The demand for electricity is forecast to drop by 2% for 2020 with oil production seeing a 200,000 barrels per day (B/D) slump for the year when compared to previous forecasts, the International Energy Agency (IEA) has released in its latest reports.
Photo: Miguel Á. Padriñán / Pexels
The IEA's annual Electricity Market Report finds the sector is on its biggest global decline since the mid-20th century and ranks far worse than the marginal incline seen immediately following the 2008 financial crisis, which saw demand decrease by 0.6% for 2009.
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The data suggests a global drop in GDP equalling 4.4% and measures to slow the spread of the virus may be the primary factors in explaining the decrease in demand.
China will be the only nation in 2020 to see higher electricity demand for 2020, according to the report, with a projected increase of 2% - representing 28 of annual global consumption. This still falls well below 2015 numbers, which saw an average annual increase of 6.5%.
Electricity prices for the last four years across various markets. Credit: IEA
Oil demand is expected to come to 96.7 million b/d for 2021, up from 91.6m for 2020, owing to a cut to demand as the aviation sector struggles to get back up and running after spending most of 2020 grounded.
The forecast for 2020 has seen a drop of roughly 200,000 b/d compared to the original numbers the Paris-based body predicted earlier in the year.
The IEA's annual Oil Market Report finds demand will likely continue to be low and the relevant sectors and borders closed until virus vaccines become more widely available.
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The price of Brent crude oil has risen above $50 p/b for the first time since March, seeing continual slumps throughout the year owing to reduced demand. The recent news of a Covid-19 vaccine has caused prices to begin to rise as it presents a time-frame from which the travel sector can resume.
In the report, the IEA said: "The understandable euphoria around the start of vaccination programmes partly explains higher prices but it will be several months before we reach a critical mass of vaccinated, economically active people and thus see an impact on oil demand.
"In the meantime, the end-of-year holiday season will soon be upon us with the risk of another surge in Covid-19 cases and the possibility of yet more confinement measures."
The IEA also noted that OPEC+ countries are set to increase their production quotas by significantly less than planned but still offering some growth for 2021.
The sector's recovery for the second half of 2020 is largely in part to China's speedy recovery from its lockdown. Demand in Europe for Q4 2020 will be down 100,000 b/d from Q3 owing to many nation's governments having to enforce second lockdowns owing to a spike in coronavirus cases.
A switch towards renewable energy has also caused oil prices to slump throughout the year, a switch which has become central to pandemic recovery for the energy sector.
The energy report forecasts that renewable energy generation is predicted to grow by at least 7% for 2020.
Long-term contracts, priority access to the grid and sustained installation of new plants are all underpinning strong growth in renewable electricity production.
This has caused a squeezed on traditional fossil fuel-based energy needs, with coal-fired generation decreasing by 5% for 2020 with nuclear power and gas-fired generation decreasing by 4% and 2%, respectively.
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Reduced demand and a switch to more renewable models has caused electricity prices to plummet across the board. The IEA’s wholesale electricity market price index, which tracks price movements in major advanced economies, shows an average price decline of 28% in 2020, after having already fallen by 12% in 2019.
The report suggests a "modest rebound" for electricity demand for 2021, with the sector expecting growth of around 3% for the year.
The IEA forecasts that coal will bounce back for 2021, with demand increasing by around 3%. Renewables, particularly wind power and PV, are expected to operate a 28% market share for 2021, up from 28% for 2020.
In most developed economies, renewables are set to continue to shrink the fossil fuel market owing to increased sustainability being paramount to post-pandemic recovery.
CO² emissions are set to see a 2% increase on 2020 numbers as plants using non-renewable sources see their demand increase going into the new year.
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