In the final few months of each year, The International Energy Agency (‘IEA’) releases its World Energy Outlook (‘WEO’). The latest edition[1] provides an analysis of global energy and of the implications for energy security, environmental protection and economic development. The WEO uses a scenario-based approach to highlight the key choices, consequences and issues lying ahead and show how the energy system can be affected by the changing energy policies of governments around the world. The present paper identifies main conclusions to draw from this year’s edition in the difficult context of the competitiveness of the EU industry and with the pressing climate urgency in the background.
Energy security concerns persist, but prices are reasonable
Many sources of energy have associated supply security concerns, including the war in Ukraine, the situation in the Middle East and the new U.S. administration. The past few years have shown how quickly situations of dependencies can turn into vulnerabilities. This is not only valid for fossil fuels, but also for the more modern clean and renewable technologies. Geopolitical tensions and associated trade tensions are major risks for energy security and for coordinated action on the reduction of emissions.
However, even in this global context with many risks and uncertainties, the price levels of the main energy sources remain reasonable. Oil, for example, is around USD70/bbl and seems to be unaffected by the situation in the Middle East — a factor that has often been a driving factor of oil price spikes and crises in the past. The main reason for this seems to be the large overcapacity in the global oil market, essentially stemming from oil demand not growing as expected in China — something in part attributed to the electrification of Chinese transport. The WEO sees this spare capacity remaining and even growing to 2030, indicating that world oil consumption would flatten at around 100 million barrels per day between now and 2035, before decreasing in a more distant future.
The situation is similar on the global liquefied natural gas (‘LNG’) market, with existing overcapacities that will only grow over the next years with the additional LNG capacities coming online between now and 2030. The WEO analysis comes to the conclusion that it is unclear where these additional LNG capacities will go and meet an increased demand — possibly in Southeast Asia or India. Possibly even backstop European consumption after cessation of Russian pipeline gas imports to Europe, with the US and Qatar holding onto their position as the world’s biggest suppliers in an increasingly complex interplay of market and geopolitical factors.
Competitiveness issues threaten the EU economy
Whilst price levels on the world markets are reasonable, the EU economy is in a very unfavourable competitiveness position compared to other economies, such as that of the United States. The EU industry, which used to have access to relatively cheap Russian pipeline gas, is now relying on more LNG imports, which is more expensive at the global LNG price levels. This has been clearly identified by the Draghi Report[2]. The EU industry is facing gas costs several times higher than the U.S. industry, which has access to cheap local gas (often shale gas). This difference in gas prices is also one of the reasons — but not the only one — why power prices are several times higher in the EU than in the United States.
Clean tech is progressing — and so is electrification
Although it’s clear that there’s been a large increase in the number of large photovoltaic installations, as well as a swift increase in the use of electric vehicles worldwide, the last year has seen very slow progress in the use of wind energy and a decrease of the rate of deployment of heat pumps, which are essential for the electrification of heating and cooling in the building sector. Hence, a mixed picture.
These clean technologies are now a market of more than USD700 billion, more than half of which is in China — a significant geographical concentration. Additionally, there are fast-growing trade flows from China to Europe that are capable of covering a significant fraction of the EU future energy demand. The WEO states that a sea carrier full of photovoltaic modules carries equipment which will generate as much energy as there is in 50 LNG carriers over its expected lifetime. There is, however, a reason for worry in the fact that Europe is developing a dependency on China in many of these clean technologies, even if it is probably less dangerous than the dependency on gas or oil providers.
Electrification is making quick progress in China, based on the deployment of renewable energy sources, and allows a decrease of the use of coal. This is also taking place in several other large economies, but less so in the United States and the EU. The main drivers for an increased electricity demand are cooling, mobility, data and artificial intelligence. The use of electricity to decarbonise large traditional industrial sectors is not happening at a meaningful scale yet.
Despite recent success, clean tech still faces obstacles
The current rate of deployment of clean technologies implies more or less stable CO2 emissions between now and 2035, which is clearly not Paris Agreement compatible. Last year looks to have been the warmest year ever since the industrial revolution, and it could well be confirmed as the first year to breach the 1.5°C limit over pre-industrial times. The vast majority of scientists would agree that this 1.5°C temperature increase of the Paris Agreement is now out of reach, and that the 2°C objective will quickly slip out of reach if trajectories are not swiftly modified. We would certainly need many more new renewable capacities, faster progress in efficiency measures and large investments in grids, system smartness and storage to allow electrification to accelerate.
The transition also requires large quantities of minerals and metals, some well-known and some exotic. In a general manner, these markets are not in a situation of overcapacity. They are very often concentrated, from a production and manufacturing point of view, in a reduced number of countries, with a large proportion in China. To take just an example, simple things like the availability of copper could quickly become problematic. Recycling can provide a partial answer, but it seems inevitable that more mining activities should be developed in order to avoid crises of undercapacity or unacceptable dependencies on a reduced number of suppliers.
So, where do we go from here?
For Europe, increasing its capacity to produce and use clean energy technologies is essential to ensure that the EU remains competitive on the global clean energy technology market. This will bring large benefits to the European economy and its citizens.
The EU is currently facing technological and non-technological challenges, such as high energy prices, critical raw materials supply chain disruptions and skills shortages. Strengthening the competitiveness of the EU clean energy sector is the only way to shape a more resilient, independent, secure and affordable energy system in Europe’s future.
The new mandate, Commission and Parliament, has this as a clear priority. It requires many adaptations to existing regulations and the fast introduction of several new ones. FTI Consulting can help your business navigate this inevitably unstable regulatory environment. Our experts can:
- Help solidify and expand your business advocacy positions on relevant topics related to the EU energy agenda.
- Increase your business positioning in the EU energy policy ecosystem.
- Enhance your business EU network, in view of the new institutional set up and the evolving policy agenda.
Author: Pierre Dechamps, Senior Advisor, Energy & Natural Resources in the Brussels office.
The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
©2025 FTI Consulting, Inc. All rights reserved. www.fticonsulting.com
[1] IEA (2024), World Energy Outlook 2024, IEA, Paris https://www.iea.org/reports/world-energy-outlook-2024 Licence: CC BY 4.0 (report); CC BY NC SA 4.0 (Annex A)
[2] https://commission.europa.eu/topics/strengthening-european-competitiveness/eu-competitiveness-looking-ahead_en
