Pandemic lowers energy demand. Best time for sustainable energy transition

A disaster is often a reality check which enables us to rebuild a system, make transformational changes and take alternate pathways. It prompts people to be resilient towards unforeseen changes. Disrupted and broken supply chains--which are often the outcomes of any disaster--makes us to adopt and chalk out more sustainable supply chains for the future. Options of doing so come almost every year in a country like Bangladesh which sits at the frontline of natural and climate change-induced disasters. But at a global scale, the opportunity to rebuild perhaps comes once in a generation. The untamed Covid-19 pandemic is allowing us to spearhead change across the globe. For instance, it has offered the opportunity for sustainable energy transformation.  

Covid-19 has had ripple effects throughout the energy value chain, including a dramatic dip in energy demand. The virus is still untamed with its second wave potentially having further knock-on effects on the global energy system. Surplus power capacity, as a result, would guide energy policymaking in different countries, including the ones that have plans to build a future energy system relying heavily on fossil fuels, particularly on dirty coal. Building on the negative experiences of surplus power capacity, countries are now focusing on forecasting future power demand trajectories more precisely to avoid economic losses.  

A recent report by IEA concludes that 90 percent of the added power generation capacity of 2020 would be from renewable energy sources. Photo: UN

While the demand for power generation is low and the chance of a dramatic rise in demand for power is unlikely very soon, governments, especially in the developing and least developed countries, will find room for manoeuvring the existing power plans with the rationality of slashing some of the new power plants that are in the pipeline. Some of these countries, strained on resources, are at times placed in difficult situations to balance between adding power generating capacity to keep pace with incremental demand and developing transmission and distribution infrastructures to deliver quality electricity to the consumers. The grim reality is even with surplus power capacity, people often are not supplied with uninterrupted and high-quality electricity. Since these countries would have more financial resources at disposal, due to the lower demand for investment in new power plants now and in near future, it is the time for their governments to ramp up efforts on the distribution and transmission. Moreover, accomplishing the target--laid out to ensure access to affordable, reliable, sustainable and modern electricity to all by 2030, under the Sustainable Development Goal (SDG) number seven-- would necessitate work on the ground to deliver quality electricity to all. Notably, quality electricity is more than merely installed generation capacity. The increased emphasis, therefore, should be on ensuring that the rural, poorer and the most vulnerable people have adequate access to quality electricity. 

Furthermore, the Covid-19 situation has forced businesses and people around the world to alter their modus operandi. Millions of people now depend on teleworking, video-conferencing, online shopping, etc. As long as Covid-19 is untamed, switching back to pre-corona modus operandi in full throttle would be challenging in many cases. This posits the need for ensuring the supply of quality electricity even at the remotest corner of each country.  

In the power system of a country, the reserve margin is an indispensable element to meet any sudden elevated demand for power or act as back-up in the event of sudden disruptions, be it due to technical glitches or natural/man-made disasters. And, for all practical purposes, the reserve margin is higher in countries that have large variable renewable power generation capacity connected to the national grid or that are net electricity exporters. However, some countries are now confronted with excess reserve margins but not necessarily due to high shares of variable renewable energy to grids or being a net electricity exporter. They may prudently consider the necessity for reserve margin management. It would, perhaps, be more logical for them to shut down some of the age-old and inefficient power plants now by gradually phasing them out. This is also the opportunity for the import-dependent countries to consider accessing renewable energy sources that could lessen their dependence on imported fossil fuels, at least partially. 

Another important aspect regarding surplus power generation capacity of different countries is the potential to advance national energy policy discussions based on the realities and opportunities that are available to them. National energy security should also be part of these discussions. The outcomes of such exercises could eventually lead to the closure of the old fossil-fuel based power plants and scrapping of the coal power plants that are in the pipeline. In all likelihood, such policy interventions would create the environment to promote the usage of renewable energy at a much higher rate across countries. 

A recent report by the International Energy Agency (IEA) concludes that 90 percent of the added power generation capacity of 2020 would be from renewable energy sources defying the challenges being posed by Covid-19. In fact, while fossil fuels have struggled globally, renewable energies have fared significantly better and showed greater resilience than what was thought before. The fundamentals behind the rise of renewables lie on economic calculus, i.e., falling prices have made renewables more competitive than fossil fuels. And needless to say, the strong political will of a considerable number of countries has been instrumental as always to smoothen renewable energy project development. 

In conclusion, the countries that are struggling to ensure quality electricity, rely on imported fossil fuels and currently have surplus power generation capacity may choose alternative energy pathways to transition towards sustainable energy. Before making headway, a neutral and evidence-based assessment could easily reveal the respective advantages of sustainable energy transition. While the coronavirus pandemic has shaped the circumstances to advance towards sustainable energy, it is still a matter of conscious choice by the countries and policymakers. One thing is for certain, as the cost of renewables further falls in the foreseeable future, the time for a bigger push towards sustainable energy transition is now. 

The author is a Humboldt Scholar, engineer and environmental economist. He is a graduate of the Dhaka School of Economics.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.