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Staying on Course: Renewable Energy in the Time of COVID-19

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Francesco La Camera, IRENA Director-General, image: IRENA

Statement by Francesco La Camera, IRENA Director-General 

In a short few weeks, much of the world has been shut down due to the novel coronavirus, COVID-19, which has crossed borders and oceans, rapidly devastating communities and livelihoods.

Decisions being taken now to address the social and economic impacts of the crisis come amid profound uncertainty about both the course of the pandemic and its long-term ramifications for societies across the world. The immediate priority remains to save as many lives as possible, bring the health emergency under control and alleviate hardship. At the same time, governments are embarking on the monumental task of devising stimulus and recovery packages. These are at a scale to shape societies and economies for years to come.

This response must align with medium- and long-term priorities. The goals set out in the United Nations 2030 Agenda and the Paris Agreement can serve as a compass to stay on course during this disorienting period. They can help to ensure that the short-term solutions adopted in the face of COVID-19 are in line with medium- and long-term development and climate objectives.

Stimulus and recovery packages can also accelerate the shift to sustainable, decarbonised economies and resilient inclusive societies. A coherent design approach is needed to secure political buy-in, business support and social acceptance. As the current crisis makes clear, we can no longer afford to make policy decisions and investments in isolation amid elaborately intertwined social, economic and environmental challenges.

The fundamentally economic, more than financial, nature of this crisis calls for a major state role in the response. This involves defining the strategies and initiating direct interventions for the way out. Expansionary budget policies may be envisaged to support this effort.

Stimulus and recovery measures in response to the pandemic must foster economic development and job creation, promote social equity and welfare, and put the world on a climate-safe path. By making the energy transition an integral part of the wider recovery, governments can achieve a step change in the pursuit of a healthy, inclusive, prosperous, just and resilient future.

Energy transitions are already underway in many countries. These transitions have become increasingly affordable because of forward-looking policy frameworks, ongoing innovations and falling technology costs for renewables. Solar photovoltaic (PV) and wind power have become the cheapest sources of electricity in many markets, with other renewable power sources poised to reach cost parity within a few years. In the power sector, renewables have dominated new capacity additions and increasingly outpaced fossil fuels for the past seven years. Last year alone, renewables accounted for nearly three quarters of global power capacity additions.

The economic fallout from the pandemic is far-reaching, with an adverse impact on many sectors including renewables. For many reasons, however, the impact may be different than in other economic sectors. Governments can turn to a renewables-based energy transition to bring a range of solutions at this difficult moment. Many renewable technologies can be ramped up relatively quickly, helping to revive industries and create new jobs.

Decentralised solutions tend to be comparatively labour-intensive. Adopting renewables can therefore create employment and boost local income in both developed and developing energy markets. Employment in the sector, which reached 11 million jobs worldwide in 2018, could quadruple by 2050, while jobs in energy efficiency and system flexibility could grow by another 40 million.

Decentralised technologies also allow for greater involvement by citizens and communities in energy decisions, with transformative social implications. Importantly, they offer a proven approach for remote health care in energy-poor communities and add a key element to the crisis response toolkit.

In the creation of future infrastructure, energy solutions aimed at scaling up renewables provide a safe and visionary strategic investment choice. Recovery measures could help to install flexible power grids, efficiency solutions, electric vehicle (EV) charging systems, energy storage, interconnected hydropower, green hydrogen and multiple other clean energy technologies. With the need for energy decarbonisation unchanged, such investments safeguard against short-sighted decisions and increased accumulation of stranded assets.

The latest oil price developments and the heightened unpredictability of returns on hydrocarbon investments make the business case for renewables even stronger. Current market dynamics could further weaken the viability of unconventional oil and gas resources and long-term contracts. The moment has come to reduce or redirect fossil-fuel subsidies towards clean energy without added social disruption.

Research and innovation are vital to keep improving the technologies and reduce the costs for sustainable energy. This is especially true in end-use sectors like transport, heating and cooling, as well as for enabling technologies such as energy storage and green hydrogen. Governments must embrace these forward-looking options to ensure that public policies and investment decisions reflect the true potential for low-carbon economic development.

These should be major considerations as policy makers put together recovery measures. A purely market-driven approach will not be adequate, either to respond to the immediate crisis or to mobilise longer-term investments. Governments will have to consider innovative approaches to secure financing at the required scale and speed. Clear long-term objectives, combined with targeted public investment and appropriate market incentives, will also enable the private sector to act swiftly and confidently.

While the current crisis has undoubtedly underlined global interconnections and strengthened the vision of a more resilient society at national and regional levels, it has also highlighted the vast differences in countries’ circumstances and capacities. International co-operation is needed to tackle deeply embedded shortfalls and vulnerabilities, and crisis responses must reflect global co-dependency. Investments must be directed everywhere they are needed, including to the most vulnerable countries and communities.

This year was meant to be a turning point for climate and sustainable development, with 2020 marking the start of the decade of action. The unexpected pandemic, with its devastating consequences for communities and economies is upending plans, interrupting trends and testing assumptions. We are yet to see the contours of the post-COVID world.

The mounting loss of life is devastating, and the strain on communities and economies will require thoughtful and far-reaching strategies. A wider perspective is needed, viewing energy, society, economy and the environment as parts of a unique, holistic system.

The response must provide more than just a bail-out for existing socio-economic structures. Now, more than ever, public policies and investment decisions must align with the vision of a sustainable and just future. Such undertakings are certainly ambitious. But they are entirely achievable with a collective, co-ordinated response.

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Surging electricity demand is putting power systems under strain around the world

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Global electricity demand surged in 2021, creating strains in major markets, pushing prices to unprecedented levels and driving the power sector’s emissions to a record high. Electricity is central to modern life and clean electricity is pivotal to energy transitions, but in the absence of faster structural change in the sector, rising demand over the next three years could result in additional market volatility and continued high emissions, according an IEA report released today.

Driven by the rapid economic rebound, and more extreme weather conditions than in 2020, including a colder than average winter, last year’s 6% rise in global electricity demand was the largest in percentage terms since 2010 when the world was recovering from the global financial crisis. In absolute terms, last year’s increase of over 1 500 terawatt-hours was the largest ever, according to the January 2022 edition of the IEA’s semi-annual Electricity Market Report.

The steep increase in demand outstripped the ability of sources of electricity supply to keep pace in some major markets, with shortages of natural gas and coal leading to volatile prices, demand destruction and negative effects on power generators, retailers and end users, notably in China, Europe and India. Around half of last year’s global growth in electricity demand took place in China, where demand grew by an estimated 10%. China and India suffered from power cuts at certain points in the second half of the year because of coal shortages.

“Sharp spikes in electricity prices in recent times have been causing hardship for many households and businesses around the world and risk becoming a driver of social and political tensions,” said IEA Executive Director Fatih Birol. “Policy makers should be taking action now to soften the impacts on the most vulnerable and to address the underlying causes. Higher investment in low-carbon energy technologies including renewables, energy efficiency and nuclear power – alongside an expansion of robust and smart electricity grids – can help us get out of today’s difficulties.”

The IEA’s price index for major wholesale electricity markets almost doubled compared with 2020 and was up 64% from the 2016-2020 average. In Europe, average wholesale electricity prices in the fourth quarter of 2021 were more than four times their 2015-2020 average.  Besides Europe, there were also sharp price increases in Japan and India, while they were more moderate in the United States where gas supplies were less perturbed.

Electricity produced from renewable sources grew by 6% in 2021, but it was not enough to keep up with galloping demand. Coal-fired generation grew by 9%, serving more than half of the increase in demand and reaching a new all-time peak as high natural gas prices led to gas-to-coal switching. Gas-fired generation grew by 2%, while nuclear increased by 3.5%, almost reaching its 2019 levels. In total, carbon dioxide (CO2) emissions from power generation rose by 7%, also reaching a record high, after having declined the two previous years.

“Emissions from electricity need to decline by 55% by 2030 to meet our Net Zero Emissions by 2050 Scenario, but in the absence of major policy action from governments, those emissions are set to remain around the same level for the next three years,” said Dr Birol. “Not only does this highlight how far off track we currently are from a pathway to net zero emissions by 2050, but it also underscores the massive changes needed for the electricity sector to fulfil its critical role in decarbonising the broader energy system.”

For 2022-2024, the report anticipates electricity demand growing 2.7% a year on average, although the Covid-19 pandemic and high energy prices bring some uncertainty to this outlook. Renewables are set to grow by 8% per year on average, serving more than 90% of net demand growth during this period. We expect nuclear-based generation to grow by 1% annually during the same period.

As a consequence of slowing electricity demand growth and significant renewables additions, fossil fuel-based generation is expected to stagnate in the coming years, with coal-fired generation falling slightly as phase-outs and declining competitiveness in the United States and Europe are balanced by growth in markets like China and India. Gas-fired generation is seen growing by around 1% a year.

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Canada’s bold policies can underpin a successful energy transition

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Canada has embarked on an ambitious transformation of its energy system, and clear policy signals will be important to expand energy sector investments in clean and sustainable energy sources, according to a policy review by the International Energy Agency.

Since the IEA’s last in-depth review in 2015, Canada has made a series of international and domestic climate change commitments, notably setting a target to cut greenhouse gas emissions by 40-45% from 2005 levels by 2030 and a commitment to reach net zero emissions by 2050.

To support those climate and energy targets, governments in Canada have in recent years worked on a number of policy measures, including an ambitious carbon-pricing system, a clean fuels standard, a commitment to phase out unabated coal-fired electricity by 2030, nuclear plant extensions, methane regulations in the oil and gas sector, energy efficiency programmes and measures to decarbonise the transport sector.

“Canada has shown impressive leadership, both at home and abroad, on clean and equitable energy transitions,” said IEA Executive Director Fatih Birol, who is launching the report today with Jonathan Wilkinson, Canada’s Minister of Natural Resources. “Canada’s wealth of clean electricity and its innovative spirit can help drive a secure and affordable transformation of its energy system and help realise its ambitious goals. Equally important, Canada’s efforts to reduce emissions – of both carbon dioxide and methane – from its oil and gas production can help ensure its continued place as a reliable supplier of energy to the world.”

Canada’s profile as a major producer, consumer and exporter of energy presents both challenges and opportunities for reaching the country’s enhanced targets. Energy makes up 10% of gross domestic product and is a major source of capital investment, export revenue and jobs. Moreover, Canada’s highly decentralised system of government means that close coordination between federal, provincial and territorial governments is essential for a successful energy transition.

“This report acknowledges Canada’s ambitious efforts and historic investments to develop pathways to achieve net-zero emissions by 2050 and ensure a transition that aligns with our shared objective of limiting global warming to 1.5 degrees Celsius, “ said Minister Wilkinson. “These are pathways that make the most sense for our people, our economy and our country and will also yield technology, products and know-how that can be exported and applied around the world.”                              

The IEA finds that emissions intensity from Canada’s oil and gas production has declined in recent years, but the sector remains a major source of greenhouse gases, accounting for about a quarter of the country’s GHG emissions. Along with strong action to curb methane emissions, improving the rate of energy technology innovation will be essential for the deep decarbonisation that is needed in oil and gas production, as well as in the transport and industry sectors. Canada is actively advancing innovation in a number of key fields, including carbon capture, utilisation and storage; clean hydrogen; and small modular nuclear reactors, with a view to serving as a supplier of energy and climate solutions to the world. The IEA notes that further federal support for research, development and demonstration would help accelerate progress towards these goals.

The IEA is also recommending that Canada’s federal government promote a comprehensive energy efficiency strategy in consultation with provinces and territories that sets clear targets for energy efficiency in the buildings, industry and transport sectors

The IEA report highlights that Canada’s electricity supply is among the cleanest in the world, with over 80% of supply coming from non-emitting sources, thanks to the dominance of hydro and the important role of nuclear. To further support the expansion of clean power and electrification, the report encourages increased interconnections among provinces and territories to ensure balanced decarbonisation progress across the country.

The IEA commends Canada on its efforts to advance a people-centred approach to its clean energy transition, including initiatives to promote diversity and inclusion in clean energy sectors; programmes to increase access to clean energy in northern, remote and Indigenous communities; and actions to enable just transitions for coal workers and their communities.

“Canada has laid out a comprehensive set of policy measures and investments across sectors to meet its climate targets, including a strong clean energy component to its Covid-19 economic recovery efforts,” said Dr Birol. “I hope this report will help Canada navigate its path toward economy-wide emissions reductions and a net zero future.” 

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Iran to add 10GW to renewable energy capacity

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Iranian Energy Ministry and some of the country’s private contractors signed memorandums of understanding (MOU) on Sunday for cooperation in the construction of renewable power plants to generate 10,000 megawatts (10 gigawatts) of electricity across the country.

The signing ceremony was attended by senior energy officials including Energy Minister Ali-Akbar Mehrabian and Head of Renewable Energy and Energy Efficiency Organization (SATBA) Mahmoud Kamani, IRIB reported.

The MOUs were signed following the Energy Ministry’s public call for the contribution of private companies in a project for developing renewable power plants in the country.

According to SATBA, after the ministry’s public call, so far 153 requests for the generation of 90,000 megawatts (MW) have been submitted to the ministry by private companies.

Speaking in the signing ceremony, Energy Minister Ali-Akbar Mehrabian said: “When the private sector invests in this industry [the renewables], the government is obliged to return the equivalent of the investment plus its interests to the investor.”

Mehrabian noted that the government has allocated over 30 trillion rials (about $101 million) for the development of renewables in the budget bill for the next Iranian calendar year (begins on March 21), saying that it is an unprecedented budget in this area.

Further in the ceremony, SATBA Head Kamani mentioned some of the Energy Ministry’s plans for the development of the country’s renewable energy industry, saying: “Export of renewable energy is a goal that has been targeted by the government.”

“Constructing renewable power plants for the cryptocurrency miners is also being seriously considered,” he added.

Back in December 2021, Kamani had announced plans to create 10,000 MW capacity of new renewable power plants across the country within the next four years.

He had put the current capacity of the country’s renewable power plants at 905 MW, saying that such power plants account only for one percent of the country’s total power generation capacity.

“Currently, 30 percent of the world’s electricity needs are provided by renewable energy sources, and some countries have even declared 2030 as the final year of using fossil fuels,” he said.

“We are far behind the global standards in the development of renewable energy,” he regretted.

Referring to another program for the development of renewable energies in the domestic sector, Kamani noted that to encourage households for constructing such power plants the Energy Ministry has announced that it will buy their surplus generated electricity at a guaranteed price.

He further pointed to the indigenization of the knowledge for the construction of the equipment used in renewable power plants as another priority of the Energy Ministry and SATBA, saying: “Currently, the construction of solar panels and wind power plants is completely indigenized, and we must strengthen our producers to finally become able to build all the required equipment from start to finish, in this regard, of course, some enterprises have announced their readiness.”

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