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IEA releases Electricity Market Report – renewables must keep up

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Today, the International Energy Agency (IEA) released its second Electricity Market Report. According to the agency, electricity demand around the world is rebounding or even exceeding pre-pandemic levels. Particularly, this is evident in emerging and developing economies. However, IEA noted, the situation remains volatile, with Covid-19 still causing disruptions.

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About the Electricity Market Report

Indeed, IEA published its first Electricity Market Report in December 2020. Half a year later, despite record additions of renewable generation capacity, fossil fuel-based generation and associated emissions are rising along with electricity demand.

Thus, this mid-2021 edition of the Electricity Market Report highlights recent developments and forecasts demand, capacity, supply, and emissions through 2022.

Among the report’s key findings, IEA found that global electricity demand will rebound strongly in 2021 and 2022. Therefore, after falling by around 1% in 2020, global electricity demand could grow by close to 5% in 2021; and also by 4% in 2022.

In fact, most of these increases will take place in the Asia Pacific region. There, more than half of global growth in 2022 will occur in the People’s Republic of China. Similarly, India, the third-largest consumer, will account for 9% of global growth.

Even though renewable electricity generation continues to grow strongly, it cannot keep up with increasing demand. In fact, after expanding by 7% in 2020, electricity generation from renewables is forecast to increase by 8% in 2021.

Although these are rapid increases, renewables will serve only around half of the projected growth in global demand in 2021 and 2022, IEA said. Accordingly, nuclear power generation will grow by around 1% in 2021 and 2% in 2022.

Other IEA forecasts

Moreover, fossil fuel-based electricity could then cover 45% of additional demand in 2021 and 40% in 2022. Similarly, after declining by 4.6% in 2020, coal-fired electricity generation will increase by almost 5% in 2021; thus, exceeding pre-pandemic levels.

More concerning is that it will grow by a further 3% in 2022 and could set an all-time high. Similarly, after declining by 2% in 2020, IEA expects gas-fired generation to increase by 1% in 2021 and close to 2% in 2022.

Per these conditions, IEA expects CO2 emissions from electricity to increase in 2021 and 2022.

Lastly, the agency recommends governments pursue and implement more robust policies to reach climate goals. Indeed, in the IEA Net‐Zero Emissions by 2050 Scenario, nearly three-quarters of emissions reductions between 2020 and 2025 take place in the power sector. Thus, coal-fired electricity generation needs to fall by more than 6% a year to achieve this decline, partially replaced by gas.

IEA also noted that recent extreme weather events had threatened the security of supply. In fact, the first half of 2021 saw supply shortfalls in multiple regions caused by extreme cold, heat, and drought. Therefore, to categorize outages, the agency introduced a new Electricity Security Event Scale. In that way, IEA assigned the Texas power crisis in February as the highest rating on this scale.

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