Recent IEA analyses on behind-the-meter energy system trends

2. IEA 2019. All rights reserved. Overview • Current energy demand and efficiency trends from Energy Efficiency 2019 • Current and mid-term trends in small-scale renewables from Renewables 2019 • Future demand-side trends and scenarios from WEO 2019

4. IEA 2019. All rights reserved. 2018 demand growth was the fastest rate this decade Change in global primary energy demand Global total primary energy demand rose by 2.3% in 2018, with the largest economies, US and China, responsible for more than 60% of growth. Renewables and gas grew the fastest. 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 2011 2012 2013 2014 2015 2016 2017 2018 Changeinprimaryenergydemand Rest of the world United States China

5. IEA 2019. All rights reserved. Global energy efficiency improvements are slowing down In 2018 the global economy produced 1.2% more value for every unit of energy used compared to 2017. Improvements in primary energy intensity 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 2000-09 2010-14 2015 2016 2017 2018 Rate achievable via the IEA's Efficient World Strategy Cost-effective opportunities exist to deliver an annual improvement rate of 3%.

6. IEA 2019. All rights reserved. What’s behind the slowdown? Three factors are driving the efficiency slowdown: 1. Short term factors: recent jumps in industrial activity and exceptional weather have pushed up demand 2. Broader trends: overarching structural trends are blunting the impact of technical efficiency improvements 3. Policy progress and investment are flat, and are not keeping up with the upward pressures on demand

7. IEA 2019. All rights reserved. Growth in energy-intensive sectors drove demand China’s steel sector consumes 4% of global final demand. Chinese steel output grew by 8% in 2017 and 6% in 2018 after 4 flat years. Global production of crude steel, 2010-18 Sources: Adapted from World Steel (2019), Total Production of Crude Steel; IEA (2019p), World Energy Balances 2019 (database). 0 100 200 300 400 500 600 700 800 900 1 000 2010 2011 2012 2013 2014 2015 2016 2017 2018 Milliontonnes China Rest of the world

8. IEA 2019. All rights reserved. Short term weather patterns also influenced demand US selected monthly temperature anomalies and change in gas demand, (2018 compared to 2016-17 average) In the US and China, relatively cooler winter months led to higher gas use. Electricity use for air conditioning was also higher in several regions due to hotter summers. Source: National Oceanic and Atmospheric Administration (2019), Climate at a Glance: Global Time Series Notes: Anomalies are based on the difference between temperatures in a given year and an average monthly temperature over the period 1910-2000. -30% -20% -10% 0% 10% 20% 30% 40% 50% - 3 - 2 - 1 0 1 2 3 4 5 April September October November Degreescelsius 2018 monthly temperature anomaly, compared to 2016-17 average (left axis) 2018 change in US residential gas demand, compared with 2016-17 average (right axis)

9. IEA 2019. All rights reserved. Structural change is blunting technical efficiency gains Structural factors can be as influential on energy demand patterns as technical efficiency gains. However, recent structural trends have worked against technical efficiency, creating more energy use. Net energy savings from technical efficiency and structural change in major economies, 2011-18 0 1 2 3 4 5 6 7 2012 2013 2014 2015 2016 2017 2018 EJ Structural change Technical efficiency Net savings

10. IEA 2019. All rights reserved. Technical efficiency isn’t keeping pace with societal trends The technical efficiency of homes and appliances is improving, resulting in energy savings. However, these savings are overwhelmed by wider societal factors that create more energy use. Factors influencing residential buildings energy use, 2015-18 Population, weather and other factors Higher appliance ownership Greater use of appliances More floor area per person - 4 - 2 0 2 4 6 Technical efficiency gains EJ

11. IEA 2019. All rights reserved. Transport users’ decisions are also affecting energy use Vehicles are more technically efficient but people are driving more, shifting to more intensive modes and larger vehicles, while travelling in smaller groups. Factors influencing passenger transport energy use, 2015-18 0 1 2 3 4 5 6 Activity Inter-mode shift Vehicle type Occupancy Technical efficiency EJ

12. IEA 2019. All rights reserved. Policy progress and investment are flat, just when they need to grow Efficiency policy progress is slow, and investments in efficiency stayed flat. Returning to a 3% annual improvement in intensity requires annual investments to double on average, between now and 2025. Mandatory policy coverage Investments in energy efficiency by region 0% 20% 40% 60% 80% 100% 2010 2011 2012 2013 2014 2015 2016 2017 2018 Finalenergyusecoveredbymandatory policy Uncovered Covered 72.2 73.5 78.4 76.0 76.5 0 50 100 150 200 250 2014 2015 2016 2017 2018 USDbillion(2018) Other North America China Europe

13. IEA 2019. All rights reserved. The slowdown is a lost opportunity for the global economy In 2018, global efficiency improvements equated to $1.6 trillion in additional productivity over 2017. Without the slowdown, the gain could have been 2.5 times bigger. Energy productivity bonus, actual and if energy efficiency had improved at 3% 0 1 2 3 4 5 2015 2016 2017 2018 USD(2018)trillions Additional bonus from 3% energy intensity improvement rate Actual energy productivity bonus

14. IEA 2019. All rights reserved. Efficiency continued to deliver financial and energy security benefits Efficiency bolstered the energy security of all fuels. Because of efficiency gains made since 2000, Japan and China reduced their 2018 oil import bill by $20 billion each. Efficiency gains have reduced oil imports by: Japan 20% South Africa 13% Germany 11% China 10% India 8% Mexico 7%

15. IEA 2019. All rights reserved. Efficiency lowered emissions, but not as much it could have Energy-related emissions were lower thanks to efficiency but still continued to increase. Reversing the recent trend is possible with cost-effective energy efficiency measures. Energy related emissions, with and without energy efficiency improvements 22 26 30 34 38 42 2000 2005 2010 2015 2020 2025 GtCO2 22 26 30 34 38 42 2000 2005 2010 2015 2020 2025 GtCO2 Emissions without technical efficiency gains Actual emissions Emissions with efficiency improvements under EWS

17. IEA 2019. All rights reserved. Policymakers can avail of the digitalisation opportunity If current trends continue, digital technologies could double between now and 2026. This presents risks of higher energy demand but also new opportunities for energy efficiency. Number of digital devices and connections, 2015-26 0 5 10 15 20 25 30 35 40 45 2018 2019 2020 2021 2022 2023 2024 2025 2026 billionsofdevices Network communications devices Smartphones Non-smartphones TVs PCs Tablets Other

18. IEA 2019. All rights reserved. Digitalisation: From end-use to system efficiency Traditional efficiency policy addresses devices individually. Digitalisation, with the right policies, enables a progression to optimising the efficiency of the whole energy system. Smart home Smart grid

19. IEA 2019. All rights reserved. Digitalisation requires policy action Policy makers must engage with a range of challenging issues if the world is to harness digitalisation for greater energy efficiency Policy principles comprising the Readiness for Digital Energy Efficiency framework

21. IEA 2019. All rights reserved. Solar PV drives strong rebound in renewable capacity expansion Renewable capacity growth between 2019 and 2024 by technology Renewables expand by 50% through 2024, with distributed PV alone growing as much as onshore wind 0 100 200 300 400 500 600 700 800 Solar PV Onshore wind Hydropower Offshore wind Bioenergy Others GW Distributed PV

22. IEA 2019. All rights reserved. Distributed PV expansion more than doubles Distributed PV growth by country/region Over the next five years, China’s distributed PV capacity becomes the world’s biggest, growth in the EU resumes, and other countries such as India emerge as new markets 0 50 100 150 200 250 300 350 2007-12 2013-18 2019-24 GW 0 50 100 150 200 250 300 350 2007-12 2013-18 2019-24 GW China EU United States Japan India Australia Other countries

23. IEA 2019. All rights reserved. Commercial buildings and industry lead distributed PV growth Distributed PV growth by application Economies of scale + better match between PV output and electricity demand in commercial/industrial applications enable higher self-consumption, saving more on electricity bills than in case of residential 0 50 100 150 200 250 300 350 400 Off-grid Residential Commercial 2018 2019-24

24. IEA 2019. All rights reserved. But residential sector leads growth in the United States Distributed PV growth by application and region (2019-24) By 2024, China surpasses Europe to have the most distributed PV capacity installed, due to commercial boom 0 20 40 60 80 100 120 140 China Europe Asia-Pacific North America Others GW Residential Commercial

25. IEA 2019. All rights reserved. Distributed PV increasingly cheaper than retail electricity prices Distributed PV LCOE versus residential retail electricity prices Continuing decline of solar PV costs widens the gap with retail electricity prices, increasing distributed PV’s economic attractiveness for private investors 0 50 100 150 200 250 300 2018 2024 2018 2024 2018 2024 2018 2024 2018 2024 2018 2024 Germany Japan Australia California USA China India USD/MWh LCOE in 2018 LCOE in 2024 Residential electriciy price

26. IEA 2019. All rights reserved. Distributed PV policies vary by application and country Remuneration policies for distributed solar PV for capacity growth over 2019-24 Buy-all, sell-all and net metering models are expected to drive growth in the residential sector while real- time self-consumption models with value-based remuneration to dominate commercial applications 0% 20% 40% 60% 80% 100% Residential Commercial No rem. Value-based Wholesale Net metering Buy-all, sell-all Real-time self consumption models 0% 20% 40% 60% 80% 100%

27. IEA 2019. All rights reserved. Distributed PV’s rapid growth must be managed Estimated annual revenue losses from distributed PV in 2024 New policies and market reforms are needed to find a balance between the opposing interests of distributed PV owners, energy & distribution companies, and electricity consumers in general 0 10 20 30 40 50 60 70 25% 50% 75% % of contractual self-consumption USDbillion VAT Levies and surcharges T&D Energy

29. IEA 2019. All rights reserved. No single or simple solutions to reach sustainable energy goals Energy-related CO2 emissions and reductions in the Sustainable Development Scenario by source A host of policies and technologies will be needed across every sector to keep climate targets within reach, and further technology innovation will be essential to aid the pursuit of a 1.5°C stabilisation 10 20 30 40 2010 2020 2030 2040 2050 Gt CO2 Other renewables end-uses Nuclear Sustainable Development Scenario Biofuels transport Air conditioners Cars & trucks Heavy industry Wind Solar PV Hydro Electric vehicles Fuel switch incl. hydrogen Buildings CCUS power Current Trends Efficiency Renewables Fuel switch, CCUS and other Aviation and shipping Power CCUS industry Other renewables power Light industry Stated Policies Scenario Industrial electric motors Behavioural change Resource efficiency

30. IEA 2019. All rights reserved. New solar PV projects are taking off Global power capacity by source in the Stated Policies Scenario The power mix is being re-shaped by the rise of renewables and natural gas. In 2040, renewables account for nearly half of total electricity generation. Gas Coal Nuclear Solar PV Wind Hydro 1 000 2 000 3 000 2000 2010 2020 2030 2040 GW

31. IEA 2019. All rights reserved. With increasing variable renewables, time of use becomes critical Daily variation in the average CO2 intensity of electricity supply increases dramatically as solar PV and wind penetration grows. Times of lowest CO2 intensity do not necessarily correspond with highest demand Average hourly CO2 emissions intensity of electricity supply in India and the European Union 50 100 150 200 250 200 400 600 800 1 000 0h 12h 24h Total Flexible demandToday Stated Policies 2040 India gCO2/kWh 150 300 450 100 200 300 0h 12h 24h European Union gCO2/kWh GW GW CO2 intensity: Electricity demand: Daily variation in the average CO2 intensity of electricity supply increases dramatically as solar PV and wind penetration grows. Times of lowest CO2 intensity do not necessarily correspond with highest demand

32. IEA 2019. All rights reserved. Demand-side flexibility can unlock further savings Tapping additional demand-side flexibility potential can further shift demand to periods of low CO2 intensity of electricity supply, reducing emissions and facilitating integration of additional renewables. Average hourly electricity supply and demand in China in the Sustainable Development Scenario, 2040 0h 12h 24h Electricity demand WithenhancedDSR 500 1 000 1 500 2 000 0h 12h 24h GW Coal Gas Oil Nuclear Other renewables Wind Solar PV Storage Unmet demand Withoutenhanced DSR Electricity demand

33. IEA 2019. All rights reserved. Targetted energy efficiency improvements can multiply benefits The time of day when appliances or equipment is used can have a major impact on the emissions intensity of a given use of electricity. Average CO2 emissions intensity of electricity supply and electricity demand by end-use in India in the Sustainable Development Scenario, 2040 50 100 150 200 0 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000 3250 gCO2/kWh TWh Residential buildings Services buildings Light industry Heavy industry Other transport Agriculture Space cooling Appliances Heating & cooking Lighting Electric Vehicles

34. IEA 2019. All rights reserved. Learn more https://www.iea.org/reports/energy-efficiency-2019 https://www.iea.org/reports/renewables-2019 https://www.iea.org/reports/world-energy-outlook-2019 https://www.iea.org/commentaries/empowering-electricity-consumers-to-lower-their-carbon-footprint

Recent IEA analyses on behind-the-meter energy system trends

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