IEA: India will lead global recovery in energy demand

In News

  • The International Energy Agency (IEA), recently released the World Energy Outlook (WEO) 2020.
  • The World Energy Outlook 2020, focuses on the important period of the next 10 years, exploring different pathways out of the pandemic.

About: World Energy Outlook

  • The annual World Energy Outlook is the International Energy Agency’s flagship publication, widely recognised as the most authoritative source for global energy projections and analysis.
  • It represents the leading source for medium to long-term energy market projections, extensive statistics, analysis and advice for both governments and the energy business.
  • The annual report is produced by the Office of the Chief Economist.

World Energy Outlook 2020


  • The four pathways out of the pandemic presented in WEO 2020 are as follows:
    • Under the Stated Policies Scenario (STEPS), Covid-19 will be brought under control in 2021 and energy demand will rebound to its pre-crisis level in 2023.
    • Under the Delayed Recovery Scenario (DRS), it assumes that the global economy would return to its pre-crisis size only in 2023 and the energy demand will not rebound until 2025.
      • As per the DRS, the pandemic would lead to a decade (2020-2030) with the lowest rate of energy demand growth since the 1930s.
    • The other two scenarios β€” the Sustainable Development Scenario (SDS) and Net Zero Emissions by 2050 β€” outline the necessary steps to reach stated climate goals.
      • In the SDS, net-zero emissions will be achieved by 2070, while in NZE 2050, the goal of net emissions will be achieved by 2050, by implementing aggressive policies.
      • The NZE 2050 includes the first detailed IEA modelling of what would be needed in the next ten years to put global carbon dioxide emissions on track for a net zero emissions scenario by 2050.

Energy demand projections:

  • Energy demand was projected to grow by 12 per cent between 2019 and 2030 before the pandemic struck. However, the growth over this period will now decline to nine per cent under the STEPS, and to four per cent in the DRS.
  • Due to the ongoing impacts of Covid-19, the IEA expects global energy demand to fall by 5% in 2020, with oil and coal consumption falling 8% and 7%, respectively.
  • Some of the coronavirus-induced changes, including working from home and travel restrictions, are negative for oil demand.
  • However, other effects such as an avoidance of public transportation and the continued popularity of SUVs, are supportive factors for oil demand.
  • Thus, IEA expects oil demand to grow till 2030 and at this point (2030) it will reach its peak consumption.
  • Natural gas demand is expected to decline by 3% this year β€” the largest decline since it became a major source of fuel in the 1930s. However, the IEA expects an increase in demand over the next decade.

Increase in renewable sources:

  • Under STEPS, renewable sources will meet around 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 bigger role in the next five years.
  • Hydropower remains the largest renewable source, but solar will be the main source of growth in the next decade, followed by onshore and offshore wind.
  • The combined share of solar and wind in global generation will rise to almost 30% in 2030 from 8% in 2019, with the solar capacity growing by an average 12% a year.
  • Improving technology and support mechanisms have cut financing costs for major solar PV projects, which has helped in bringing down overall output costs. Solar PV is now cheaper than new coal- or gas-fired power plants in most countries.
  • Despite the increase in solar and wind power, carbon emissions are projected to pick up in 2021 after a 2.4 gigatonne (Gt) drop in 2020, and to exceed 2019 levels in 2027 before growing to 36 Gt in 2030.

Highlights on India

  • AS per the report, India has started showing signs of recovery in energy demand, which is an indicator of economic activity.
  • With demand for energy in advanced economies on a declining trend, most of the increase will come from emerging market and developing economies, led by India, over the next 10 years.
  • A slower pace of growth in global oil demand with a growing oil production outlook will help the Indian government through lower oil import and fuel subsidy bills. It will also benefit the consumers with cheaper fuels.
  • However, low oil and gas prices will hurt domestic producers and their ability to spend on future projects.
  • The large drop in investments globally will increase the risk of future market volatility (unpredictability), which will be a negative for India, as the country depends on imports for 83% of its oil needs.

Way Ahead

  • While, the clean energy transition continues to show improvement, faster and bolder structural changes are needed if the world plans to reach net-zero carbon emissions.
  • A significant part of those efforts would have to focus on reducing emissions from existing energy infrastructure – such as coal plants, steel mills and cement factories.
  • Maintaining a strong pace of emissions reductions post-2030 requires a strong focus on energy and material efficiency, electrification, and a strong role for low-carbon liquids and gases.
  • The finance sector will have to facilitate a significant increase in clean technologies, aid the transitions of fossil fuel companies and bring low-cost capital to the countries and communities that need it most.
  • Governments have the capacity and the responsibility to take decisive actions to accelerate clean energy transitions and put the world on a path to reaching the climate goals, including net-zero emissions.

About: International Energy Agency

  • The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development (OECD) in 1974 in the wake of the 1973 oil crisis.
  • The IEA was initially dedicated to responding to physical disruptions in the supply of oil, as well as serving as an information source on statistics about the international oil market and other energy sectors.
  • It acts as a policy adviser to its member states, but also works with non-member countries, especially China, India, and Russia.
  • The Agency’s mandate has broadened to focus on the 3Es of effectual energy policy: energy security, economic development, and environmental protection.
  • The IEA has a broad role in promoting alternate energy sources (including renewable energy), rational energy policies, and multinational energy technology co-operation.

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