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Global electricity demand to rebound modestly in 2021 after historic shock from pandemic

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After experiencing its biggest decline in decades, global electricity demand is expected to rebound modestly next year, led by growth in China, India and other emerging economies, according to a new report by the International Energy Agency.

The historic shock of the Covid-19 crisis is set to result in a 2% decline in global electricity demand in 2020, according to the IEA’s first ever Electricity Market Report, which was published today. With the recovery of the world economy in 2021, electricity demand is forecast to grow by around 3%. That would be significantly weaker than the rebound in demand of over 7% in 2010, the year following the global financial crisis. China will be the only major economy to see higher electricity demand in 2020. However, its expected growth of around 2% is well below its recent average of 6.5%. Other big electricity consumers including the United States, India, Europe, Japan, Korea and Southeast Asia are all set to experience declines for the year as a whole.

Electricity generation from renewable energy – such as hydropower, wind and solar – is forecast to grow by almost 7% in 2020, squeezing conventional power sources. Coal-fired generation is set to fall by around 5%, the largest decrease on record; nuclear power generation by around 4%; and gas-fired electricity generation by 2%. Overall, CO2 emissions from electricity generation are on course to fall by 5% in 2020.

“Electricity has a central role in today’s energy world – a role that will only increase in importance as clean energy transitions accelerate,” said Dr Fatih Birol, the IEA’s Executive Director. “Based on the very latest data available, the IEA’s new Electricity Market Report provides fresh insights on this critical sector. Starting next year, we will publish a new edition of the report on a half-yearly basis.”

Falling demand, lower fuel prices and the increase in renewable generation have dragged down wholesale electricity prices in 2020. The IEA’s wholesale electricity market price index, which tracks price movements in major advanced economies, shows an average price decline of 28% this year, after having already fallen by 12% in 2019.

The growth of renewable power generation is forecast to continue in 2021 with an increase of more than 6%, expanding the share of renewables in the power mix to 29% from 28% in 2020. Nuclear power is set for growth of 2.5% next year on rebounds in France and Japan and new plants coming online in China and the United Arab Emirates.

In advanced economies, the growth of renewables and nuclear power will continue to shrink the space remaining for fossil fuel generation. Natural gas is likely to be impacted more than coal as a result of an expected rise in natural gas prices. In emerging and developing economies, demand growth is forecast to outpace increases in renewables and nuclear power, leaving some room for coal and gas generation to expand. 

The expected net result globally is that coal-fired generation increases by around 3% in 2021, while gas-fired plants increase output by roughly 1%. This would lead to a rise in CO2 emissions from the power sector of around 2% in 2021.

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Colombia’s energy districts: an example for the region

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image: UNIDO

An energy district is a local institution that leads, implements and accelerates a locally-owned, inclusive and clean energy transition. In the process, energy districts create local jobs and retain and grow wealth, while simultaneously reducing carbon emissions and air pollution.

Colombia is a pioneer South American country in the promotion of this approach. Beginning in 2013, the United Nations Industrial Development Organization (UNIDO), together with Switzerland’s State Secretariat for Economic Affairs (SECO), has been implementing an energy districts project in cooperation with the Ministry of Environment and Sustainable Development (Minambiente) and the public utility of the city of Medellín (Empresas Publicas de Medellín – EPM).

In its second phase, beginning in 2019, the project has been working closely with national and city-level authorities and stakeholders to improve and implement national and sub-national policy and regulatory frameworks to promote further development of energy districts; reinforce knowledge and capacities for energy districts of all market players; and provide technical assistance to some 10 selected cities so that they can include energy districts in their urban planning and support the realization of two-three near-future mature projects.

From the 17-19 November, the UNIDO project and partners, ACAIRE (Colombian Association for Refrigeration and Air Conditioning) and CIDARE, the Centre of Research and Development in Air Conditioning and Refrigeration hosted the Third International Conference for Energy Districts, a virtual event bringing together national and international experts from industry and academia, and representatives from the public sector and international organizations.

Carlos Eduardo Correa, Colombia’sMinister of Environment and Sustainable Development, stated that the conference was the ideal scenario to show the achievements of the country in the implementation of district energy as a contribution to the Sustainable Development Goals.

“All of our actions, plans, projects and regulations, are geared towards the achievements of the Nationally Determined Contributions, the reduction of greenhouse gas emissions, and, at the same time, the contribution of low-carbon development. Here, Colombia has an important experience and is an example for the region,” he stated.

The progress of district energy in Colombia and the region, the importance of their implementation in urban planning, energy maps and clean energy transition, the mechanisms to finance these projects and the use of renewable energies in their execution, were some of the main topics addressed by more than 30 national and international speakers during the three days of discussions.

“The implementation of the project has, as a main component, the sustainability of knowledge and capacities in Colombia. That is why the support and work with academia are fundamental to strengthen the capacities of all the actors in the value chain and promote the education of professionals in the areas of sustainability and energy efficiency, among others,” noted Alex Saer, Director of Climate Change and Risk Management at the Ministry of Environment and Sustainable Development.

The conference was also the opportunity to celebrate the awards of the Second Competition for Universities in District Energy, with the objective of designing a business model for the sale of thermal energy applied to residential users.

The contest, which had the participation of eight universities from Colombia, awarded the first-place winner team with  fully funded attendance to the International District Energy Association Campus Energy in Boston in February 2022.

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Global energy efficiency progress is recovering – but not quickly enough

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A rapid expansion of technologies and solutions that drive more efficient use of energy across the economy is necessary to keep global climate pledges within reach, according to a new IEA report, which urges governments to take the lead in mobilising the required increase in investment.

Global progress on energy efficiency has recovered this year to its pre-pandemic pace, but that was already well short of what would be needed to help put the world on track to reach net zero emissions by mid-century, according to Energy Efficiency 2021, the IEA’s annual market report on the topic. Total annual investment in energy efficiency worldwide needs to triple by 2030 to be consistent with a path towards reaching net zero emissions by 2050, as set out in the IEA’s Roadmap to Net Zero by 2050.

The IEA’s latest global assessment of market and policy trends in energy efficiency highlights the urgent need for stronger implementation of clean energy policies – with energy efficiency at their core – in order to reach international climate goals. This is the first update of the IEA’s energy efficiency market report since a raft of new spending commitments aimed at supporting the economic recovery were announced by governments over the course of 2021.

The report comes shortly after the end of the COP26 Climate Change Conference in Glasgow, whose final statement specifically called for the rapid scaling up of energy efficiency measures, recognising their key role in decarbonising energy systems. 

“We consider energy efficiency to be the ‘first fuel’ as it still represents the cleanest and, in most cases, the cheapest way to meet our energy needs. There is no plausible pathway to net zero emissions without using our energy resources much more efficiently,” said IEA Executive Director Fatih Birol. “A step change in energy efficiency will give us a fighting chance of staving off the worst effects of climate change while creating millions of decent jobs and driving down energy bills.”

The report notes that governments have scaled up existing, employment-intensive efficiency programmes, but it also highlights that substantial potential for job creation remains untapped. For example, investments in the energy efficiency of buildings – a well-established driver of construction jobs – are expected to rise by 20% in 2021 compared with pre-pandemic levels. Even with this record level of spending, the report details how 4 million more jobs could be added by 2030 by further increasing spending on efficient buildings, appliances and other measures in line with the IEA’s Net Zero Emissions by 2050 Scenario.

After its worst year in a decade in 2020, when the Covid-19 pandemic shifted the centre of economic activity away from services and towards industry, the rate of improvement in global energy intensity – a key indicator of how efficiently the world’s economic activity uses energy – is expected to recover in 2021 to 1.9%. This is line with the average annual rate of improvement over the past 10 years but well below the 4% needed between 2020 and 2030 in the IEA’s pathway to net zero emissions by 2050.

As energy efficiency offers some of the fastest and most cost-effective actions to reduce CO2 emissions, front-loading efficiency measures into net zero strategies will be crucial for closing the gap between climate ambitions and current trends. This year’s report examines over 40 energy efficiency milestones mapped out in the IEA Roadmap to Net Zero by 2050 that can enhance efficiency and help get emission reductions on track.

In addition to well-developed energy efficiency policies such as appliance standards – which in some countries have avoided electricity usage equivalent to their total wind and solar power generation – the report also underlines the increasingly important role for digital technologies in energy efficiency’s future. Rapid uptake of digitally connected devices is helping to expand the scale and scope of benefits from energy efficiency, and can deliver a cheaper, easier and more cost effective clean energy transition.

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Fatih Birol urges Middle Eastern producer economies to accelerate clean energy transition

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IEA Executive Director Fatih Birol today received a lifetime achievement award at the major international energy industry conference ADIPEC, which is hosted by the United Arab Emirates. The award was presented by Sultan Ahmed Al Jaber, the UAE Special Envoy for Climate Change, in recognition of Dr Birol’s long-standing work assessing the global energy sector and providing clarity on how it can adapt to the clean energy transition.

The acknowledgement of Dr Birol’s efforts to advance the clean energy transition comes at a time when the IEA is multiplying its efforts to build a broad coalition to accelerate global climate action that includes the oil and gas exporting countries in the Middle East and North Africa. It also comes after the recent announcement that the United Arab Emirates will host the COP28 Climate Change Conference in 2023, after Egypt hosts COP27 next year.

“I would like to congratulate Fatih Birol on a truly well-deserved recognition of his lifetime’s commitment across the energy landscape. His understanding of how the whole energy system fits together is unparalleled. Moreover, his practical approach to ensuring sustainable development is having – and will continue to have – a positive, powerful impact on how the world makes an equitable and orderly transition to the energy system of the future,” said Sultan Al Jaber in presenting the award to Dr Birol in Abu Dhabi.

“The global warming that is already affecting us all worldwide is especially treacherous for Middle Eastern and North African countries – some are experiencing warming at a far higher rate than the global average. The region is today going through its worst drought in over 900 years,” Dr Birol said in his acceptance speech during the awards ceremony in Abu Dhabi. He underscored the need for oil and gas producing economies to reduce their reliance on fossil fuels and rapidly shift towards cleaner alternatives.

“More than at any other point in recent history, fundamental changes to the economic model of resource-rich countries look unavoidable. The future will look very different from the past,” he told the audience. “That is why it is so important that we work together. We need to deploy traditional strengths in support of economic diversification and low-carbon transformation. First movers – countries that take a proactive approach to this – could do especially well.”

In his remarks, Dr Birol highlighted that the IEA’s work with multiple countries across the region centres on supporting efforts to decarbonise energy systems while also securing the economic benefits that the clean energy transition can bring.

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