In brief

In brief

  • Accenture explores whether the COVID-19 crisis will be remembered for accelerating energy transition and tackling climate change.
  • Short-term effects of the crisis like a hold on emission cutbacks, utilities living up to their critical role, and forced behaviors, may leave a mark.
  • The energy transition may be hampered where economic concerns are seen as a trade-off with climate. Slowing demand can also pose a challenge.
  • There are good reasons to be optimistic as COVID-19 may be a trigger to tackle climate change for businesses, individuals, and governments.

The year began on an upbeat note for the global effort to solve the climate change problem. Europe was presenting its Green Deal, energy-related greenhouse gas emissions were flattening, and Greta Thunberg was the latest TIME Magazine “Person of the Year.” Then, COVID-19 happened, and changed everything.

Energy transition players stand fast and behaviors adapt

Even as energy consumption drops and patterns morph, with less revenues and less sources of flexibility, utilities keep balancing the grid and providing reliable power, helped by solid contingency and continuity plans. Past investment in smart meters and other digitalized operations are proving useful, providing the backbone for operations continuity, while a shift to renewable energy is underscoring the reliability of those resources during stressful situations.

Utilities are also doing their part to ease customer hardships in this crisis, offering flexibility in payment collection and suspending disconnections among other voluntary initiatives. The outlook is more muted for distributed energy resources (DER) and energy services. At the same time, individuals and decision-makers are experimenting in new ways, with potentially lasting consequences.

Concerns are real for energy transition players

COVID-19 has temporarily reduced harmful carbon emissions from curtailed economic activity and lower power consumption. However, economic value creation, as measured by GDP, is strongly correlated to energy consumption. It is hard to see how the global economy could recover without a corresponding increase in emissions at the same pace—or worse, growing—unless there is a surge in energy efficiency. The economic stimulus packages that countries adopt will largely determine whether this crisis is a threat or an opportunity for energy transition.

Electricity from utility-scale renewable resources continues to be produced without any problem. Disruptions can still crop up over time, for example when critical parts need replacement. And new projects are likely to have a harder time being financed.

Overall, energy services and DER companies are more likely to suffer from the current difficulties, especially the smaller ones that cater to the needs of individuals and small businesses. Operations are currently disrupted in this labor-intensive business, while they face payment obligations from growth investments. In the longer term, the main question is how fast demand will be back to its pre-crisis level.

"It’s a fragile moment for sustainability. For example, will cities divest their discretionary investment from environment to health? Or will they commit to keep the pure air citizens breathed during the crisis, and increase their air quality targets? Nobody can tell yet."

— MELISSA STARK, Global Renewables Lead – Accenture Utilities

Can the positive effects outweigh the negative?

In the post-pandemic world, one thing that won’t disappear is the need to protect the world from climate change, a global threat that has more than one commonality with the pandemic. Although the current crisis is creating setbacks to energy transition, it could eventually pave the way for a huge opportunity to support and accelerate it. Indeed, some countries believe energy transition is highly compatible with stimulating the economy. Incentives to modernize the electric power grid infrastructure would be more than welcome.

On the DER and energy services side, these labor-intensive activities are perfect candidates for stimulus plans that aspire to create jobs and boost economies while keeping climate change in mind. And customers, citizens and employees have a chance to awaken to more interest, not less, for climate change after this crisis, despite the pressing economic concerns. That is, provided inequalities don’t increase as a result and make economic considerations the only valid ones for many.

"For many of our large industrial clients, sustainability has become an integral part of their strategy. Thus, the potential redefinition of priorities after COVID-19 raises some very difficult questions about their sustainability investments."

– BRUNO BERTHON, Global Lead – Accenture Strategy Utilities

What color will the new normal be?

A few years from now, when we look back at the history of energy transition in the rear-view mirror, what will we see? A boost enabled by public awakening and green stimulus plans, or a blow delivered by the unprecedented economic downturn? It is too early to say as there still are many moving parts in the current situation. While we know by now that the economic shock will be massive, spending and saving may both be good answers. As lock downs are lifted and the features of the new normal start to be better understood, the time will come for energy transition leaders to plan for what comes next and review their strategy in the light of the new environment, with its shades of green and black.

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