Economy

Lockdown has cut India's energy demand by 30%, says report

Richa Mishra New Delhi | Updated on April 30, 2020

‘Biggest shock’ to the system may result in 6% drop in global demand, says IEA

Covid-19 is having a ripple effect in the global energy space. When India, a major consumer, goes for a nationwide lockdown, it reduces energy demand by almost 30 per cent. With each additional week of lockdown, annual energy demand is reduced by 0.6 per cent, according to the latest report of the International Energy Agency (IEA).

“Overall, we estimate that an additional month of the restrictions in place as of early April would reduce global annual energy demand by around 1.5 per cent,” said the IEA’s ‘Global Energy Review — the impacts of the Covid-19 crisis on global energy demand and CO emissions’. It projects a 6 per cent fall in energy demand in 2020 — seven times the decline after the 2008 global financial crisis. In absolute terms, the decline is unprecedented — the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer.

“The Covid-19 pandemic represents the biggest shock to the global energy system in seven decades, with the drop in demand this year set to dwarf the impact of the 2008 financial crisis and result in a record annual decline in carbon emissions of almost 8 per cent,” it said.

“It is still too early to determine the longer-term impacts, but the energy industry that emerges from this crisis will be significantly different from the one that came before,” said Fatih Birol, Executive Director, IEA.

“This is a historic shock to the entire energy world,” he added. “Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas. Only renewables are holding up during the previously unheard-of slump in electricity use.”

The report’s projections of energy demand and energy-related emissions for 2020 are based on assumptions that the lockdowns implemented around the world are progressively eased in most countries in the coming months, accompanied by a gradual economic recovery.

India scenario

“The declines in electricity and transport demand in India have been among the deepest globally, but the contractions over the full year are likely to be smaller than the global average,” Birol told BusinessLine.

“Like every country, India’s demand recovery will be determined by the duration and scope of its lockdown measures. We have been pleased to see the Government of India working closely with its citizens and companies to ensure energy supplies and navigate this difficult time,” he said.

Advanced economies are expected to see the biggest declines, with demand set to fall by 9 per cent in the US and by 11 per cent in the EU. The impact of the crisis on energy demand is heavily dependent on the duration and stringency of measures to curb the spread of the virus.

The IEA found that each month of worldwide lockdown reduces annual global energy demand by about 1.5 per cent. Changes to electricity use during lockdowns have resulted in significant declines in overall electricity demand. “Electricity demand is set to decline by 5 per cent in 2020, the largest drop since the Great Depression in the 1930s,” it said, adding, “At the same time, lockdown measures are driving a major shift towards low-carbon sources of electricity including nuclear, hydropower, wind and solar PV. After overtaking for the first time ever in 2019, low-carbon sources are set to extend their lead this year to reach 40 per cent of global electricity generation — 6 percentage points ahead of coal. Electricity generation from wind and solar PV continues to increase in 2020, lifted by new projects that were completed in 2019 and early 2020.”

“This trend is affecting demand for electricity from coal and natural gas, which are finding themselves increasingly squeezed between low overall power demand and increasing output from renewables,” the report said. As a result, the combined share of gas and coal in the global power mix is set to drop by 3 percentage points in 2020 to a level not seen since 2001. Coal is particularly hard hit, with global demand projected to fall by 8 per cent in 2020, the largest decline since the Second World War.

Growth of renewables

Renewables are set to be the only energy source that will grow in 2020, with their share of global electricity generation projected to jump thanks to their priority access to grids and low operating costs. Despite supply chain disruptions that have paused or delayed deployment in several key regions this year, solar PV and wind are on track to help lift renewable electricity generation by 5 per cent in 2020, aided by higher output from hydropower.

As after previous crises, however, the rebound in emissions may be larger than the decline, unless the wave of investment to restart the economy is dedicated to cleaner and more resilient energy infrastructure, said the report.

Published on April 30, 2020

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