“The world’s most authoritative source of energy-market analysis and projections” is how the International Energy Agency (IEA) describes its World Energy Outlook (WEO).
First published in 1977, the WEO is a key annual report on energy data and trends, with significant potential to influence energy policies worldwide. The main mission of the IEA, born out of the 1973-74 oil crisis, has been energy security and, for most of its lifetime, fossil fuels have been at the heart of this mandate. The agency says it has moved with the times and now provides a much greater focus on clean energy. However, ahead of the release of this year’s WEO, a new study suggests a historical bias towards fossil fuel incumbents has slowed the development of solar and wind, and calls for urgent change.
The reports reveal “a pattern of more optimistic assumptions for fossil fuels and the technologies that will enable fossil fuels”, states author Sven Teske from the Institute for Sustainable Futures at the University of Sydney, Australia, in a draft copy of his research seen by Energy Monitor.
After analysing WEOs dating back to 2000, Teske concludes they are particularly positive towards the potential of carbon capture and storage (CCS) and nuclear energy.
“WEO scenarios exhibit signs of a consistent bias towards describing future pathways – including those with specific climate constraints – that create minimum disruption to the incumbent fossil fuel industry,” says the draft. The final version of the study will be published on Tuesday 13 October to coincide with the latest WEO.
On the other side of the coin, the reports have consistently underestimated the growth of wind and solar power, finds Teske. The WEO’s projection for wind power by 2020, made in 2004, was reached 15 years early and “offshore wind was only recognised as a major power-generating technology in its own right in 2019”, he states. “Its projection in 2002 for total solar photovoltaic (PV) capacity – of 18GW – was equal to installations made in just one year, 2007, five years later.”
The IEA did not respond to opportunities to comment.
These discrepancies need highlighting because IEA scenarios play an important role in political debate and in investment decisions, says Teske.
“Financial institutions look for guidance when they decide on future investments and the development of their energy portfolio,” he explains. “That does not mean they cannot do their own analysis, but they have to rely on data from the energy sector. The IEA has somehow a monopoly on energy data.”
This monopoly position is not necessarily a bad thing, says Teske, “but with this unique and exposed position comes responsibility. If the IEA tells the investment community that renewable energy won’t do the job, and we need nuclear and CCS – which we don’t – the financial community will believe it,” he states. “Projects get financed which shouldn’t and the IEA energy scenario becomes a self-fulfilling prophesy. For a decade, the IEA played down the role of solar PV and wind, this damaged this industry and held them up.”
Some clean energy campaigners are sceptical that a body such as the IEA, whose members are countries with their own energy ideologies and corporate interests, can ever produce a totally independent report.
Hans-Josef Fell, founder and president of the Energy Watch Group, a non-profit based in Germany, castigates WEO forecasts for CCS and describes its figures for solar and wind as “totally irrational”. The agency’s goal has been “to say that renewables cannot grow fast enough to replace fossils and nuclear”, says Fell. Any bias towards fossil fuels is “a clear political issue” linked with the agency’s roots in the oil industry and the vested interests of some member countries, he believes.
Teske makes clear his beef is not with the IEA’s statistical data, but with its scenarios and projections.
“We need a fair evaluation of the progress of energy technologies in the market,” he says. “The solar and wind industry tripled capacity from around 460GW to over 1200GW between 2010 and 2020, and more than halved their costs. Not a single commercially viable CCS project has been built over the past decade. Scientifically, you cannot conclude that CCS will play an important role in the market by 2030.”
Senior researcher at Norway’s Center for International Climate Research Glen Peters says it is important to remember the purpose and remit of the WEO: “The IEA’s approach is to analyse existing policies and not to try to predict the future.” The agency could not have known countries would ramp up their climate policies and so the fact Teske concludes the central scenarios are wrong should come as no surprise, he says.
The WEO typically presents three scenarios: a baseline scenario that assumes no change to existing, implemented energy policies; central scenarios that assume announced policies will be implemented; and climate scenarios that assume future policies will constrain emissions.
“They got it wrong on solar PV,” says Jesse Scott from German think tank Agora Energiewende, “but then so did everybody, even the most optimistic scenarios.” The fact the agency is packed with “very fact-based, careful analysts” focused on the agency’s traditional mandate of energy security and “what works rather than what might work in the future” is one reason the WEOs were further off the mark than some other scenarios, she suggests.
“Had the analysts gone out and spoken to companies producing solar panels, they would have understood the industry was more akin to the mobile phone electronics sector than traditional energy industry mechanical engineering models, and seen how quickly production could ramp up and prices come down,” adds Scott.
Indeed, CEO of Brussels-based lobby group SolarPower Europe Walburga Hemetsberger acknowledges that “all analysts – including ourselves – underestimated the rapid pace of the development of solar”, although she agrees “analysis from [the] WEO has usually been on the more conservative end of the forecast range”.
She believes, however, that this is changing.
“We see a positive trend in the yearly revision of their solar PV forecasts, which year after year – although still below SolarPower Europe estimates – are coming closer to ours,” she says.
And she expects the 2020 WEO to “substantially increase” its figures for solar, although still remain slightly behind industry assumptions. If correct, this would mean the IEA’s forecast for PV growth over six years would be equivalent to SolarPower Europe’s five-year forecast.
Peters is also quick to recognise that the IEA is changing.
“In the last five years, indeed since Fatih Birol was appointed as director, the IEA has been pretty receptive to criticism,” he says. “Because of this, each new WEO has more and better analysis on mitigation. It is constantly evolving.”
IMF for energy
Chris Bataille, associate researcher at the Institute for Sustainable Development and International Relations in Paris, believes a new body is needed to get the world on course to meet international climate commitments.
“Given how slow we are moving, we can’t be counting on analytical institutions like the IEA or the International Renewables Energy Agency (IRENA),” he says. “We need a new international clean electricity agency focused on holding global warming to 1.5°C that would be able to help channel clean energy finance, technology and skills training to help countries move quickly to clean energy economies, a sort of International Monetary Fund for energy.”
Teske doesn’t agree that yet another agency is the solution. He believes Abu Dhabi-headquartered IRENA, established in 2009 with German government funding and now supported by 183 countries, is “in a very good position to do the job and be a cornerstone for the energy transition”. However, for IRENA to be able to manage this task, he calls for its funding to be massively ramped up from $22m in 2020 to $1bn by 2030.
Joeri Rogelj, Director of Research at the Grantham Institute, Imperial College London, offers a third way to move forward. “The IEA has been extremely successful in providing annual updates that are easy to incorporate in business plans,” he says. “Maybe businesses should simply be aware the IEA is only one source of information, and a lot can be learned from other sources, such as the reports from the Intergovernmental Panel on Climate Change (IPCC) or the reports of IRENA.”
Whoever is in charge, getting energy transition scenarios right is critical “for world climate change predictions and for saving economies”, says Fell, referring to the threat of stranded assets and bankruptcies if investment continues in infrastructure that becomes obsolete the minute it comes online.