A slow economic recovery from the pandemic threatens to delay a full rebound in world energy demand to 2025, the International Energy Agency said on Tuesday.
In its central scenario, a vaccine and therapeutics could mean the global economy rebounds in 2021 and energy demand recovers by 2023, the IEA, which advises Western governments on energy policy, said in its annual World Energy Outlook.
But under a “delayed recovery scenario,” the timeline is pushed back two years, it said.
The Paris-based IEA sees global energy demand falling by 5% in 2020, CO2 emissions related to energy by 7% and energy investment by 18%.
Demand for oil is set to fall by 8% and coal use by 7% while renewables will see a slight rise.
Much of the growth is generated from solar, and that’s set to continue in the years to come as prices decline, making solar a cheaper power source than new coal and gas-fired plants.
Under the stated policies scenario, renewables are on track to meet 80% of the growth in electricity demand over the next 10 years. By 2025, renewables will overtake coal as the primary means of producing electricity. If more aggressive policies are adopted, renewables will play an even larger part in the next five or so years, according to the report.
However, one obstacle stands in the way of renewables-generated power: the outdated electrical grid.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,” IEA said.
Overall, the energy watchdog said it was too soon to say whether the pandemic had acted as a spur or a setback to governments and the energy industry as they seek to make the industry more sustainable.
IEA chief Fatih Birol told Reuters that policy makers were lagging behind: “We are far from reaching our climate goals with the existing policies around the world.”
“The era of global oil demand growth will come to an end within the next 10 years, but in the absence in a large shift in government policies, I don’t see a clear sign of a peak. A global economic rebound would soon bring oil demand back to pre-crisis levels,” he said in an interview.
Uncertainty over future demand and the oil price plunge in 2020 could mean that oil producers are unsure how to gauge investment decisions leading to a mismatch in supply and demand, stoking future market volatility, the IEA warned.