The International Energy Agency (IEA) this week at a Group of 8 (G8) Energy Ministers’ Meeting in Rome announced its projections that world energy demand would fall by 3.5% in 2009.  This marks the first annual drop in electricity consumption worldwide since 1945.  This includes an expected 2% drop in China, 10% in Russia, 5% among OECD (Organisation for Economic Co-operation and Development) countries, (such as the US and Japan), and slower growth of 1% in India.  These drops are primarily occurring in the commercial and industrial sectors, not the residential sectors.

Weak demand will be coupled with financing difficulties, as credit remains relatively tight.  The IEA estimates that investments in renewable energy could drop by as much as 38%, but could recover due to stimulus bills.  Other sectors are also feeling the pinch, with a 40% expected drop in the coal sector in 2009, compared to 2008.

We’ve been through a lot since the end of WWII, which makes it all the more interesting that a recession should mark the end of continued electricity growth.  The connectedness of our economies through trade and the ability of financial institutions to magnify and speed up events have clearly been factors in this trend.

These developments do not bode well for conventional fuel suppliers, who will have to tread through an era of low fuel prices when many were ready for a “permanently high price of fossil fuels” (remember that?).  While the downturn is still relatively mild now, utilities may also suffer if it continues over the long term.

Whether or not a mild drop in demand for electricity and funding will have such negative implications for the renewable energy market is not so clear-cut.  This recession may prove to be the first major stress test for the revamped renewable energy and electric car market. And that’s not necessarily a bad thing at all.

   Read the International Business Times Article