The new coronavirus and climate change have many similarities. Both are global and highlight the dangers of ignoring experts and scientific data. They do not respect national borders and no one is immune from their impacts. Only joint actions will effectively control the pandemic or mitigate the scale of climate change.

The crisis caused by COVID-19 also taught us that early action is essential and that inaction is costly both in economic terms and in terms of human lives. In the same way, the later measures are taken to mitigate the growth of greenhouse gas emissions, the more difficult it will be to limit global warming and the greater its impact on the economy, as well as on people’s lives.

Due to the economic slowdown caused by COVID-19, we see a substantial reduction of greenhouse gas emissions related to the energy sector. The carbon dioxide (CO2) emissions of the electricity sector have fallen 23% in the first half of 2020 in the European Union according to EMBER, a climate think tank. Electricity generation from fossil fuels fell 18%. Two fronts squeezed fossil energy sources: the 7% drop in electricity demand and the 11% increase in renewable generation. With less demand and more supply from renewable sources, the more expensive fossil fuel plants were less utilised. Therefore, for the first time in European Union history, renewable electricity generation has exceeded that of fossil fuel.

If, on the one hand, the growth in electricity generation from renewable energy sources shows the importance of continuing to invest heavily in this alternative, on the other hand, the sharp drop in electricity demand was only possible due to a critical economic recession. The social costs of the recession show that this is not a solution to reduce emissions structurally. The path to achieving the Paris Agreement's objectives must pass through the decoupling between economic growth and increased greenhouse gas emissions.

The crucial moment for the energy transition

The future of energy consumption, generation matrix and emissions are still open and depends on the decisions we make to promote the return of growth. Governments around the world are designing massive stimulus packages to try to restart their economies after the pandemic has improved. These huge spending programs, given their size, are likely to define the infrastructure of countries for decades to come. The battle over how to spend recovery resources will define the post-pandemic world. Restoring the brown economy or investing in a low-carbon economy is a decision that will determine the path of emissions and our climate future.

While there is a risk that the economic recovery will take place on the same basis as in the past, the volume of resources to be contributed by states is an opportunity to restart growth in different ways and invest in a recovery that accelerates the energy transition. The clamour for a green stimulus is already spreading.

An Ipsos survey conducted in April in 14 countries reveals that 71% of adults globally agree that, in the long term, climate change is as severe a crisis as COVID-19 and 68% feel their government will be failing them if they don’t act on climate change now. Up to 65% globally support a green economic recovery from the crisis.

Therefore, a stimulus package must simultaneously focus on the short term, guarantee employment for millions of people, and in the long term, take advantage of the volume of resources to accelerate the energy transition.

The growth in electricity consumption that has been taking place through the electrification of transport and the generation of heat will be reinforced by the new trend in remote work. The increased dependence on electricity will have a significant impact on the very nature of the consumption of the primary fuel used for its generation, accelerating the need to replace fossil fuels with renewable sources. The adoption of renewable energy technologies creates job opportunities. Studies show that each $1 million shifted from brown to green energy will create a net increase of five jobs.

The great limitation for the growth of non-conventional renewable sources is no longer the price since they are cheaper than fossil fuels, but their intermittency. Increasing the flexibility of the electricity system through investments in transmission, storage (battery, green hydrogen and pumped-storage hydroelectricity) and responding to demand is the way to accommodate increasing amounts of renewable energy.

The transmission system increases the electrical system's flexibility by allowing intermittent renewable sources in different regions and countries to complement each other. The expansion of transmission networks is also essential for the connection of wind and solar farms, given that resources are often far from the consumption centre. Besides, strengthening the transmission system is crucial in regions subject to extreme weather events, such as Central America and the Caribbean.

The development of storage mechanisms has the potential to contribute to the integration of variable renewable energies without a significant increase in greenhouse gas emissions, which occurs in the use of thermal power plants. The storage systems can be charged in times of excessive renewable electrical generation, storing energy for use in periods of scarcity of renewable resources. The demand response is another source of flexibility in the energy system that increases the alignment between renewable energy generation and demand. For example, price stimuli can make the consumer reduce their demand when wind or solar energy generation is low and increase it in periods of abundance of these resources or lower load.

Grid digitalisation is essential to a good demand response plan. It also allows people to choose the services they need or to help them become active participants in the energy system with their own projects and resources. Moreover, digitalisation is essential to increase the productivity, security, accessibility and sustainability of energy systems. With regard to power generators, transmitters and distributors, digitalisation allows for monitoring the system, determining where problems exist and acquiring the services and solutions necessary to keep the system running, which is increasingly important as seen now in the case of the pandemic.

Depending on the choices countries make for the resumption of the economy, the post-pandemic period may mark a turning point in the pace of the energy transition.

Authors:

Mauricio T. Tolmasquim is a visiting researcher at the Inter-American Development Bank (IDB).
Ariel Yépez is the Energy Division Chief at the Inter-American Development Bank.