As risks multiply for energy, need for diversification and global cooperation more urgent: IEA

New Delhi, Nov 12 Countries around the world are contending with pressing energy security threats and growing longer-term risks across an unprecedented range of fuels and technologies, thrusting energy into the heart of geopolitical tensions and elevating it as a core issue of economic and national security.

In this context, the latest edition of the IEA’s World Energy Outlook (WEO) underscores the need for governments to pursue greater diversification of supplies and increased cooperation with one another to help navigate the uncertainties and turbulence ahead.

The 2025 edition of the WEO, the most authoritative global source of energy analysis and projections, covers a broad range of trajectories, highlighting different opportunities and vulnerabilities -- but also commonalities.

It does this through three main scenarios, none of which are forecasts. Each maps out a distinct energy future, enabling an analysis of the implications of different policy, investment and technology choices for energy security, affordability and emissions.

Among the many trends common to all the scenarios in this year’s WEO is the world’s growing need for energy services over the coming decades -- with demand rising for mobility, heating, cooling, lighting and other household and industrial uses; and increasingly for data and AI-related services.

In particular, a group of emerging economies -- led by India and Southeast Asia and joined by countries in the Middle East, Africa and Latin America -- comes to increasingly shape energy market dynamics in the years ahead.

Collectively, they take up the baton from China, which accounted for half of global oil and gas demand growth and 60 per cent of electricity demand growth since 2010, although no country or group of countries comes close to replicating China’s energy-intensive rise.

Amid these shifts, traditional energy risks affecting the security of oil and gas supply are now accompanied by vulnerabilities in other areas, most visibly in supply chains for critical minerals due to high levels of market concentration.

A single country is the dominant refiner for 19 out of 20 energy-related strategic minerals, with an average market share of around 70 per cent. The minerals in question are vital for power grids, batteries and EVs, but they also play a crucial role in AI chips, jet engines, defence systems and other strategic industries.

Geographic concentration in refining has increased for nearly all key energy minerals since 2020, and particularly for nickel and cobalt.

Analysis in this year’s WEO of the pipeline of announced projects suggests that reversing this process is set to be slow, calling for stronger action by governments.

“When we look at the history of the energy world in recent decades, there is no other time when energy security tensions have applied to so many fuels and technologies at once -- a situation that calls for the same spirit and focus that governments showed when they created the IEA after the 1973 oil shock,” said IEA Executive Director Fatih Birol.

“With energy security front and centre for many governments, their responses need to consider the synergies and trade-offs that can arise with other policy goals -- on affordability, access, competitiveness and climate change. The WEO's scenarios illustrate the key decision points that lie ahead and, together, provide a framework for evidence-based, data-driven discussion over the way forward.”

Electricity is at the heart of modern economies, and electricity demand grows much faster than overall energy use in all scenarios in WEO-2025.

Investors are reacting to this trend: Spending on electricity supply and end-use electrification already accounts for half of today’s global energy investment.

For the moment, electricity accounts for only about 20 per cent of final energy consumption globally, but it is the key source of energy for sectors accounting for over 40 per cent of the global economy and the main source of energy for most households.

“Analysis in the World Energy Outlook has been highlighting for many years the growing role of electricity in economies around the world. Last year, we said the world was moving quickly into the Age of Electricity -- and it’s clear today that it has already arrived,” Birol said.

“In a break from the trend of the past decade, the increase in electricity consumption is no longer limited to emerging and developing economies. Breakneck demand growth from data centres and AI is helping drive up electricity use in advanced economies, too.

"Global investment in data centres is expected to reach $580 billion in 2025. Those who say that ‘data is the new oil’ will note that this surpasses the $540 billion being spent on global oil supply -- a striking example of the changing nature of modern economies.”

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor