The United States will become the world's top producer of oil and natural gas over the next several decades, but China and India will lead a host of developing countries in embracing clean energy technologies for power generation as costs for renewables continue to decline.
That's according to an analysis by Fatih Birol, executive director of the International Energy Agency (IEA), who testified Tuesday before the Senate Energy and Natural Resources Committee. He added that electricity will play an expanding role in the energy sector in the future.
"The United States is set to become the undisputed leader of oil and gas production for many years to come, which has huge implications," Birol said. As a supplement to written testimony he said IEA is projecting an 8 million b/d increase in U.S. tight oil output from 2010 to 2025. IEA is forecasting the United States will become the world's largest liquefied natural gas (LNG) exporter by the mid-2020s. A few years after that it should become a net oil exporter.
"Your country remains a major importer of heavier crudes that suit the configuration of your refineries, but at the same time a larger exporter of light crude and refined products,” he said. “As such, with the United States accounting for 80% of the increase in global oil supply to 2025 and maintaining near-term downward pressure on prices, our projections suggest that the world's consumers are not yet ready to say goodbye to the era of oil."
However, an era of renewables is clearly on the horizon, Birol said, in part on a 70% decline in solar photovoltaic (PV) capacity costs since 2010. At the same time, wind costs have fallen 25% and battery costs have dropped 40%.
"In addition to industrious countries, major growth in renewables is coming today from emerging countries, especially China and India -- they are the leaders," Birol said. China is the current world leader in terms of solar and wind power. "When we look at the future, we see that the cost of solar and wind continue to decline, and they are going to compete very soon...[with] traditional sources of electricity."
Why are China and other countries pushing solar and wind? Birol said the primary reason is not climate change, but rather renewables are cheap and their development could help mitigate pollution, especially in cities.
"We are seeing big growth in solar and wind in the next years to come," Birol said. In his written testimony, he said China would overtake the United States as the largest oil consumer around 2030, with net imports reaching 13 million b/d in 2040. "But stringent fuel efficiency measures for cars and trucks, and a shift which sees one-in-four cars being electric by 2040, means that China is no longer the main driving force behind global oil use -- demand growth is larger in India post-2025.
"In fact, India is the largest contributor to demand growth to 2040, almost 30% of total growth, as its share of global energy use rises to 11%. Southeast Asia is another rising heavyweight in global energy, with demand growing at twice the pace of China. Overall, developing countries in Asia account for two-thirds of global energy growth, with the rest coming mainly from the Middle East, Africa and Latin America."
Meanwhile, global demand for electricity is projected to grow by 2% per year from 2016 to 2040, a rate nearly twice the rate of final energy demand.
"The scale of future electricity needs and the challenge of decarbonizing power supply help to explain why global investment in electricity overtook that of oil and gas for the first time in 2016 and why electricity security is moving firmly up the policy agenda," Birol said. "This does not come without significant challenges.
"For example, because wind and solar PV are variable renewable resources and their input cannot be fully forecast and programmed, the so-called system integration of these variable renewable sources has emerged as a major economic and policy challenge. The U.S. is not alone in facing this challenge as there are countries with already much larger shares of wind and solar PV in their respective power systems."
IEA’s flagship annual publication, World Energy Outlook-2017, was published last November. Among the findings, economists said U.S. tight oil production was expected to plateau in the late 2020s, while global natural gas use is projected to rise by 45% to 2040.