In recent months, the energy sector has suffered a double shock: due to the COVID-19 pandemic and the disruption of the oil market amid falling demand and surplus supply. According to PwC estimates from the “PwC Power Utilities Future of Industries” report, which is based on data from the International Energy Agency for 2020 (IEA), the 2020 energy demand shock is the largest in 70 years. At the same time, global energy demand is expected to fall by 6% this year, seven times more than in the 2009 financial crisis.
The global recession caused by prolonged restrictions on the movement of people, goods and social and economic activity will also have a significant impact on energy investment, which is estimated to fall by 20% this year.
In response to the collapse in oil prices and continued price uncertainty, Opec has announced the world’s largest supply cut of 10 million barrels per day, but it is only a short-term measure. Even if there is a chance of a V-shaped economic recovery, the shock of the pandemic on future behavior cannot be ignored. Thus, all possible scenarios must be considered: a slower U-shaped recovery or a longer L-shaped recession that will have deeper implications. Whatever happens next, the world will be different and companies need to prepare for the new normality.
The impact of the crisis generated by COVID-19 is being felt at all levels of the energy sector, from fuel supply and efficiency, with serious implications for energy security and the transition to clean energy.
The industry is moving away from the use of fossil fuels and moving to renewable sources. Coal will decline the most since World War II, along with sharp reductions in gas and oil.
Nuclear power is less affected by the blocking measures, while renewables are the only ones growing in 2020, the PwC study also reveals.