© OECD/IEA 2016

The global energy outlook and what it means for Belgium

Dr. Fatih Birol

Executive Director, International Energy Agency

Belgium IDR launch

Brussels, 19 May 2016

© OECD/IEA 2016

The European context

Downturn in prices for all fossil fuels

Oil & gas facing second year of falling upstream investment in 2016

Coal prices remain at rock bottom as demand slows in China

An ongoing shift towards clean energy technologies is being driven by policy action & cost reductions

Renewables accounted for over 90% of new global electricity generation in 2015

Belgium is a leading performer in offshore wind power

COP21 was an historic milestone that can stimulate energy sector innovation

Pledges of 180+ countries account for 95% of emissions

EU intends to reduce GHG emissions by at least 40% by 2030

© IEA 2016

Upstream oil and gas investment continues to fall

Upstream oil and gas investment

Upstream oil and gas investment continues to fall; raising the prospect of increasing reliance on the Middle East in the future

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300

400

500

600

700

800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-23%

-19%

USD

bill

ions

(nom

inal

)

© OECD/IEA 2016

Global energy emissions – peaked?

Global energy-related CO2 emissions

IEA analysis shows renewables, led by wind, and improvements in energy efficiency were key to keeping emissions flat for a second year in a row

5

10

15

20

25

30

35Gt

1975 1980 1990 2000 2010 2015

Global economic downturn

Dissolution ofSoviet UnionSecond

oil shock

1985 1995 2005

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0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015

Inde

xed

cost

(200

8=10

0%)

Onshore wind Solar PV - utility scale LEDs

The cost of clean energy continues to fall

Indexed cost of onshore wind, utility scale PV and LED lighting

The falling cost of clean energies opens new opportunities, but support mechanisms need to be reviewed as costs decline

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Greater efforts are still needed to reach a 2°C pathway

Energy efficiency & renewables account for the bulk of the additional emission reductions required for a 2°C pathway, but all forms of clean energies are needed

16

20

24

28

32

36

40

2010 2015 2020 2025 2030 2035 2040

Gt

Trend post-COP21

2°C Scenario

17.9 Gt

Energy efficiency

Fuel & technology switching in end-uses

Renewables

Nuclear

CCS

Other

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How can Belgium contribute?

Belgium has decoupled CO2 emissions and energy demand from economic growth

60

70

80

90

100

110

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Inde

x (2

005=

100) Real GDP

TPES

CO₂ emissions

© OECD/IEA 2016

Developments in electricity markets

Challenges

Wholesale prices are too low to encourage new investment in power generation

Market design in Europe does not ensure viable business without subsidies

Increases in interconnection capacity are needed

More flexible electricity system is also needed – smart meters could help

Progress made thus far

Major improvements in competition in the wholesale and retail markets

Customers are often changing supplier and get better prices

© OECD/IEA 2016

Nuclear power phase-out raises electricity security issues

2015

89.1 TWh

Nuclear29%

Natural gas 24%

Coal 5%

Renewable and Others 18%

Net Imports 24%

2010

94.4 TWh

Nuclear51%

Natural gas 33%

Coal 6%

Renewable and Others 9%

Net Imports 1%

Phase-out by 2025 is close. Security of supply needs to be ensured, but new investment in generation capacity is lacking.

© OECD/IEA 2016

Renewable energy supply increasing

Subsidy levels and regulatory certainty must be addressed to ensure policies are sustainable, and more focus should be given to heat and transport

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Tapping energy efficiency potential

Welcome developments National road pricing for heavy duty vehicles from 2016 on

Excise taxes on diesel to be increased to match gasoline in 2016-18

Areas with further potential Building renovations should be further encouraged

Subsidies to energy users (companies and low-income households) should be replaced by direct aid to those in need

Favourable tax treatment of company cars and fuel cards should be phased out

Time for a broad tax reform to stimulate energy efficiency and GHG savings?

© OECD/IEA 2016

IEA recommendations: how can Belgium meet its challenges?

Adopt a long-term energy strategy (the energy vision)

For electricity security, economic & carbon objectives, consider allowing nuclear plants to operate beyond 2025 if they obtain safety approvals

Promote energy investment by stable & transparent regulation, smooth permitting systems and cross-border co-ordination on market design

Strengthen measures for further diversifying energy supply & curbing energy demand