The corona pandemic has caused incomparable disruptions in the global economy and energy system in 2020. Global energy demand is set to drop by 5%, energy-related CO2 emissions by 7%, and energy investment by 18%. Nobody knows what will happen next and reflecting this uncertainty, this year’s version of the highly influential annual outlook offers several different scenarios - including one where the pandemic is quickly under control and the economy returns to the same position as before in 2021, and one with a more protracted course that postpones the return to 2023.
Renewables take starring roles in all our scenarios, with solar centre stage.
Supportive policies and maturing technologies are enabling very cheap access to capital in leading markets. Solar PV is now consistently cheaper than new coal- or gas-fired power plants in most countries, and solar projects now offer some of the lowest cost electricity ever seen. In the first scenario, where the world economy is recovering rapidly, renewable energy will account for 80 percent of energy consumption in the coming decade, with hydropower as the largest and solar energy as the fastest growing energy source.
“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,” said Faith Birol, IEA's CEO, in a press release.
But what about fossil fuels? Demand for natural gas will grow significantly, especially in Asia, and for oil to be phased out, politicians must lead the way.
“The era of global oil demand growth will come to an end in the next decade,” Dr Birol said. “But without a large shift in government policies, there is no sign of a rapid decline. Based on today’s policy settings, a global economic rebound would soon push oil demand back to pre-crisis levels.”
Despite a faster increase in renewable energy sources, it is too early to explain peak oil - i.e. a peak in global oil use. For that, stronger climate actions are needed. For instance, the demand for natural gas that can increase by 30% until 2040, unless political responses to global warming increase.
This means that even though global carbon dioxide emissions have reached their peak, they are "far from the immediate peak and decline" needed to stabilize the climate. The report's analysis shows that if energy consumption remains unchanged, we are moving towards a temperature increase of 1.65 degrees and according to the IEA, "never before seen" efforts are required from all parts of the global economy, not just the power sector, to reach net zero by 2070. World countries need to increase investment in renewable electricity from $ 380 billion a year to $ 1,600 billion a year by 2030. Until then, hydrogen production needs to increase from 0.45 million tons a year to 40 million tons, while sales of electric cars need to increase from 2.5 million a year to 50 million a year.