Lockdown measures have significantly reduced electricity demand, which has in turn affected the power mix. As increases in residential demand have been far outweighed by reductions in commercial and industrial operations, every month of full lockdown reduced demand by 20% on average, or over 1.5% on an annual basis. Demand reductions have resulted in renewables making up a larger share of the electricity supply because their output is largely unaffected by demand, while demand for electricity generated from all other sources (coal, gas and nuclear power) fell.

A slow and progressive recovery in 2020 would place electricity generated from low-carbon sources well ahead of coal-fired generation globally. The low-carbon share of generation is expected to expand to 40% in 2020, the highest level on record, partly because total generation would fall by almost 5%. Low-carbon sources are expected to overtake coal by six percentage points, after having taken the lead in 2019.

Renewables could reach the highest levels in terms of output and share, with new projects more than compensating for lower nuclear power output. Wind and solar power are set to increase in any case because new projects built in the past year will raise their share of generation to nearly 9% in 2020 – twice as high as in 2015.

Coal-fired generation is projected to decrease the most, falling 10% in 2020, followed by a 7% drop in gas-fired generation, the largest declines on record.

Global generation shares from coal and low-carbon sources, 1971-2020

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Renewable power

Overall global demand for renewables is expected to increase in 2020 owing to their use in the electricity sector. Even with end-use electricity demand falling significantly because of lockdown measures, the low operating costs of renewables-based generation and its priority access to the grid in many markets allow it to operate at near full capacity and even expand.

However, supply chain disruptions, construction delays and macroeconomic challenges increase the uncertainty about the total amount of renewable capacity growth in 2020 and 2021.

The IEA forecasts that net renewable electricity capacity additions in 2020 will be 13% lower than in 2019 as a result of delayed construction activity from supply chain disruptions, lockdowns and social distancing, and emerging financial challenges. Nevertheless, global cumulative installed renewable power capacity is projected to increase 6%, surpassing the combined size of North America’s and Europe’s power systems. The resilience of renewables is expected to be demonstrated in 2021, with most of the delayed projects coming online, leading to a rebound in new installations.

Renewable electricity capacity additions, 2007-2021, updated IEA forecast

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Solar PV capacity additions are forecast to decline 17% from 2019 to 2020, while wind additions shrink 12%. Utility-scale PV and wind are expected to rebound, as the majority of projects in development have already obtained financing and are under construction. However, forecast uncertainty remains for projects that were to achieve financial close in 2020 and become operational next year. Moreover, total PV additions in 2021 are expected to fall short of the 2019 level due to slower recovery of distributed PV applications, as individuals and small business are expected to reprioritise investment decisions.

The impact of COVID-19 on renewable electricity technologies with long lead times, such as hydropower, offshore wind, CSP and geothermal, remains limited.

The pandemic has the potential to change the priority of government policies and budgets, developers’ investment decisions and the availability of financing through 2025 and beyond. This casts a great deal of uncertainty over a market that had been expanding rapidly in the previous five years.

At the same time, several countries are introducing significant stimulus programmes to respond to the current economic meltdown and support their economies. Some of these stimulus measures may be relevant for renewables. The IEA has been re-emphasising that increasingly competitive renewable technologies can offer structural benefits such as economic development and job creation, while also reducing emissions and fostering technological innovation.

Unfortunately, falling costs alone will not shelter renewables projects from a number of challenges. The slow pace of economic recovery, heightened pressure on public budgets, and the poor financial health of the energy sector overall, further exacerbate the policy uncertainties and financing challenges that were already present.

Almost half of the wind and solar PV projects in development for the next five years are tied to planned – but not finalised – government-backed auctions or other incentives such as tax credits, rebates and FITs. However, the COVID-19 crisis poses challenges to the timely implementation of previously announced government plans.

Although governments may delay scheduling new renewable capacity auctions and turn to existing natural gas plants to meet new demand in the short term, in the medium and long term the economic cases for wind and solar remain strong because costs are expected to continue falling and long-term prices are predictable over the project lifetimes.

While project development linked to private agreements accounts for about one-quarter of planned projects, lower electricity demand, plummeting power prices and a weaker financing environment may lead to such projects being reconsidered. The willingness of corporations to continue procuring renewables when fossil fuel prices are so low will also depend strongly on the ambition of their own climate change mitigation policies and on government carbon-pricing regimes.

While renewables in several markets were already facing financing, policy uncertainty and grid integration challenges at the beginning of 2020, COVID‑19 is now intensifying these concerns. However, the present situation offers governments the opportunity to reverse this trend by making investment in renewables a key part of stimulus packages designed to reinvigorate their economies. They can harness the structural benefits that increasingly affordable renewables have to offer, including opportunities for job creation and economic development, while reducing emissions and fostering innovation.

Nuclear power

At the global level, nuclear power plants generated about 3% less power in Q1 2020 than in Q1 2019, due mainly to the reduction in electricity demand during the COVID‑19 crisis. Nuclear power has been an important source of power system flexibility in Europe, helping to maintain electricity security by operating in load-following mode, complementing the supply of variable renewable generation.

The nuclear sector has adapted to the lower electricity demand and human resource challenges imposed by COVID‑19 confinement by rescheduling planned outages and maintenance. Utilities in countries with a large share of nuclear in their electricity mix (e.g. France) are further adjusting outage planning so that the nuclear fleet is available during the forthcoming winter period and can continue to support the security of the electricity supply as economies recover from COVID-19.

Nuclear power, both new nuclear projects and the long-term operation of existing reactors, can play a role in the post-COVID-19 strategic recovery efforts by boosting economic growth in the short term, while supporting, in a cost-effective manner, the development of a low-carbon resilient electricity infrastructure.

Gas-fired power

The COVID-19 crisis caused unprecedented energy market uncertainty in 2020. The IEA expects a sharp drop in power sector gas demand in 2020, accounting for almost 60% of the anticipated overall drop in gas demand globally. The sharpest decline is expected in Europe, prompted by lower electricity demand in the industry sector and a more resilient renewables-based power generation system. Very low natural gas prices in North America mean that the impact on gas-fired generation is expected to be less severe there.

Coal-fired power

The COVID-19 crisis destabilised energy markets to an unprecedented degree in 2020. The IEA expects a sharp drop in power sector coal demand in 2020 after an 8% year-on-year decrease in overall coal demand in the first quarter. In the current situation, uncertainty about the outlook for coal is higher than for any other fuel.

Coal demand for power depends strongly on the level of electricity demand. In addition, the use of coal in power generation is being displaced by low-carbon energy sources such as hydro, wind, solar and nuclear, which have all been less affected by the COVID‑19 crisis. Hence, changes in economic activity and the associated electricity demand have a tremendous effect on coal-fired electricity generation and overall coal consumption.