World energy demand will witness an unprecedented decline in 2020, a drop bigger than any since the World War II, due to the effects of the COVID-9 pandemic and the attendant lockdowns in many countries, the International Energy Agency (IEA) has predicted.
The IEA specifically predicted a six per cent decline in energy demand for the year, saying, in absolute terms, the drop would the largest on record, while in percentage, it would be the steepest decline in 70 years.
The agency’s prediction emanated from its latest Global Energy Report released recently, wherein it also projected that only renewables would record growth in the year under review, surpassing all other sources of energy, owing to certain factors.
The Executive Director of IEA, Mr. Fatih Birol, stated in the report, that demand hit from the pandemic was expected to be seven times greater than the decline in the aftermath of the financial crisis in 2008.
“In absolute terms, the decline is unprecedented — the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer,” he said.
The projections were based on the assumption that shelter-in-place and social distancing measures will slowly ease in the coming months, with a gradual economic recovery following.
Under a faster return-to-business scenario, the report stated that demand loss could be limited to 3.8 per cent while a possible second wave of the virus could cause a greater than six per cent decline.
“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
“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,” Birol added.
According to the report, the impact has already been felt. In the first quarter, energy demand fell 3.8 per cent year-over-year, wiping out all of 2019 demand growth.
It added that coal was hit especially hard in the quarter after the outbreak brought much of China, a coal-based economy, to a standstill and that cheaper gas prices as well as warmer temperatures also contributed to the decline.
The IEA projected that annual demand would drop eight per cent, which would be the most since World War II.
The report also noted that oil had also been heavily impacted, with roughly 60 per cent of global demand for crude stemming from driving and flying, so with people at home and planes grounded demand has fallen off a cliff.
In March, oil demand dropped by a record 10.8 million barrels per day from a year earlier and in April, the IEA estimated that demand would fall by 29 million barrel per day year-on-year, hitting a level last seen in 1995.
Electricity demand has also contracted with factories shuttered and businesses closed as people work from home.
“Changes to how and when electricity is used during lockdowns have transformed the shape of electricity demand over the course of the day in some regions, with the pattern on weekdays now resembling the pattern usually seen only on Sundays,” the report said.
For the full year, the agency expects electricity demand to fall five per cent for the full year, which would be the largest decline since the Great Depression.
This means a falloff in demand for natural gas after 10 years of uninterrupted growth.
“This decline is less than the anticipated fall in oil demand, reflecting the fact that natural gas is less exposed to the collapse in demand for transportation fuels.
“But it nonetheless represents a huge shock to a gas industry that is used to robust growth in consumption,” the report said.
However, it forecast that the only energy source expected to grow this year was renewables.
“Demand is expected to increase because of low operating costs and preferential access to many power systems. Recent growth in capacity, with some new projects coming online in 2020, will also boost output.” the report said.
Renewable electricity generation grew by three per cent during the first quarter and accounted for nearly 28 per cent of electricity supply, up from 26 per cent a year earlier.
The IEA expects renewable to grow by five per cent, with total global use of renewable energy rising one per cent, pointing out that these numbers were lower than projections prior to the COVID-19.