of all the major inputs, many carried out by government agencies as well as the usual research institutes – a little time on google scholar and on the EU website will find a vast literature on it.

        That twitter thread has been floating around for a while and is not taken seriously by anyone in the sector. Anyone who claims that we don’t know about the energy inputs to solar panels or the copper cycle is either lying or completely clueless about the topic.

  2. Peter Nightingale

    The latest International Energy Agency report reads as if it was written by NATO headquarters located at Boulevard Leopold III in Brussels. Who knows? The bizarre mix of units used throughout the report suggests undue influence of some country that refuses to use Standard International units.

    Here’s some of the NATO talk:

    Today, the world is in the midst of the first truly global energy crisis, with impacts that will be felt for years to come. Russia’s unprovoked invasion of Ukraine in February has had far‐reaching impacts on the global energy system, disrupting supply and demand patterns and fracturing long‐standing trading relationships.

    When people misleadingly blame climate and clean energy for today’s crisis, what they are doing— whether they mean to or not—is shifting attention away from the real cause: Russia’s invasion of Ukraine.

    The member countries of the International Energy Agency listed in the report suggests the same lack of global balance: China, Russia and quite a few other countries are missing.

    None of the above proves that the report is incorrect, but it seems quite clear that the global climate catastrophe will not be solved by attempts of NATO and the (lack of) Washington Consensus to impose the American vision of a unipolar world.

    Apart from the some in the Green Party and the Black Left represented at Black Agenda Report, it appears that Dennis Kucinich is one of the few in the U.S. who not only understands this but even says it out loud:

    We really need, as individuals and collectively, to begin to see the world as one, to see the world as interconnected and interdependent. And our goal should be human unity. Not homogenized, not that we’re seeing the world emerge into one econo-technic system, but to respect all cultures and the diversity of cultures. We need to reformulate that this movement is about protecting humanity, to create human and ecological security. Because it’s about the planet in which we live, which war could destroy, because war is ecocide. So you know we are at an inflection point right now in the history of this country and in human history, where we have an opportunity to create a new world.

    While I’m at it let me add my pet peeve. There is no way on earth that we’ll develop a global understanding of the energy situation if we keep using a mix of 19th century units for power. I’m thinking of units such as barrels of oil equivalent per day (mboe/d) and footinches per split second. The unit should be the (giga) watt. All power sources must be seen in relation to the 20,000 gigawatts of power currently used globally. Lacking context, numbers have no meaning; they are used to suggest expertise where there is none.

    Also note that the word “hydrogen” appears 551 times in the report, frequently right next to natural gas.

  3. Joseph Chaisson

    As I have commented before, the upcoming global energy system transition will look quite different than imagined and will not be primarily wind/pv/storage driven.

    What will emerge relatively soon is a “long forgotten” nuclear fission technology that has been modernized by a very capable nuclear engineer. Until recently, moving this has always run into the “too good to be true” view, which has taught me much about the narrow perspectives of today’s nuclear engineers and their training (since around 1980).

    A recent change is that a very serious (non-US) industrial and nuclear power company consortium caught word of this technology and is exploring serious investment, parallel physical demonstration and commercial deployment – initially to replace several nuclear power stations that will need to be decommissioned over the next decade plus.

    This technology will be quite easily licensed given it’s inherent safety, will use non-fissal gaseous nuclear fuel (of which, massive global stockpiles exist), use an adapted already mass manufactured physical energy system and would have a physical footprint quite similar to natural gas combined cycle power plants, except be about 25% small for an equivalent power capacity and have no fuel logistics as a roughly 5 gallon container of fuel (that can be delivered by common carrier) would provide sufficient fuel for a year’s operation of a 400 MW power plant. Current electricity cost estimates are ~under 3 cents/kwh and given heat output this technology would be well suited to hydrogen and eventually ammonia fuel production.

    If all goes well, this technology will be much more publicly available to review within the next six to twelve months.

    For the inquisitive minds here, plug “gaseous nuclear fuel” into google scholar and also look for information on the University of Florida’s extensive nuclear work for NASA (conducted at Los Alamos National Lab) in the 1960s and up to the zeroing out of NASA’s nuclear budget due to Space Shuttle cost over runs.

    Stay tuned!

    1. Anthony G Stegman

      We should all be concerned when engineers start tinkering around. Throughout history engineers have created at least as many problems as they have solved. This new fangled nuclear power will prove to be no different. The world has reached a point with 8 billion humans all clamoring for more that there is no more slack in the system. Any and all technological “fixes” will most certainly create new problems that can’t simply be ignored or hand waved away.

  4. Greg S

    I did not see the word nuclear listed in the Key Energy Trends of the report. I don’t have time to read through the entire 524 page report but I did see the word nuclear used once in the forward to the report (in relation to Korea). What do you make of this?

  5. Anthony G Stegman

    I have jars of copper pennies that I’m willing to trade for gold. :) No shortage of gold I hear.

  6. iea_hmmm

    I’m suspicious of the IEA right now. They recently published this glowing article that states in the opening paragraph:

    Defying expectations, CO2 emissions from global fossil fuel combustion are set to grow in 2022 by only a fraction of last year’s big increase

    “Despite concerns about the effects of the current energy crisis, global carbon dioxide (CO2) emissions from fossil fuel combustion are expected to grow by just under 1% this year, only a small fraction of their increase last year, as a strong expansion of renewables and electric vehicles prevents a much sharper rise.”

    However just days prior to this IEA story, the Carbon Monitor project posted the actual 2022 CO2 emissions through August.

    Carbon Monitor global CO₂ emissions updates: Jan-Aug of 2022 is +2.2 % than that of 2021, +11.6% of 2020 and +2.9% than 2019 (pre-pandemic level).

    So at the 8 month mark we’ve actually emitted 2.2% more CO2 emissions than in 2021 while the IEA is boasting a projection of a <1% increase for 2022.

    Something isn't adding up.

    And methane and NO2 are already at record high levels while continuing to increase at a record pace.

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