2021 was an exceptional year globally in many ways, and one of them is the sky-rocketing commodity prices and hence wholesale energy prices in 2021. One of the key factors behind the surge in prices was the exceptional demand for electricity around the world, which came from rebounding economies and stronger economic growth after a bleak 2020, and extreme weather conditions including a warmer summer and colder winter.

International Energy Agency (IEA) in its Electricity Market Report – January 2022 highlights that the global electricity demand in 2021 grew by more than 6 percent, which was the largest ever annual increase in absolute term as well as the largest increase in electricity demand since the recovery from 2010 financial crisis. The record rise in electricity demand came after a slower year 2020, and as per the study, the industrial sector contributed the most to electricity demand growth, followed by the commercial, services, and the residential sector - in that order. Geographically, the global electricity demand growth in 2021 was concentrated in emerging and developing Asia led by China and India.

IEA’s report also shows how despite the worldwide hue and cry over rising carbon emissions, coal and other fossils made their way back into the energy mix. As per the estimates, coal made up for more than half the increase in global electricity demand. And even though renewable energy continued to grow, coal power generation reached all-time peak in 2021 growing by 9 percent – the fastest since 2011.

Rise in demand for fossil fuels and supply constraints were enough for how the energy prices responded. High energy prices resulted in higher wholesale electricity prices around the world. And with coal rising the most, global emissions jumped in 2021 as well; IEA report shows that after declining in 2019 and 2020, global electricity sector emissions grew around 7 percent - peaking in 2021.

However, the global energy watchdog foresees a slowdown in demand in the coming years. And even though coal made a comeback, it is forecasted that the renewables will dominate medium-term supply growth. And electricity emissions are expected to plateau too during 2022-2024. The outlook for 2022-2024 include record-breaking growth in renewables with Covid pandemic and high energy prices as bottlenecks to the growth forecast. At the same time, generation from fossil fuel is expected to stagnate over the next three years primarily due to slowing demand worldwide especially phasing out plans for coal power generation to deal with the climate consequence of the same.