Access to electricity is so foundational to an economy that the World Bank notes that ‘unreliable electricity supply and high tariffs, in particular, are obstacles to entrepreneurial activity.’ The link between electrification and economic growth is particularly pronounced in rural areas, home to the majority of the 840 million people globally who still lack access to electricity.
In the aftermath of COVID-19, the electricity industry will play a particularly crucial role in rebuilding economies. For many countries faced with massive job cuts and stressed healthcare systems, a stable, secure, and affordable electricity supply could mean the difference between moving forward and falling behind. Here, we look at four crucial areas in which the energy industry can catalyse economic growth in a post-COVID-19 reality.
1. Opportunity in the New Digital Economy
Coronavirus COVID-19 has focused the spotlight on a fundamental element of modern society that goes hand-in-hand with electrification — internet connectivity. With many people transitioning into work-from-home lifestyles and turning to digital means of transacting, that link between connectivity, electrification, and opportunity has never been more apparent.
Electrification and digital transformation also can provide a dual catalyst to reinvigorate developing economies in the wake of COVID-19. The World Bank estimates that 60% of global GDP will be digitised by 2022. Without access to electricity, the true value of digital transformation is unlikely to be realised.
Some utilities are already pioneering an integrated approach to this digital-electrification journey. Malaysia’s Tenaga Nasional Berhad (TNB) entered the broadband market in 2019, announcing a partnership with communications service provider Maxis to provide enhanced internet speeds across the nation. The move will provide a leg-up for the nation’s fibre infrastructure as it prepares for 5G implementation.
2. Opportunities in Renewable Energy
Throughout the crisis, the pandemic has shed light on the inadequacies of economies, and the weaknesses in nation’s electricity supply chains. Over-reliance on imported fossil fuels could negatively impact electricity generation costs, while incomplete or pending renewable energy projects have taken a backseat as supply chains are interrupted.
In spite of this, renewable energy opportunities have emerged as an avenue for long-term growth. Even as utilities struggle to operate despite facing cuts in revenue, the industry must allocate strategic investments in renewable energy projects to prepare for future crises.
the industry must allocate strategic investments in renewable energy to prepare for future crises
Focus in this area can also spur the creation of new job opportunities and specialised, high-skill roles. New economic sectors can also blossom, given the appropriate support and direction. From wind to biomass, entire value chains can flourish to meet the research, production, transportation, and implementation of new renewable technologies. As one of the world’s leading photovoltaics equipment manufacturers, Malaysia itself is poised to capitalise on this area and fill the demand gap.
Regulators must view these opportunities with a long-term objective to enhance the sustainability, security, and affordability of a nation’s electricity supply. In many countries, governmental authorities determine an area’s renewable energy capacity and decide when to call for project tenders. Lack of planning or foresight may hinder development in this sector.
3. Energy Innovation Inspiring Growth
The impact of the pandemic on traditional industries also creates new opportunities to divest, pivot, and innovate. Energy efficiency is one prevalent theme that underscores innovation today. UK-based Carbon Trust estimates that SMEs could save up to 30% of their energy costs through a combination of behavioural change and new technologies. That has resulted in partnerships with utilities such as Scottish Power, working to enhance efficiency in more than 250,000 businesses it supplies.
Similar measures have been embraced by utilities such as Malaysia’s TNB, Singapore’s SP Group, and other utilities in Southeast Asia. The introduction of smart meters and other energy efficiency technology can help businesses monitor, track, and improve their energy consumption – significantly improving financial resilience. That’s a powerful opportunity in a region where SMEs account for up to 99% of all businesses.
Integrating new technologies will also be crucial to futureproof both utilities and customers. In Japan, electricity company TEPCO is exploring blockchain technology to assess how customers on renewable energy tariffs could use solar, batteries, and electric vehicles to trade energy via the grid. This new technology could provide the base for new ways of transacting and consuming energy – changing the world as we know it.
4. Mobilising the Future
Smart cities provide another example of how integrated technology can enable inclusive growth. United States utility Georgia Power offers one example in action, leveraging street lighting infrastructure to create connected smart infrastructure in Atlanta.
The data collected helps improve decision-making on issues such as road construction, street closures, traffic flow, and roadside dangers or accidents. These insights offer a chance to enhance transportation links for citizens – and importantly, should there be a new virus hotspot or emerging red area, such data can be utilised to determine the right approach towards government-mandated lockdowns.
Another promising area of innovation centres on mobility technologies. More than half of all passenger vehicle sales will be electric by 2040, Bloomberg New Energy Finance predicts. Furthermore, the total energy storage capacity of electric vehicles (EV) is expected to far exceed the total storage requirements of electricity grids over the coming decades. This trend could catalyse the move towards renewable energy adoption, as consumers look towards charging stations instead of petrol stations in the near future.
E-vehicle expansion can also ignite fresh collaboration between different economic sectors. Vehicle manufactures can find opportunity to partner with disruptive transport firms such as Uber and Grab, while working alongside utilities for e-charging facilities.
Malaysia has recognised the potential of this technology in its recently updated National Automotive Policy 2020 (NAP). The NAP sets out plans to establish the country as a regional hub for next generation vehicles; under the policy, the automotive industry is projected to contribute RM104 billion to the economy by 2030.
Success of the global response to COVID-19 will be measured in human cost
Meeting the EV-charging needs of a growing electric vehicle fleet, while also managing the intermittent and variable nature of renewable energy, will require advanced smart grid technology. These smart grids use data technologies to monitor and manage electricity supply across large areas, resulting in improved grid performance, infrastructure resilience, operator efficiency, and system security.
The adoption of smart grids also provides an opportunity to develop homegrown talent and technologies, which provide major export potential in software, manufacturing, and data analytics. Analysis projects that the smart grid market will almost triple in value to reach a global market value of US$169.18 billion by 2025. The Asia-Pacific region is expected to be at the forefront of that growth.
Delivering on a Promise of Growth
The immediate success of the global response to COVID-19 will undeniably be measured in human cost. Sparking the economic rebound to follow will have an equally profound impact on the lives and livelihoods of billions of global citizens. While governments will provide the driving force, industry will have an equally important part to play.