Thursday, 15 October 2020
On 13 October, the International Energy Agency published its flagship report, the World Energy Outlook 2020 which paid particular attention to the COVID-19 crises, and the impact on the future of energy.
The IEA has published the Outlook every year since 2006. However, the lockdowns associated with the pandemic this year has resulted in a significant drop in global energy demand, which threatens previous energy development plans and deserves closer focus. The response to the pandemic will shape energy policy for years to come.
Global energy demand is set to drop 5% this year - while this is set to reduce CO2 emissions by 7%, energy investment is similarly expected to drop by 18%. The uncertainty beyond this year is explored by analysing various scenarios.
Previous Outlooks have used two projection scenarios, which are also considered in the 2020 Outlook:
However, two new scenarios have been introduced in this year's Outlook:
While the Outlook does not focus exclusively on renewable energy, they are prominent in all scenarios. In particular, the rise of solar technology is noted, given that the cost of solar PV has dropped rapidly, and we are now able to produce electricity from PV consistently cheaper than from similar-sized fossil plants. In the STEPS scenario, 80% of new demand is fulfilled by renewables. While solar sees the most rapid growth, hydropower is expected to remain the mainstay of the global renewables portfolio.
“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. “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.”
Growth in generation capacity will also require the upgrading of transmission and network infrastructure. Critically, the transmission system operators in three large countries, the US, China, and Germany, all saw reductions in revenue in H1 2020 compared to 2019 which has implications for grid investment. Without proper attention, grid infrastructure may become a sizeable bottleneck to the energy revolution.
In all scenarios, coal demand reduces year-on-year by 2025 at the latest and falls below 20% in 2040 in the STEPS scenario, the first time since the Industrial Revolution. Coal sees strong competition from not only renewables but also natural gas.
A synopsis of the Outlook is available on the IEA website, with the full report available via the IEA store. Outlooks for 2018 and prior are available with free registration on the IEA website.