After global electricity demand registered its biggest decline in 2020, prospects about the electricity market are that, demand would rebound slightly next year, led by growth in China, India and other emerging economies, a new electricity market report by International Energy Agency reveals.
According to the report, 2021 electricity demand is expected to grow by 3 percent as 2020 closes with an expected electricity demand around 2 percent due to the aftermath of the COVID-19 shock and the nature of measures taken.
Although, this expected recovery is welcomed, it still remains significantly weaker than the recovery in demand of over 7 percent in 2010, the year following the global financial crisis, but moderately higher than in 2019.
China is the only major country tipped to close 2020 with higher electricity demand, albeit also lower than the 6.5%. Other big electricity consumers including the United States, India, Europe, Japan, Korea and South East Asia are all expected to experience declines going into 2021.
Further, two-thirds of the increase in demand is expected in the Asia Pacific region. China and India are expected to grow by 5.2 percent and 3.6 percent respectively compared to 2020. In South East Asia, electricity demand in 2021 is expected to exceed that of 2019 in significant proportions with expected growth of 5.4 percent of demand in 2021. In the US, only a slight recovery of about 1 percent is expected, after falling by 3.6 percent in 2020.
Electricity generation from renewable energy such as hydropower, wind and solar is forecast to grow by about 7 percent in 2020 outperforming other traditional power sources. Coal-fired generation is also set to fall by around 5 percent, the biggest decline on record; nuclear power generation by 4 percent; and gas-fired electricity generation by 2 percent. On the whole, CO2 emissions from electricity generation are on course to fall by 5 percent in 2020.
“Electricity has a central role in today’s energy world. A role that will only increase in importance as clean energy transitions accelerate,” said Fatih Birol, Executive Director, IEA. “Based on the very latest data available, the IEA’s new Electricity Market Report provides fresh insights on this critical sector. Starting next year, we will publish a new edition of the report on a half-yearly basis.”
Furthermore, whole sale electricity prices have not been steady in 2020 due to a combination of fallen demand, lower fuel prices and the increase in renewable generation. According to a wholesale electricity market price index developed to track price movements in major advanced economies, average price declined by 28 percent this year, having already fallen by 12 percent in 2019.
Renewable power generation is also forecasted to continue on an ascending path in 2021 with an increase of more than 6 percent, expanding the share of renewables in the power mix to 29 percent from 28 percent in 2020. On the other hand, nuclear power is expected to grow at 2.5 percent next year on the back of rebounds in France and Japan and new nuclear power plants being installed in China and the United Arab Emirates.
Going forward, advanced economies will continue to experience growth of renewables and nuclear power which will simultaneously reduce fossil fuel generation. Natural gas is also likely to be impacted more than coal as a result of an expected rise in natural gas prices. Whereas in emerging and developing economies, demand growth is forecast to outpace increases in renewables and nuclear power, to make room for coal and gas generation to increase.
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