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We are not in 1974 anymore, says Maria van der Hoeven, as she scans the complex and multi-layered energy world.
That year OECD countries had hastily launched the International Energy Agency as a direct response to the Arab oil embargo that was hurting Western economies and had quadrupled crude prices. The Americans were concerned about their dwindling oil production and the Western world tasked the IEA to keep an eye on their fragile crude inventories.
But the world has moved on since then. “It has changed dramatically in more than one aspect,” Ms. van der Hoeven, who heads the agency, told a conference in Montreal last week. “The IEA has also been changing dramatically and has to change, because energy policy in 1974 was quite simple, although — how should I put it — not easy.”
The Paris-based autonomous IEA and its 28-member countries now have to balance climate change issues with economic development and the importance of non-OECD countries in the global economy — a far cry from just releasing crude stocks to counter OPEC’s machinations.
But one thing that is not going to change: the demand for oil. In 2010, fossil fuels made up more than 80% of the world’s energy, and despite the rapid deployment of renewable energy technologies, they will still command three-fourths of the market by 2035, according to the IEA’s estimates.
“Natural gas is catching up with coal. But oil remains the largest single source of global energy,” Ms. van der Hoeven said in an interview.
Sometimes accused of being biased towards traditional energy sources, the IEA has lately been publishing numerous reports highlighting climate change issues, and pushing for a larger role for renewables in the energy mix.
One of its more recent reports acknowledged that even if countries made good on all current policy commitments to tackle climate change and other energy-related challenges, global energy demand in 2035 is projected to rise by 40% — with fossil fuels still contributing 75%.
Does that mean massive investments in renewables are misguided?
“Oh no, definitely not. Energy demand is rising 40%, and fossil fuel [will make up] 75% [of demand], but it means the rest is coming from another source — and that’s renewables. And we can see solar PV feed and wind costs have come down dramatically, and that’s exactly what every one wants to happen.
“At the same time, it’s important to realize that because of the huge growth in energy demand, we will need all energy. If we look at power generation, renewables will become the second-largest source of power generation by 2015, and will close in on coal by 2035.”
Renewables also have to compete with North America’s oil and gas “supply shock” which is further fueling the world’s appetite for hydrocarbons.
The IEA chief says U.S. and Canadian oil and gas production is leading a “veritable energy revolution.” However, lower U.S. demand for imported crude and natural gas is pushing Canada into the international market.
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