COVID-19 Will Permanently Reduce Global Energy Demand: DNV GL

According to a new report, the behavioral and economic ramifications of COVID-19 will permanently reduce global energy demand.

According to the recently published Energy Transition Outlook by DNV GL, the behavioral and economic ramifications of COVID-19 will permanently reduce global energy demand. The report finds that compared to the pre-pandemic forecast, energy demand will be lowered 6-8 percent each year to the middle of the century.

The pandemic has prompted major behavioural shifts important to energy consumption, as demonstrated by the reduction in long distance travel and the increase in home office, both of which are responsible for the peak in transport energy demand and oil demand in 2019. The report and its authors believe that these trends are likely to have lasting societal effects, which will a have major impact on energy demand from transport and commercial buildings.

It further details how carbon dioxide emissions are set to fall 8 percent this year, making 2019 the year of peak carbon dioxide emissions. “However, we will still blow past the carbon budget for a 1.5-degree future in 2028, and if we are to meet this target, we must repeat the 2020 emissions saving every year until the middle of the century,” the report added.

“COVID-19 has changed the global energy outlook, yet the global climate crisis remains as urgent as before the pandemic,” said Remi Eriksen, Group President and CEO of DNV GL. “Early optimism about decreased air pollution has been replaced by the cold reality that it is not because of a more decarbonised energy mix but because of short term changes unique to the pandemic. We can transition faster with the technology at hand, but now more than ever before, we require national and sectorial policy incentives to bring us to the ambitions of Paris.”

The report goes on to add that while we must transition faster to create to a more sustainable future, it should be noted that the current pace of the energy transition is already fast. Within a generation, renewables and fossil fuels will have roughly an equal share of the energy mix compared to an approximately 20-80 split today. The share of electricity in the final energy mix is expected to double by mid-century, with solar PV and wind contributing 31 percent each. Floating offshore wind will grow rapidly, by 2050 DNV GL expects a large new industry with 250 GW installed.

And despite these significant shifts in the energy system, the outlook finds that the transition is affordable; as a proportion of GDP, humanity will be spending less on energy in 2050 (1.6 percent of global GDP) compared to 2018 (3 percent of GDP). As the world will spend an ever-smaller share of GDP on energy, it allows policy makers additional room to take the extraordinary actions required to decarbonise the energy mix.

Furthermore, the rapid rise of electric vehicles is perhaps the shining example of how policymakers can transform an industry. DNV GL forecasts that by 2032 half of new car sales will be electric. This will cause a steep reduction in oil demand from road transport, which DNV GL forecasts will decrease by 56 percent from 2018 to 2050.