Across the world, lockdown measures to try to contain the spread of COVID-19 have led to economic contraction, causing a significant drop in power consumption, including electricity, gas, and oil. In the case of renewables, the impact of the pandemic is yet to be seen.
While the first effects of the drop can already be seen, long term implications are still being analyzed. Government agencies, non-profits, corporations; economists, and entrepreneurs are debating between a favorable scenario and a somber future for renewables after the pandemic.
🗣️ @IRENA's first Global Renewables Outlook shows decarbonising the energy system supports short-term recovery while creating climate-friendly, resilient and inclusive economies and societies 👉 https://t.co/MuE6ZXVSzZ #BuildBackBetter pic.twitter.com/M87rnBKZSd
— IRENA (@IRENA) May 17, 2020
Reduced power consumption is causing a number of results. Lower energy demand, if maintained, could put fossil fuel producers in a difficult economic position with limited production and shrinking revenues.
This situation could lead to the anticipated shutdown of some privately owned fossil fuel power plants, particularly the older units.
On the contrary, the pandemic has generated a relatively lower economic impact for renewable power operators. In many national networks, renewable feeders are sent first, which means they may continue to sell energy without obstacles.
As a result, many networks have seen levels of renewable penetration that were unimaginable a decade ago. This constitutes a test for the system and a vision for a high-kilowatt future.
Before and during the COVID-19 crisis, there was an oil price war. The convergence of low consumption and this trade dispute led crude prices to spiral down. They even, although temporarily, got to negative territory.
This significant price drop represents a potential threat to the progress of renewables. Cheaper crude could discourage investments in alternative sources.
Even so, the International Renewable Energy Agency remains optimistic, based on the fact that renewables are mainly focused on power generation. In this sector. Oil plays an insignificant role.
For instance, in Asia and the Pacific oil accounts for just 1.8% of power generation.
However, the story is quite different in the transport sector. Should they continue, low oil prices could discourage the use of electric vehicles and biofuels.
Governments could counteract this with subsidies for EVs, as part of an economic stimulus package. The surprising growth of urban delivery vehicles during the lockdown poses a great opportunity for sustainable energy.
With China 🇨🇳 accounting for 70% of PV module manufacturing, the country’s factory shutdowns in February & early March drastically lowered availability.
— IEA (@IEA) May 26, 2020
Another effect of the lockdown measures is the blockage of global supply chains. The situation is particularly critical for renewable technologies.
The top solar PV equipment suppliers in China, South Korea, and the United States have been very affected by COVID-19.
Therefore, 2020 could see a significant drop in renewable power additions, as a result of these disruptions of supply and limitations for key workers.
An important question to ask is how these changes in the power sector will affect those most vulnerable in the Asia-Pacific region.
The economic challenges derived from the pandemic will likely force countries in this region to focus on short-term solutions to promote the growth of their GDP, which could undermine the long-term sustainable goal.
As to the energy sector, the effects of the pandemic could decrease investment in renewable development and energy efficiency. This would be an obstacle to compliance with the Paris Agreement.
Most likely, the government’s stimulus packages will focus on businesses, employment, and economic growth. But this should not distract the attention from renewable development, nor risk the progress of the 2030 Agenda for Sustainable Development in the post-pandemic world.
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