The steep increase in global electricity demand pushed prices to unprecedented levels and drove CO2 emissions to a record high in 2021, as coal-fired electricity generation reached an all-time peak, according to the International Energy Agency's (IEA) semi-annual Electricity Market Report published on Friday
CO2 emissions from the electricity sector rose by 7% last year, in parallel with a 6% global electricity demand growth.
This growth marked the largest ever annual increase in absolute terms of over 1,500 terawatt-hours, and the largest percentage rise since 2010 after the financial crisis, the IEA calculated.
A rapid economic recovery combined with more extreme weather conditions last year relative to 2020, including a colder-than-average winter, and high demand growth from industrial, commercial and residential sectors boosted global electricity.
The increase in demand outstripped the ability of electricity supply sources to keep pace in some major markets, with shortages of natural gas and coal leading to volatile prices. This also led to demand destruction and negative effects on power generators, retailers and end-users, notably in China, Europe and India, the report said.
Around half of the global growth took place in China, where demand increased by an estimated 10%. China and India suffered from power cuts during the second half of the year due to coal shortages.
- Coal-fired power generation up by 9%
Coal met more than half of the increase in global demand as coal-fired generation reached an all-time peak, growing by 9%, the fastest since 2011, after having declined the two previous years, according to the report.
The exceptionally demand growth and coal's competitiveness in some markets compared to natural gas propelled the increase in coal-fired generation.
Renewables electricity grew by 6% while gas-fired generation and nuclear saw growth rates of 2% and 3.5%, respectively, to almost reach levels seen in 2019, the report found.
'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 IEA Executive Director, Fatih Birol.
'Policy makers should be taking action now to soften the impacts on the most vulnerable and to address the underlying causes. 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.'
- IEA warns of emissions and volatility in coming years
The IEA’s price index for major wholesale electricity markets almost doubled year on year, and showed a 64% increase from the 2016-2020 average, the report showed.
In Europe, average wholesale electricity prices in the fourth quarter of 2021 were more than four times their 2015-2020 average. There were also sharp price increases in Japan and India, although prices were more moderate in the US where gas supplies were less perturbed.
The IEA said in the report that growth in renewable electricity generation in 2021 was not enough to keep up with galloping demand.
'Emissions from electricity need to decline by 55% by 2030 to meet our Net Zero Emissions by 2050 Scenario, 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,' Birol 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 decarbonizing the broader energy system,' he underlined.
The report anticipates a growth of 2.7% a year on average in electricity demand between 2022 and 2024, although the COVID-19 pandemic and high energy prices bring some uncertainty to this outlook.
Renewables are set to grow by 8% per year on average, serving more than 90% of net demand growth during this period, while nuclear-based generation is expected to grow by 1% annually.
As a result of slowing electricity demand growth and significant renewables additions, fossil fuel-based generation is expected to stagnate in the coming years, with coal-fired generation falling slightly as phase-outs and declining competitiveness in the US and Europe are balanced by growth in markets like China and India. Gas-fired generation is therefore forecast to grow by around 1% a year.
The IEA said in the report that current policy settings are insufficient to cut emissions, requiring massive changes in terms of energy efficiency and low-carbon supply for the electricity sector to fulfill its critical role in decarbonizing the broader energy system.
By Nuran Erkul Kaya