COVID-19 + Clean Energy: Powering our economic recovery
How can economies recover from the COVID-19 pandemic whilst also ensuring that they meet clean energy goals? Dave Turk, Acting Deputy Executive and Head of the Strategic Initiatives Office at the International Energy Agency (IEA), discusses the importance of including renewables in economic stimulus packages and why clean energy technologies are showing resilience in these unprecedented times.
In this first episode of our new series, Dave explores the impact COVID-19 has had on global energy consumption, with the IEA’s Global Energy Review 2020 finding that, despite a predicted 6% overall drop in global energy demand in 2020, renewable energy use will actually increase following the pandemic. He then discusses what learnings can be taken from the global response to the COVID-19 pandemic in order to transition faster together towards a clean energy future.
DAVE TURK Well, just as it’s impacting you in unprecedented ways, it’s certainly impacting me in my personal life and in my work life and I think it’s having that kind of unprecedented impact for people in societies around the world. On the professional front, what we’ve tried to do at the IEA is really push our analysts to really repurpose their analysis to try to bring out real-time information to help inform decision making. What’s the latest numbers we’re seeing in electricity, or in the oil markets, or in renewables?
What are the key challenges for all of those technologies? How can we help provide that in real-time? And really try to do that rigorous analysis. So, we’re focused on the same issues that we were before the COVID-19 economic challenges and health challenges, but we really ask ourselves the question on a daily basis, how is this going to be relevant for decision makers right now? How can this impact real world decision-making for the better right now? And it’s causing us to sharpen up our analysis to make it more real-time.
And then, of course, instead of meeting the emissions around the world, we’re doing everything by video conference, as everyone is as well, so it’s new modalities of working, which are challenging but it allows you to do these kinds of podcasts, or webinars, or other kinds of things that reach huge audiences around the world without everybody having to travel for a big conference. So, there’s certainly some opportunity to reach a broader audience as well.
DAVE TURK Happy to do so and the word that keeps coming up in all our reports, commentaries, and analyses, and the one that I find myself, I suspect, Mathias, maybe you as well and others of our listeners, the word I keep using is unprecedented. These really are unprecedented times in all sorts of ways and very much so in the energy markets, the energy fuels and other parts of the energy systems around the world. And what we’ve been trying to do at the IEA is really make sure that all the data, all the analysis that they’re putting together, is as relevant as it can be for the challenges that are facing decision-makers around the world.
So, part of that is putting together the latest real-time, as real-time as we possibly can, information on what’s actually happening out there in the real world in energy markets around the world. And the project you mentioned, the Global Energy Review that came out very recently, is an attempt to look at the first 100 days in 2000. What’s happening with energy markets in different countries and around the world? And what do those numbers look like under a set of reasonable assumptions, although it’s very difficult to know what’s going to happen next week, next month, given these dynamic times. But what could be the impact in 2020 in terms of somebody’s fuel, CO2 emissions, etc.? So, just a few headlines… Go ahead, Mathias.
DAVE TURK It’s incredibly dynamic times and likely to remain dynamic for some period of time going forward. And there’s a huge amount of variables there, certainly the health issues, the spread of COVID, the resurgence. Hopefully, not very many second spikes in countries, etc., as we learn more and medical science comes along, then ultimately, hopefully, as quickly as we can, having a vaccine as well. But it is dynamic. It has been dynamic. And I think it will be dynamic and unprecedented.
That said, certainly what we feel from the IEA side of things is our role is to try to even though it’s dynamic, even though it’s unprecedented, what are the latest numbers out there in the real world? And really push our experts to really give their judgement, their best sense of what’s likely to happen, what are the contingencies, etc.? So, in our Global Energy Review, what we found was on energy demand overall in quarter one, a 3.8% drop. And under a reasonable set of assumptions, that looks like it could be a 6% overall drop in energy demand globally for 2020.
Now, just to give you a sense of scale, that’s about seven times the amount of the drop in energy demand we saw at the last great recession in 2009. So, this is a big deal on energy demand. And, of course, the quarantine rules and economic slowdowns and shutdowns around the world is directly responsible for that. So, oil demand, we predict a 9% drop for 2020, coal demand, 8% drop, gas, down, nuclear down, a little bit less so. The one fuel that’s the most resilient and will actually see some increase, not as big of an increase as would have been the case, had we not had COVID, is renewables. Renewables is actually the most resilient fuel that we found when we actually looked at the numbers, with a slight uptick.
DAVE TURK It’s certainly good to look with specificity on what’s happening in the oil markets around the world. It’s something that we spend a lot of time on and have some of the best analysts, certainly that I’ve ever worked with, on these issues. In fact, over the next couple of days, we’ll be coming out with our next monthly oil report, so we’ll have the very latest numbers in there in the sense of what’s likely to come over the next few months and even beyond that as well.
And it has been incredible to see not only the drop in oil price, but the dynamic nature of where it goes even on a daily or hourly basis, up, down, etc. And we’ve seen some extraordinary efforts around the world to try to rationalise and try to bring some stability. So, one thing we spend a lot of time including, and especially our executive director, Dr Fatih Birol, was to set up an extraordinary meeting of the G20 energy ministers on very short notice, really with the initiative of the IEA, trying to bring together the key countries of the world, both on the producer side and the consumer side, and really try to have some meeting of the mind in order to try to bring some more stability into the oil markets and to try to have that discussion and common purpose.
So, it’s been dynamic and unprecedented in all sorts of ways, including the ways organisations and others, like the IEA, are trying to work to try to be helpful to the cause here. To your question on the interplay on the oil side and renewables, certainly, it’s a marketplace out there and our governments set the rules around the world. Some have prices on carbon, some don’t have prices on carbon or other kinds of means of greater stringency or less stringency. But it is a marketplace and certainly, the cost and relative cost of whether it’s oil, gas, renewables, or whatever fuels, nuclear, you’re looking at, is incredibly important in terms of where we expect to see increases going forward along those lines.
Two things I’d say, specifically on the renewables side, is renewables, certainly solar and wind, have seen such tremendous cost decreases over the last several years that renewables are much differently positioned for this recession than they were even a decade ago in 2008 and 2009. And so, the cost and price points are quite different, frankly, than they were not too many years ago. And then the other thing we’re seeing, which I think is quite interesting, it’s not only the relative price of different fuels, it’s how predictable those prices will be or how predictable or stable those sources of fuels are.
And certainly, renewables have shown themselves and proved themselves in a variety of contexts around the world, and even being drawn upon in greater numbers because of the dispatch rules, etc., in a variety of societies. So, renewables are doing their part, certainly to keep hospital lights on, keep us all teleworking, keep our kids tele schooling, at least when our kids are able to pay attention and tele school, which is a challenge, of course.
DAVE TURK It may be useful to think about this, there are three things going on simultaneously with regard to this question. Obviously, many more than three things, which is, by our real world, very dynamic and challenging to predict what’s going to happen. But you have the immediate health crisis facing countries and societies around the world and the imperative for governments to do the kinds of things that are necessary to protect their populations, avoid the spread, etc. Secondly, you have the economic and jobs issues that countries are facing around the world in terms of people being let go, in terms of the economic recession.
And absolutely, a political imperative in those countries and those political leaders accountable, in one way or another, whether in democracies or otherwise, to their populous to get their economies up and running again to provide jobs, to provide the kinds of employment means that are necessary in modern society. So, that’s the second kind of imperative. But you also have governments thinking about other key issues, including sustainability, including climate change, including air pollution reductions we’ve seen around the world as some of the economies have slowed down, remarkable improvements in air quality.
And hopefully, that is something that will resonate in those societies and those populations will want, in addition to climate reduction, but air pollution reductions as well. So, there’s certainly a third priority, when it comes to energy, about building towards the future, building towards the future energy sources, the sustainability, the security that governments will want to have and will want to have not only next year, two years, three years, four years, five years from now.
And with the kinds of funding through these stimulus packages, literally trillions of dollars, trillions of euros, name your currency around the world, that is a huge amount of money that could be with smart analysis, with politically real world rounded analysis, useful for the energy transition side of things. So, we’re spending a lot of time, at the IEA, we’ve got a special report coming out in the middle of June looking at those economic stimulus activities, which could have a big impact, in a positive sense, on the energy transition side of things.
Trying to quantify the number of jobs, if you do retrofits of this kind or that kind for residential or commercial. Or what kind of jobs are associated with different renewables projects or other kinds of clean energy technologies. So, we’re trying, at the IEA, to have rigorous analysis that helps inform those political decision makers as they try to deal with their health crisis, try to deal with their economic recovery, and all at the same time, try to build resilient, secure, affordable, and sustainable energy systems of the future.
DAVE TURK It is a remarkable drop, that 8% drop that we’re predicting under a reasonable set of assumptions for the entirety of 2020 would bring emissions down 2.6 gigatons, down to their level last seen ten years ago. So, that is a very significant drop in overall global emissions. It’s actually six times larger than the drop we saw in the 2009 great recession. So, a huge, huge drop. Now, this drop should not be, and our executive director has been very clear in the many times he’s spoken about this, this is coming with human tragedy, with the health tragedy, with people losing their jobs, with kids going hungry in some societies, other kinds of social costs at a huge, huge level.
So, that’s not how we want and need to have certainly sustained drops, sustained reductions on emissions. We really need to have a well thought through energy transition, a structural readjustment in terms of how energy is produced and consumed around the world to get us to those deep levels of reduction that science tells us we need to get to avoid the worst consequences of climate change. The kinds of goals that are embedded in the Paris Agreement, sustainable development goals, etc. And what we’ve seen in the past, unfortunately, and again, looking back to the great recession in 2008, 2009, is we did see a drop.
At that point it was the 0.4 gigatons or smaller, as I said, than the 2.6 gigatons currently, but emissions came roaring back. As the economy came roaring back, emissions came roaring back. And there were some stimulus efforts there to try to move along to clean energy transitions. Some efforts that really helped really boost the cost reductions that we’ve seen in solar, wind, and renewables, and now we’re benefitting from. So, there was some smart policy certainly made at that point. But overall, not enough to put emissions on a different trajectory. It really was, as you said, a little bit of a boop downward, but then they came roaring back.
So, that’s certainly the fundamental challenge or, at least, one of the fundamental challenges and opportunities with all this stimulus funding, with all of these efforts to try to be as smart, as targeted about those fundings, those efforts, in order to try to move our energy systems towards a more sustainable future going forward and to really put it in a different trajectory. That’s going to require a lot of work, a lot of analysis, certainly from organisations like IEA, a lot of political leadership, etc., along those lines. But there’s certainly some opportunity here as well.
DAVE TURK I think there are two things that re really quite interesting and we’re doing a lot of analysis this year. I think you hit the nail on the head and one of the most interesting areas of all this is the human behavioural changes. And how sticky those changes will be when we’re able to go back to the workplace or when we’re able to fly safely internationally, etc. Will people find that teleworking, or a certain percentage of people find that teleworking actually has a lot of benefits, so maybe some people switch to full telework.
Maybe some people decide, with their employers, that it’d be great to work from home two days a week and avoid the commute for those two days, especially if you have a longer commute and stuck in traffic or whatnot, along those lines. How many people flock back to the kind of international air travel that we saw previous to COVID-19? Are people a little bit more cautious? Are people looking to do vacations nearer to their home as opposed to flying around the world?
So, I think it’s going to be fascinating to see how sticky some of this behaviour is and that will have very big impacts on energy in many ways. And certainly, smart policy makers, mayors, other decision makers looking at that can take that into account and help channel some of those human behavioural aspects against trying to re-orientate different systems, whether it’s urban design or other kinds of policies that can be done to try to make some long lasting structural benefits for everybody.
The other thing that’s related to this that I think has been quite instructive and insightful is this crisis has really caused a lot of us and a lot of decision makers around the world, companies, governments, etc., to think outside the box. To think beyond their day-to-day. Maybe they are in the mentality of this kind of crisis, the scale of crisis, which causes such disruption and impact on so many daily lives around the world.
It opens up the aperture, removes the blinders, or allows people to think a little bit more creatively or think outside the box in terms of what is actually possible. What is actually possible from a human behavioural perspective, but also, what’s actually possible from a government perspective as well. And we’ll see how that plays out around countries around the world.
DAVE TURK Certainly, resiliency, more generally, I think, has been underscored in all of our systems, whether it’s health systems, educational systems, social support systems, etc. And certainly on the energy side, one area where we’re spending a lot of time and effort in putting in some analysis we’re actually undertaking right now that will be coming out over the next few months is on electricity. And we’ve seen electricity systems around the world, which are relied upon to power hospitals, to power clinics, to power all parts of the health infrastructure.
But also to power our computers to allow us to have this chance to do this podcast with you, Mathias, to allow our kids to do tele schooling, even if they can’t physically go into their schools. So, electricity has shown itself to be incredibly important and we are going through electrification and electricity increases in very significant ways around the world. The numbers are incredibly compelling in terms of how much electricity is becoming even more important in society. One data point for you from analysis we did last year looking at India.
When we looked at India, which already has a very sizeable electricity grid, and looked ahead 20 years, again, under a reasonable set of assumptions, we forecasted that they could have an additional electricity grid the size of Europe put on top of their already sizeable electricity grid in the Indian context. Obviously, India is a fast growing economy, large population, growing middle class, etc. But electricity and electrification, electric vehicles, other kinds of applications, all the things we plug into the wall, our computers, our iPhones, etc.
So, electricity has shown itself to be incredibly important, incredibly vital for modern societies, and we’re doing some analysis right now, looking at the resiliency of electricity, including and especially when it comes to cyber disruption, so certainly, cyber-attacks or other kinds of mischief that would be coming from the digitalisation side of things. And I know Mathias, looking at your bio, I think you spent quite a bit of time on some of these issues.
And then also climate resilience. How can our electricity systems and our energy systems, more generally, be resilient to the changing climate, the changing weather patterns around the world. So, I think resilience is something that this crisis is underscored as absolutely critical in many, many parts of society, and certainly, in energy overall, and especially on the electricity side of the energy equation.
DAVE TURK Well, this is where well-functioning governments and well-functioning regulators need to be thinking about all the risks facing their systems. And again, our analysis is trying to help inform decision making, especially by governments, but by companies and others as well. What we recommend, time and again, is you’ve got to build resilience in by design. So, you build it in square one, in terms of the technology you use, in terms of the human resources, in terms of the design. You just have to think about it at all stages of the equation.
Again, COVID-19, hopefully, is making decision makers, planners, aware that there are risks, there are a variety of risks, and it’s not impossible to have a global epidemic that shuts down significant parts of the global economy. You need to plan for that and you need to do the risk mitigation. And again, you need to plan for resiliency and by design, so you have those procedures in place, if a certain percentage of your workforce gets infected or if there’s a cyber-attack, or if there’s climate disruption to certain of your key assets.
So, again, that’s where rigorous analysis, learning from each other, seeing what some countries are doing and what might work in a different context, maybe with some additional tweaking or changes. So, that’s a lot of what we do at the IEA, trying to really share those best practices and trying to think ahead and think in rigorous, smart, and thoughtful ways.
DAVE TURK That’s absolutely right and each country around the world, of course, is situated very differently and is not only seeing the health impacts differently, the economic recession impacts differently, and the ability to have the kinds of stimulus packages and recovery efforts as well around the world. So, we deal with countries around the world or a global energy. As you can see, we spend a lot of time with major emerging economies, with India, with China, which is in its own category, Indonesia, South Africa.
We’re actually spending an increasing amount of time on Africa, including an African energy ministerial that we’ll have at the end of June, bringing African decision makers together. I think there’s a special set of challenges on the economic recovery in those countries and that certainly a lot of countries don’t have the ability to borrow, don’t have the ability to do huge stimulus packages on par with the means that they have not only to dig themselves out of the challenging recessions that they’re in, but also to provide that development, to provide that increasing middle class, etc., along those lines.
And there’s a constellation of other international actors and decision makers that will be very important here. So, it will be the IMF, the World Bank, regional development banks, bilateral donors, and others as well. And we’re certainly trying to partner with those organisations as well, so that we can have the kinds of robust economic recovery in countries around the world. And again, as we’ve talked about really trying to have that be done with an eye towards the global energy systems of the future, less polluting, less CO2 emissions, bringing energy access around the world, etc.
All the social goods that energy can provide in trying to reduce those social harms that sometimes come along with certain energy sources. So, there’s a huge opportunity, if we’re smart and we can work together across the world, to really have this economic recovery, but with a boost to sustainability around the world. It won’t just happen, it will require a lot of leadership and a lot of collaboration around the world.
DAVE TURK Certainly, a lot of different lessons that can be drawn out of this, as we talked about at the outset of this conversation, this unprecedented situation. I would maybe narrow down to three key lessons, at least I’m taking from it. One, and we’ve talked about this some, is really having decision makers, government decision makers, private sector decision makers, NGO decision makers, think outside the box. I think the longer we’re in our own respective jobs, there can sometimes be a sense of this is how it always works, this is how it always will work, and the possibility of big change is discounted or is just thought of as completely unlikely.
And I think that this kind of situation, hopefully, causes all of us to step back and think creatively, to think about big change, both big change that can happen in a positive sense, and certainly, to meet our energy transition goals, our CO2 reduction goals, we do need big structural change. The kind of change that won’t just happen automatically, but government leadership, private sector leadership will absolutely be necessary.
So, I’m hopefully, as a lesson learnt, we can think outside the box, we can get out of our day-to-day email inbox and really look at the different opportunities that are out there. And as you said, Mathias, one of those is the human behavioural aspect and how sticky some of that might be. So, that’s one key lesson learnt, at least I’m taking away. Another key one is the importance of real-time information and real-time data. And, as I said at the outset, with our Global Energy Review, really trying to push our analysts and experts to the maximum to provide and to work with their data sources to really provide a sense of what’s actually happening out in the real world.
If you want to make sound decisions, you’ve got to know what’s actually happening out there. What kind of electricity reductions are we seeing in different types of lockdown? What is happening in aviation? What is happening in road transport? What’s happening in all sorts of parts of the energy spectrum? So, I’m taking big lesson learnt as let’s try to have that real-time information and obviously, if you need to make estimates or do other kinds of ways to do that, that can help. But sometimes, timely good, solid information is much better than perfect information that’s two years old or three years old in terms of real world decision making out there.
And then the third thing, and I think we’re seeing this already, and hopefully, we can see this even more over the coming months, we’ve got a big clean energy transition summit that we’re hosting on the 9th July that’ll be in virtual form with key decision makers in the energy space from around the world, trying to learn from each other. Different companies are going through similar challenges, different challenges, we all have different circumstances.
But what we hope to do, certainly at the IEA, and I think this is a lesson learnt, we’re seeing this certainly in the health crisis, if country X is doing better in a health crisis what lessons learnt can we have there from a testing regime or from how they’re responding to the situation? Similarly, on the energy side and certainly on the energy transition side, I think there’s a lot of lessons learnt in real-time that can be gleaned, shared, tailored for different government contexts. We’ve spent an awful lot of time doing that at the IEA, and to me, that’s certainly a key lesson learnt from this whole terrible crisis in front of us.