Like every other industry in the world, the energy sector has also been rocked into uncertainty by the COVID-19 pandemic. Some aspects of Energy Industry Trends in 2021 production and consumption have fluctuated, while others have stagnated.
Factors that affect the energy market:
- pandemic control measures
- speed of economic recovery
- government stimulus plans
- travel and trade modifications
- fuel prices
- imports and exports
- production trends
What is the future of the energy industry?
In October last year, the International Energy Agency (IEA) released its annual World Energy Outlook 2020 (WEO2020). This contains projections for the next decade. The report tells us about the possible paths of global energy system development and the impact of the pandemic on the energy industry. On Dec. 14, the IEA also released the Electricity Market Report (EMR2020). This includes an assessment of 2020 and forecasts for Energy Industry Trends in 2021. Let’s take a look at the most notable insights shared between these two reports.
Energy Sector Trends
1. Rebound of Global Electricity Demand
In 2020, lockdowns and quarantine took a toll on the commercial sector. According to the EMR2020, these safety precautions of the pandemic caused the global electricity demand to drop by 2%. However, the Energy Industry Trends in 2021 are expected to increase by 3%. Two-thirds of the additional demand depends on China and India. Southeast Asia is also expected to bounce back and add growth for electricity demand. The growth in the United States is expected to be 1%, while Europe’s rate will be at 2.3%.
WEO2020 forecasts that global energy demand will bounce back to its pre-crisis level in early 2023.
2. Steady Coal Prices vs. Volatile Gas Prices
Gas prices fell drastically in the first half of 2020. However, it started climbing up fast in October and November. While spot gas prices have an inconsistent pattern, IEA expects coal prices to remain steady this year.
Recovering gas prices Limit competitiveness of gas-fired generation. In the EMR2020, the sharp recovery of gas prices in the United States and Europe would limit the advantage of gas-fired power plants over coal-fired ones. In the U.S., coal-fired power generation recovery is forecasted to increase, while a slump is expected of gas-fired power plants.
3. Growth in Renewable Capacity
Renewable capacity is renewable energy that has been generated at capacity. Last year, renewable capacity hit a new record with its net additions. However, it doesn’t stop there. This year’s net additions in total capacity is expected to increase by 10%. The growth is largely connected to the continuation of the projects delayed in 2020. Wind makes up 31% and Solar panels make up 54% of these additions.
4. Seasonal Variability of Renewables
The production of renewable energy greatly depends on the weather, which is a variable that none of us can control. The annual capacity of solar, wind, and hydropower plants vary from year to year. The weather and water levels change every hour. The EMR2020 goes on to say that the fluctuation of hydro generation varies in wider ranges compared to wind and solar.
Renewables leave an unmet gap that non-renewable generation has to make up for. If unfavorable weather persists for a long time, coal and gas power plants have to generate additional power. This compensates for the demand gap. This results in an increase in carbon emissions. Because of this, there is a need for long-term storage of future electricity systems.
At the end of the WEO2020 report, the IEA concludes that governments hold unique capacities in leading efforts to address foreseeable problems. For example, they can work on foreseeing energy reliability, price, and supply. Consumers, investors, and industries also play their own roles in shaping this sector. They have a choice to start supporting sustainable energy.
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