By David Hodari

The coronavirus pandemic has thrown the growth of global energy consumption into reverse this year, but clean energy sources like solar and wind power are set to buck that trend, the International Energy Agency said in a report Tuesday.

While global energy demand is on course to shrink by 5% this year--measures aimed at slowing the spread of Covid-19 have grounded air travel, stymied economic growth and injected volatility into oil prices--renewable energy demand is set to rise by 1%, the agency said.

Underlying that modest increase is a more considerable 7% rise in the amount of renewable energy being used in electricity generation. The amount of green energy being auctioned globally in the period January-October, was 15% higher than the same period last year--a record increase.

That marked a change from the extraordinary report the IEA released at the height of the coronavirus's impact on the global economy in May--the renewable energy report is usually annual--when the organization said it expected a 13% decline in renewable capacity addition from its pace in 2019.

"Supply chain disruptions and construction delays slowed the progress of renewable energy projects in the first six months of 2020," the IEA said. "However, construction of plants and manufacturing activity ramped up again quickly, and logistical challenges have been mostly resolved with the easing of cross-border restrictions since mid-May."

The building of new renewable power capacity will allow that overall increase to happen, with the U.S. and China having driven a 4% increase in installed capacity this year. The size of the world's new renewable-energy generation is set to hit a record high of 200 gigawatts: approximately enough to power 200 million homes according to U.K. electricity regulator Ofgem. That means renewable power will be responsible for almost 90% of the total expansion in the world's overall power capacity this year.

Critics of the viability of renewable power have often noted the dependence of such investments on government support for their success, and the expiry in China of government-sanctioned subsidies for wind and solar power this year could cause the country's push for greener energy to backslide. The expiry of similar tax credits in the U.S. present a similar challenge and "renewables are resilient to the Covid-19 crisis but not to policy uncertainties," the Paris-based organization said.

Still, while some sectors of the global economy such as aviation and farming have struggled to cut down on greenhouse gas emissions, the report shows the relative success of the electricity-generation sector in doing so. In the power industry, total installed wind and solar photovoltaic capacity is on course to surpass natural gas in 2023 and coal in 2024, the IEA said.

That news comes during a period in which renewable-energy assets are beginning to rival and in some cases overtake fossil-fuel investments. Alternative energy investment funds have traded at multi-year highs in recent months, buoyed by factors such as the European Union's green-tinted economic recovery plan and the prospect of U.S. president-elect Joe Biden pursuing clean energy priorities when he arrives in office.

Meanwhile, Exxon Mobil, which just seven years ago was America's largest company by market capitalization, was removed from the Dow Jones Industrial Average in August and is on course to lose more than $1 billion this year, analysts say. NextEra Energy Inc., a utilities firm focused on renewables recently became the largest publicly traded energy company in the U.S., with market capitalization larger than that of Exxon.

Exxon's doubling down on oil-and-gas investments and the oil-demand destruction brought by the coronavirus have been among the factors behind the company's fall. Some of the giant's rivals--particularly ones in Europe--have ploughed funds into green technology and clean power.

That trend is expected to continue, the IEA said, with major oil-and-gas companies' investments in new renewable electricity capacity on course to increase tenfold through 2025.

The gulf in performance between clean energy and fossil-fuel assets "is thanks to expectations of healthy business growth and finances over the medium term," the IEA report said, pointing to a doubling in the share price of solar companies between December 2019 and last month.

Write to David Hodari at david.hodari@wsj.com

(END) Dow Jones Newswires

11-10-20 0114ET