The International Energy Agency’s (IEA) 2023 Power Market Report presents a pivotal moment in global electricity trends, emphasizing the rapid shift towards renewable energy and significant changes in power demand. Pknergy summarizes the core findings and their implications for the future of the energy industry.
Global Power Demand and Renewable Energy Surge
According to the IEA’s latest 2023 Power Market Update, a decline in electricity usage in developed economies, struggling with the ongoing impacts of the global energy crisis and economic slowdown, is expected to slow the growth of global electricity demand in 2023. The report indicates a significant drop in European wholesale electricity prices from last year’s record levels (disrupted by the Russia-Ukraine conflict) but notes that current average prices are still over twice the level of 2019.
In the first half of the year, due to high electricity prices, there was reduced consumption in energy-intensive industries like aluminum, steel, paper, and chemicals in the EU, leading to the lowest power demand in nearly two decades. However, a strong resurgence in global electricity consumption is anticipated for 2024.
In contrast, electricity prices in India have risen by 80% compared to 2019, while Japan has seen an increase of over 30%. India’s power consumption is expected to grow by 6.8% in 2023 and 6.1% in 2024, lower than the 8.4% increase in 2022.
The July update reveals that power demand in the US is expected to decline by nearly 2% this year, with Japan projecting a 3% decrease. The EU’s electricity demand is set to drop by 3%, in line with the reduction in 2022. This year’s global electricity demand growth may be just below 2%, lower than the 2.3% increase in 2022.
However, the IEA’s latest forecast assumes an improvement in the global economic outlook, thus anticipating a rebound in electricity demand growth to 3.3% in 2024.
Notably, renewable energies, especially wind and solar power, are poised to dominate the electricity market. By 2022, these sources accounted for 12% of global electricity, with carbon intensity of electricity generation reaching an all-time low of 436 grams of CO2 per kilowatt-hour. By 2024, renewables are expected to account for over a third of the global electricity mix.
The accelerating pace of new renewable energy installations suggests that, given favorable weather conditions, renewables could surpass coal as early as 2024 in power generation share. After a 1.5% increase in coal-fired power installations in 2022, a slight decline is expected in 2023 and 2024, with higher natural gas prices catalyzing this process.
The IEA 2023 Power Market Report predicts that increases in coal-fired electricity in Asia in 2023 and 2024 will be offset by significant reductions in power consumption in the US and Europe.
2023 Power Market Report：Fossil Fuels’ Diminishing Role and the Rise of Nuclear Power
In the coming years, electricity generation based on fossil fuels, especially oil and coal, is expected to decline. Despite a temporary increase in coal-fired power in 2022, this trend reflects a broader shift towards cleaner energy sources.
Amidst the current energy crisis, nuclear power has regained attention for its role in enhancing energy security and reducing carbon emissions. The IEA forecasts a significant increase in nuclear power generation, particularly in China, India, Japan, and South Korea.
By 2025, over half of the global increase in nuclear power is expected to come primarily from these four countries. China leads in absolute increase (an additional 58 billion kilowatt-hours), while India is the fastest-growing country (an 81% increase).
2023 Power Market Report：Looking Ahead The Future of Clean Energy
The global power sector is at a crucial threshold of transitioning to a more sustainable, cleaner energy future. This shift requires not only the continued growth of renewable energies but also strategic focus on integrating these sources into the existing power grid. Addressing challenges related to grid connectivity, flexibility, and market design is critical for this transformation.
Conclusion
The IEA 2023 Power Market Report an era of transformation in the global power landscape, characterized by robust growth in renewable energies and a significant decline in fossil fuel-based power generation. A new era of emissions reduction in the power sector is on the horizon, driven by the superpower sources of wind and solar energy.
For these to mature, rapid growth must be sustained over this decade. All other clean power sources also need to grow further, coupled with greater focus on efficiency to avoid uncontrolled growth in electricity demand. Urgent work needed to ensure the integration of wind and solar power into the grid includes government permitting, grid-link compatibility, flexibility, and BESS design.
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