Global Energy Review 2020
Attributed to: International Energy Agency
Renewable energy has so far been the energy source most resilient to Covid‑19 lockdown measures. Renewable electricity has been largely unaffected while demand has fallen for other uses of renewable energy. In Q1 2020, the global use of renewable energy in all sectors increased by about 1.5% relative to Q1 2019. Renewable electricity generation increased by almost 3%, mainly because of new wind and solar PV projects completed over the past year and because renewables are generally dispatched before other sources of electricity. Along with depressed electricity demand, power grids have managed heightened shares of wind and solar PV. The use of renewable energy in the form of biofuels declined in Q1 2020 as consumption of blended fuels for road transport fell.
We estimate that the total global use of renewable energy will rise by about 1% in 2020. Despite supply chain disruptions that have paused or delayed activity in several key regions, the expansion of solar, wind and hydropower is expected to help renewable electricity generation to rise by nearly 5% in 2020. This growth is smaller than anticipated before the Covid‑19 crisis, however. A faster recovery would have a minimal impact on renewable energy production, though it would enable more new renewables-based projects to be completed. If recovery is slower, renewable energy would still increase, making renewables the energy source the most resilient to the Covid‑19 current crisis.
In Q1 2020, the global use of renewable energy was 1.5% higher than in Q1 2019. The increase was driven by a rise of about 3% in renewable electricity generation after more than 100 GW of solar PV and about 60 GW of wind power projects were completed in 2019. In addition, wind availability was high in Europe and the United States in Q1 2020. Renewables are also resilient to lower electricity demand because they are generally dispatched before other electricity sources due to their low operating costs or regulations that give them a priority.
The share of renewables in global electricity generation jumped to nearly 28% in Q1 2020 from 26% in Q1 2019. The increase in renewables came mainly at the cost of coal and gas, though those two sources still represent close to 60% of the global electricity supply. In Q1 2020 variable renewables – in the form of solar PV and wind power – reached 9% of generation, up from 8% in Q1 2019.
On an hourly basis, variable renewables met a higher share of electricity demand throughout most of Q1 2020. Before lockdown measures were implemented, shares of variable renewables were similar or higher due to favorable weather conditions, projects completed in 2019 and limited electricity demand growth. Once lockdown measures were put in place, electricity demand fell while levels of wind and solar PV held steady. This led to a noticeable step up in variable renewables’ share of demand. Multiple regions have seen record-high hourly shares of variable renewables in electricity demand during lockdowns, including Belgium, Italy, Germany, Hungary, and eastern parts of the United States. Since strict social distancing measures began in Germany on March 22, the share of variable renewables has been consistently higher than in the same period in 2019. Overall, electricity systems have been able to deal with increasing shares of variable renewables over the past few months because most markets have already experienced higher levels in summer months when solar PV penetration increases significantly.
Liquid biofuels are directly affected by declining road transport fuel demand as they are blended with gasoline or diesel under existing blending mandates. Ethanol and biodiesel production facilities in Brazil, the European Union and the United States have reduced their outputs as a result of sluggish local and international demand. US ethanol production was down by nearly 50% between the end of February and early April, as numerous plants idled or reduced output. Brazil’s ethanol sector is under dual pressure from constrained demand and low gasoline prices that undercut the competitiveness of ethanol consumption. As demand has fallen, biofuel stocks have grown in many markets, depressing biofuel prices and compromising the profitability of production. Ethanol plants in many countries have ventured into the production of much-needed hand sanitizer.
In our estimate for 2020, renewable energy demand increases by about 1% from 2019 levels, in contrast to all other energy sources. Renewable electricity generation grows by nearly 5% despite the supply chain and construction delays caused by the Covid‑19 crisis. In doing so, renewables almost reach 30% of electricity supply globally, halving the gap with coal (from 10 percentage points in 2019). Overall, renewables growth is more sluggish than last year but in line with the general slowing trend since 2016. The output of hydropower remains the largest uncertainty in 2020, as it accounts for almost 60% of all renewable generation globally and is dependent on rainfall and temperature patterns.
The pace of renewable power capacity additions could decline in 2020 as supply chain disruptions and labor restrictions delay construction. The duration and extent of lockdowns and social distancing measures in different countries will influence the total for the year, along with the scope and timing of economic stimulus packages in response to the economic downturn.
Solar PV is set to increase the fastest of all renewable energy sources in 2020. However, uncertainty remains over capacity growth in 2020, especially for distributed solar PV applications. Last year, one-fifth of all renewable capacity deployed globally consisted of individuals and small-to-medium-sized enterprises installing solar PV panels on their roofs or business sites. Currently, the installation of distributed solar PV has stopped or dramatically slowed in many countries as lockdown measures prevent access to the buildings.
Wind power is expected to increase the most in absolute generation terms among all renewables. A windy start of the year from January to March in many regions and strong capacity additions last year is expected to give a boost to wind generation in 2020. Some important policy deadlines require developers to commission projects by the end of 2020. In China, all wind projects need to be commissioned by the end of 2020 to qualify for feed-in tariff subsidies. In the United States, wind developers are in a similar situation, as they are required to ensure projects are operational by the end of 2020 to receive production tax credits. Despite such policy deadlines, however, uncertainty remains over capacity growth this year because of possible delays.
Electricity generation for bioenergy is expected to slow down as supply chain interruptions and logistical challenges are expected for the delivery of solid biofuels to large-scale power plants. For instance, large bioenergy power plants in Europe use as fuelwood pellets that mostly come from North America.
Pressure on biofuel consumption levels will continue because transport activity is expected to contract still further in the second quarter of 2020 in the United States, European countries and many other countries. If the pandemic is under control by late in the northern summer, transport demand could rebound in the second half of the year, allowing partial recovery of biofuel production. Full-year biofuel consumption is nonetheless likely to be substantially lower than in 2019. Planned increases to blending mandates have already been delayed in several Southeast Asian countries and the introduction of Brazil’s flagship RenovaBio policy may be disrupted. Low oil and prices also limit appetites to increase biofuel blending levels. The impact on biofuel production across 2020 will depend on the share of sugar cane directed to sugar rather than ethanol, and the scope of financial support made available for producers as part of Covid‑19 rescue and recovery packages.
A faster or slower recovery would have limited effects on renewable electricity production in 2020, with year-on-year growth expected under most conditions. However, the impacts on the renewable energy industry could be very large, as the regions most affected by the Covid‑19 crisis could see a sharp reduction in construction. The production of renewable electricity largely depends on the availability of natural resources, as the weather is the main determinant for hydropower, wind and solar PV, which together account for about 90% of all renewable electricity generation. The estimates for 2020 are based on past weather trends, and so deviations from these historical averages are a source of significant uncertainty. The total amount and timing of new capacity additions in 2020 also remain uncertain, but their impact on total renewable electricity generation is limited. The use of biofuels is more sensitive to the pace of the recovery, given its strong link to road oil demand, and could fall substantially if the recovery in 2020 is slow.