The pandemic’s effects on energy transition
The pandemic which has devastated the world during the last two years led to an unprecedented global crisis, with economic activities slowing down and flows of trade, transport and people falling sharply. According to the figures compiled by the International Energy Agency (IEA), countries which went into lockdown have seen a 25% decrease in demand for energy, while countries practising partial social distancing saw their energy consumption fall by around 18%. But it’s not all negative: forecasts indicate an 8% cut in global CO2 emissions.
But despite all expectations that the post-pandemic recovery would be based on accelerating the energy transition at a global level, this “historic opportunity was lost”, This was the conclusion of the REN21 annual report released this January. The document warns that the transition to global clean energy is not happening and that it is therefore unlikely that the world will be able to meet the climate targets for the decade. “Despite evidence that renewables are the most affordable energy source to both improve resilience and support decarbonisation, governments across the world continue to resort to fossil fuel subsidies to keep their energy bills under control. This growing gap between countries’ ambition and action on the ground is alarming and sends a clear warning that the global energy transition is not happening,” says Rana Adib in the Renewables 2022 Global Status Report (GSR 2022), which is now in its 17th edition.
Investment in renewables will be crucial
The Associação de Reguladores de Energia dos Países de Língua Oficial Portuguesa (RELOP) [Association of Portuguese Speaking Energy Regulatory Entities] published a report which examines the repercussions of the Covid-19 pandemic on the regulation of the energy sector, throughout 2020, encompassing the measures taken by the Entidade Reguladora dos Serviços Energéticos – ERSE [Energy Services Regulatory Authority].
The report explains that in the energy sector, economic recovery will have to involve an equilibrium between worldwide economic growth, taking into account its specific regional characteristics and the creation of an energy system which is sustainable in the long term.
“At the same time, investment in renewables will be crucial to decarbonise the sector and to reduce carbon reliance. Reduced consumption and prices affected the electricity, gas and fuel sectors. In line with international energy markets and the almost total grounding of the aviation sector resulting from cross-border travel restrictions, this fall was more significant in the fuel sector than in the gas and electricity sectors.”
The report estimates that natural gas, as a transitional energy supply during the recovery period, will re-gain its ground quicker than other fuels such as petrol. “The demand for natural gas is likely to increase, particularly in Europe where liquefied natural gas (LNG) accounts for a more substantial share of the energy mix.”
Transition to clean energies is vital
Expounding that “energy regulation contributes greatly towards the economic and technical resilience of the sector,” the report goes on to say that the regulators decided to prioritise mitigating risks to the consumer, and simultaneously sought to maintain the sector’s economic and financial equilibrium. “It must be pointed out that the regulators made vital contributions to a transparent analysis and monitoring of the market and of the sector, enabling the implementation of policies based on reliable and robust statistical data. Because of its vital nature in the response to the crisis, regulation may play a more active role in the process of economic recovery and energy transition.”
Therefore, with the emergency period over, “it falls to the regulators to assess the advantages and disadvantages of returning to a pre-COVID regulatory benchmark or creating a new framework which incorporates the best practices and lessons learnt from the regulatory response during the pandemic.”
According to the European Council, energy production and consumption currently account for 75 % of EU greenhouse gas emissions, and so switching to clean energy is a precondition for putting the EU on the path to climate neutrality by 2050 and a great opportunity to stimulate and support the recovery of the EU economy after the COVID-19 pandemic.