The global surge in demand for energy could spark another three years of market volatility and record power plant pollution unless countries make major changes to how they generate electricity, the world’s energy watchdog has warned.
The International Energy Agency recorded the steepest ever increase in electricity demand last year, which triggered blackouts in major economies and led to historic energy price highs and record emissions.
The IEA’s annual electricity report said this could continue for another three years, with serious consequences for consumers and economies unless there is a faster structural change to the way electricity is produced.
“Sharp spikes in electricity prices in recent times have been causing hardship for many households and businesses around the world and risk becoming a driver of social and political tensions,” said the IEA’s executive director, Fatih Birol.
The IEA found that the world’s demand for electricity surged by 6% last year, following the global economic rebound from the 2020 pandemic recession, the steepest increase since 2010 when economies began to bounce back from the global financial crisis. The total increase in electricity demand was over 1,500 terawatt-hours, the largest on record.
About half of the growth in electricity demand took place in China alone, where it rose by an estimated 10% compared with 2020. China and India both suffered from power cuts in the second half of the year because coal supplies failed to keep pace with the demand on their power plants, leading to an economic slowdown in Asia.
In the UK, electricity market prices have reached record highs in recent months, in large part because the power grid continues to rely on gas-burning power plants for almost half of its electricity. The cost of running of these sites has rocketed following a global gas supply crunch which has triggered record high market prices across Europe.
The rising cost of keeping the lights on has left the UK facing a national energy crisis as household bills have rocketed, energy suppliers have collapsed and factories have been forced to shut.
The global strain on electricity systems has also led to record emissions from power generation as economies turn to cheaper coal power plants to keep a lid on soaring costs.
“Policymakers should be taking action now to soften the impacts on the most vulnerable and to address the underlying causes,” Birol said. “Higher investment in low-carbon energy technologies including renewables, energy efficiency and nuclear power – alongside an expansion of robust and smart electricity grids – can help us get out of today’s difficulties.”
The IEA’s report found that renewable energy sources grew by 6% in 2021, but that increase was unable to keep pace with the surge in demand as economies reopened following the sudden Covid-19 lockdowns that had choked economic growth.
In order to meet the rebound in demand for power, coal-fired plants generated 9% more electricity last year, or more than half of the global increase in power demand, to reach an all-time peak as gas became more expensive. Electricity generated by gas power plants grew by 2% last year, according to the IEA, while nuclear generation increased by 3.5%.
The return to dirtier sources of electricity caused the world’s total carbon dioxide (CO2) emissions from power generation to climb by 7% to a new all-time high after having declined the two previous years, the IEA said.
Birol warned that emissions from electricity would need to decline by 55% by 2030 if the world hopes to limit the rise in global heating by becoming “net zero carbon” by 2050.
“But in the absence of major policy action from governments, those emissions are set to remain around the same level for the next three years,” he said. “Not only does this highlight how far off track we currently are from a pathway to net zero emissions by 2050, but it also underscores the massive changes needed for the electricity sector to fulfil its critical role in decarbonising the broader energy system.”
