Gas, coal bounce back from 2020: IEA
Among fossil fuels, natural gas is likely to see the biggest rise in demand this year relative to 2019, by 1%, the International Energy Agency (IEA) said in its April 20 report, Global Energy Review 2021. Demand is set to grow by 3.2% year on year in 2021, propelled by Asia, the Middle East and Russia. Last year it pushed out coal where possible on price, and demand fell only 2% year on year.
But renewably generated electricity pushed both gas and coal out of the supply stack in many markets on occasion, the energy watchdog said in its annual report, which this year is hedged with uncertainty surrounding the speed at which different countries will cope with COVID-19. Europe is proving very sluggish, for example: "The impact of national stimulus packages may not be felt until the second half of the year," the IEA said of the continent.
Most of the 90mn mt CO2 drop in Europe's power sector emissions in 2020 will endure through 2021, with a slight anticipated increase in coal and gas-fired generation in 2021 reversing only 10% of the 2020 drop, the IEA said, owing to the region's "dimmer" outlook.
However, the outlook is brighter elsewhere: "The combination of continued lower prices and rapid growth in economies across Asia and the Middle East should drive growth of 3% in gas demand in 2021. As a result, global natural gas demand in 2021 is projected to rise 1.3% above 2019 levels, the strongest anticipated rebound amongst fossil fuels," said the IEA. While spot prices have been very high, about three quarters of LNG is sold on oil indexed contracts, or about $6.00-7.50/mn Btu at $60/barrel of crude.
In the US – the world’s largest natural gas market – the increase is expected to be less than 20% of the 20bn m3 decline in 2020, squeezed by the continued growth of renewables and rising natural gas prices. Nearly three-quarters of the global demand growth in 2021 is from the industry and buildings sectors, while electricity generation from natural gas
remains below 2019 levels, it said.
Global electricity demand is forecast to rise by 4.5% in 2021, or over 1,000 TWh, which is almost five times greater than the decline in 2020, cementing electricity's share in final energy demand above 20%.
Demand for renewables grew by 3% in 2020 and is set to increase across all key sectors – power, heating, industry and transport – in 2021. Electricity demand for renewables is on course to expand by more than 8%, to reach 8,300 TWh, the largest year-on-year growth on record in absolute terms. But they enjoy support: "They have benefited from priority market access in many markets," said the IEA.
In the UK for example they have not only pushed other generating capacity out of the market, but by over-producing on hot and windy days when demand is low, such as weekends, last year they caused negative wholesale prices. Overall, renewables use grew by 3% in 2020, with solar PV and wind adding 330 TWh.
Coal demand alone is projected to underpin a rise in emissions of almost 5%, or 1,500mn mt, mostly in Asia and with China accounting for half the growth. This expected increase would leave emissions just 1.2% below 2019. And they would exceed that level but for sluggish demand for transport. "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," said the IEA.