IEA: Energy demand may not recover until 2025

Source: By Mike Lee and Carlos Anchondo, E&E News reporters • Posted: Tuesday, October 13, 2020

The coronavirus has scrambled the global energy industry, lowering emissions temporarily while still not putting the world on a long-term path to reduce climate-changing pollution, according to the International Energy Agency.

This year’s edition of the Paris-based agency’s World Energy Outlook paints an especially shaky portrait of the sector’s future.

In the most likely scenario, solar and other renewable power sources will meet 80% of the growth in electricity demand, the closely watched IEA report said. Coal consumption will fall and natural gas consumption will rise, driven by demand in Asia. And demand for oil will flatten or trail off in the next decade.

If the virus is not contained, though, global energy demand won’t rebound to pre-crisis levels until 2025, IEA said.

Prolonged COVID-19 outbreaks would also result in emissions that exceed the goals of the Paris climate accord, the 464-page IEA report said. If the world’s energy system continues to operate as it has in the past, it would lock in a global temperature rise of 1.65 degrees Celsius, higher than the 1.5 C goal laid out in the 2015 Paris Agreement.

“Only faster structural changes to the way we produce and consume energy can break the emissions trend for good,” Fatih Birol, IEA’s executive director, said in a statement.

“Governments have the capacity and the responsibility to take decisive actions to accelerate clean energy transitions and put the world on a path to reaching our climate goals, including net-zero emissions,” he said.

The COVID-19 pandemic, which has killed more than 1 million people worldwide, has upended the global energy landscape. Quarantines and social distancing rules have pushed global energy use down 5% this year, and energy-related carbon dioxide emissions have fallen 7%.

“Uncertainty over the duration of the pandemic, its economic and social impacts, and the policy responses open up a wide range of possible energy futures,” the report says.

In IEA’s most likely scenario, the virus is brought under control in 2021 and global energy use rebounds by 2023, led by solar power. Coal-fired generation will slide to less than 20% of world demand by 2040.

“I see solar becoming the new king of the world’s electricity markets,” Birol said.

Under the same scenario, though, electrification in sub-Saharan Africa stalls, and emissions continue to grow.

Under IEA’s worst-case or “delayed recovery scenario,” the world will see “the lowest rate of global energy demand growth since the 1930s,” with fossil fuels bearing the brunt of the reduction in demand, the report said.

In that forecast, oil demand won’t return to pre-crisis levels until 2027, and industry, road freight, shipping and aviation will face a bigger slump than oil use for cars, buildings and the petrochemical sector.

Natural gas demand still grows, but not as much as it would under the most likely, “stated policies” scenario. Demand doesn’t return to last year’s levels until 2024, the report said.

“Gas is particularly hard hit in the power sector, where the share of renewables increases as electricity demand falls back relative to the [stated policies scenario] and marginal thermal power generation plants reduce their operations,” the outlook said, noting that the “opportunity for gas to fill the space left by retiring coal and nuclear capacity is closed off by lower electricity demand.”

Carbon dioxide emissions under the worst-case pandemic scenario would be 2 metric gigatons lower in 2030 than under the stated policies outcome, the IEA said — but the reduction would happen because of reduced demand for energy and a lower level of economic activity, rather than “any structural change in the way that energy is produced or consumed.”

‘Spectacular’ growth?

To address climate change, the world’s governments will have to invest in their electric grids to allow more renewable power generation and adopt one of two scenarios that lead to overall emissions reductions.

The “sustainable development” pathway would require more renewable power and steps such as carbon capture to cut pollution from existing infrastructure like steel and cement plants.

Yet under this scenario, the “average annual level of energy sector investment in the late 2020s” is roughly 60% higher than in the past five years, and the world achieves net-zero emissions by 2070, according to the outlook.

And although investment in some clean energy sectors has remained strong amid the coronavirus pandemic, “funding and financing pressures have increased in many countries,” the report said, and “clean energy technologies have generally not featured prominently in the COVID-19 recovery plans announced to date.”

The most rigorous path, the “net zero emissions by 2050” scenario, would require cutting emissions 40% below peak levels by 2030. To achieve that, nearly 75% of the world’s electricity would have to come from renewables and more than half of passenger cars would have to be electric.

“If governments and investors step up their clean energy efforts in line with our Sustainable Development Scenario, the growth of both solar and wind would be even more spectacular — and hugely encouraging for overcoming the world’s climate challenge,” Birol said.

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