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11 June 2020

Why clean energy should be at the heart of post-Covid-19 stimulus plans

Post-pandemic packages could provide the perfect opportunity to green up our energy systems for environmental and economic benefit.

By Philippa Nuttall

In June of 1993, Germany’s energy companies took out a series of newspaper adverts. Their message was a grim, possibly self-serving, prediction, that sun, wind and water power would only ever meet four per cent of the country’s needs. Now over half of Germany’s electricity comes from renewable sources, although there has been more scepticism along the way. 

“In 2002 I was told by two engineers that renewables could never provide more than 10 per cent  of electricity in Germany,” says Jan Rosenow, director of European programmes at the Regulatory Assistance Project, an independent organisation aimed at accelerating the clean energy transition. “In the first quarter of 2020 it was 51.9 per cent.”

The very notion of a renewables-dependent grid was considered by many engineers as “pipe dream”, says John Murton, the UK’s COP26 climate summit envoy. This week, Britain passed the landmark of burning no coal to generate power for a full two months. A decade ago, about 40 per cent of the country’s electricity came from coal. During lockdown, as much as 30 per cent of power has come from renewables.

In previous decades, there was also an idea that power grids could only handle relatively low amounts of energy from renewables. This was “just tacit knowledge that kept being perpetuated”, according to Hisham Zerriffi, Associate Professor at the University of British Columbia, Canada.“I am confident, based on modelling work, that we can reach very high levels of renewable energy generation at a reasonable cost.”

As the received wisdom of previous decades is dismantled, it is essential for policy makers to work with the energy industry to tackle issues of sustainability. The Covid-19 pandemic, and the economic rebuilding that must follow, could provide the needed push. 

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Brian Vad Mathiesen, professor of energy planning at Aalborg University, Denmark, notes that many countries are moving in the right direction, but to build on this progress, it is “pivotal to use the corona crisis to restart our economies in a much more sustainable way. We have 95 per cent of the technologies. A few need scaling up, but most are just waiting for the right policies so they can be taken down from the shelf and employed.”

“There is now a unique opportunity to direct investments towards a cleaner, more flexible and more efficient power system,” says Rosenow. It would be prudent to make short-term choices align with long-term objectives, including international and domestic carbon reduction targets, agrees Zerriffi.

While lockdown measures aimed at stopping the spread of coronavirus may lead to a 4-7 per cent drop in global emissions this year, the World Meteorological Organization, a UN body, is clear this does not mean atmospheric levels of carbon dioxide will decrease. Rather they will just increase a little less. 

Emissions rose by 6 per cent following the 2008 financial crisis, and would need to fall by around 7.6 per cent every year this decade to keep warming to less than 1.5C above pre-industrial temperatures. Policymakers agreed in the Paris Climate Agreement to “pursue efforts” to reach this target.

Betting on renewables makes economic, as well as environmental, sense. “Clean energy investments deliver about three times more jobs than investments in fossil fuel infrastructure,” says Rosenow. 

Research led by Oxford University and economists Nicholas Stern and Joseph Stiglitz shows green projects create more jobs, deliver higher short-term returns and lead to increased long-term cost savings compared to traditional fiscal stimulus. “Green fiscal recovery packages can act to decouple economic growth from greenhouse gas emissions and reduce existing welfare inequalities that will be exacerbated by the pandemic in the short-term and climate change in the long-term,” says the study published in May 2020. 

“The move to more local, clean energy production, massive renovation of buildings to make them more energy efficient and the creation of renewable district energy systems will create jobs,” says Vad Mathiesen. Rockwool, a Danish insulation company, says 20,000 local jobs can be secured in the short-term for every €1 billion invested in house renovation. The deep renovation of energy-leaky buildings also cuts consumer bills, reduces emissions and has positive health impacts. 

A renewables-led recovery would create over 100,000 direct jobs and future-proof Australia’s economy, says a report published this week by consultants EY. It estimates that converting the country’s manufacturing industries to renewable power sources with $520 million of government investment would reduce energy bills, boost manufacturing efficiency and create 22,000 new jobs. Similarly, impressive figures are projected for investments in the battery, solar, electric bus and renewable hydrogen sectors. 

Europe claims to be leading the way with green stimulus plans with the European Commission unveiling a €750 billion package to tackle the economic downturn and fulfil the EU’s pledge to achieve net zero carbon emissions by 2050. At a national level, Germany has come out in front with a package that includes €50 billion for investments in fields such as future mobility and hydrogen technologies.

Gerard Wynn, a UK-based energy finance consultant, warns all countries against squandering the opportunity wrought by the destruction of the pandemic by investing in projects and technologies that will quickly become obsolete. “Policymakers need to understand the balance of jobs and the risk of stranded assets,” he says. 

The think-tank Carbon Tracker believes the Covid-19 crisis will hasten the demise of the fossil fuel industry. It warns that falling demand and rising investment risk could slash the value of oil, gas and coal reserves by nearly two thirds, sending shock waves through the global economy

The fall out from the pandemic will require careful handling and longterm planning. Clean and renewable energy can provide both hope and opportunity. “Policymakers need to see beyond the lobbying of powerful energy incumbents,” says Wynn.

Philippa Nuttall Jones is the editor-in-chief of Energy at NS Media