Global energy industry faces biggest shock in 70 years, IEA says

Global energy demand is set to fall 6 per cent this year, nearly seven times the decline following the 2008 global financial crisis, as the industry faces its biggest shock in 70 years from the coronavirus pandemic, according to the International Energy Agency.

The decline in demand from the outbreak, which brought air and land transportation to a standstill following worldwide lockdowns, resulted in a decline equivalent to losing all of India's energy needs, the agency said. India has the third highest total primary energy consumption globally after China and the US.

“This is a historic shock to the entire energy world. Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil, and gas," said IEA executive director Fatih Birol. "Only renewables are holding up during the previously unheard-of slump in electricity use.”

It's too early to determine the long term impact of the crisis on the energy sector, Mr Birol said at the launch of agency's Global Energy Review.

The biggest declines in demand will come from advanced economies, with the US likely to see a 9 per cent drop, followed by an 11 per cent decline in the European Union.

Each month of lockdown reduces global energy demand by around 1.5 per cent, according to the IEA.

Electricity demand has also slowed, falling 20 per cent or more, with overall demand for power set to decline 5 per cent this year, the biggest drop since the Great Depression.

The biggest winner from the lockdown measures is the renewables sector. Low-carbon sources are expected to contribute to 40 per cent of global power generation this year.

Global emissions have also fallen nearly 8 per cent following the grounding of aircraft and slowdown in private and public transport.

The share of fossil fuels, notably gas and coal in the energy mix, is set to drop 3 percentage points in 2020, a level not seen since 2001, according to the agency.

An 8 per cent decline in demand for coal this year will be the steepest since the Second Word War, with natural gas, the cleaner source of power generation, also set to fall 5 per cent.

“This crisis has underlined the deep reliance of modern societies on reliable electricity supplies for supporting healthcare systems, businesses and the basic amenities of daily life,” Mr Birol said.

“But nobody should take any of this for granted – greater investments and smarter policies are needed to keep electricity supplies secure.”