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New Energy World magazine anniversary logo

Celebrating two years of reporting on the industry’s progress toward net zero

ISSN 2753-7757 (Online)

Low carbon technologies needed at pace and scale for fast and deep decarbonisation

29/6/2022

Wind turbines and solar panels Photo: Shutterstock
Solar and wind drove renewables growth in 2021

Photo: Shutterstock

The challenges and uncertainties facing the global energy system are at their greatest for almost 50 years, according to BP’s latest review of world energy statistics, with growing shortages and increasing prices highlighting the continuing importance of energy security and affordability alongside lower carbon when addressing the energy trilemma.

This year’s data in the BP Statistical Review of World Energy shows that global energy consumption increased by almost 6% in 2021, more than reversing the sharp fall in 2020 as much of the world locked down in response to the COVID-19 pandemic.

 

As BP’s Chief Economist Spencer Dale noted in the report’s introduction, this sharp rebound in energy demand ‘is a sign of global success, driven by a rapid recovery in economic activity as the widespread distribution of effective vaccines allowed for an easing in COVID restrictions in many parts of the world and a return to our everyday lives’. However, he warned that ‘it also highlights that the pronounced dip in carbon emissions in 2020 was only temporary’ – carbon equivalent emissions from energy (including methane), industrial processes and flaring increased by 5.7% last year, to reach 39 Gt CO2e, close to 2019 levels.

 

Strong renewables growth 
On a positive note, renewable energy, led by wind and solar power, continued to grow strongly in 2021, more than any other fuel, and now accounts for 13% of total power generation. Renewable generation (excluding hydro) increased by almost 17% in 2021 and accounted for over half of the increase in global power generation over the past two years.

 

Solar and wind capacity increased by 226 GW in 2021, close to the record increase of 236 GW seen in 2020. China remained the main driver, accounting for about 36% and 40% of the global capacity additions, respectively.

 

Meanwhile, hydroelectricity generation decreased by around 1.4% in 2021, the first fall since 2015. In contrast, nuclear generation increased by 4.2% – the strongest increase since 2004 – led by China.

 

Growing gas demand 
The review also reports that global gas demand grew 5.3% in 2021, increasing above pre-pandemic 2019 levels and crossing the 4tn m3 mark for the first time. Its share in primary energy in 2021 was unchanged from the previous year at 24%.

 

Natural gas prices rebounded strongly across all three major gas regions, rising four-fold to record annual levels in Europe (TTF averaging $16.02/mn Btu) and tripling in the Asian LNG spot market (JKM averaging $18.60/mn Btu). US Henry Hub prices nearly doubled to average $3.84/mn Btu in 2021 – their highest annual level since 2014.

 

LNG supply grew 5.6% (+26bn m3) to 516 bn m3 in 2021, its slowest rate of growth since 2015 (other than in 2020). LNG supply from the US rose by 34bn m3, accounting for most of the new incremental supplies and more than offsetting declines from mainly other Atlantic Basin exporters. China surpassed Japan as the world’s largest LNG importer and accounted for close to 60% of global LNG demand growth in 2021.

 

Oil on the rise 
Meanwhile, oil consumption increased by 5.3mn b/d in 2021, but remained 3.7mn b/d below 2019 levels. Regionally, most of the growth took place in the US (1.5mn b/d), China (1.3mn b/d) and the EU (570,000 b/d). Oil prices averaged $70.91/b, the second highest level since 2015.

 

Global oil production increased by 1.4mn b/d in 2021, with OPEC+ accounting for more than three-quarters of the increase. Among all countries, Libya (840,000 b/d), Iran (540,000 b/d) and Canada (300,000 b/d) saw the largest increases. Nigeria (–200,000 b/d), the UK (–170,000 b/d) and Angola (–150,000 b/d) reported the biggest declines.

 

Refinery capacity first 
Refinery capacity declined for the first time in over 30 years by almost 500,000 b/d last year, driven by a sharp reduction in the OECD (1.1mn b/d).

 

As a result, refining capacity in the OECD in 2021 was at its lowest level since 1998, reports BP.

 

Rocketing coal prices 
Looking to coal, prices rose dramatically in 2021, with European prices averaging $121/t and the Asian marker price averaging $145/t, its highest since 2008. Coal consumption grew over 6% in 2021 to 160 EJ, slightly above 2019 levels and its highest level since 2014. China and India accounted for over 70% of the growth in coal demand in 2021, increasing by 3.7 and 2.7 EJ, respectively.

 

Meanwhile, global production matched consumption with an increase in supply of 440mn tonnes. China and India accounted for much of the increase in production, which was largely consumed domestically, as well as Indonesia, supporting higher exports. Notably, both Europe and North America showed an increase in coal consumption in 2021 after nearly 10 years of back-to-back declines.

 

A final word 
Looking ahead, Dale closed his introduction to what was the 71st issue of BP’s flagship report, by saying: ‘The low carbon energy sources, vectors and technologies needed to achieve a fast and deep decarbonisation exist today – wind and solar power, biofuels, blue and green hydrogen, CCUS (carbon capture, use and storage), and CO2 removals. The challenge is to apply them at unprecedented pace and scale.’