INSIGHT: Renewables a pandemic success story but emissions to rise as fossil fuels remain dominant - IEA

Author: Jonathan Lopez


LONDON (ICIS)--Renewable energy could be considered the “success story” of the Covid-19 pandemic in the global energy mix, but growing use of fossil fuels in 2021 is set to increase emissions above 2019 levels, the International Energy Agency (IEA) said on Tuesday.

Demand for crude oil from the petrochemicals industry is set to remain booming, said the IEA, and is expected to be the first sub-sector to reach pre-pandemic levels.

Demand for petrochemicals feedstocks liquefied petroleum gas (LPG), ethane and naphtha is to increase by 800,000 bbl/day in 2021, or 4% higher year on year.

"Petrochemical feedstock will be the only oil sector to surpass pre-crisis levels with plastics production driven by increased needs for packaging and personal
protective equipment," said the IEA.

But the overall picture for energy demand in 2021 is one where booming demand makes a reduction of greenhouse gas (GHG) emissions very hard to achieve.

Carbon dioxide (CO2) is a GHG and one of the main causes for global warming; more than 200 countries signed up to the 2015 Paris Agreement that contemplates keeping global temperatures 1.5 degree Celsius above pre-industrial levels by 2011. Many experts believe the world is on course for a 3.0-degree Celsius rise.

Apart from advanced economies, where demand for energy is set to fall compared with 2019 levels, all other areas will increase its demand, and higher use of renewable energies will not make up for all the increase in demand: the use of fossil fuels is set to remain strong.

Coal, the most polluting fossil fuels per the highest concentration of CO2, will increase its presence in the energy mix as China and the US keep or increase use of that material.

Ruling out coal from the energy mix is an indispensable measure to contain rising temperatures, but economic growth in many emerging economies – including China – is still linked to coal-powered plants to produce electricity.

Global coal demand in 2021 is set to rise 4.5%, year on year, with 80% of that growth in Asia; was this forecast to become a reality, coal demand would then exceed 2019 levels and approach its 2014 peak, said the IEA.

“China alone is projected to account for over 50% of global growth. Coal demand in the US and the EU is also rebounding, but is still set to remain well below pre-crisis levels,” said the Paris-based agency.

“The power sector accounted for only 50% of the drop in coal-related emissions in 2020. But the rapid increase in coal-fired generation in Asia means the power sector is expected to account for 80% of the rebound in 2021.”

As the world electrifies transport and other activities, cities may become cleaner and quieter, but the dirt will be miles away where the coal power plants are: hardly a commitment to reduce overall emissions.

Electricity demand will indeed boom in 2021, and rise at its fastest pace for 10 years, according to the IEA, although in advanced economies demand will actually be below 2019 levels.

Overall, electricity demand is set to increase by 4.5% in 2021.

“This is almost five times greater than the decline in 2020, cementing electricity's share in final energy demand above 20%. Almost 80% of the projected increase in demand in 2021 is in emerging market and developing economies, with China alone accounting for half of global growth,” said the IEA.

The world’s thirst for sources of energy to power relentless urbanisation in emerging economies will not bode well for a necessary reduction in emissions to keep global warming at bay.

In fact, the IEA said that energy-related CO2 emissions are heading for their second highest annual increase in 2021, as demand for all fossil fuels – apart from coal, natural gas or crude oil, among others – is set to increase significantly.

“Coal demand alone is projected to increase by 60% more than all renewables combined, underpinning a rise in emissions of almost 5%, or 1,500m tonnes. This expected increase would reverse 80% of the drop in 2020, with emissions ending up just 1.2% (or 400m tonnes) below 2019 emissions levels,” said the IEA.

The fact that emissions may end up below 2019 levels this year is not due to a more conscious approach to energy production; it will have to do more with the beleaguered transport sector – especially aviation – which continues to suffer from pandemic-related restrictions to mobility.

This would show in the global demand for crude oil, which despite a projected rise of more than 6% year on year, would remain still 3% lower than in 2019.

“Oil use for road transport is not projected to reach pre-Covid levels until the end of 2021. Oil use for aviation is projected to remain 20% below 2019 levels even in December 2021, with annual demand more than 30% lower than in 2019,” said the IEA.

“A full return to pre-crisis oil demand levels would have pushed up CO2 emissions a further 1.5%, putting them well above 2019 levels.”

Despite the forecasts predicting containment of global warming is along way ahead, the IEA wanted to offer a sign of hope showing renewable energies have finally become a widespread affordable form of avoiding fossil fuels.

The problem is that deployment of renewable energy does not go as fast as needed, and is unable to provide the needs for a world which devours energy resources.

“Renewables remain the success story of the Covid-19 era. Demand for renewables grew by 3% in 2020 and is set to increase across all key sectors – power, heating, industry and transport – in 2021,” said the agency.

“The power sector leads the way, with its demand for renewables on course to expand by more than 8%, to reach 8,300TWh [terawatt hours], the largest year-on-year growth on record in absolute terms.”

Solar and wind energy are set to be the stars of the show, contributing two-third in growth within the renewable energy industry; overall, renewable energy is set to provide more than half of the increase in global electricity supply in 2021.

The share of renewables in electricity generation is projected to increase to almost 30% in 2021, their highest share since the beginning of the Industrial Revolution and up from less than 27% in 2019, the IEA added.

“Wind is on track to record the largest increase in renewable generation, growing by 275TWh, or around 17%, from 2020. Solar PV [photovoltaic] electricity generation is expected to rise by 145TWh, or almost 18%, and to approach 1,000TWh in 2021.”

China will account for almost half the global increase in renewable electricity generation, followed by the US, the EU, and India; the four combined will account for three quarters of global wind and solar power generation.

Insight article by Jonathan Lopez