1.
© OECD/IEA 2018
Electricity Focus
Laura Cozzi, Brent Wanner,
Stéphanie Bouckaert
26 November 2018

2.
© OECD/IEA 2018
Context
 Electricity is increasingly important in the modern world, to date:
 Electricity demand has been growing twice as fast as total energy demand
 Investment in the power sector is larger than that in the oil and gas sector
 The rise of solar PV and wind power is transforming electricity supply
 Overall energy-related CO2 emissions are back on a rising trend in 2018
 For the first time, the global population without access to electricity fell below 1 billion
 Policy makers need well-grounded insights about different possible futures & how
they come about. The WEO provides two key scenarios:
 New Policies Scenario
 The Future is Electric Scenario was introduced to explore the implications of more
rapid electrification of end uses and the digitalization of the economy
 Sustainable Development Scenario

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Electricity, the fastest growing “fuel”
In 2000, developing economies accounted for one-third of electricity demand,
30
40
2000 2010 2017 2030 2040
United States
European Union
Other developing economies
India
China
Other advanced economies
Japan
Global electricity demand by region
ThousandTWh
20
United States
European Union
Other developing economies
India
China
Other advanced economies
Japan
by 2040, their share doubles as they account for most of the electricity growth

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Electricity demand flattening in advanced economies
Electricity consumption in advanced economies
Efficiency measures have moderated growth in electricity demand in advanced economies
TWh
1 763 TWh
41%
Industry
30%
Services
29%
Residential
2 000
4 000
6 000
8 000
10 000
12 000
2000 2005 2010 2015 2017
Observed
Without energy efficiency
Without electrification
Efficiency savings contribution
by sector in 2017

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Energy efficiency is key to lower electricity growth
Electricity demand and avoided demand due to energy efficiency in the New Policies Scenario
Global electricity demand growth would be more than 60% higher in 2040 without
projected energy efficiency improvements
15%
30%
45%
60%
Industry Buildings Transport
2017 2040
Developing economies
4 000
8 000
12 000
16 000
Industry Buildings Transport
TWh
2017 Growth to 2040 Efficiency savings
Share of electricity in TFC (right axis)
Advanced economies
Electricity demand

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What if the future is electric?
Buildings
Level of household uptake
Electrification makes inroads in all end-uses in parallel with global access to electricity
and greater digitalisation
25%
50%
75%
100%
Electricity
for heating
Access to
electricity
15%
30%
45%
60%
EAF in
steel
2%
4%
6%
8%
Ammonia Heat
Future is Electric ScenarioNew Policies Scenario
Industry
Electrification of end-uses
Transport
Electric vehicle fleet
Network
enabled
appliances
0.2
0.4
0.6
0.8
1.0
Light
duty
vehicles
2/3
wheelers
Billionvehicles
2
4
6
8
10
Trucks Buses
Millionvehicles

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25
50
75
100
125
2015 2020 2030 2040
Oil demand
(mb/d)
8
16
24
32
40
2015 2020 2030 2040
Energy-related
CO2 emissions (Gt)
Implications of greater electrification
Increased electrification leads to a peak in oil demand
Scenario:
Future is Electric
New Policies
, avoids 2 million air pollution-
related premature deaths, but does not necessarily lead to large CO2 emissions reductions
25
30
35
40
45
2015 2020 2030 2040
Electricity demand
(thousand TWh)
20

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Solar PV outpaces all other technologies
Installed power generation capacity by source in the New Policies Scenario
Renewables make up two-thirds of all capacity additions worldwide to 2040,
capturing 70% of power plant investment
1 000
2 000
3 000
2000 2010 2020 2030 2040
GW Historical Projections Gas
Other renewables
Coal
Nuclear
Oil
Solar PV
Wind
Hydro
Battery storage

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40
80
120
160
China Russia India
GW
2017
Two directions for nuclear power
Without policy changes
The contribution of nuclear power could decline substantially in leading markets,
while large growth is coming, as China takes first position within a decade
40
80
120
160
United
States
European
Union
Japan
Retirements
from 2017
2040
GW
Growth markets
Additions
to 2040
2017

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The electricity landscape is transforming
World electricity generation mix by source
Coal and renewables switch roles by 2040, mainly driven by policy support and
accelerated by the improving competitiveness of renewables
20%
40%
60%
80%
Fossil fuels Renewables Nuclear
2017
Fossil fuels Renewables Nuclear
2040
Coal
Oil
Gas
Gas
Coal
Oil
Hydro
Wind
Solar
Other
Hydro
Wind
Solar
Other

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All sources of
flexibility needed
6
5
2
1
Mobilise existing
power system flexibility
4
3
Targeted investment
in flexibility needed
Flexibility: the cornerstone of tomorrow’s power systems
Phases of integration with variable renewables share, 2017
Higher shares of variable renewables raise flexibility needs and call for reforms to deliver
investment in power plants, grids & energy storage, and unlock demand-side response
Integration
phase
Wind and solar PV share of generation
0% 10% 20% 30% 40% 50% 60%
India
China
United States
India
China
United States
European Union
European Union
Germany
Germany
United Kingdom
United Kingdom
Phases of integration with variable renewables share, 2030

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20%
40%
60%
80%
100%
2010 2017
Market designs will be under stress
Share of long-run generation costs covered by energy sales in the European Union
The widening gap between electricity sales and total generation costs in some markets
raises questions about the ability of competitive markets to attract timely investment
2025 2030
Other revenue needed
Rising CO2 price
Energy sales

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Looking beyond the levelised cost of electricity
Technology costs
Costs remain an important indicator of competitiveness, but better metrics are needed
to reflect the changing nature and needs of power systems
DollarsperMWh
Levelised cost
(LCOE)
System value
Value-adjusted LCOEs (VALCOEs) in China
Capital,
fuel,
O&M,
CO2
costs
Energy
Flexibility
Capacity
DollarsperMWh(2017)
40
80
120
160
2020 2030 2040
Coal
Gas CCGT
Coal existing
Nuclear
Wind onshore
Solar PV
Solar PV with storage
Wind offshore
and value

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Our energy destiny lies with governments
Power sector investment to 2040
$20 trillion
Power sector investment continues to be driven by regulated market frameworks
Regulated/contracted
(generation and grids)
93%
Wholesale market pricing 7%

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Can we unlock a different energy future?
Global energy-related CO2 emissions
Coal plants make up one-third of CO2 emissions today and half are less than 15 years old;
policies are needed to support CCUS, efficient operations and technology innovation
12
18
24
30
2017 2025 2030 2035 2040
Gt CO2 36
Sustainable Development
Scenario
Coal-fired power plants
Increased room
to manoeuvre
6
New Policies Scenario
Existing and under construction
power plants, factories, buildings etc.

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Conclusions
 The links between energy & geopolitics are strengthening & becoming more
complex, a major factor in the outlook for energy security
 The rapid growth of electricity brings huge opportunities; but market designs need
to deliver both electricity and flexibility to keep the lights on
 A comprehensive strategy to electrify end uses and decarbonise the power sector is
needed to achieve environmental goals
 There is no single solution to turn emissions around: renewables, efficiency & a host
of innovative technologies, including storage, CCUS & hydrogen, are all required
 The future pathway for energy is open: governments will determine where our
energy destiny lies

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iea.org/weo