The 21st annual report examines the electricity and gas markets in North America, Europe, Australia, Southeast Asia, India and China.
Reframing crisis as opportunity
The 21st annual World Energy Markets Observatory (WEMO) reveals a world struggling to balance the the desire for continued economic growth with the need to take deliberate and drastic steps against climate change.
In 2018, global energy consumption rose 2.3 percent—nearly twice the average rate since 2010—as driven by a robust worldwide economy. Despite the rapid growth of renewables in some regions, oiI, gas and coal accounted for nearly three-quarters of the increase in total energy demand, their highest share in five years. As a result, greenhouse gas emissions climbed 2 percent globally, a significant break from the plateau of 2014 to 2016.
While renewables remain the fastest-growing energy source worldwide, investments during the first half of 2019 declined 14 percent compared with the same period in 2018. Population growth, as well as a lack of anticipated technical breakthroughs over the next two decades, further contribute to a bleak medium- and long-term landscape.
This year’s WEMO report explores these issues in greater detail and presents new ideas for how utilities, policymakers and private companies can embrace a long-term strategy that balances growth and change—and draws opportunity from crisis.
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The World Energy Markets Observatory (WEMO) is Capgemini’s annual thought leadership and research report that tracks the development and transformation of electricity and gas markets in Europe, North America, Australia, Southeast Asia, India and China. Now in its 21st year, WEMO examines the following topics: climate change & regulatory policies; energy transition; infrastructure & adequacy of supply; supply & final customer; transformation; and financials.
Climate change is an increasing global concern
The world is not on track to reach targets set in the 2015 Paris accord. Most notably, almost all countries are contributing to the rise in carbon emissions, with India and China experiencing the highest increases over the past year. EU emissions are nearly flat for five years, following a decade of strong falls, though medium- and long-term emissions goals will not be achieved without significant new actions.
Advances in non-carbon emitting generation and storage will increase the viability of renewables
Renewables remain the fastest-growing worldwide energy source, with consumption increasing 14.5 percent in 2018. Further, advancements in clean energy storage, including pumped hydro storage, li-ion batteries and clean hydrogen production are helping to drive down costs and improve accessibility. However, the pace of renewables growth depends not only on equipment improvements and costs, but on many other factors, including public acceptance, sales agreements and financing.
The worldwide energy mix is dominated by coal, hampering broader energy transition efforts
While many countries are reducing the use of fossil fuels, especially those in Europe, the energy mix in the developing world is dominated by coal. As a result, worldwide coal consumption grew by 4 percent in 2018, as driven by the need to expand electricity service—a legitimate need. That said, developing countries must adopt sound policies related to cleaner extraction methods in mining, clean coal combustion technologies in power plants and accelerated RD&D investments in carbon capture and storage (CCS).
Continuous advancement in existing technology will drive incremental gains over the next two decades
While the energy industry does not expect any major technical breakthroughs over the next two decades, advances in existing technologies will continue to decrease the cost of renewables, electric batteries, electric vehicles, and small modular reactors. In addition, at-scale deployment of the smart grid, as well as advancements in intelligent automation, will help improve reliability and cost savings, while also reducing the environmental impact of increased demand and consumption.
Geopolitical considerations are increasing energy market volatility
Developments in the energy sector have contributed to geopolitical tensions around the world—and vice versa. U.S. oil independence has allowed the country to enact an aggressive international policy, notably in the Middle-East. U.S. sanctions on Iran and Venezuela, coupled with regional instabilities, have led to a significant decrease in oil production and sustained commodities prices at certain levels. Meanwhile, China has threatened to use rare earth exports as leverage in the trade war with the U.S.