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Total energy consumption - outlook from IEA

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Contents
 

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Justification for indicator selection

Total energy consumption disaggregated by fuel type is a driving force indicator describing the development of energy sources and the corresponding levels of consumption. The environmental impact of each fuel is very specific.

The consumption of fossil fuels (such as crude oil, oil products, hard coal, lignite and natural and derived gas) provides a proxy indicator of resource depletion, CO2 and other greenhouse gas emissions and air pollution levels (e.g. SO2 and NOX). The degree of the environmental impact depends on the relative share of different fossil fuels and the extent to which pollution abatement measures are used. Natural gas, for instance, has approximately 40 % less carbon content than coal and 25 % less carbon content than oil and contains only marginal quantities of sulphur.

The level of nuclear energy consumption provides an indication of the trends in the amount of nuclear waste generated and of the risks associated with radioactive leaks and accidents. Increasing consumption of nuclear energy at the expense of fossil fuels would on the other hand contribute to reductions in CO2 emissions.

Renewable energy consumption is a measure of the contribution from technologies that are more environmentally benign, as they produce no (or very little) net CO2 and usually significantly lower levels of other pollutants. Renewable energy can, however, have impacts on landscapes and ecosystems. The incineration of municipal waste is generally made up of both renewable and non-renewable material and may also generate local air pollution. However, emissions from the incineration of waste are subject to stringent regulations including tight controls on quantities of cadmium, mercury and other such substances. Similarly, the inclusion of both large and small-scale hydropower provides only a broad indicator of environmentally benign energy supply. While small-scale hydro schemes generally have little environmental impact, large-scale hydro can have major adverse impacts (flooding, impact on ecosystems, water levels, requirements for population resettlement).

Scientific references:

Indicator definition

Definition: Total energy consumption is made up of production plus imports, minus exports, minus international marine bunkers plus/minus stock changes. It is also called Total primary energy supply or Gross inland energy consumption and represents the quantity of all energy necessary to satisfy inland consumption.

Model used: World Energy Model (WEM)

Ownership: International Energy Agency

Temporal coverage: 2004 - 2030

Geographical coverage: Transition countries, excluding the Russian Federation (Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Estonia, Serbia and Montenegro, the Former Yugoslav Republic of Macedonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Republic of Moldova, Romania, Slovenia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Cyprus, Malta); the Russian Federation; OECD Europe (Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, the United Kingdom); USA; India; China

Units

 Total Primary Energy consumption is measured in million tonnes of oil equivalent (Mtoe). Therefore, the share of each fuel in total energy consumption is measured in absolute value, but presented in the form of a percentage. The sum of all fuel-shares equals 100 %.

Policy context and targets

Context description

Global policy context

The major documents that relate to trends of the total energy consumption (supply) at the global level were developed and presented during the World Summit on Sustainable Development  in Johannesburg (WSSD,2002) in Agenda 21. WSSD, 2002 aims to achieve a sustainable energy future, including diversified energy sources using cleaner technologies. Moreover, there is a number of sub-negotiations and declarations concerning more sustainable ratio in balance between a global energy supply and consumption of different energy types.

Pan-European policy context

The recent pan-european policies concerning different aspects of total energy consumption have been developed under different intenational fora. 

The Committee on Sustainable Energy seeks to reform energy prices and subsidies and ways how to carry out it to meet more sustainable energy supply, production and consumption in the region (UNECE Guidelines).

Kiev Declaration " Environment for Europe" (2003) aims at supporting further efforts to promote renewable energy supply to meet environmental objectives.

EU policy context

Total energy consumption disaggregated by fuel type provides an indication of the extent of environmental pressure caused (or at risk of being caused) by energy production and consumption. The relative shares of fossil fuels, nuclear power and renewable energies together with the total amount of energy consumption are valuable in determining the overall environmental burden of energy consumption in the EU.

 Trends in the share of these fuels will be one of the major determinants of whether the EU meets its target of reduction in greenhouse gas emissions as agreed in 1997 under the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC). The overall Kyoto target for the pre-2004 EU-15 Member States requires a 8% reduction by 2008-2012 from baseyear levels (1990 for most greenhouse gases), while most new Member States have individual targets under the Kyoto Protocol. 

On 23 January 2008 the European Commission adopted the 'Climate Action and Renewable Energy' package. The Package sets a number of targets for EU member states with the ambition to achieve the goal of limiting the rise in global average temperature to 2 degrees Celsius compared to pre-industrial times including: GHG reduction of 20% compared to 1990 by 2020. (under a satisfactory global climate agreement this could be scaled up to a 30% reduction); 20% reduction in energy consumption through improved energy efficiency, an increase in renewable energy's share to 20% and a 10% share for sustainably produced biofuels and other renewable fuels in transport. With these goals in mind, each Member State will by June 30th 2010 submit a National Renewable Energy Action Plan to the Commission.

EECCA policy context

The main policy illustrating regional objectives of EECCA countries is EECCA Environmental Strategy. One of the main goals is "to contribute to improving environmental conditions and to implement the WSSD Implementation Plan in EECCA countries" regarding energy issues as well as Kiev Declaration's energy perfomance tasks.

Targets

Global level

  • Implement energy strategies for Sustainable Development, including diversified energy sources using cleaner technologies (WSSD)

Pan-European level

  • Increase the share of renewable sources...to meet environmental objectives (Kiev Declaration)

EU level

EECCA

  • Energy infrastructure improvements for sustainability by 2025 (EECCA Strategy)
  • Support regional cooperation for energy trade (EECCA Strategy)

Related policy documents

Key policy question

Are we consuming less energy?

Methodology

Methodology for indicator calculation

Total primary energy consumption (supply) or gross inland energy consumption is calculated as the sum of the gross inland consumption of energy from solid fuels, oil, gas, nuclear and renewable sources. The relative contribution of a specific fuel is the ratio between the energy consumption originating from that specific fuel and the total gross inland energy consumption. Note that the terms "total primary energy consumption" and "total primary energy supply" are convertible within the World Energy Outlook 2004 references.

Primary energy consumption is measured in million tonnes of oil equivalent (Mtoe). The share of each fuel in total energy consumption is presented in the form of a percentage. The sum of all fuel-shares equals 100 %.

The projections are made with the use of the World Energy Model 2004 developed by Internation Energy Agency.

Overview of the World Energy Model 2004 (WEM)

The WEM is a mathematical model made up of five main modules: final energy demand, power generation; refinery and other transformation; fossil fuel supply and CO2 emissions. Figure C1. (World Energy Outlook, 2004, p.532) provides a simplified overview of the structure of the model.

The main exogenous assumptions concern economic growth, demographics, international fossil fuel prices and technological developments. The assumptions determinant the modules of the WEM. Also electricity consumption and electricity prices dynamically link the final energy demand and power generation modules. Then regional energy balance which includes the total primary energy consumption was calculated.

Description of the Modules

Final Energy Demand

The OECD and non-OECD regions have been modelled in the following sectoral and end-use detail:

  • Industry which is separated into six sub-sectors.
  • Residential energy demand separated into five end-uses by fuel.
  • Services demand modelled as three end-uses by fuel.
  • Transport demand modelled by fuel and mode.

More detail description of the module can be found in the methodology of the Final Energy consumption by sectors.

The Power Generation and Heat Plants module.

The power generation module calculates the following: amount of electricity generated by each type of plant to meet electricity demand; amount of new generating capacity needed; type of new plants to be built; fuel consumption of the power generation sector; electricity prices.

Electricity generation is calculated using the demand for electricity and taking into account electricity used by power plants themselves and system losses. New generating capacity is the difference between total capacity requirements and plant retirements using assumed plant lives. The model considers the following types of plants: coal, oil and gas steam boilers; combined-cycle gas turbine (CCGT); open-cycle gas turbine (GT); integrated gasification combined cycle (IGCC); oil and gas internal combustion; fuel cell; nuclear; biomass; geothermal; wind (onshore); wind (offshore); hydro (conventional); hydro (pumped storage); solar (photovoltaics); solar (thermal) and tidal/wave.

Capacities for nuclear power are based on assumptions on government plans or  are influenced by international fossil fuel prices where market conditions prevail.

Fossil fuel prices and efficiencies are used to rank plants in ascending order of their short-run marginal operating costs, allowing for assumed plant availability.

The marginal generation cost of the system is calculated, and this cost is then fed back to the demand model to determine the final electricity price.

The combined heat and power (CHP) option is considered for fossil-fuel and biomass plants. CHP, renewables and distributed generation are sub-modules of the power generation module.

Renewable module

The projections of renewable electricity generation were derived in a separate model. It has been assessed the future deployment of renewable energies for electricity generation and the investment needed for such deployment. For a detail description of this model - developed by Energy Economics Group (EEG) at Vienna University of Technology in co-operation with Wiener Zentrum fur Energie, Umwelt und Klima - see Resch et al. (2004). The methodology is illustrated in Figure C.6 p. 543 in World Energy Outlook 2004.

The model uses a database of dynamic cost-resource curves. The development of renewables is based on an assessment of potentials and costs for each source (biomass, hydro, photovoltaics, solar thermal electricity, geothermal electricity, on- and offshore wind, tidal and wave).

Fossil Fuel Supply module

Oil sub-module

Production in the sub-module is split into three categories: non-OPEC; OPEC; and non-conventional oil production.

Total oil demand is the sum of regional oil demand, world bunkers and stock variation. OPEC conventional oil production is assumed to fill the gap between non-OPEC production and non-conventional and total world oil demand.

The derivation of non-OPEC production of conventional oil uses a combination of two different approaches. A short-term approach estimates production profiles based on a field-by-field analysis. Along-term approach involves the determination of production according to the level of ultimately recoverable resources and a depletion rate estimated by using historical data.

Non-conventional oil supply is directly linked to the oil price. Higher oil prices bring forth greater non-conventional oil supply over time.

Gas module

The gas module is similarly based on a resources approach. However, there are some important differences with the oil module. In particular, Europe gas market, whereas oil is modelled as a single international market. Once gas production from each net-importing region is estimated, taking into account ultimately recoverable resources and depletion rates, the remaining regional demand is derived and then allocated to the net-exporting regions, again according to recoverable resources and depletion rates. Production in the net-exporting regions is consequently calculated from their owm demand projections and export needs.

Coal module

The coal module is a combination of a resources approach and an assessment of the development of domestic and international markets, based on the international coal price. Production, imports and exports are based on coal demand projections, and historical data on a country basis. Three marjets are considered: coking coal, steam coal and brown coal.

Investment on the demand side

WEM energy consumption, end-use prices and income are used as an input to the calculations for the investments on the demand side. These estimates are mostly based on a co-operative effort between the Argonne Laboratory in the United States and the IEA. The model uses a stock flow approach in modelling end-use energy demand. Projections of investment needs in the fuel supply chain are based on the methodology reported in the World Energy Investment Outlook 2003.

Key model assumptions for the reference case

The central projections derived from a Reference Scenario. They are based on  a set of assumptions about governmental policies, microeconomic conditions, population growth, energy prices and technology.

Governmental policies and measures

The reference Scenario takes into account only those governmental policies and measures that were already enacted - though not necessary implemented - as of min-2004.   The Reference Scenario does not include possible< potential or even likely future policy initiatives. Major new energy policy initiatives will inevitably be implemented during the projection period, but it is difficult to predict which measures will eventually be adopted and how they will be implemented, especially towards the end of the projection period.

Although the Reference Scenario assumes that there will be no change in energy and environmental policies through the projection period, the pace of implementation those policies and the way they are implemented in practice are nonetheless assumed to vary by the fuel and region. For example electricity and gas market reforms are assumed to move ahead, but at varying speeds among countries and regions. In all cases, the share of taxes in energy process is assumed to remain unchanged, so that retail process are assumed to change directly in proportion to international prices. Similarly, it is assumed that there will be no changes in national policies on nuclear power. As a result, nuclear energy will remain an option for power generation only in those countries that have not officially banned it or decided to phase it out.

Macroeconomic factors
Economic growth is by far the most important driver of energy demand. The link between total energy demand and economic output remains close. Detailed GDP assumptions by region are set out in Table below.

Economic Growth Assumptions (average annual growth rates, in %)


1971-2020
2002-2010 2010-2020 2020-2030 2002-2030
OECD-Europe 2.4
2.4
2.2
1.7
2.1
Transition Economies total
0.7
4.6
3.7
2.9
3.7
- Russia
-1.1
4.4
3.4
2.8
3.5
- Other transition economies
-0.5
4.8
3.9
3.0
3.8
European Union
2.4
2.3
2.1
1.7
2.0
World 3.3
3.7
3.2
2.7
3.2

Population

Population growth affects the size and composition of energy demand, directly and through its impact on economic growth and development. The WEO population growth rate assumptions are drawn from the most recent UN populations' projections contained in World population Prospects: the 2002 Revision. Detailed populations assumptions by region are set out in Table below.

Population growth assumptions (average annual growth rates, in %)


1971-2020
2002-2010 2010-2020 2020-2030 2002-2030
OECD-Europe 0.5
0.3
0.1
0.0
0.1
Transition Economies total
0.5
-0.2
-0.2
-0.4
-0.3
- Russia
-0.3
-0.6
-0.6
-0.7
-0.7
- Other transition economies
0.0
0.0
0.1
-0.1
0.0
European Union
0.3
0.1
0.0
-0.1
0.0
World 1.6
1.2
1.0
0.8
1.0

Energy Prices

As in previous additions of the WEO, average and-user process for oil, gas and coal are derived from assumed price trends on wholesale or bulk markets. Tax rates are assumed to remain unchangeable over the projection period. Final electricity prices are based on marginal power generation costs. The assumed price paths assumed in the table presented below should not be interpreted as forecasts. Rater, they reflect IEA judgment of the prices that will be needed to encourage sufficient investment in supply to meet projected demand over the Outlook period.

Fossil-Fuel Price Assumptions (in year-2000 dollars)


2003 2010 2020 2030
IEA crude oil imports ($/barrel)
27
22
26
29
Natural gas ($/Btu):




   - US imports
5.3
3.8
4.2
4.7
   - European imports 3.4
3.3
3.8
4.3
OECD steam coal imports ($/tonne)
38
40
42
44

Technological development

Technological innovation and the rate of development of new technologies for supplying or using energy are important considerations. In general, it is assumed that available end-use technologies become steadily in use and the overall intensity of energy consumption will depend heavily on the rate of retirement and replacement of the stock of capital. Since the energy-using capital stock in use today will be replaced only gradually, most of the impact of technological developments that improve energy efficiency will not be felt until near the end of the projection period.

The rate of capital-stock turnover varies considerably according to the type of equipment. Most cars and trucks, heating and cooling systems and industrial boilers will be replaced by 2030. on the other hand, most existing buildings, roads, railways and airports, as well as many power stations and refineries will still be in use then. The very long life of this type of energy-capital stock will limit the extent to which technological progress can alter the amount of energy needed to provide a particular energy service. Retiring these assets before the end of their normal lives is usually costly and would, in most cases, require major new governmental initiatives - beyond those assumed in the Reference Scenario. Refurbishment can, however, achieve worthwhile improvements in energy efficiency in some cases.

Technological developments will also affect the costs of energy supply and the availability of new ways of producing and delivering energy services. Power generation efficiencies are assumed to improve over the projection period, but at different rates for different technologies. Towards the end of the projection period, fuel cells based on hydrogen are expected o become economically attractive in some power generation applications ad, to a much smaller extent, also expected to improve, lowering the unit production costs and opening up new opportunities for developing resources. But the Reference Scenario assumes that no new breakthrough technologies beyond those known today will be used before 2030.

The World Alternative Scenario

WEO also considers Alternative policy Scenario to analyze how the global energy market could evolve were countries around the world to adopt a set of policies and measures that they are either currently considering or might reasonably be expected to implement over the projection period. The purpose of this scenario is to provide insights into how effective those policies might be in addressing environmental and energy-security concerns.

Methodology for gap filling

The development and running of the WEM requires access to huge quantities of historical data on economic and energy variables. Most of the data are obtained from the IEA's own databases of energy and economics statistics. A significant amount of additional data from a wide range of external sources is also used.

The parameters of the demand-side modules' equations are estimated econometrically, usually using data fro the period 19971-2002. Shorter periods are sometimes used where data are unavailable or significant structural breaks are identified. To tae into account expected changes in structure, policy or technology, adjustments to these parameters are sometimes made over the Outlook period, using econometric and other modeling techniques. In regions such as transition economies, where most data are available only from 1992, it has not been possible to use econometric estimations. In such cases, IEA results have been prepared using assumptions based on cross-country analyses or expert judgment.

Simulations are carried out on annual basis. Demand modules can e isolated and simulations run separately. This is particularly useful in the adjustment process and in sensitivity analyses of specific factors.

The WEM makes use of wide range of software, including specific database management tools, econometric software and simulation programmes.

Methodology references

  • World energy outlook 2004 IEA (2004) International Atomic Agency (2004) . World energy outlook 2004, OECD/IEA, Paris. Online not available

Uncertainties

Methodology uncertainty

In common with all attempts to describe future market trends, the energy projections presented in the Outlook are subject to a wide range of uncertainties energy markets could evolve in ways that are much different from either the Reference Scenario or the Alternative Policy Scenario. The reliability or WEM projections depends both on how well the model represents reality and on the validity of the assumptions it works under.

Macroeconomic conditions are, as ever, a critical source of uncertainty. Slower GDP growth than assumed in both scenarios would cause demand to grow less rapidly. Growth rates at the regional and country levels could be very different from those assumed here, especially  over short periods. Political upheavals in some countries could have major implications for economic growth. Sustained high oil process  which are not assumed in either of WEM scenarios – would curb economic growth in oil importing countries and globally in the neat term. The impact of structural economic changes, including the worldwide shift from manufacturing to service activities, is also uncertain, especially late in the projection period.

Uncertainty about the outlook for economic growth in China is particularly acute.

The effects of resource availability and supply costs on energy process are very uncertain. Resources of every type of energy are sufficient to meet projected demand through to 2030, but the future costs of extracting and transporting those resources is uncertain – partly because of lack of information about geophysical factor.

Changes in government energy and environmental policies and the adoption of new measures to address energy security and environmental concerns especially climate change, could have profound consequences for energy markets. Among the leading uncertainties in this area are: the production and pricing policies of oil-producing countries, the future of energy-market reforms, taxation and subsidy policies, the possible introduction of carbon dioxide emission-trading and the role of nuclear power.

Improvements in the efficiency of current energy technologies and the adoption of new ones along the energy supply chain are a key source of uncertainty for the global energy outlook. It is possible that hydrogen-based energy systems and carbon-sequestration technologies, which are now under development, could dramatically reduce carbon emissions associated with energy use. If they did so, they would radically alter the energy supply picture in long term. But these technologies are still a long way from ready to be commercialized on a large scale, and it is always difficult to predict when a technological breakthrough might occur.

It is uncertain whether all the investment in energy-supply infrastructure that will be needed over the projection period will be forthcoming. Ample financial resources exist at a global level to finance projected energy investments, but those investments have to compete with other sectors. More important than the absolute amount of finance available worldwide, or even locally, is the question of whether conditions in energy sector are right to attract the necessary capital. This factor is particularly uncertain in the transition economies and in developing nations, whose financial needs for energy development are much greater relative to the size of their economies than they are in OECD countries. In general, the risks involved in investing in energy in non-OECD countries are also greater, particularly for domestic electricity and downstream gas projects. More of the capital needed for energy projects will have to come from private and foreign sources than in the past. Crating an attractive investment framework and climate will be critical to mobilizing the necessary capital. 

Data sets uncertainty

Major challenge is a reliable input data energy statistics. The statistics of IEA which provide a major input to the WEO, cover 130 countries worldwide. Most time-series begin in 1960 for OECD counties and in 1971 for non-OECD countries. Recently, however, maintaining the very high caliber of IEA statistics has become increasingly difficult, in many cases because national administrations have faced growing problems in maintaining the quality of their own statistics. Breaks in time series and missing data have become frequent in some countries. The lapses compromise the completeness of IEA statistics. They could seriously affect any type of analysis, including modeling and forecasting.

The projections from WEO should not be interpreted as a forecast of how energy markets are likely to develop. The Reference Scenario projections should rather be considered as a baseline vision of how the global energy system will evolve if governments will take no further action to affect its evolution beyond that which they have already committed themselves to.

Rationale uncertainty

In common with all attempts to describe future market trends, the energy projections presented in the Outlook are subject to a wide range of uncertainties energy markets could evolve in ways that are much different from either the Reference Scenario or the Alternative Policy Scenario. The reliability or WEM projections depends both on how well the model represents reality and on the validity of the assumptions it works under.

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EEA Contact Info

Anita Pirc Velkavrh

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No owners.

Identification

Indicator code
Outlook 030
Specification
Version id: 1

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Classification

DPSIR: Pressure
Typology: Descriptive indicator (Type A - What is happening to the environment and to humans?)

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