Power Up: Energy demand is recovering, but who’s winning?

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Energy is an essential piece of modern life and while energy demand fell in 2020 due to the impact of the COVID-19 pandemic, emerging markets and developing economies are expected to drive a 4.6 per cent increase in demand.

In its Global Energy Review 2021, the International Energy Agency noted that demand in emerging markets and developing economies is set to rise to 3.4 per cent above 2019 levels while energy use in advanced economies is on course to be 3% below pre-pandemic levels.

So just how do the different sources of energy shape up?

At first glance, it doesn’t look good for uranium, what with prices sliding for a third straight week and the IEA noting that power generation from nuclear energy is expected to be up just 2 per cent this year, half the 4 per cent decline in 2020.

Nuclear power also accounts for just over 4 per cent of global primary energy consumption in 2019.

Despite this, the outlook for the nuclear fuel to meet future energy demand is looking increasingly positive with several countries already looking to expand its use to help slash emissions.

Existing nuclear power capacity and advanced reactor technology is part of the US plan to slash its carbon dioxide emissions by 50 per cent while Russian President Vladimir Putin referred to low-carbon energy sources, including nuclear, as part of the international effort to address climate change.

China is also in on the game. Its recently completed 14th Five-Year Plan includes plans to increase nuclear power capacity to 70 gigawatt equivalent by the end of 2025 while the China Nuclear Energy Association expects the country will have 200GW of nuclear capacity by 2035.

Even Japan is looking at increasing its nuclear power generation capacity, with its 2018 Basic Energy Plan flagging that nuclear power could generate between 20 per cent to 22 per cent of its generation capacity by the end of the decade to meet energy demand.
 

Growing energy demand drives fossil fuel bonanza

Coal and gas are also expected to see gains this year with the IEA expecting recovering economic activity to reverse declines in 2020.

Demand for coal is likely see a 4.5 per cent increase, taking it above 2019 levels thanks to increasing use in Asia.

Meanwhile, gas is on track for the biggest rise of any fossil fuel relative to 2019 with energy demand expected to climb by 3.2 per cent to 2021 due to increased demand in Asia, the Middle East and Russia.

Higher carbon prices in Europe have also provided some support for gas over coal.

However, the sluggish aviation sector means that oil’s rebound will be sluggish compared to its compatriots with the IEA flagging that despite a 6 per cent increase over 2020 levels, demand will remain 3.2 per cent below 2019 levels.

And the winner is …
 

Renewable energy. Were you expecting something else?

The share of renewable energy in electricity generation is expected to increase to almost 30 per cent in 2021, its highest share since the beginning of the Industrial Revolution and up from less than 27 per cent in 2019.

According to the IEA, long-term contracts, priority access to the grid, and continuous installation of new plants underpinned renewables growth despite lower electricity demand, supply chain challenges, and construction delays in many parts of the world.

Renewable energy demand is responsible for wind taking the lead, with capacity expected to grow almost 17 per cent.

Here’s how a basket of ASX stocks with exposure to oil, gas, uranium and coal are performing>>>

Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop:

Small cap energy plays

Lion Energy (ASX:LIO) +61%

Green hydrogen is the in thing at the moment, so when Lion announced that it was entering the space, its shares rocketed.

The company will raise $2.8 million to explore opportunities in green hydrogen in Australia as well as on Seram Island Indonesia where it currently has oil interests.

Triangle Energy (ASX:TEG) +23%

After months of uncertainty relating to alternatives for the processing of crude oil from its Cliff Head oil field in Western Australia, Triangle has reached an agreement to store crude at BP’s Kwinana Facility.

It has also reached a non-binding agreement with BP Singapore for an offtake agreement for its product.

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