IEA Predicts Global Energy Demand Recovery Only In 2025, Key Solar Role

The International Energy Agency (IEA), in its annual World Energy Outlook 2020, (WEO-2020) has predicted a return to normalcy for world energy demand only by 2025. This is mainly due to the sluggish recover being experienced from the Covid pandemic worldwide, including fears of a second wave of infections in key markets like Europe and North America.

The Paris-based IEA has predicted a fall in global energy demand by 5 per cent in 2020, while CO2 emissions related to energy fall by 7 per cent thanks to more renewable energy share and energy investment by 18 per cent.

Demand for oil is set to fall by 8 per cent and coal use by 7 per cent while renewables will see a slight rise.

The agency remained ambiguous on the impact of the pandemic on governments, in terms of a setback to renewable effort push or a a stronger resolve to make the most of this crisis.

Interestingly, the agency sees solar power playing a key role in all its scenarios.

“I see solar becoming the new king of the world’s electricity markets. Based on today’s policy settings, it is on track to set new records for deployment every year after 2022,” said Dr Fatih Birol, the IEA Executive Director.

The WEO-2020 report shows that strong growth of renewables needs to be paired with robust investment in electricity grids. Without enough investment, grids will prove to be a weak link in the transformation of the power sector, with implications for the reliability and security of electricity supply.

Fossil fuels face varying challenges. Coal demand does not return to pre-crisis levels in the Stated Policies Scenario, with its share in the 2040 energy mix falling below 20% for the first time since the Industrial Revolution. But demand for natural gas grows significantly, mainly in Asia, while oil remains vulnerable to the major economic uncertainties resulting from the pandemic.

For India, where the World bank has predicted a 9 percent contraction in 2020, followed by just 5 percent growth in 2021, effectively meaning that the country will reach 2019 levels only by 2022, these predictions may not hold as much relevance. Electricity demand is already back to 2019 levels or above, while fossil fuel consumption is also on track to be at 2019 levels by the end of the year.

The best case for the global economy remains a vaccine and therapeutics launch that ensures a strong recovery in 2021, and a full demand recovery by 2023.

A delay on this could mean a pushback of full recovery by another two years, or 2023.

Fatih Birol says that  “The era of global oil demand growth will come to an end within the next 10 years, but in the absence in a large shift in government policies, I don’t see a clear sign of a peak. A global economic rebound would soon bring oil demand back to pre-crisis levels,”.

That is one reason its central scenario, predicts “upstream investment picks up from the low point in 2020, underpinned by a rise in the oil price to $75 a barrel by 2030. However, it is not clear whether this investment will come in time and, if it does come, where it will come from.”

Current oil prices of $35 to $45 have effectively made offshore oil almost non-viable in many fields around the world, while placing even more pressure on shale oil and gas producers to deliver a profit. Fresh prospecting and investments have slowed down massively, something whose impact is likely to play out from 2023 onwards. Should oil consumption keep growing slowly even.

The best scenario in our view remains the view hat 2018-19 might have seen peak oil consumption, and from here on, hastened by the Covid -19 pandemic, consumption will be stagnant or drop gradually. Driven in part by the rise of Electric vehicles, renewable power, and actual reduction in travel. The global aviation sector for instance, is still below 70percent of peak levels, virtually wiping out 2020, and taking the sector back to 2014 levels.

Further disruptions wait  around the corner, in the form of a sharp drop in battery storage costs for instance, or gains in energy efficiency, besides any breakthrough in hydrogen gas production efficiency, using renewable energy.