The International Energy Agency has released a report titled, “Global Energy Review 2021: Assessing the effects of economic recoveries on global energy demand and CO2 emissions in 2021”. REGlobal presents the key findings, the detailed analysis on global economic recovery and the renewable energy sector from the report…

Key Findings

  • The Covid-19 pandemic continues to impact global energy demand. Third waves of the pandemic are prolonging restrictions on movement and continue to subdue global energy demand. But stimulus packages and vaccine rollouts provide a beacon of hope. Global economic output is expected to rebound by 6 per cent in 2021, pushing the global GDP more than 2 per cent higher than 2019 levels.
  • Emerging markets are driving energy demand back above 2019 levels. Global energy demand is set to increase by 4.6 per cent in 2021, more than offsetting the 4 per cent contraction in 2020 and pushing demand 0.5 per cent above 2019 levels. Almost 70 per cent of the projected increase in global energy demand is in emerging markets and developing economies, where demand is set to rise to 3.4 per cent above 2019 levels. Energy use in advanced economies is on course to be 3 per cent below pre-Covid levels.
  • Global energy-related CO2 emissions are heading for their second-largest annual increase ever. Demand for all fossil fuels is set to grow significantly in 2021. Coal demand alone is projected to increase by 60 per cent more than all renewables combined, underpinning a rise in emissions of almost 5 per cent, or 1 500 Mt. This expected increase would reverse 80 per cent of the drop in 2020, with emissions ending up just 1.2 per cent (or 400 Mt) below 2019 emissions levels.
  • Sluggish demand for transport oil is mitigating the rebound in emissions. Despite an expected annual increase of 6.2 per cent in 2021, global oil demand is set to remain around 3 per cent below 2019 levels. Oil use for road transport is not projected to reach pre-Covid levels until the end of 2021. Oil use for aviation is projected to remain 20 per cent below 2019 levels even in December 2021, with annual demand more than 30 per cent lower than in 2019. A full return to pre-crisis oil demand levels would have pushed up CO2 emissions a further 1.5 per cent, putting them well above 2019 levels.
  • Global coal demand in 2021 is set to exceed 2019 levels and approach its 2014 peak. Coal demand is on course to rise 4.5 per cent in 2021, with more than 80 per cent of the growth concentrated in Asia. China alone is projected to account for over 50 per cent of global growth. Coal demand in the United States and the European Union is also rebounding, but is still set to remain well below pre-crisis levels. The power sector accounted for only 50 per cent of the drop in coal-related emissions in 2020. But the rapid increase in coal-fired generation in Asia means the power sector is expected to account for 80 per cent of the rebound in 2021.
  • Among fossil fuels, natural gas is on course for the biggest rise relative to 2019 levels. Natural gas demand is set to grow by 3.2 per cent in 2021, propelled by increasing demand in Asia, the Middle East and the Russian Federation. This is expected to put global demand more than 1 per cent above 2019 levels. In the United States – the world’s largest natural gas market – the annual increase in demand is set to amount to less than 20 per cent of the 20 bcm decline in 2020, squeezed by the continued growth of renewables and rising natural gas prices. Nearly three-quarters of the global demand growth in 2021 is from the industry and buildings sectors, while electricity generation from natural gas remains below 2019 levels.
  • Electricity demand is heading for its fastest growth in more than 10 years. Electricity demand is due to increase by 4.5 per cent in 2021, or over 1, 000 TWh. This is almost five times greater than the decline in 2020, cementing electricity’s share in final energy demand above 20 per cent. Almost 80 per cent of the projected increase in demand in 2021 is in emerging market and developing economies, with the People’s Republic China alone accounting for half of global growth. Demand in advanced economies remains below 2019 levels.
  • Renewables remain the success story of the Covid-19 era. Demand for renewables grew by 3 per cent in 2020 and is set to increase across all key sectors – power, heating, industry and transport – in 2021. The power sector leads the way, with its demand for renewables on course to expand by more than 8 per cent, to reach 8,300 TWh, the largest year-on-year growth on record in absolute terms.
  • Renewables are set to provide more than half of the increase in global electricity supply in 2021. Solar PV and wind are expected to contribute two thirds of renewables’ growth. The share of renewables in electricity generation is projected to increase to almost 30 per cent in 2021, their highest share since the beginning of the Industrial Revolution and up from less than 27 per cent in 2019. Wind is on track to record the largest increase in renewable generation, growing by 275 TWh, or around 17 per cent, from 2020. Solar PV electricity generation is expected to rise by 145 TWh, or almost 18 per cent, and to approach 1,000 TWh in 2021.
  • China alone is likely to account for almost half the global increase in renewable electricity generation. It is followed by the United States, the European Union and India. China is expected to generate over 900 TWh from solar PV and wind in 2021, the European Union around 580 TWh, and the United States 550 TWh. Together, they represent almost three-quarters of global solar PV and wind output.

2021: A year of global economic recovery?

While the global health crisis continues in the early months of 2021 with second and even third waves of the virus in many regions, accelerating vaccine rollouts and major stimulus packages in many advanced economies have provided a beacon of hope. The IMF projects the global economy will grow by 6 per cent in 2021, more than compensating for the 3.5 per cent drop in 2020. Thanks to a successful vaccine program and the American Rescue Plan, GDP in the United Stateswill rise above pre-Covid-19 projections.

The European Union, on the other hand, was hit by a severe second wave in the winter of 2020/21, leading to renewed economic closures and lockdowns, with recovery further impeded by a slow start to vaccination campaigns. The impact of national stimulus packages may not be felt until the second half of the year.

Economic output in 2021 is expected to remain 2.3 per cent below 2019 levels. On a positive note, the bloc’s industrial production is back to pre-Covid levels, owing to a recovery in international trade. Chinacurtailed the virus early on and was one of the few economies to expand in 2020. Dynamic growth is expected to continue through 2021, driven by exports, but especially by domestic demand, including policy-sponsored infrastructure projects. Korea and Japan avoided repeated waves of the pandemic through testing and tracing, and likewise are benefiting from reviving world trade.

Renewables bucked the trend in 2020

Renewable energy use increased 3 per cent in 2020 as demand for all other fuels declined. The primary driver was an almost 7 per cent growth in electricity generation from renewable sources. Long-term contracts, priority access to the grid, and continuous installation of new plants underpinned renewables growth despite lower electricity demand, supply chain challenges, and construction delays in many parts of the world. Accordingly, the share of renewables in global electricity generation jumped to 29 per cent in 2020, up from 27 per cent in 2019. Bioenergy use in industry grew 3 per cent, but was largely offset by a decline in biofuels as lower oil demand also reduced the use of blended biofuels.

Renewables are on track to set new records in 2021

Renewable electricity generation in 2021 is set to expand by more than 8 per cent to reach 8,300 TWh, the fastest year-on-year growth since the 1970s. Solar PV and wind are set to contribute two-thirds of renewables growth. China alone should account for almost half of the global increase in renewable electricity in 2021, followed by the United States, the European Union and India.

Wind is set for the largest increase in renewable generation, growing by 275 TWh, or almost 17 per cent, which is significantly greater than 2020 levels. Policy deadlines in China and the United States drove developers to complete a record amount of capacity late in the fourth quarter of 2020, leading to notable increases in generation already from the first two months of 2021. Over the course of 2021, China is expected to generate 600 TWh and the United States 400 TWh, together representing more than half of global wind output.

While China will remain the largest PV market, expansion will continue in the United States with ongoing policy support at the federal and state level. Having experienced a significant decline in new solar PV capacity additions in 2020 as a result of Covid-related delays, India’s PV market is expected to recover rapidly in 2021, while increases in generation in Brazil and Viet Nam are driven by strong policy supports for distributed solar PV applications. Globally, solar PV electricity generation is expected to increase by 145 TWh, almost 18 per cent, to approach 1,000 TWh in 2021.

We expect hydropower generation to increase further in 2021 through a combination of economic recovery and new capacity additions from large projects in China. Energy from waste electricity projects in Asia will drive growth of bioenergy, thanks to incentives.

Increases in electricity generation from all renewable sources should push the share of renewables in the electricity generation mix to an all-time high of 30 per cent in 2021. Combined with nuclear, low-carbon sources of generation well and truly exceed output from the world’s coal plants in 2021.

In 2021, the biofuels market is likely to recover and approach 2019 production levels as transportation activity slowly resumes and biofuel blending rates increase. Biofuels are consumed mostly in road transportation, blended with gasoline and diesel fuels, and thus are less affected by continued depressed activity in the aviation sector.

The full report can be read here