Laura Cozzi was appointed as IEA’s Chief Energy Modeller in 2018. As Chief Energy Modeller, Ms. Cozzi oversees the Agency’s work on outlooks and forecasts and is in charge of overall consistency of modelling work and resulting messages. Ms. Cozzi is, also, Head of the Demand Outlook Division with responsibility of producing the annual World Energy Outlook, the IEA flagship publication. The Division produces medium to long term energy demand, efficiency, power generation, renewable and environmental analysis for the World Energy Outlook and other publications. Ms Cozzi joined the IEA in 1999, and has been leading several editions of the Outlook, and has been co-author of multiple editions of the report. Prior to joining the IEA, Ms. Cozzi worked for the Italian energy company ENI S.p.A. She holds a Masters’ Degree in Environmental Engineering (from Polytechnic Milan) and a Masters’ Degree in Energy and Environmental Economics (from Eni Corporate University).
What’s the outlook for global energy demand?
The evolution of global energy demand and trends by fuel are strictly related to the scenario considered. Under stated policies, energy demand continues to grow, with the next decade looking much like the past decade for many fuels: global oil demand rebounds strongly and grows steadily to 2030 before reaching its peak in the mid-2030s (103 mb/d in 2030), natural gas continues a strong growth to 2030 (15% higher in 2030 than in 2020) and output from solar PV and wind triple over the next decade, meeting three-quarters of global electricity demand growth. According to scenario that takes into account all of the climate commitments (pre-COP26) made by governments around the world the outlook of global demand by fuel is quite different. Total global demand will increase but lower than stated policies scenario thanks to efficiency improvement. More specifically, oil peaks by 2025 and flattens and most of this change is driven by high penetration of electric vehicles. Natural gas demand grows 2025 but flattens thereafter. Most of this change in trends stems from the power sector: in countries with net-zero targets, natural gas loses market shares with the growing role of solar PV and wind. The buildings sector sees also gas demand in 2030 lower than in 2020 with the introduction of strict performance standards for existing and new buildings. Moreover in 2030, solar PV and wind capacity additions near 470 GW, nearly double today. This means that the growth of solar PV and wind keeps up with all growth in electricity demand over the next decade, and raises their share of generation from under 10% in 2020 to nearly 30% in 2030
Will power prices become more volatile?
Price volatility is an ever-present feature of commodity markets, but well-managed transitions offer ways to dampen the impacts on household energy bills. The impact of higher commodity prices is dampened by more rapid efficiency gains, by reduced direct use of oil and gas, and by electricity having a higher share in total household energy expenditure (electricity is less affected by the price shock than oil and gas because of the rising role of renewables). According to Net Zero scenario, If we shock these systems in 2030, with a spike in oil and gas prices, this would be 30% less costly to households in case of rapid transitions compared with a more gradual approach. These benefits though don’t come for free. They require a significant amount of additional investment in the meantime, in new low-emissions equipment, electric cars, efficiency retrofits and so on. These solutions are typically very cost-effective, but many households, especially poorer ones, will require help from governments to manage the upfront costs.
What is your opinion on the COP26 agreement? Are the world energy markets ready to embrace it?
COP 26 has provided a significant momentum for the necessary transformation of energy sector: commitments and collaborations are the main achievements of the Climate Change Conference and they are essential steps in the right direction to clean energy transition. More specifically, up to now countries that account 90% of global economy have put commitments to reduce emission to net zero and more than 100 countries promising to cut emissions of methane (another potent greenhouse gas) by 30% by 2030. Moreover, the international collaboration had an important role in COP 26, such as the declaration joined by US and China (the two largest emitters) and the energy transitions partnership signed by a number of major countries in order to support South Africa. According to our updated analysis of these new targets, the rise in global temperatures will be to 1.8°C by the end of the century if the pledges are met in full and on time. COP 26 achieved a lot but not everything: ambitions count for little if they are not implemented successfully. What is essential now is that governments turn their pledges into clear and credible policy actions and strategies.
To what extent will the new shape that energy markets are taking will lead to a change in geopolitical balance?
Clean energy transitions are set to bring about a major change in the energy trade patterns that have long been dominated by fossil fuel. The rising importance of critical minerals and low-carbon hydrogen means that their combined share in global energy-related trade rises further to 80% by 2050 in a net zero emissions scenario. The supply chain for many clean energy technologies and their raw materials is more geographically concentrated than that of oil or natural gas. For lithium, cobalt and rare earth elements, the top three producing nations control well over three-quarters of global output. In some cases, a single country is responsible for around half of worldwide production. South Africa and the Democratic Republic of the Congo are responsible for some 70% of global production of platinum and cobalt respectively, and China accounted for 60% of global Rare Earth Elements production in 2019. The level of concentration is even higher for processing and refining operations. China has gained a strong presence across the board. This is inevitably a source of concern because it means that supply chains for solar panels, wind turbines and batteries using imported materials could quickly be affected by regulatory changes, trade restrictions or even political instability in a small number of countries. Early attention from policy makers is required to develop a comprehensive approach to mineral security that encompasses measures to scale up investment and promote technology innovation together with a strong focus on recycling, supply chain resilience and sustainability