Over the past few months, life as we know it has changed dramatically. The coronavirus pandemic has brought disruption and despair to millions, affecting lives and livelihoods across the globe. Entire industries have been upended by the unprecedented health crisis, raising the spectre of a global economic downturn on a scale unseen since the Great Depression. The pandemic is also altering the global energy landscape at a critical moment in time. In this blog, Energy Futures Lab researcher Alexander Brown examines how COVID-19 is impacting everything from electricity demand to the roll-out of clean energy.
Electricity demand is falling as workers stay at home
One of the most apparent effects of the coronavirus pandemic has been the large-scale shift in working patterns. Across Europe and beyond, millions of people are now working from home for the first time and many more who cannot do so have been furloughed or made redundant. The closure of workplaces, reduction in industrial and commercial activity and shift towards remote working are changing the profile of electricity demand. Although more electricity is now being consumed in homes, on the whole, demand in the UK is down by around 10% on normal levels, according to National Grid. That figure could fall even further if restrictions remain in place and industrial sites continue to operate at lower-than-expected output. For its Summer Outlook Report, National Grid modelled a range of possible scenarios, all of which show demand falling to between 96% and 80% of usual daytime levels this summer. Remote working has also led to a slightly later and less pronounced peak in morning demand owing to the fact that, with no commute or school run to do, people are waking up later than they normally would. These changes in the demand profile have contributed to a reduction in the carbon intensity of the UK grid. On the 6th April, 60% of the electricity used in the UK was generated by renewables for most of the day. This was the result of a 4GW reduction in demand coinciding with peak renewable production of 18GW, up 4GW on the previous year, according to Electric Insights data. What’s not clear is how electricity demand will change in the long-term because of the pandemic. It’s possible that we will see some of this shift towards remote-working becoming permanent, as companies adapt to the current situation and invest in remote-working technologies.
Travel restrictions are driving down oil consumption
Widespread restrictions on mobility have resulted in a sharp decline in both road and air travel. With far fewer people on the move, demand for petrol and diesel has decreased significantly, while the aviation industry has gone into freefall. The world’s largest airlines have slashed commercial flights and laid off tens of thousands of staff, and some, like EasyJet, have grounded their entire fleets. The International Air Transport Association forecasts a 48% fall in air traffic compared to 2019, a downturn it describes as ‘catastrophic’ for the industry. The resulting decline in jet fuel consumption has contributed to the collapse of oil prices. According to the International Energy Agency, demand for oil will fall to levels not seen since 1995 this month and a deal announced by Opec to cut oil production by 10% in May and June will not, the agency says, be enough to offset near-term demand losses. Whilst causing significant economic damage, the decline in transport and industrial activity has led to environmental benefits. Satellite data show significant reductions in nitrogen dioxide concentrations over both Europe and China coinciding with strict quarantine measures and analysis by Carbon Brief suggests CO2 emissions could fall by as much as 5.5% this year. These reductions are, however, likely to be temporary and there is a risk that emissions will rebound sharply once the recovery begins. Analysis by Lauri Myllyvirta shows that emissions are already returning to normal in China.
Renewable projects are facing delays
The coronavirus pandemic is affecting planned renewable energy projects across the world. China, where the outbreak originated, is the world’s largest producer of photovoltaic solar panels and a significant producer of components for wind turbines. Production delays at Chinese factories, though now beginning to ease, will have knock-on effects for projects under construction both within China and beyond, compounding delays caused by labour shortages and travel restrictions. In a report published at the end of March, the Global Wind Energy Council said that while 2020 was initially expected to be a record-breaking year for the industry, forecasts would ‘undoubtedly be impacted by the ongoing COVID-19 pandemic, due to disruptions to global supply chains and project execution’. Analysts at Wood Mackenzie, meanwhile, have cut their 2020 forecast for global PV installations by 18%. The threat of long-term global recession is another significant concern and there are fears that a downturn could negatively impact investment in clean energy for several years. There are signs, however, that momentum will not be lost entirely. This week, Anglo-Dutch oil and gas giant Shell signalled plans to increase investment in the renewables sector, having already pledged to move forward with a plan to construct the world’s largest offshore wind farm in the North Sea to produce green hydrogen. Ultimately, the long-term impacts on the uptake of renewables are likely to be highly variable and dependent on how governments respond to the economic downturn.
The transition to electric mobility is slowing
Cheap oil and a slump in consumer confidence look likely to reduce global demand for electric vehicles this year, temporarily slowing the inevitable demise of the internal combustion engine. Analysts at Wood Mackenzie predict a 43% year-on-year drop in global EV sales, pointing out a steep fall in demand in China – the world’s largest EV market – at the beginning of this year. Despite the uncertainty brought about by the pandemic, however, a change in the long-term trajectory of the automotive industry is highly improbable. Car manufacturers have invested heavily in EVs and are moving forward with plans to electrify their fleets and scrap more polluting models, motivated, at least in part, by new, tighter emissions regulations in both China and the European Union. Just this week, Renault announced plans to stop producing ICE-powered passenger cars in China to concentrate on EVs and light commercial vehicles. As LMC Automotive’s Al Bedwell notes, ‘the shift to electrification is baked into the future strategy, and indeed survival, of the European industry and no-one wants to get left behind’.
Calls for a ‘green recovery’ are growing
This crisis has come at an important juncture in the clean energy transition. A head of steam had been building behind efforts to address rising greenhouse gas emissions since the Intergovernmental Panel on Climate Change published its special report on 1.5C warming in 2018 and this year’s COP summit in Glasgow, now postponed until next spring, had been billed as a turning point in the delivery of the 2015 Paris Agreement. It is, of course, only right that the immediate priorities and energies of national governments be shifted entirely towards saving lives and safeguarding health systems. But, in the months ahead, as decisions are made to help rebuild economies, it is critical that we do not lose sight of the challenges posed by the climate crisis. The US has already begun to relax environmental regulations to aid its economic recovery and there are fears that China could do the same, investing in new coal plants. In Europe, calls are growing for a ‘green recovery’ and thirteen EU member states, including France and Germany, have joined a campaign to put the European Green Deal at the heart of the bloc’s recovery plan. Elsewhere, the International Energy Agency, through its Executive Director Dr Faith Birol, has called for the use of stimulus packages ‘to ensure that the essential task of building a secure and sustainable energy future doesn’t get lost amid the flurry of immediate priorities’. It’s a sentiment shared by IRENA Director General Francesco La Camera, who has called on governments to ‘ensure that public policies and investment decisions reflect the true potential for low-carbon economic development’.
The coronavirus pandemic has created new and unprecedented challenges for every sector of the economy and, as we’ve seen, is already altering how we use and source energy. Some of the changes we’ve witnessed so far will be temporary but in the months and years ahead, governments and industry will forge a new ‘normal’. Ultimately, the shape of the energy landscape of tomorrow will be decided in no small part by the global response to the crisis today.