POST-COVID-19: A 'GOLDEN' OPPORTUNITY TO TRANSFORM THE ENERGY INDUSTRY AS WE KNOW IT?

By Mina Anderson, Emilia Cardente, and Hannah Steward

Edited by Ellie Bouton, Aleksandra Dragan, and Rebekah Kaufman

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As many countries worldwide have, or are currently preparing, for an easing of lockdown restrictions, the questions of the ways and lasting extent to which new behaviours will shape future consumption practices prevail. The energy industry, struck simultaneously by international travel restrictions, a surge in digitisation and teleconferencing, and an overall worldwide reduction in energy demand, is one such field deserved of exploration, with many predictions pointing towards a ‘new normal’ [1]. The pandemic recovery period is being described as a ‘golden’ opportunity for the sector’s structural transformation [2]. With fossil fuels having been most affected by reduced demand [3], there is increased optimism in its large-scale transition towards cleaner and more reliable renewable energy sources. Nonetheless, whilst ambiguity in actual future outcomes persists, it is believed that a post-COVID-19 world will be one of opportunities and challenges alike.

A catastrophic ‘peak’ in fossil fuel demand?

A forced change in human behaviours from a global lockdown, and subsequent decline in consumer demand for fossil fuels, currently presents itself in two such opposing ways. The positive climatic effects have already surfaced; the UK has, for example, seen temporary falls of up to 40% in both Carbon and Nitrogen Dioxide [4], drastically improving air quality. Oil and gas majors, from BP to Chevron, are becoming alert to the probability of lasting changes in consumer demand, evident in current efforts to restructure and adapt to a ‘low carbon’ economy [5]. Nonetheless, as with any market, decreased consumer demand leaves the industry vulnerable; oil wells are closing [6], investments are being lost [7], and global storage capacity is close to full [8], leading to unprecedented job loss. OGUK warns that approximately 30,000 direct and indirect jobs could be cut in the next twelve to eighteen months in the energy sector due to the pandemic [9]. Although a transition from fossil fuel dependence is deemed necessary, the industry’s complete collapse may necessitate lasting economic decline: detrimental both financially and socially. Rob Jackson, Chair of the Global Carbon Project, summarises this by stating, “I refuse to celebrate a drop-in emission driven by tens of millions of people losing their jobs” [10]. Whilst its potential current ‘collapse’ may provide stimulus for increased commitment to a more sustainable future of renewable energy, rigorous strategies must first be in place. The revival of current infrastructural supply chains for renewable alternatives, many of which have been paused by social distancing precautions [11], and the retraining of current industry workers in future energy technologies [12], may serve as those from which to begin.

Clean energy: the future?

Unlike fossil fuels, renewables have not faced a similar mass halt in demand; they are “the only energy sources expected to grow this year” [13]. This stark contrast is largely due to their primary provision of electricity, an area of the energy sector unaffected by both limited transport and material production. New wind and solar facilities [14] allow for increased energy production and, with their reaching of hourly usage highs across many western countries in early 2020 [15], they are expected to ‘dominate’ production in the coming years [16]. The cost of solar and wind powered electricity continues to fall, ‘significantly below those for gas and coal generation’ [17], making it economically viable for the future. Renewable electricity has proven resilient to lifestyle and economic changes during lockdown, though other renewable energy uses have experienced a ‘hit’ similar to that of fossil fuels; renewable electricity is expected to rise 5% globally in 2020, compared to renewable energy rising by only 1% [18].

Subtle challenges, however, remain for renewable energy, with the potential to hinder any such expected growth. Aforementioned limited production has suspended all wind and solar projects, potentially impacting expected finishing dates, altering the ability to receive tax credit and, therefore, lowering the appeal of investment. As certain countries, production lines [19], and transport begin to reopen and mimic pre-Covid ways, it is, nonetheless, hoped that these projects will resume and continue towards a trajectory of a more available, affordable, and increasingly efficient electricity supply: replacing global fossil fuel dependency [20].

As it stands, there are currently no definitive answers as to the ultimate future outcomes of the pandemic. Questions of how quickly a vaccination may be developed, the extent to which politicians will respond to ever-increasing pressures to create and maintain jobs by supporting renewables, and consumer willingness to return to traditional ways of living, all demonstrate this ongoing ambiguity. Whilst a transition away from fossil fuels may come at a cost, financially and socially, with appropriate strategies in place, it presents an opportunity for increased commitment to renewables and a more sustainable energy industry overall.

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References:

Cover image: © Richard Schultz / Corbis <https://www.smithsonianmag.com/innovation/we-dont-have-to-choose-between-fossil-fuels-and-green-energy-74723445/> [Accessed 02 August 2020]

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