Yesterday, the International Energy Agency (IEA) launched its World Energy Outlook 2020. As expected, this year’s report and expectations for the development of the energy sector have been heavily influenced by the global Covid-19 health crisis. One thing is however clear: We all need to choose a more renewable energy future.
Every year in November, the IEA releases its World Energy Outlook, providing a comprehensive view on how the global energy system could develop in the decades to come. But not this year.
This year, the report has been released a month early and its focus is firmly on the next decade. According to the IEA, the Covid-19 pandemic has caused more disruption to the global energy sector than any other event in recent history. The uncertainty as to how long it will last and how policy-makers react calls for a detailed exploration of its impacts on the energy sector and the near-term actions that could accelerate clean energy transmission.
The report highlights four areas that are likely be influenced the most by the uncertainties of the pandemic: oil, renewables, climate change and Africa.
The era of oil growth is over
There is a lot of debate currently about the peak in the demand for oil. According to the report, the era of growth will come to an end within the next decade.
While the pandemic has shocked the oil industry, IEA estimates that the oil demand will rebound to pre-pandemic levels and then flatten. The report ascribes the forecasted development to a change in corporate and private behaviour as well as an uncertain future for oil in the transport sector with the emergence of alternative fuels. These include technologies like batteries and Power-to-X, where Danish solutions are also moving fast.
Opposite oil, the report estimates a significant growth in renewable energy sources: Even without major policy changes, renewables will meet half of the global electricity demand in the next 10 years. Especially solar, which the report estimates to undergo a major installation growth and cost reduction during the next decade. Also onshore and offshore wind are expected to continue to play major roles in the energy mix of the future with onshore wind already beating all other energy sources in the cost race in most of the western world.
Ramp up to reach net zero emissions
While renewables are doing very well, the verdict from IEA is clear: The world is far from doing enough to battle climate change.
Even though the economic crisis has hit the oil sector harder than renewables and has caused a drop in CO2 emissions, an economic downturn should not be seen as a low emissions strategy. According to the IEA, a globally weak economic situation slows down the process of sustainable change as it supresses the oil demand only for a limited time due to hold-back in investments from households, companies and countries.
In addition, in the current crisis, the reports identifies the most vulnerable countries to be hit the worst. Specifically, sub-Saharan Africa. After a long-time steady increase in the number of people with access to electricity, IEA’s analysis predicts a drop in the regions positive development due to governments’ prioritising the immediate public health and economic crisis.
An increasing number of countries are pledging to implement net zero emissions strategies, including Denmark, of which we should see the effects within the next decade. However, the report highlights that there is still a major a gap to reach global carbon neutrality: besides the fact that more countries need to jump onto the wagon, IEA highlights that we also need to see a global change in citizen behaviour (choosing electric cars, retrofitting houses, etc.), companies (especially shifting to clean hydrogen) and the financial sector (renewable investments).
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Furthermore, the report identifies existing infrastructure as a major contributor to our current emissions. In fact, the infrastructure in the world we live in today (our houses, offices, power plants, grids, etc.) could in itself result in a global temperature rise of 1.65 degree Celsius over the next decades, putting our climate goals out of reach. Thus, for any environmental policy, we need to look at existing infrastructure as well.
Thus, the message from the IEA World Energy Outlook 2020 is clear: There are no shortcuts to reach global net zero emissions. It requires profound changes, guided by good policies. This is a choice for citizens, investors, companies and, not the least, governments.