What to watch in 2024: energy

• Growth in global energy consumption will accelerate to 1.8% in 2024, supported by strong demand in Asia despite still-high energy prices and ongoing geopolitical tensions.

• Global coal, gas and oil demand will reach record levels, setting back efforts to reduce emissions. High commodity prices will continue to drive investment into oil and gas production.

• Momentum in renewable energy will continue, with combined solar and wind energy consumption growing by about 11% year on year globally. Many countries will also rush to build more hydrogen production capacity.

• Hydropower production will remain low as climate change continues to lower water levels in many regions. Nuclear power will also be adversely affected.

Energy demand will get healthier

The post-pandemic recovery in energy consumption will accelerate to growth of 1.8% in 2024, up from just 1.2% in 2023. This will be supported by strong demand in Asia, where consumption is expected to expand by 3.1%, despite the clouds over China’s economic outlook. Growth in energy consumption will also be strong in the Middle East, particularly if the climate there continues to warm, bolstering demand for air conditioning. Although, an escalation of the Israel-Hamas war (not our core scenario) poses a prominent risk to the economic outlook in the Middle East region. 

However, we expect that energy demand in Europe will record its third consecutive year of decline as the region continues to battle against high energy prices and limited gas supply. Nevertheless, the situation in Europe has improved from 2022-23, so we do not expect any rationing to gas consumption during 2024. Growth will also be only marginal in North America and Latin America, where we forecast soft economic growth.

Global fossil-fuel demand will reach record levels in 2024

We expect that global demand for oil, gas and coal will reach record levels in 2024, in spite of the pressure to reduce carbon emissions. Of the three fossil fuels, gas will be the most subdued as high prices pull down demand in Europe and North America. We do not expect gas demand in Europe to return to levels seen before Russia’s invasion of Ukraine during our 2023-32 forecast period. On the other hand, gas consumption in Asia and in the Middle East will grow rapidly, driven mainly by strong demand from the power generation sector.

Coal consumption will rise for the fourth consecutive year, as governments continue to focus on energy security. Indeed, we expect global coal demand to continue growing until 2026, when it will simultaneously peak globally and in China. However, in Europe (excluding Russia) the increase in coal demand seen in 2022, when gas supplies suddenly slumped, will prove short-lived. European coal consumption will decline sharply in 2024 as France and the UK phase out coal-fired power generation. 

Oil demand will expand by 1.7% year on year in 2024, mainly driven by Asia, Latin America and the Middle East, where demand continues growing fast despite high oil prices. In the developed world, demand growth will be timid, expanding by only 1.1% in North America and staying flat in Europe.

Supported by high prices, oil and gas production will continue to grow

High commodity prices and EU efforts to replace Russian energy supplies will continue to attract new investment into fossil-fuel production in 2024. We expect global natural gas production to expand by 2.2% year on year. The main sources of increased production will be North America, Norway, the Middle East, North Africa, Azerbaijan, Turkmenistan, China, Australia and Mozambique.

US exports of liquefied natural gas are set to increase in the coming years as export capacity expands. This will support domestic production growth, which we forecast will increase by 1.9% in 2024. We expect Algeria’s gas production to be boosted by the fast-track development of a major new natural gas discovery in the Hassi R’Mel area in late 2023 and 2024. We also forecast that Russian gas exports will start to recover, albeit marginally, from 2024.

Although they have fallen from their peak in 2022, we expect oil prices to remain high during 2024, as OPEC (led by Saudi Arabia) has shown its determination to cut production to support them. Russia has also agreed on paper to extend a 500,000 barrels a day (b/d) cut announced in February 2023 until the end of 2024, and to cut oil exports by 300,000 b/d until December 2024. However, this target will be revised periodically. Despite a limited immediate impact, the Israel-Gaza war has added to major upside risks to oil prices. Although not our core scenario, a regional escalation of the war would lead to a surge in global oil prices.   

In response to still-high prices and continued demand growth, at least in non-OECD economies, we expect a supply response of about 1.2m b/d from producers in 2024. Only about 540,000 b/d will come from OPEC, owing to cuts in production quotas announced. This means that the US will be the only major producer still in a position to make up the difference. Strong demand growth in non-OECD countries and still-elevated prices will encourage US producers to raise output further in 2024, to a record high of 19.2m b/d.

Growth in renewable energy to remain strong

The need to strengthen energy security in the wake of the energy crisis, in addition to decarbonisation efforts, will drive many governments to push ahead even faster with the deployment of renewable energy. Renewable energy will continue to expand quickly in 2024, with combined solar and wind energy consumption growing by about 11% year on year. Capacity additions are set to reach a record high of about 400 GW in 2023 and to grow even more in 2024.

However, unresolved supply-chain issues, the elevated costs of mining commodities, higher financial costs and low auction prices will challenge the success of many renewable-energy auctions in 2024 (see box below).

Hydrogen production will remain low in 2024

Aiming to meet their hydrogen production goals, many countries around the world will rush to build more hydrogen production capacity in 2024. However, this will not be an easy task. Most hydrogen production currently is of grey hydrogen, which is made through fossil-fuel reforming. Rapid growth in clean hydrogen production will require massive expansion in electrolysis capacity, which will present many challenges.

Producing hydrogen using electrolysis is mineral- and metal-intensive, sharing some of the main raw materials with the manufacturing of renewable energy technologies. So a rapid expansion in electrolyser production is likely to boost mineral and metals prices, which in turn will raise the cost of renewable energy generation. Furthermore, production of green hydrogen will compete with other sectors of the economy for scarce renewable energy output. Therefore, we do not expect much progress in clean hydrogen production in 2024. 

What to watch

Lacklustre offshore wind auctions. Auctions for offshore wind projects are planned in the US, Germany, Finland, Italy, Brazil and India in 2024. However, they are likely to generate low investor interest owing to a host of challenges including rising input and financing costs, supply-chain disruptions, and infrastructure limitations. The scale of these issues was underlined in offshore wind project auctions held in the US and UK in August-September 2023, which received paltry interest from developers owing to rising input material and financing costs and a low price offered to wind-power generators. 

New nuclear reactors. In the first quarter of 2024 a new 1.6-GW reactor will come online at France’s Flamanville nuclear plant. Flamanville 3 is among the first of a new type of reactor and has been beset with protracted delays and cost overruns. In the US, the 1-GW Vogtle Unit 4 reactor is expected to start operating in the fourth quarter of 2023 or the first quarter of 2024. In South Korea, the third reactor at the Saeul facility is expected to start operations in 2024, while the construction of the Shin Hanul-3 and Shin Hanul-4 reactors will commence. By contrast, two nuclear plants in the UK—in Hartlepool and Heysham—are expected to go offline in 2024. 

Indonesia’s energy transition plan. By late 2023 or early 2024, Indonesia is expected to release a detailed investment plan under the Just Energy Transition Partnership, a US$20bn agreement with developed countries to support Indonesia’s decarbonisation. The plan aims for Indonesia’s total power sector emissions to peak by 2030 and brings the sector’s net-zero target forward by ten years, to 2050. However, the delayed release comes after tense negotiations over the terms of funding between developed-world partners and a nation that is reliant on fossil fuels, particularly the country’s relatively new coal-fired power plants.

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.