In the biggest shock the energy world has seen in 70 years, IEA announce renewable energy may be the only source expected to grow, as a result of the coronavirus pandemic.
The coronavirus outbreak has led to a global lockdown with the majority of the world's population forced to stay at home for their own safety. In response to this, a new report from the International Energy Agency is forecasting that global energy demand will decline by 6% this year. In absolute terms, that is the largest drop on record and the steepest decline in 70 years.
"This is a historic shock to the entire energy world. 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," Fatih Birol, IEA Executive Director.
The outbreak of Covid-19 is expected to prompt a collapse in energy demand, seven times greater than the decline caused by the global financial crisis in 2008. This could completely wipe out demand for fossil fuels.
The IEA report states that "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 reports projections are based on the assumption that social distancing measures will gradually ease in the coming months, followed by slow economic recovery. If nations adopt a faster return to 'business as usual' IEA predicts that the loss in demand could be limited to 3.8%. However, a second wave of the virus could lead to a greater decline of more than 6%.
We have already seen the immediate impact of the coronavirus crisis on fossil fuel commodities with the collapse of oil market prices, earlier this month. Multi-decade lows for the world's consumption of oil actually turned oil market prices negative in the US for the first time.
Renewable energy on the other hand is expected to grow by 5% this year, making up for some of the world's retiring demand for electricity. This growth in renewables could spur many fossil fuel companies towards clean energy. The renewables industry is set to experience some sort of growth no matter what the shape of economic recovery and is therefore the most resilient to the COVID-19 crisis.
IEA believes that governments should use economic stimulus packages as a window of opportunity to ensure a green recovery. They argue that a well designed package should have clean energy at the heart, to offer economic benefits and facilitate a turnover of energy capital to the clean energy transition.
"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", Fath Birol.