Tonight we are lucky to have with us Tim Gould, who's one of the principal authors of the World Energy Outlook. This is the key product of the International Energy Agency published every year. Today we are presenting the 2018 edition of this book which as you can see is a rather ponderous book. It's a bible for each and every one who deals with energy issues in the world. So it's our pleasure to have Tim with us and I would ask him a few questions to help us understand what is in this book and what is the main message that comes out of it. So my first question to your team is, you have two scenarios plus one here in the book, can you help us explain the difference in between these scenarios? What is really meant by current policies, new policies in Sustainable Development Goals? First of all, thanks very much for the chance to come here today and to present some of the findings from the World Energy Outlook. A few words on the book itself. Every year, we start the year with the ambition to make it slimmer than the previous year, each year we fail. So I'm afraid it is still 600 and something pages. However, this year we are trying to make a lot more information available online, the website has expanded, there's a lot more digital content available. So I hope people can also visit that. The book itself is designed as a way to think about the future of energy. It provides a framework for doing that. There are too many variables involved in doing forecasts for 2030 or 2040. So it's a scenario-based outlook. What we do is we vary our assumptions about for the scenarios that you mentioned up front, the current policies and the new policies scenario. We vary our assumptions about what governments are going to do. The new policy scenario is probably the one that gets a lot of attention. It assesses the things that are in place today but also the things that governments say they would like to achieve in future. So their intentions, their targets, the things that are in the nationally determined contributions under the Paris Agreement. So if you like, the new policies scenario is a way of assessing the adequacy of today's policy intentions against different criteria, energy security, sustainability, air quality, energy access. That assessment is enabled by comparison with the sustainable development scenario. The sustainable development scenario draws its inspiration from the UN Sustainable Development Goals which were agreed in 2015. The key ones for the energy sector are achievement of the goals of the Paris Agreement, a major reduction in the pollutants that cause poor air quality, and the achievement of universal access to modern energy, by which we mean both electricity and clean cooking by 2030. If you compare the outcomes across scenarios, you can understand better the implications of today's actions, the leavers that bring different scenarios about, and the ways that taking different decisions in the future could lead to a different outcome to bring us closer for example, to achieving climate goals or to achieve them in full, to bring universal access, to improve air quality, and so on. We know that scenarios are not to be confused with forecasts. They're not forecasts, they're just a vision of the possible futures. But would you say that the new policy scenarios represents what we may consider today most likely outcome for the coming years? The answer to that question really depends on how you view government action. If you believe that governments are going to achieve roughly what they are talking about today, but not really go beyond that, then you might assume that the new policies scenario represents an indication of where we might end up. But it's unlikely that there will be no new actions after those that we already see today. The Paris Agreement itself has a mechanism for countries to ratchet up their ambition when it comes to climate change for example. You could expect perhaps that that would move things in a slightly different direction in the future. On the other hand, there may be people who feel that governments by large don't deliver on their promises. Things may fall short even if the things they're talking about today. If you're in that frame of mind, maybe you would look more towards the outcomes in the current policy scenario as an indication of where we might end up. So it really depends. We delegate that responsibility in a sense to our readers, which way they think governments will react. It's not in a sense us proclaiming from the International Energy Agency in Paris and about the way that things will be, it's really for people to read it and say, "I can see that there are choices ahead of us, which ones would we like to take, which government policies would make a difference?" Then in our view, they leave us to choose our energy destiny. They're still open, we still don't know which ones are going to be pulled in and it's for then for decision makers today to determine which direction we end up taking. But the gap between the new policy scenarios and the sustainable development scenario remains very wide. So can we conclude from that that it is extremely difficult or very unlikely that the Sustainable Development Goals would be achieved because they are so demanding? I think you have to treat them slightly separately. Certainly when it comes to climate change, there is a real disconnect between the trends that we're seeing in the energy sector today and the goals of the Paris Agreement. Every indication that we have from the data for 2018, suggests that we'll see another rise in energy-related CO2 emissions. So reaching another historic high. Of course that's a long way away from the early peak in emissions and rapid subsequent decline that would be consistent with Paris. If you look at another sustainable development goal, for instance in relation to universal energy access, there are some encouraging signs. Only a few years ago, in year 2000 in our assessment, there were around 1.7 billion people worldwide without access to electricity. Our latest assessment is that that number has fallen below one billion. So there are signs particularly in India where earlier this year the government announced that they'd achieved universal village electrification, a huge step towards universal household electrification. So there you do see some momentum. In our view, it's still going to be very tough to hit those targets of universal access to modern energy by 2030, particularly in parts of Sub-Saharan Africa. But that's an area where you can see that things are moving albeit relatively slowly but moving in a positive direction. When it comes to air quality, there again the picture is mixed. In some countries, there are quite strong actions being taken to improve air quality, particularly in some of the large cities. But in other areas, in parts of China, in parts of India, this remains a really tough problem to crack and it would need additional measures, well beyond what we're seeing today in order to really address that. Oil [inaudible] as we can see in the old projection at the oil daily demand will not be met in 20's, what is your idea about them? The answer depends on which part of the world you're talking about. Because the latest numbers that you can see in the United States with US Shale are quite extraordinary. You're seeing year-on-year increases in production from the United States of something around two million barrels a day, which is a remarkable increase. But in other parts of the world, particularly when you're looking at new conventional projects in offshore or in parts of the Middle East. The numbers of projects that are being approved, if they fell quite substantially after the decline in the oil price in 2014, and they haven't really picked up since then. So you're seeing a continued slump in approvals of new oil upstream projects outside the shale sector in the US, and at the same time demand growth has been and continues to be fairly robust. So well above one million barrels a day increase every year. There are risks now that if demand continues to be moving along that fairly robust growth path and conventional approvals remain relatively subdued, we will be asking extraordinary things of the US shale to fill that remaining gap in the market and avoid turbulent times for oil markets. I think it's important to remember that the reason why companies invest in new oil supply, they need to keep an eye on demand certainly, but they need to keep a very close eye on the declines in production from their existing fields, and because that continually drains oil supply and it needs to be replenished with new investment just to keep supplier at the same level. You spoke about the United States regarding to gas. We have seen some long-term contracts between American exporters of LNG and European countries. Do you think this can be profitable even with cheap brush and gas? Again it depends where in Europe you are. But there is parts of Western Europe and Southern Europe where bringing LNG can be a very competitive option and the more you move towards Central, Eastern, Southeastern Europe and the more in a sense, the more competitive pipelines supply from the Russian Federation is and Russia also has some options as to how it prices it's gas and you've seen in the last few years that it has been pricing that gas at competitive. At a point at which it takes a very large market share. So, Russian exports to Europe have been close to historic highs in recent years. But I think the question about LNG and Russian gas is also a question about how many options do buyers have? Because of course, if you have options then you are in a much stronger position to bargain with your existing supplier. So a lot of the discussion in Brussels around gas security and infrastructure development is about ensuring that wherever you are in the European single market, you have the possibility to access multiple sources of imported gas. And that's at the heart of what the European Union is trying to achieve with the Energy Union Project. Regarding to their pipeline gas in general, we have seen some future pipeline projects between Russia and China and some other possibilities. But do you think the pipeline gas is doomed? Not doomed by any means. A major new artery and global pipeline gas supply is going to open up in the next couple of years between Russia and China and there are other major pipeline projects that are likely to go ahead particularly in our long-term outlook to 2040. But what we do think is that, markets and buyers are pricing the optionality and the flexibility that comes with LNG. So in our view, the majority over 80 percent of the gas traded over long distances. Over 80 percent of the increase in gas traded over long distances comes in the form of LNG. In the New Policies Scenario in 2014, there is a pipeline considered that it's not from Russia, Caspian, North Africa or Norway. What is the other possibilities? Do you think any chance for Iran or Iraq for example? The southern gas corridor which is almost complete now. It opens up some interesting possibilities for other sources of supply to reach the European market and that includes Northern Iraq, potentially could include Iran. It could include some gas from the east Mediterranean they have large off-shore gas finds that you've seen there. At the moment, none of those possibilities sufficiently mature for us to see those as, to build that into our base case, but there's certainly room for those to grow. Now that their basic infrastructure is in place. For how long Russia will be the main supplier of gas to Europe do you think? It's an interesting question. In our projections, Russia remains the largest gas supplier all the way through to 2040 and it has very large resources. It has infrastructure. It has existing customers. Our model tends to try and map things out based on the contracts that we can see, but then also on the relative competitiveness of different sources of gas and Russia remains and unless Europe chooses to do something different, Russia remains a very competitive supply to Europe. If you are going to go to electricity which is the most important part of the World Energy Outlook. I want to ask you in case of significant development in renewable source power generation, greed expenses would be really high more than expected. Is it considered in your assumption and calculation? Yes we look at not just at the costs of different sources of generation, but also at the how you integrate those sources of generation into the power system and there's and what we find is that in the future, the task for regulators and policy makers is going to be in part about providing electricity, but it's going to be in very large part about incentivizing investments in flexibility as well. Because you're going to need a lot full of flexibility in power systems in order to accommodate rising shares of wind and solar PV, and there's different flexibility options, some of those exist already today. I mean the thermal fleet in many countries. That can ramp up and down. That's a major source of flexibility grid strengthening likewise, but there's new flexibility options that are emerging and becoming more competitive energy storage for short-term including batteries and then demand side response which means that consumers can vary their consumption in a way that matches the needs of the system. And so some combination of your existing fleet, the grid, energy storage demand side response in different measures for different countries.Those are going to be the ingredients then secure reliable electricity supply and in a renewables rich system. The reports does not provide many insights on the future of nuclear. It appears that there is a major shift in the use of nuclear toward Asia. What is your idea about the future of nuclear in Europe specifically about small and modular reactors? There are some important anniversary is coming up for nuclear, the average age of the fleet in many advanced economies is now reaching 40 years, and that includes European Union, United States, Japan as well. That's the original design lifetime of many of these reactors. So unless you have decisions on lifetime extensions, then many of these reactors would be shutting down, sometime over the next year during our projection period to 2040. If there are no new lifetime extensions, and no new projects beyond the ones that are currently under construction, then the share of electricity generated from nuclear power in Europe would declined quite substantially. So go down from above 20 percent today to something like 5 percent in 2040. That raises a number of questions about electricity security, raises a number of questions about how you're going to secure emissions reductions. The issue of like small modular reactors, this is an active area of research and development in many parts of the world. We keep a close eye on that, we wouldn't given the lead times for new technologies. By the time these are really ready for deployment, we're looking at the earliest towards the end of the 2020s and into the 2030s. So they don't play a huge role in our projections. But that's an important area for Technology Development Firm Innovation, and so we're keeping a close eye them. Regarding to electricity, what are the changes since 2017 and what are the motivation for future is for electric scenario? There's a pretty wide consensus that the share of electricity in our consumption is consumers, that will go up over time. It's been going up since the year 2000. In all probability will continue to go up in the future. Right now, it's worldwide, it's around 19 percent, slightly higher in advanced economies, slightly lower in developing economies. The big question is, how much further that's going to go? There's a number of reasons it could get significantly higher. Universal access to electricity, I mentioned already, the number of connected devices we all have in our daily lives, our phones, our tablets, and all the things that we're buying appliances at home. There is also an increasing momentum behind the idea that electricity could provide more of our mobility and more of our heat in the future and displace oil or gas in some cases from those markets. So all of those together push us to the conclusion that the future is going to be more electric than we see today. How much more is the question? We have a few different pieces of analysis that tells us that electricity is going to grow. Whichever scenario you're looking at, there are some big upside cases where you can reach. If you take all of the economically viable options, you can reach around one-third of final consumption from electricity by 2040. That would have some quite interesting implications for other fuels. It would have interesting implications also in reducing local pollution. But unless you really push harder on the decarbonization of electricity supply, it's not the solution on its own to climate change. You need to think in a more integrated way about electricity decarbonizing supply, but also the rest of the system that currently relies on fossil fuels essentially and bio-energy. Under topic of electricity, we should speak about renewable. What is your idea about the main drivers for renewable in future duty, governmental policy or market trends, which one could be the main drivers? When you talk about wind and solar PV, it's clear that government policies have been instrumental in getting us to where we are today. Increasingly, the future of these technologies and how they deploy it will be driven by economics. That will vary in different countries depending on the quality of the resources, but they become increasingly cost-competitive. That said it doesn't mean that policy makers then need to step back. Because as I mentioned before, there are these needs for flexibility which increase over time. So policy makers will need to focus on some different aspects of policy in order to actually enable the continued rise of renewables in in electricity generation. When we speak about renewables, we always should speak about the competition with nuclear too. Do see resurgence in nuclear energy in the coming 10 years? It's quite country specific. The big growth market for nuclear investment projections in China, India also grows, Russia also grows. The outlook in many advanced economies it really depends on those issues that we talked about before. It depends on lifetime extensions, it depends on some other policies. Of course, it's very clear that different countries have different attitudes towards nuclear and that will play into this as well. I think what we would say is that there's a preference for investment decisions that deliver quickly. So when you have offshore wind is a bit of an exception, but onshore wind in particular solar PV, you invest and within a few years time, you have production, you can start getting a return on your investment. The capital intensity and long lead times of nuclear make that more challenging in this environment. As you mentioned, almost one billion people still will lack access to electricity. What solution should be put in place to achieve universal access for them? I think two things have changed over the last few years, in this discussion about universal access to electricity. The first is, the falling cost of low carbon technologies, which opens up some interesting new avenues for providing off-grid or mini-grid access to electricity. That's a very important point that has actually enabled some communities that have been previously difficult to reach with the grid to have electricity. The other is that there is some interesting new business models emerging as well, where a basic package you can pay for it through your mobile phone, and there are some commercial operators that are thinking carefully about how you can bundle energy-efficient appliances with some basic solar plus battery and market those even to households that don't have much disposable income. So I think both on the business model side and on the technology costs side, those are two things that offer some hope for the future. In your own idea, what are the main message from this year reports? That's the most difficult question that you've asked because we try and cover all fuels, all technologies, all parts of the world, and different scenarios. So it's difficult to highlight a few things that would stand out. For me, some of the interesting work this year has been on this question of flexibility. We looked in a much more granular way at the operation of power systems, and that has enabled us to come up with some interesting new findings in that area. One other thing that I didn't mention but I should, is that we've for the first time put together a complete picture of how each barrel of oil and each cubic meter of gas where it's produced? What processing it goes through? How does it reach markets by LNG or pipeline in the case of gas suited refining system in the case of oil? And what that enabled us to do is to build up a picture of the emissions intensity of each of these different sources of oil and gas. What we find is that, not all oil is equal in its environmental impact, not all gas is equal and its environmental like there's actually in fact, a wide variation depending on things like methane emissions flaring, the cost of extraction, some sources of oil at that much more difficult to get out of the ground, they need more energy. So I think some interesting findings there because in my view, consumers will be paying more attention into the future, not just to the combustion emissions, so the direct emissions of the fossil fuels that they use, but also how they're produced, how they transported, whether there's methane leakage along that value chain. So I think that was an interesting new area for us to look at.
