The International Energy Agency (IEA) published its annual energy outlook report Tuesday, where it explores various scenarios of energy demand in the future, government regulations, renewable energy, the Paris accord, and the COVID-19 crisis.
Impact Of COVID-19 Remains Uncertain: The COVID-19 crisis, which has "caused more disruption than any other event in recent history," is a major focus of the IEA report.
"The crisis is still unfolding today — and its consequences for the world’s energy future remain highly uncertain," IEA said in a statement, adding that the "scars" from the pandemic "will last for years to come."
The report highlights that the coronavirus pandemic will cause a record 7% decline in global energy-related carbon dioxide emissions in 2020, but governments are not doing enough to prevent a rapid rebound.
A Catalyst Against Coal: The COVID-19 has been a catalyst to move away from coal, which tends to be the most polluting among fossil fuels, according to IEA. The agency expects coal to account for less than 20% of energy consumption by 2040, a record since the Industrial Revolution. IEA doesn't expect the coal demand to reach pre-pandemic levels.
The consumption of oil and coal will fall by 8% and 7% respectively with global energy demand falling 5% in 2020, led by the coronavirus crisis. On the other hand, natural gas demand is expected to fall 3% in 2020 but will rise over the next decade, driven by emerging economies.
Exploring Global Energy Demand Scenarios: IEX explores four scenarios for world energy demand. In the first "Stated Policy Scenario," COVID-19 is brought under control by 2021 and the global economy returns to pre-crisis levels, the same year.
Under the second scenario, titled the 'Delayed Recovery Scenario', all policies remain the same as the first scenario, but the prolonged pandemic causes a delayed economic recovery by 2023, leading to the lowest energy demand growth in the decade since 1930.
The next two scenarios take an optimistic approach. The "Sustainable Development Scenario" forecasts a demand surge in clean energy with the policy assumptions and economic recovery of the first scenario. This puts the system on track to achieve all objectives of the Paris accord.
The "Net Zero Emissions by 2050" case puts forward a model of what would be needed in the next 10 years to put global carbon dioxide emissions on track to be net-zero by 2050.
Solar Is The 'New King:' IEA expects renewable energy to play a major part in global oil demand. "I see solar becoming the new king of the world’s electricity markets," said IEA's executive director Fatih Birol.
The agency expects supportive government policies and declining costs for solar energy to push the demand. "Based on today’s policy settings, it is on track to set new records for deployment every year after 2022," said Birol.
Under the Stated Policy Scenario, renewable energy will be on track to meet 80% of all growth in electricity demand over the next 10 years and renewables will surpass coal as the primary source of producing electricity by 2025.
The only obstacle in the way of renewables is the outdated electrical grid. "Without enough investment, grids will prove to be a weak link in the transformation of the power sector, with implications for the reliability and security of electricity supply," the report said.
The global annual investment in clean energy needs to increase from $300 billion to $1.6 trillion by 2030 to tackle the climate crisis. This is equivalent to total energy investment in 2020.
Price Action: The WTI crude futures are trading 0.91% higher to $39.81/barrel at press time.
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