The global fall in electricity consumption will continue for long as nations lift stay-at-home orders. This is considered to be the biggest drop after the Great depression and fundamentally reshaping power markets.
As countries to put effort in recovering their economy, worldwide electricity usage will decline 5% in 2020, the most in more than eight decades, according to the International Energy Agency. In the U.S. last week, government analysts projected the nation’s biggest drop on record. And in Europe, analysts say a full recovery could take years.
The prolonged slowdown will increase economic pressure on older, uneconomic power plants, especially those that burn coal, and consequently speed the transition toward cleaner and cheaper wind and solar. It will also contribute to the biggest annual decline in greenhouse gasses from energy ever recorded.
The good news for renewable sector is that the wind and solar farms have an upper hand in many regions because they don’t need to buy fuel. Natural gas, which is trading near historic lows, remains competitive. Coal power, which is more expensive, is shouldering the majority of the cuts as generators scale back.
While wind and solar are producing a larger share of power, they’re not unscathed. Power auctions are being suspended in France, Brazil, Saudi Arabia and elsewhere, sapping the need for additional clean-energy projects. For the first time in two decades, the number of new wind and solar farms globally is set to decline this year, the IEA said in a report Wednesday.
Some of the drastic drops in electricity usage will be in Europe, where 2020 demand is forecast to fall 8%, according to the IEA. In Germany, companies including RWE AG and Uniper SE are running coal generators less and relying more on gas plants. Coal is on pace for the first time ever to produce less electricity nationwide than renewable energy.
In Asia, power consumption is forecast to rebound faster. Nations like India and China, where industrial production accounts for a large chunk of the economy, had some of the strict lockdowns -- a combination that hammered demand, according to Bloomberg NEF analyst Ali Asghar.
While the IEA sees demand in China, the world’s top energy user, plunging this year, official estimates put consumption in May already above last year’s levels and on course to grow as much as 3% in 2020.
However, global demand for power will resume as nations turn more to electricity to power cars, heat homes and others, analysts said. Nevertheless, currently, the power sector faces a long, slow recovery.
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