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When shit hits the fan

April 8, 2020 | Comments: 0Author:

Photo: Maja Pokrovac, private archive
When shit hits the fan

Author: Maja Pokrovac, Managing Director at Renewable Energy Sources of Croatia (RES Croatia)

Now it is clear to everyone – the world has literally and drastically changed overnight. A viral pandemic that has hit all of humanity has shown just how sensitive the global economy really is, and when the going gets tough, it becomes fragmented.

The current decline in oil prices and demand, largely caused by a significant decline in travel and economic activities due to the COVID-19 pandemic, combined with the Saudi and Russian oil price wars, has also reduced greenhouse gas emissions.

As numerous studies show it appears that the global economic crisis caused by coronavirus will decrease carbon dioxide emissions this year for the first time since the 2008 global economic crisis. One of many projections shows an overall annual decline in these emissions of 0.3 to 1.2 percent.

NASA satellite images show that the reduction of pollution in China is truly amazing – within four weeks, harmful emissions have dropped 25 percent! In a completely unexpected way, we were given the opportunity to see what in fact a clean energy future might look like.

However, to put it bluntly, this has not happened because of a well thought energy strategy, and the fall in emissions, when things return to “normal”, will not be sustainable in the long run. But this points to two other important things: the future of clean energy and the need for climate action.

The global pandemic with thousands of deaths, rising unemployment and decline in economic activity, which has led to a reduction in CO2 emissions in the first place, is the latest call to raise awareness of the scale and scope of the climate challenges ahead of us and the urgency of addressing them.

Reducing emissions this year could buy a little more time to work on climate changes. However – as the Atlantic Council think-tank warns – if the low fossil fuel prices and slowing economic growth stop the development and introduction of clean energy technologies and if policy makers do not take the advantage and use economic incentive plans to support the low carbon transition, satellite imagery of the pollution will quickly return to its former state. As it is already starting to happen in China…

Coronavirus has entered almost all sectors and supply chains, as well as the production of electricity. Imagine an apocalyptic scenario where, for example, Russian gas fields, Bosnian thermal power plants, or French nuclear power plants have to cease production because there are not enough people to safely run the facilities. If countries that own such facilities do not have enough energy for domestic consumption and export – which of these two will be hit first?

Can we expect that undisturbed market relations will continue to prevail under such conditions and that there will be no cancellation of the energy supply contracts? Or that there will be no significant price increase encouraged by higher import demands?

The pandemic has disrupted all energy supply chains, just as the global shift to clean energy has begun to intensify. Clean energy technologies that drive global low carbon targets have been slowly expanding their reach, developing supply chains that spread from China, across Europe, to the US.

In addition to that, current events have brought to light that our long-term national, security and climate interests on global scale are in conflict with over-dependence on one region for essential parts of clean energy production technology.

This is why some experts and analysts are pointing out that it is high time for policy makers and the private sector to begin forming measures that would bring balance and diversify supply, not forgetting in any way the current green agenda.

WindEurope emphasized the role of wind parks in securing a continuous supply of electricity, making it crucial for the industry to continue to produce equipment and components for these plants.

SolarPower Europe is committed to making the RES industry a place in the EU’s industrial strategy. Solar energy, as the cheapest, easily implemented technology can play an important role here.

All forms of renewable sources (solar, wind, biomass, biogas, geothermal) currently face many challenges in producing electricity: difficulties in transport, power plants maintenance, equipment and spare parts purchase as well as raw materials and significant restrictions in labour movement.

In order to preserve jobs, but also to ensure a continuous supply of electricity and to raise awareness of the strategic importance of production from our own renewable sources, this sector must not be forgotten. In the moments of some future crisis, it can be an important support to all of us!

The International Energy Agency (IEA) has warned that coronavirus will certainly weaken global investments in clean energy and efforts to reduce emissions. So they have urged governments not to lose sight of the climate challenges and clean energy solutions while devising stimulus packages to combat the economic damage inflicted by the coronavirus pandemic.

European scientists, industry and the non-governmental sector all believe that it is crucial to integrate the green transition into European aid package to combat the pandemic. The idea of ​​combining economic incentives with climate protection is not even new. Since the 2008 financial crisis, governments have directed significant funding to reduce greenhouse gas emissions and increase production of renewable energy.

It is highly likely that the RES sector will not be on the priority list at this time and that less resources will be invested in decarbonisation. This will affect the dynamics of the energy transition in the years ahead.

In one possible development there will be a reduction in the price of oil and gas and a further increase in greenhouse gas emissions. Oil companies committed to reducing their carbon footprint and diversifying their businesses by entering green technology projects could pull out of that.

In a different and opposite possible development, we could get volatile oil prices in the coming months, which in turn could lead to diversification of portfolios and increased investment in RES, as well as hydrogen technologies, electric vehicles and energy storage solutions. In that case, they might have a smaller but stable return, and low interest rates could certainly help in the realization of current and future RES projects and the strengthening of the RES market.

However, being realistic, the coronavirus is currently the cause of the greatest impasse in the energy transition. In addition, there is concern that the lack of solidarity among European countries in dealing with the crisis caused by the coronavirus pandemic will affect the ability to continue pursuing a common climate policy.

It is still too early to draw conclusions about the consequences of the pandemic. The current situation is unprecedented and future development of events varies. But current oil prices are a clear indication of how significant clean energy technologies are and why they need to improve their competitiveness quickly.

The need for clean domestic energy – local energy whose production does not depend on turbulent international relations is becoming strategically important.

Although, at this time of the coronavirus, energy transition and even climate change are not priorities. What is pretty clear at the moment is that the global health crisis has revealed weaknesses in international cooperation and energy system governance. What it will bring in the context of future geopolitical relations, however, is yet to be seen.

So let’s make our own checklist. What are the domestic energy capacities? How much natural RES potential have we not even started to use? What can we rely on in any case? How to keep the basic vital economic and social processes in the moment when shit hits the fan?

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