The world’s energy industry is being transformed by the pandemic

A report by the International Energy Agency projects that energy demand will drop 6% in 2020, seven times the decline after the 2008 global financial crisis, on account of measures taken by governments to curb the coronavirus.

The Covid-19 pandemic represents the biggest shock to the global energy system in more than seven decades, with demand falling this year that will worsen the impact of the 2008 financial crisis and lead to a record annual decrease in carbon emissions of almost 8%.

A new report released today by the International Energy Agency provides a near-real-time view of the extraordinary impact of the Covid-19 pandemic on all major fuels. Based on an analysis of more than 100 days of actual data so far this year, the IEA Global Energy Review includes estimates of how trends in energy consumption and carbon dioxide (CO2) emissions are likely to evolve during the rest of 2020.

“This is a historical shock for the entire energy world. Amid today’s unrivaled health and economic crises, the drop in demand for almost all major fuels is staggering, especially for coal, oil and gas. Only renewable energy is retained during the unprecedented drop in electricity use, ”said Dr. Fatih Birol, Executive Director of the IEA. “It is still too early to determine the long-term impacts, but the energy industry emerging from this crisis will be significantly different from the one that came before it.”

The Global Energy Review’s projections of energy demand and energy-related emissions for 2020 are based on assumptions that blockades implemented worldwide in response to the pandemic are progressively alleviated in most countries in the coming months, accompanied by a gradual economic recovery.

The report projects that energy demand will drop 6% in 2020, seven times the decline after the 2008 global financial crisis. In absolute terms, the decline is unprecedented: the equivalent of losing all of India’s energy demand, the world’s third largest consumer of energy. Advanced economies are expected to experience the biggest declines, with demand falling by 9% in the United States and 11% in the European Union. The impact of the crisis on energy demand depends largely on the duration and rigor of the measures to stop the spread of the virus. For example, the IEA found that each global closure month at the levels observed in early April reduces annual global energy demand by approximately 1.5%.

Changes in electricity use during the blockades have resulted in a significant decline in overall electricity demand, with consumption levels and patterns on weekdays similar to those on a Sunday before the crisis. Full locks have reduced electricity demand by 20% or more, with fewer impacts from partial locks. Electricity demand will decrease 5% in 2020, the biggest drop since the Great Depression in the 1930s.

At the same time, the blockade measures are driving a major shift towards low-carbon sources of electricity, including wind, solar photovoltaic, hydro, and nuclear. After overtaking coal for the first time in 2019, low-carbon sources will expand its leadership this year to reach 40% of global electricity generation, 6 percentage points ahead of coal. Electricity generation from wind and solar photovoltaic energy continues to increase in 2020, driven by new projects that were completed in 2019 and early 2020.

This trend is affecting the demand for electricity from coal and natural gas, which are increasingly pressured between the low general demand for energy and the increase in the production of renewable energy. As a result, the combined share of gas and coal in the global energy mix will drop by 3 percentage points in 2020 to a level not seen since 2001.

Coal is particularly affected, with global demand expected to drop 8% in 2020, the biggest decline since World War II. After its peak in 2018, coal-fired power generation will decrease by more than 10% this year.

After 10 years of uninterrupted growth, the demand for natural gas is on track to decrease by 5% in 2020. This would be the largest annual drop in consumption since natural gas demand developed at scale during the second half of twentieth century. The massive impact of the crisis on oil demand has already been covered in detail in our April Oil Market Report.

Renewable energy will become the only energy source to grow in 2020, and its share in global electricity generation is projected to increase thanks to its priority access to grids and low operating costs. Despite supply chain disruptions that have slowed or delayed deployment in several key regions this year, photovoltaic and wind solar power are on track to help increase renewable electricity generation by 5% in 2020, aided by increased production of hydroelectric power.

“This crisis has underscored the deep reliance of modern societies on reliable electricity supplies to support healthcare systems, businesses, and

Despite the resilience of renewable energy in electricity generation in 2020, its growth will be less than in previous years. Nuclear power, another major source of low-carbon electricity, is on track to drop 3% this year from the all-time high it reached in 2019. And renewables outside the power sector are doing less well. Global demand for biofuels will drop substantially in 2020 as transport and travel restrictions reduce the demand for fuel for road transport, including mixed fuels.

As a result of these trends, primarily the decline in the use of coal and oil, global energy-related CO2 emissions will drop almost 8% in 2020, reaching their lowest level since 2010. This would be the largest decrease in emissions ever recorded – almost six times greater than the previous record drop of 400 million tons in 2009 that resulted from the global financial crisis.

“As a result of premature deaths and economic trauma worldwide, the historical decline in global emissions is absolutely nothing to cheer about,” said Dr. Birol. “And if the aftermath of the 2008 financial crisis has anything to do with it, we are likely to see a sharp rebound in emissions soon as economic conditions improve. But governments can learn from that experience by putting clean energy technologies (renewable energy, efficiency, batteries, carbon and hydrogen capture) at the center of their economic recovery plans. Investing in those areas can create jobs, make economies more competitive, and steer the world towards a stronger and cleaner energy future. ”