Gap between renewable energy and power demand: oil, gas, coal needed

The world wants to “transition” away from fossil fuels toward green energy, but the difficult reality is this: Dirty fuels are not going away — or even declining — anytime soon.

The total amount of renewable energy that’s available is growing. That’s good news for a world threatened by potentially devastating climate change.

But the increase in renewable energy is still lower than the increase in global energy demand overall. A “transition” from fossil fuels may come someday, but for now, renewable energy isn’t even keeping pace with rising energy demand — so fossil fuel demand is still growing.

“The global power market is experiencing rapid power demand growth as markets recover from the pandemic. Despite all the capacity additions in renewables generation, the amount of power currently generated by renewables is still not enough to meet this increased demand,” Matthew Boyle, manager of global coal and Asia power analytics at S&P Global Platts, told CNBC.

The global supply of renewables will grow by 35 gigawatts from 2021 to 2022, but global power demand growth will go up by 100 gigawatts over the same period, according to Boyle. Countries will have to tap traditional fuel sources to meet the rest of the demand. A gigawatt is 1 billion watts.

At the same time, the amount spent on oil and gas has declined as prices collapsed in 2020 and the industry faced growing pressure to move away from dirty fuels. Total spending in 2021 was a little more than $350 billion – “well below” 2019 levels, said the IEA’s World Energy Outlook 2021 report released last month.

“The world is not investing enough to meet its future energy needs … Transition-related spending is gradually picking up, but remains far short of what is required to meet rising demand for energy services in a sustainable way,” the IEA report said.

That shortfall will only widen as economies reopen and travel resumes, with demand already spiking to pre-pandemic levels. The IEA said the rapid “but uneven” recovery from the pandemic is straining energy markets, sparking sharp rises in prices for natural gas, coal and electricity.

Already, countries are in the throes of a major energy crunch, as a gas shortage slams Europe and coal shortages pressure China and India.

That said, just because major energy companies may be cutting investment in fossil fuels doesn’t mean those emissions have stopped altogether.

Speaking at the Green Horizon Summit chaired by CNBC’s Julianna Tatelbaum during the COP26 climate conference in Glasgow, Scotland, BlackRock Chairman and CEO Larry Fink expressed worries that publicly traded oil companies are lowering their reportable emissions by merely selling parts of their business to private companies that are less transparent than big firms traded on public markets.

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