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India will lead global recovery in energy demand: IEA

NEW DELHI: India will lead the global recovery in energy demand but much will hinge on how soon an effective Covid-19 vaccine is found and whether current practices such as work from home and aversion to travel outlast the pandemic, according to the International Energy Agency.
“Prior to the crisis, energy demand was projected to grow by 12% between 2019 and 2030. Growth over this period is now 9% in the ‘stated policy scenario’ (STEPS) and only 4% in the ‘delayed recovery scenario’ (DRS). With demand in advanced economies on a declining trend, all of the increase comes from emerging market and developing economies, led by India,” says the IEA’s World Energy Outlook released on Tuesday.
The report sees global energy demand shrinking by 5% this year and energy investments by 18%. Oil demand is expected to decline 8% and coal 7% in sharp contrast to a marginal rise in the contribution of renewables. It says global oil demand will recover to pre-crisis level by 2023 if a vaccine comes out in 2021 under STEPS. But this will not happen before 2025 if the pandemic prolongs and the economic slump deepens.
India has started showing signs of recovery in energy demand, a proxy for economic activities. Petrol consumption shot past pre-Covid level and diesel sales stood just 7% short of the pre-crisis mark in September, while power consumption rose 4.6% year-on-year.
A slower pace of growth in global oil demand amid bullish production outlook will keep government math in check by reducing the crude import and fuel subsidy bills. Consumers will benefit from cheaper fuels. Diesel has become cheaper by Rs 2.93 per litre and petrol by 97 paise in Delhi in September, with corresponding price reduction in other markets across the country.
But low oil and gas prices will hurt domestic producers and their ability to spend on future projects. The large drop in investments globally will increase the risk of future market volatility, which will be negative as India depends on imports for 83% of its oil needs.
On the brighter side, solar gets a boost and shows an uptick in all scenarios. Coal is also expected to never regain its pre-crisis consumption level. “I see solar becoming the new king of the world’s electricity markets. Based on today’s policy settings, it is on track to set new records for deployment every year after 2022,” says IEA executive director Fatih Birol.
Carbon emission comes down by 7% as a result of lower consumption of the two most widely used fossil fuels and reduced economic activities. The 2.4 gigatonnes decline takes annual CO2 emissions back to where they were a decade ago. However, the initial signs are that there may not have been a similar fall in 2020 in emissions of methane – a powerful greenhouse gas – from the energy sector, despite lower oil and gas output.

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