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Global energy demand to plunge this year as a result of the biggest shock since World War 2

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The Covid-19 pandemic represents the biggest shock to the global energy system in more than seven decades, with the drop in demand this year set to dwarf the impact of the 2008 financial crisis and result in a record annual decline in carbon emissions of almost 8%.

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

“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. Only renewables are holding up during the previously unheard-of slump in electricity use,” said Dr Fatih Birol, the IEA Executive Director. “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.”

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

The report projects that energy demand will fall 6% in 2020 – seven times the decline after the 2008 global financial crisis. In absolute terms, the decline is unprecedented – the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer. Advanced economies are expected to see the biggest declines, with demand set to fall by 9% in the United States and by 11% in the European Union. The impact of the crisis on energy demand is heavily dependent on the duration and stringency of measures to curb the spread of the virus. For instance, the IEA found that each month of worldwide lockdown at the levels seen in early April reduces annual global energy demand by about 1.5%.

Changes to electricity use during lockdowns have resulted in significant declines in overall electricity demand, with consumption levels and patterns on weekdays looking like those of a pre-crisis Sunday. Full lockdowns have pushed down electricity demand by 20% or more, with lesser impacts from partial lockdowns. Electricity demand is set to decline by 5% in 2020, the largest drop since the Great Depression in the 1930s.

At the same time, lockdown measures are driving a major shift towards low-carbon sources of electricity including wind, solar PV, hydropower and nuclear. After overtaking coal for the first time ever in 2019, low-carbon sources are set to extend their lead this year to reach 40% of global electricity generation – 6 percentage points ahead of coal. Electricity generation from wind and solar PV continues to increase in 2020, lifted by new projects that were completed in 2019 and early 2020.

This trend is affecting demand for electricity from coal and natural gas, which are finding themselves increasingly squeezed between low overall power demand and increasing output from renewables. As a result, the combined share of gas and coal in the global power mix is set to drop by 3 percentage points in 2020 to a level not seen since 2001.

Coal is particularly hard hit, with global demand projected to fall by 8% in 2020, the largest decline since the Second World War. Following its 2018 peak, coal-fired power generation is set to fall by more than 10% this year.

After 10 years of uninterrupted growth, natural gas demand is on track to decline 5% in 2020. This would be the largest recorded year-on-year drop in consumption since natural gas demand developed at scale during the second half of the 20th century. The massive impact of the crisis on oil demand has already been covered in detail in our April Oil Market Report.

Renewables are set to be the only energy source that will grow in 2020, with their share of global electricity generation projected to jump thanks to their priority access to grids and low operating costs. Despite supply chain disruptions that have paused or delayed deployment in several key regions this year, solar PV and wind are on track to help lift renewable electricity generation by 5% in 2020, aided by higher output from hydropower.

“This crisis has underlined the deep reliance of modern societies on reliable electricity supplies for supporting healthcare systems, businesses and the basic amenities of daily life,” said Dr Birol. “But nobody should take any of this for granted – greater investments and smarter policies are needed to keep electricity supplies secure.”

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

As a result of these trends – mainly the declines in coal and oil use – global energy-related CO2 emissions are set to fall by almost 8% in 2020, reaching their lowest level since 2010. This would be the largest decrease in emissions ever recorded – nearly six times larger than the previous record drop of 400 million tonnes in 2009 that resulted from the global financial crisis.

“Resulting from premature deaths and economic trauma around the world, the historic decline in global emissions is absolutely nothing to cheer,” said Dr Birol. “And if the aftermath of the 2008 financial crisis is anything to go by, we are likely to soon see a sharp rebound in emissions as economic conditions improve. But governments can learn from that experience by putting clean energy technologies – renewables, efficiency, batteries, hydrogen and carbon capture – at the heart of their plans for economic recovery. Investing in those areas can create jobs, make economies more competitive and steer the world towards a more resilient and cleaner energy future.”

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Clean energy demand for critical minerals set to soar as the world pursues net zero goals

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Supplies of critical minerals essential for key clean energy technologies like electric vehicles and wind turbines need to pick up sharply over the coming decades to meet the world’s climate goals, creating potential energy security hazards that governments must act now to address, according to a new report by the International Energy Agency. 

The special report, The Role of Critical Minerals in Clean Energy Transitions, is the most comprehensive global study to date on the central importance of minerals such as copper, lithium, nickel, cobalt and rare earth elements in a secure and rapid transformation of the global energy sector. Building on the IEA’s longstanding leadership role in energy security, the report recommends six key areas of action for policy makers to ensure that critical minerals enable an accelerated transition to clean energy rather than becoming a bottleneck.

“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions,” said Fatih Birol, Executive Director of the IEA. “The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action. By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions.”

“Left unaddressed, these potential vulnerabilities could make global progress towards a clean energy future slower and more costly – and therefore hamper international efforts to tackle climate change,” Dr Birol said. “This is what energy security looks like in the 21st century, and the IEA is fully committed to helping governments ensure that these hazards don’t derail the global drive to accelerate energy transitions.”

The special report, part of the IEA’s flagship World Energy Outlook series, underscores that the mineral requirements of an energy system powered by clean energy technologies differ profoundly from one that runs on fossil fuels. A typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a similarly sized gas-fired power plant.

Demand outlooks and supply vulnerabilities vary widely by mineral, but the energy sector’s overall needs for critical minerals could increase by as much as six times by 2040, depending on how rapidly governments act to reduce emissions. Not only is this a massive increase in absolute terms, but as the costs of technologies fall, mineral inputs will account for an increasingly important part of the value of key components, making their overall costs more vulnerable to potential mineral price swings.

The commercial importance of these minerals also grow rapidly: today’s revenue from coal production is ten times larger than from energy transition minerals. However, in climate-driven scenarios, these positions are reversed well before 2040.

To produce the report, the IEA built on its detailed, technology-rich energy modelling tools to establish a unique database showing future mineral requirements under varying scenarios that span a range of levels of climate action and 11 different technology evolution pathways. In climate-driven scenarios, mineral demand for use in batteries for electric vehicles and grid storage is a major force, growing at least thirty times to 2040. The rise of low-carbon power generation to meet climate goals also means a tripling of mineral demand from this sector by 2040. Wind takes the lead, bolstered by material-intensive offshore wind. Solar PV follows closely, due to the sheer volume of capacity that is added. The expansion of electricity networks also requires a huge amount of copper and aluminium.

Unlike oil – a commodity produced around the world and traded in liquid markets – production and processing of many minerals such as lithium, cobalt and some rare earth elements are highly concentrated in a handful of countries, with the top three producers accounting for more than 75% of supplies. Complex and sometimes opaque supply chains also increase the risks that could arise from physical disruptions, trade restrictions or other developments in major producing countries. In addition, while there is no shortage of resources, the quality of available deposits is declining as the most immediately accessible resources are exploited. Producers also face the necessity of stricter environmental and social standards.

The IEA report provides six key recommendations for policy makers to foster stable supplies of critical minerals to support accelerated clean energy transitions. These include the need for governments to lay out their long-term commitments for emission reductions, which would provide the confidence needed for suppliers to invest in and expand mineral production. Governments should also promote technological advances, scale up recycling to relieve pressure on primary supplies, maintain high environmental and social standards, and strengthen international collaboration between producers and consumers.

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Global e-commerce jumps to $26.7 trillion, fuelled by COVID-19

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Parts of the online economy have boomed since COVID-19 began, while some pre-pandemic big-hitters have seen a reversal of their fortunes in the last year, amid widespread movement restrictions, UN economists have found.

According to UN trade and development experts UNCTAD, the e-commerce sector saw a “dramatic” rise in its share of all retail sales, from 16 per cent to 19 per cent in 2020.

The digital retail economy experienced most growth in the Republic of Korea, where internet sales increased from around one in five transactions in 2019, to more than one in four last year.

“These statistics show the growing importance of online activities”, said Shamika Sirimanne, UNCTAD’s director of technology and logistics. “They also point to the need for countries, especially developing ones, to have such information as they rebuild their economies in the wake of the COVID-19 pandemic.” 

The UK also saw a spike in online transactions over the same period, from 15.8 to 23.3 per cent; so too did China (from 20.7 to 24.9 per cent), the US (11 to 14 per cent), Australia (6.3 to 9.4 per cent), Singapore (5.9 to 11.7 per cent) and Canada (3.6 to 6.2 per cent).  

Online business-to-consumer (B2C) sales for the world’s top 13 companies stood at $2.9 trillion in 2020, UNCTAD said on Friday.

Bumpy ride

UNCTAD also said that among the top 13 e-commerce firms – most being from China and the US – those offering ride-hailing and travel services have suffered.

These include holiday site Expedia, which fell from fifth place in 2019 to 11th in 2020, a slide mirrored by travel aggregator, Booking Holdings, and Airbnb.

By comparison, e-firms offering a wider range of services and goods to online consumers fared better, with the top 13 companies seeing a more than 20 per cent increase in their sales – up from 17.9 per cent in 2019.

These winners include Shopify, whose gains rose more than 95 per cent last year – and Walmart (up 72.4 per cent). 

Cashing-up

Overall, global e-commerce sales jumped to $26.7 trillion in 2019, up four per cent from a year earlier, the UN number-crunchers noted, citing the latest available estimates.

In addition to consumer online purchases, this figure includes “business-to-business” (B2B) trade, which put together was worth 30 per cent of global gross domestic product two years ago.

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COVID-19 has reshaped last-mile logistics, with e-commerce deliveries rising 25% in 2020

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COVID-19 has shifted the way people buy goods, accelerating the rise in online shopping and e-commerce deliveries. According to a new report from the World Economic Forum, this has led to a 25% rise in consumer e-commerce deliveries in 2020.

The new report, Pandemic, Parcels and Public Vaccination: Envisioning the Next Normal for the Last-Mile Ecosystem, explores changes seen over the last year which will greatly influence last mile deliveries in the future. For example, it’s expected that 10%-20% of the recent increase in e-commerce deliveries will continue after the pandemic and the lifting of COVID-19 restrictions.

“Covid-19 shutdowns have completely reshaped how we live and of course this includes how and what we’re buying,” said Christoph Wolff, Head of Mobility, World Economic Forum. “Leaders must consider and respond to the effects COVID-19 has had on e-commerce deliveries and what impact these changes will have on their cities and communities.”

Beyond rising demand, the past year has also seen a large shift to greener delivery options, with wider spread EV across the industry and more stringent carbon emission rules from cities expected to shape delivery networks in the near future.

Overall, the report finds six main structural changes to the delivery and logistics sector that are expected to last:

Six structural changes

The pandemic has caused an increase in last-mile deliveries that are likely to persist.
In 2020, business-to-consumer parcel deliveries have risen by about 25%. The report suggests that part of this increased demand will be durable, with at least 10%-20% of the growth remaining post-pandemic.

Consumers increasingly buy new types of products online and consider environmental and health impact when buying.
As consumers continue to buy a wider array of goods online, they are also becoming more ecologically aware. For example, 56% of millennials cite environmental protection as the reason for choosing alternatives to home delivery.

Decarbonization of last-mile deliveries has accelerated.
Companies and cities have ramped up commitments to make emission-free deliveries, while many pandemic-related economic stimulus packages, especially in the European Union and China, contain provisions to support green mobility and goods transport.

Faced with budget challenges and increased transport needs, cities steer last-mile transitions.
Many cities, like Seattle and Boston, have started to repurpose kerb space to designated delivery pick-up. Others, including Santa Monica and Amsterdam, are taking bold action on cleaner delivery with “zero-emission delivery zones” and electric vehicle charging infrastructure.

Proven technologies are fuelling the last-mile ecosystem revolution.
While disruptive new technologies, such as drones and delivery robots, will continue to emerge, the last-mile revolution is happening now as proven technologies scale up. The likes of parcel lockers and data sharing for load pooling are being adopted around the world as the costs of implementation decrease

New business models emerge to meet increased demand for sustainable delivery vehicles.
Certain logistics companies are now offering services to online retailers, which will help them identify the delivery routes most suited to make the immediate transition to electric delivery vehicles.

Last mile for vaccines

While ensuring equitable access to COVID-19 vaccines remains the most pressing issue in global vaccine distribution, effective last-mile delivery is another critical issue for countries. The key challenges are cold storage, second vaccine dose needs, and a disconnect between the vaccine and patient journey.

“Governments and logistics companies could think about teaming up with players who are experienced in managing very local, capillary demand and with integrating a large number of local retail outlets,” says Anja Huber, Engagement Manager, McKinsey & Company. “Examples include large online retailers, eGrocery giants and technology platform players”

Potential solutions countries can implement for efficient vaccine delivery include real-time logistics planning, data integration, centralized management of delivery strategies at the national level and many more.

There are also early examples of countries that have handled this challenge particularly well. While there are many factors in vaccine distribution success, broadly speaking, countries with tight integration of healthcare and logistics stakeholders seem to show the highest national vaccination rates two months into 2021.

These include Israel, the UK and Chile outperforming other countries with more decentralized healthcare systems, like the US and Germany, which had slower initial vaccine rollouts.

Clearly, much still needs to be done to ensure developed countries overcome operational issues with vaccine delivery. However, mobility solutions should not overshadow an even larger ethical challenge in the differences of vaccine access between the global north and global south, which is a priority for greater equity.

Future of the last mile

The impact of COVID-19 on the last-mile delivery has accelerated existing trends across the sector, leading to six structural changes expected to shape the future of last mile deliveries.

These will be part of a broader urban mobility transition, driven by public policy and company actions. As cities and logistics leaders continue the sustainable urban delivery transition, close public-private coordination will be critical. Zero Emissions Urban Fleets (ZEUF) network, for example, provides a relevant dedicated stakeholder platform for this work.

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