The COVID-19 pandemic shows the power market’s preference for renewables in the face of falling demand, and the clean energy transition is likely to accelerate, Moody’s reports.
“Coal generation has continued to decline, while renewable energy has shown greater resilience in key markets in the United States, Europe, China and India,” the report said.
As a result of the blockade, electricity demand in India has fallen by 20 per cent, which has had a significant impact on coal production.
Both business and household electricity demand are expected to be severely affected by the recession and weaker expectations for long-term growth. Conventional energy production, such as coal and oil, also declined, the agency said.
Worldwide, renewable energy accounts for most of the recent new capacity, which continues to displace coal-fired power. Moody’s said the trend was expected to continue as electricity demand fell sharply as a result of the blockade.
“Covid-19 could have a ratchet effect, limiting any rebound in coal production and accelerating declines in the US and Europe for several years,” the rating agency said.
Moody’s also predicts that increased use of biofuels, electric cars and improved engine efficiency will increase the likelihood that oil demand will flow over time. While most developed countries already have targets and incentives for rapid adoption of electric vehicles over the next decade, India has yet to enact such a policy.
Renewable energy growth hit a record high in 2019
On June 17, the 69th edition of THE BP Statistical Yearbook on World Energy was released. The Yearbook points to continued strong growth in renewable energy. Renewable energy, led by wind and solar, is growing at record levels, accounting for more than 40% of primary energy growth in 2019. Meanwhile, coal consumption has fallen for the fourth time in the past six years, and its share of the global energy mix has fallen to its lowest level in 16 years.
But the structural picture remains grim. Although coal’s share fell last year, it is still the biggest source of electricity, accounting for more than 36% of global output. Renewables, by contrast, account for only 10 per cent, and will need to grow even more strongly over the next three decades to decarbonise the sector.
More worrying is the trend in carbon emissions. Carbon emissions growth slowed to 0.5% in 2019, a lower rate that suggests some optimism. But this deceleration comes against the backdrop of a huge 2.1 per cent increase in carbon emissions in 2018. As the world emerges from the coVID-19 crisis, the energy transition will also require decisive changes towards a more sustainable path.
To achieve net zero emissions by 2050, the world would need to reduce carbon emissions by the same amount every other year for the next 25 years, or 2.6 billion tonnes, the yearbook says.
This can only be achieved through a fundamental shift in behaviour, namely through more efficient use of resources and energy, and the implementation of all the technologies that are available in zero and low carbon energy, including renewable energy, electrification, hydrogen, CCUS (carbon capture and storage), bioenergy, and more.
In terms of consumption, China has become the largest contributor to global energy consumption growth, accounting for more than three quarters of global net growth. In the net zero vision, China’s energy policy choices and paths will directly affect the future pattern of global energy consumption.