Global energy demand set to plummet in 2020

Worldwide energy demand will fall 6 per cent in 2020 – seven times the decline after the 2008 global financial crisis, according to the International Energy Agency in its Global Energy Review for 2020.

Electricity demand is set to decline by 5 per cent, the largest drop since the Great Depression in the 1930s and, after ten years of uninterrupted growth, natural gas demand is on track to decline 5 per cent in 2020. This would be the largest recorded year-on-year drop in consumption since natural gas demand developed at scale during the second half of the 20th century.

In absolute terms, the global decline is unprecedented – the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer.

The Covid-19 pandemic represents the biggest shock to the global energy system in more than seven decades, believes the IEA. The drop in demand this year is set to dwarf the impact of the 2008 financial crisis and result in a record annual decline in carbon emissions of almost 8 per cent.

“This is a historic shock to the entire energy world. Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas,” said Dr Fatih Birol (pictured), the IEA executive director. “Only renewables are holding up during the previously unheard-of slump in electricity use. It is still too early to determine the longer-term impacts, but the energy industry that emerges from this crisis will be significantly different from the one that came before.”

Thereport’sprojections of energy demand and energy-related emissions for 2020 are based on assumptions that the lockdowns implemented around the world in response to the pandemic are progressively eased in most countries in the coming months, accompanied by a gradual economic recovery.

Advanced economies are expected to see the biggest declines, with demand set to fall by 9 per cent in the United States and by 11 per cent in the European Union. The impact of the crisis on energy demand is heavily dependent on the duration and stringency of measures to curb the spread of the virus. For instance, the IEA found that each month of worldwide lockdown at the levels seen in early April reduces annual global energy demand by about 1.5 per cent.

Changes to electricity use during lockdowns have resulted in significant declines in overall electricity demand, with consumption levels and patterns on weekdays looking like those of a pre-crisis Sunday. Full lockdowns have pushed down electricity demand by 20 per cent or more, with lesser impacts from partial lockdowns.

At the same time, lockdown measures are driving a major shift towards low-carbon sources of electricity including wind, solar PV, hydropower and nuclear. After overtaking coal for the first time ever in 2019, low-carbon sources are set to extend their lead this year to reach 40 per cent of global electricity generation – 6 percentage points ahead of coal. Electricity generation from wind and solar PV continues to increase in 2020, lifted by new projects that were completed in 2019 and early 2020.

This trend is affecting demand for electricity from coal and natural gas, which are finding themselves increasingly squeezed between low overall power demand and increasing output from renewables. As a result, the combined share of gas and coal in the global power mix is set to drop by 3 percentage points in 2020 to a level not seen since 2001.

Coal is particularly hard hit, with global demand projected to fall by 8 per cent in 2020, the largest decline since the Second World War. Following its 2018 peak, coal-fired power generation is set to fall by more than 10 per cent this year.

Renewables are set to be the only energy source that will grow in 2020, with their share of global electricity generation projected to jump thanks to their priority access to grids and low operating costs. Despite supply chain disruptions that have paused or delayed deployment in several key regions this year, solar PV and wind are on track to help lift renewable electricity generation by 5 per cent in 2020, aided by higher output from hydropower.

Despite the resilience of renewables in electricity generation in 2020, their growth is set to be lower than in previous years. Nuclear power, another major source of low-carbon electricity, is on track to drop by 3 per cent this year from the all-time high it reached in 2019. And renewables outside the power sector are faring less well. Global demand for biofuels is set to fall substantially in 2020 as restrictions on transport and travel reduce road transport fuel demand, including for blended fuels.

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