Global energy efficiency gains slow in 2020, hobbled by coronavirus pandemic

Energize Weekly, December 16, 2020

Energy efficiency gains slowed to their lowest level in a decade in 2020, and feeling the impact of the novel coronavirus pandemic, energy efficiency investment is projected to be down 9 percent year-on-year to $227 billion in 2020, according to the International Energy Agency (IEA).

Energy intensity, a measure of efficiency, is projected to improve by just 0.8 percent in 2020, compared to 1.6 percent in 2019, marking the lowest level since 2010 when the world was coming out of the last recession.

Overall, the IEA expects global primary energy demand in 2020 to decrease by 5.3 percent from 2019 levels and global gross domestic product to fall by 4.6 percent.

Energy efficiency gains have been on a five-year downward trend, and even 2019’s rate is below the average annual improvement of more than 3 percent, which would be needed to help meet international climate and sustainability goals, the IEA said.

“It is especially worrying because energy efficiency delivers more than 40 percent of the reduction in energy-related greenhouse gas emissions over the next 20 years in the IEA’s Sustainable Development Scenario,” the agency said.

Energy efficiency investment for the year is slated to drop, a result of the pandemic-induced recession.

“Investments in new energy efficient buildings, equipment and vehicles are expected to decline in 2020, as economic growth falls by an estimated 4.6 percent and income uncertainty affects consumer and business decision-making,” the IEA said.

There has been a small rebound, however, as earlier this year, the IEA had projected a 12 percent decline.

Technical energy efficiency improvements – new fuel-efficient cars, heat pumps, improved insulation and windows – are the main driver for efficiency gains.

In 2019, the IEA said technical improvements offset almost half the potential increase in energy demand due to economic growth.

The pandemic, however, has hobbled this activity. “Technical efficiency improvements in some markets have been delayed as lockdowns and physical distancing curtail building contractors’ physical access to premises,” the agency said.

The pandemic caused by the COVID-19 virus is a confounding element in the analysis of energy efficiency. “The COVID-19 crisis adds an extra level of stress,” the agency said.

It had appeared that the downward trend in annual efficiency gains was going to flatten in 2019. Instead, they fell even more sharply in 2020 due to the pandemic. COVID-19 is also roiling efforts to analyze and project what comes next in three ways.

First, there is the threat that the ongoing economic crisis threatens to further delay investments by businesses and households in energy-efficient technologies. “The resilience of investments will be tested in the coming years, particularly if the crisis deepens,” the IEA said.

Second, there is the chance that the pandemic and recession will precipitate changes in consumer, business and market behavior.

For example, the agency asked, could the sharp drop in aviation transport create a permanent change in energy intensity for international travel and freight or will increased teleworking lead to a change in work and community travel patterns?

Finally, the way governments respond to the crisis and the policies they adopt will have an impact on the progress in energy efficiency.

“In industry, for example, stimulus funding in the past has sometimes resulted in ageing, inefficient facilities operating for longer,” the IEA said. “If governments do not consider the energy system in the design of COVID-19 stimulus packages, similar results could ensue.”

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