“2020 is shaping up to be a ‘pivot point’ in the energy transition—the moment when noncarbon energy’s share of global demand increases compared to fossil fuels,” according to a new analysis by Jim Burkhard, vice president and head of oil markets and energy and mobility at IHS Markit.
Share of noncarbon energy more than 10% first time
On a global basis, noncarbon energy’s share of energy demand changed little from 1990 to 2019—staying within a narrow band of 8.3-9.8% . Demand for fossil fuels increased 63% during that period. This kept fossil fuels at a very steady 80-82%% share of total global primary energy demand.
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However, 2020 is proving to be the year when the combination of COVID-19 impacts on fossil fuel demand, growing investment in renewables and increased concerns of climate change begin to shift that balance.
IHS Markit expects noncarbon energy’s share of global demand will reach or exceed 10% this year, a mark not seen before.
8-12% annual growth in renewable energy demand
Furthermore, investments in renewable electricity generation capacity and IHS Markit expectations for actual electricity generation point to 8-12% annual growth in renewable energy demand to 2030.
That level of growth would put noncarbon energy’s 2030 share of global demand at 13-16%—well above the historic range of the past 30 years.
Fossil fuel’s share of world energy demand in 2030 would drop to 73-77% under those conditions. That figure never fell below 80% between 1990-2019.
10% decline of oil demand in 2020 due to COVID-19
IHS Markit expects fossil fuel demand for 2020 to fall 7% compared to 2019. Oil demand, which has born the harshest brunt from COVID-19 impacts, will register a 10% decline.
Fossil fuel demand is unlikely to record persistent demand declines. And a return to global economic growth in 2021 would lead to an increase in overall fossil fuel demand. The IHS Markit base case does not expect world oil demand to plateau until the mid-2030s.
Noncarbon energy poised to gain more global market share
Nevertheless, investment trends indicate that noncarbon energy, led by solar and wind power, are poised to gain more global market share in the years ahead—even as demand for oil grows past pre-COVID levels.
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“We are still years away from peak oil demand and the world will continue to consume large amounts of crude for decades to come. But 2020 could be remembered as the pivot point where the next 30 years look much different in terms of the noncarbon energy’s share of demand and the overall pace of change. Certain years stand out in the history of energy. This year will be one of them“, Jim Burkhard, vice president and head of oil markets, IHS Markit said. (hcn)
