The International Energy Agency (IEA) announced the release of its flagship publication, World Energy Outlook 2020, aiming to provide a comprehensive view of how the global energy system could develop in the coming decades. According to the IEA report, renewable energy is set to dominate as the primary source of energy growth going forward.
In terms of the current state of energy markets and the impact of the pandemic on the current year, the IEA estimates that global energy demand will be down by 5% in 2020, with energy-related CO2 emissions dropping by 7%, and energy investment declining 18%.
The report presents 4 scenarios highlighting the possible pathways the energy sector could develop in the coming years. These include the “Stated Policies Scenario” (STEPS) under which the global economy returns to pre-crisis levels in 2021, and reflects all of today’s announced policy intentions and targets; the “Delayed Recovery Scenario” (DRS), with the same policy assumptions as in the prior scenario, but assuming a prolonged pandemic causing the global economy to return to its pre-crisis levels only in 2023; the “Sustainable Development Scenario” (SDS), in which a surge in clean energy policies and investment puts the energy system on track to achieve sustainable energy objectives in full, including the Paris Agreement, energy access and air quality goals, and economic assumptions in line with STEP, and; the “Net Zero Emissions by 2050” case (NZE2050), an extension of SDS, in which companies’ and countries’ mid-century net zero goals are met, and global emissions are on track for net zero by 2070. The IEA stated that the latter scenario includes its first detailed modelling of what would be needed in the next ten years to put global CO2 emissions on track for net zero by 2050.
According to the IEA, in every one of its scenario outlooks, renewable energy – especially solar – dominates as the primary source of energy growth, as technologies mature and prices drop. The report notes that solar power is now cheaper in most regions than coal or gas-based energy, and estimates that renewable energy may meet up to 80% of global electricity demand growth over the next ten years. According to a release introducing the new report, the IAE stated:
“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.”
The outlook for fossil fuel growth, on the other hand, is much more mixed, according the IEA scenarios. Coal demand, for example, is not expected to return to pre-crisis levels even under the STEPS, while natural gas demand is expected to grow significantly. Oil growth is expected to slow, with the long-term outlook uncertain.
Dr Fatih Birol, IEA Executive Director, said:
“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. 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.”
Dr Birol added:
“The era of global oil demand growth will come to an end in the next decade. 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.”
Following this year’s reduction in emissions, the IEA expects a bounce-back, but at a pace below that following the 2008 financial crisis. The long-term outlook, however, varies significantly by each of the scenarios. The IEA notes that a sustained reduction would rely heavily on efforts to address emissions from the existing energy infrastructure.
Dr Birol commented:
“Despite a record drop in global emissions this year, the world is far from doing enough to put them into decisive decline. The economic downturn has temporarily suppressed emissions, but low economic growth is not a low-emissions strategy – it is a strategy that would only serve to further impoverish the world’s most vulnerable populations. Only faster structural changes to the way we produce and consume energy can break the emissions trend for good. Governments have the capacity and the responsibility to take decisive actions to accelerate clean energy transitions and put the world on a path to reaching our climate goals, including net-zero emissions.”
Click here for access to the full IEA World Energy Outlook 2020 report.