What COVID-19 Means for Renewable Energy

What COVID-19 Means for Renewable Energy

THIS ARTICLE WAS WRITTEN BY Energy Watch | 23.04.20 | 8:20 PM

In a post-COVID-19 world, the remarkable growth that renewable energy has enjoyed over the past decade seems uncertain. The disruption of the global energy supply chain poses a serious question to regulators and utilities across the world – can we still balance the energy trilemma in delivering sustainable, secure and affordable electricity, or will times like this force us to sacrifice one element over the others?


Managing the Energy Trilemma

Globally, movement restrictions have slowed down economic activity, and energy consumption has fallen significantly. While many sectors are simply closing shop and waiting for the crisis to tide over, utilities are expected to step up and deliver, now more so than ever.  A stable and secure supply of electricity has never been more important, even as energy companies face declining revenue and operational challenges.

A stable and secure supply of electricity has never been more important

Hospitals, research labs, medical equipment manufacturers and a host of other essential sectors are racing against time to contain the virus, cure patients, develop a vaccine and protect frontliners. In the time of COVID-19, balancing the energy trilemma is no longer an option – a secure supply of electricity is paramount in ensuring more lives are not lost to the virus.

On top of this, with national lockdowns and social distancing being enforced by authorities, many in previously stable sectors have lost their jobs as economies come to a grinding halt. Salaried workers are being furloughed with little warning, leaving them in financially rocky situations, while day-workers who rely on a daily income are left completely unable to earn a living.

Ensuring electricity remains affordable now for the most vulnerable in society has become vital in ensuring lives are not lost simply because the poor are unable to pay their electricity bills. Thankfully, authorities and utilities all around the world have stepped up to offer discounts and bill delays for their communities, and many utilities have completely halted service disconnections during the crisis.

In Southeast Asia the shift caused by COVID-19 could mean a setback in renewable energy plans

To this end, the pursuit of renewable energy projects is temporarily deprioritised, as utilities look to the nearest, cheapest, and fastest fuel options available to power through the crisis. In Southeast Asia, where affordability is a key issue amongst emerging countries struggling to even meet 100% electrification rates, the shift caused by COVID-19 could mean a setback in renewable energy plans. The collapse in oil and gas prices, coupled with a decline in coal prices, will most likely spur nations to capitalise on the transitory price cuts. Such decisions would eventually delay the uptake of renewable energy for a few years.


How is Renewable Energy Doing Now?

The most significant impact the novel coronavirus has had on the renewable energy economy is on construction projects that have only recently been contracted, and those that were already in the middle of construction. Considering that 9 of the world’s top 10 solar cell makers are Chinese manufacturers, manufacturing shutdowns have created a global impact on renewable energy timelines.

The novel coronavirus has thrown a wrench into plans for the transition to clean energy

Indeed, 2020 was set to represent a pivotal year for renewable energy, with even the European Union designating 2020 as the year to agree to binding renewable energy targets. Now, there is no doubt that the novel coronavirus has thrown a wrench into plans for the transition to clean energy, significantly slowing down renewable energy penetration in developing nations. However, when essential sectors are relying on an uninterrupted supply of electricity, the sustainability of this supply must take a backseat.

However, in countries whose electricity generation systems have been already deeply integrated with renewable energy sources, there seems to be an uptick in the use of green energy. In Italy, the hardest hit nation in Europe, the first week of quarantine saw solar energy use increase by 24% while gas-fired production fell by 5%. A similar story can be seen in the United Kingdom, where the economic shutdown has reduced electricity demand by ~10%. This reduction in demand has enabled renewable energy to contribute a greater share of electricity production, reducing fossil fuels to as little as 15% of electricity generation.

Investing in renewable energy projects will allow nations to ensure energy stability in the future

These remarkable circumstances underline the importance of maintaining an energy mix that balances the benefits of renewable energy with the flexibility of gas-fired power to meet volatile consumer demand. More importantly, we see that markets with healthy levels of renewable energy penetration are not seeing their clean energy transition negatively impacted. On the contrary, already established and widely available renewable energy infrastructure has helped support these nations by providing a stable supply of clean energy throughout the COVID-19 crisis.


The Global Renewable Energy Transition

The relatively higher upfront costs of renewable energy installation compared to the short-term reduction in fossil fuel prices could undermine renewable energy investment decisions as governments seek to recover from the fallout of COVID-19. This is particularly true in markets where renewables have lower penetration, and thus higher capital costs. With IRENA estimating that a US$27 trillion cumulative investment will be required to meet the objectives of the Paris Climate Agreement, the economic impact of COVID-19 places a serious question mark over this journey.

On a positive note, there is also the possibility that governments will take this situation as a learning opportunity. Investing in long-term renewable energy projects will allow nations to ensure energy stability in the future, as well as detach themselves from non-renewable sources of energy – we are, after all, still staring down the barrel of climate change.



Investing in the Future

In the end, the path ahead for renewable energy investment is not without green shoots of hope. If there is anything the energy industry has learned from this crisis, it is that we need to invest in renewable energy infrastructure before being thrown into the next global crisis. Short-term worries surrounding the economic downturn will set governments looking for long-term solutions to protect their nations against future crises – renewable energy will need to be part of that solution. Ultimately, what widespread adoption of renewable energy requires most is political and social will. In some ways, the novel coronavirus COVID-19 may be the spark to ignite that fire.

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