Growing divergence in global energy forecasts hurting energy security, transition, says International Energy Forum

McMonigle’s comments were based on the IEF’s annual comparison of the most recent energy outlooks by the IEA, OPEC, and several research groups. The comparison report was released at the Riyadh symposium. Among other observations, the report highlighted that divergence between the highest and lowest forecasts for the global primary energy demand for the year 2050 exceeded the current size of the global energy market.

 “This ‘uncertainty gap’ erodes investor confidence, which in turn damages energy security and market stability…We are already seeing this in the high prices and volatility, contributing to the cost-of-living crises, widening global divisions, conflict, and geopolitical adversity,” the IEF secretary general said.

The IEF report has flagged the issue of enormous variance in energy forecasts at a time when the entire world is debating the likely contours and timelines of global energy transition. India, which depends on oil and gas imports to meet a bulk of its energy needs, has set a target to achieve net-zero emission status by 2070. 

Contentious issues between the developed world and the Global South include transition pathways, role of fossil fuels, access to new energy technology and finance, and green energy targets and commitments.

“While the direction of travel is clear, the speed and modalities of transitions have become more contentious. This creates new risks and uncertainties for everyone involved in the energy market, whether they be regulators, investors or advisors. There is no single linear path for energy transitions,” McMonigle said.

As per the comparison report, the divergences in energy forecasts are growing, underscoring the vast uncertainties pertaining to policy, technology, energy costs, and energy efficiency. The range between the high and low scenarios for 2050 total primary energy demand is over 8 per cent higher than the current global demand levels in 2022. Similarly, wide ranges are found in the long-term demand outlooks for oil, natural gas, coal, nuclear power, and renewables.

For instance, the report shows that while the IEA forecasts on primary energy demand by 2045 was generally revised downwards, OPEC forecasts saw an upward revision. Also, several net-zero scenarios show oil demand falling by over 75 per cent by 2050, while some reference case scenarios show up to 15 per cent growth over the same period. Another example of the variance between various forecasts pertains to natural gas demand over the next two-and-a-half decades.

“Excluding a high outlier, scenarios for natural gas demand in 2050 diverge by more than 6,000 bcm (billion cubic metres) — an amount that is still 45 per cent larger than today’s global gas market,” the report said. The report also highlighted that the divergence is not just on demand forecasts, but even on some historical baseline data.

“Different approaches to modeling and the complexity of energy systems help explain the large range in projections. Some models use backcasting and start from a desired end-goal, such as achieving net zero emissions by a specific date, and then model a path to reach specific targets. Other models take a bottom-up approach with different assumptions on whether and how policies will evolve, how geopolitics will impact energy security and resource availability, and how technology costs will develop,” the report said.

Further, the report emphasised that all energy sources and technologies will be needed to meet the world’s growing energy needs while reducing greenhouse gas emissions, and different countries will progress at different paces according to domestic circumstances, priorities, and financial and technological capabilities.