Paris: Global demand for electricity is slowing sharply this year due to sluggish economic growth and runaway energy prices and the trend will likely continue next year, the International Energy Agency said Wednesday.
“Electricity demand growth is slowing significantly in 2022,” the IEA wrote in its new Electricity Market Report.
“After global electricity demand grew by a strong six percent in 2021, propelled by rapid economic recovery as Covid-19 lockdowns eased, we expect growth to slow to 2.4 percent in 2022 — about the same as the average from 2015 to 2019,” it said.
“This reflects slower global economic growth, higher energy prices following Russia’s invasion of Ukraine, and renewed public health restrictions, particularly in China.”
The electricity sector’s carbon emissions were set to decline slightly this year, the report found.
“After having risen to an all-time high in 2021, CO2 emissions from the global electricity sector are set to decline in 2022, albeit by less than one percent,” it said.
The agency said renewable sources of energy were growing faster than demand and replacing fossil fuels.
“Strong capacity additions are helping global renewable power generation toward growth of more than 10 percent in 2022,” the report said.
Nevertheless, due to high gas prices and supply constraints, coal is replacing gas for power generation in markets with spare coal plant capacity, the IEA observed.
“In Europe, governments delayed coal plant phase-outs and lifted restrictions to increase the availability of coal generation, thereby reducing gas consumption to improve security of supply.”
The IEA said that wholesale electricity prices were skyrocketing in many countries.
“In the first half of 2022, gas prices in Europe rose fourfold and coal more than threefold from the same period in 2021, resulting in wholesale electricity prices more than tripling in many markets.”
It said its price index for major global electricity wholesale markets had “reached levels that were twice the first-half average from 2016 to 2021.”
The IEA said that Europe was gearing up to reduce its reliance on Russian fossil fuel imports by accelerating its clean energy transition.
“The implementation of the European Commission’s ‘REPowerEU’ plan would greatly accelerate deployment of renewables in the coming years, doubling their share in EU gross final energy consumption from 2020 to 2030 and significantly reducing fossil fuel use.”
Looking ahead to next year, the IEA said that the main uncertainties affecting its 2023 forecasts for electricity demand and generation mix would remain fossil fuel prices and economic growth.
“As of mid-2022, we expect global electricity demand growth in 2023 to remain on a similar path as this year. Strong renewables growth of eight percent and recovering nuclear generation could displace some gas and coal power, resulting in the electricity sector’s CO2 emissions declining by one percent,” the IEA said.