Global electricity demand could drop by up to 3.5% this year compared with the previous year due to the financial crisis and economic downturn, the International Energy Agency said in a new report.
The contraction in world electricity demand, particularly in industrial sectors and in almost all countries, would be the first since the end of the second world war, the Paris-based watchdog for the world's major energy consuming nations said.
"Even during the first and second oil shocks and U.S. recession in the early 1980s, global electricity demand continued on its upward trend," the IEA said.
Power demand is expected to fall the most in Russia, by 8.8%, followed by 4.8% in the countries of the Organization of Economic Cooperation and Development and 2.9% in China. Only India is expected to continue to grow, but by only a tiny fraction of the previous year's rate.
The IEA report, a copy of which was reviewed by the Wall Street Journal, purports to be the first comprehensive assessment of the negative impact the economic downturn is having on oil drillers, power producers and other members of the energy industry - as well as global efforts to cut carbon emissions.
It will be presented to energy ministers from Group of Eight industrialized nations this weekend in Rome and to G-8 leaders at a July summit.
This drop in electricity demand will reduce the need for new capacity additions, while weaker power prices coupled with higher borrowing costs and falling venture capital and private equity investment could ultimately favor less capital intensive generation such as coal and gas over the more costly nuclear and renewables projects.
"If a recovery takes longer than expected, and fossil fuel prices remain at depressed levels relative to recent peaks, we would expect to see a shift to coal- and gas-fired plants in the longer term," the IEA said.