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.