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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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Strength of IEA-ASEAN energy cooperation highlighted at Ministerial meeting

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IEA Executive Director Fatih Birol spoke today to Energy Ministers from across Southeast Asia about the latest global and regional energy trends, pathways to net zero emissions and the importance of clean energy investment.

He was participating in the seventh annual dialogue between the IEA and Ministers from the Association of Southeast Asian Nations (ASEAN) – the economic bloc comprised of 10 Southeast Asian economies. The meeting was hosted via video link by Brunei Darussalam, which is chairing ASEAN’s 39th annual Ministers on Energy Meeting (AMEM). 

“The IEA remains firmly committed to assisting ASEAN and its member states in developing pathways towards net zero that respect their capacities and capabilities,” Dr Birol told the Ministers. “One of the key messages from the IEA’s Roadmap to Net Zero by 2050 Roadmap is that not all countries are starting the race to net zero from the same place. I have and will continue to underscore the importance of ensuring that a greater share of global clean energy investment is directed towards the emerging and developing economies including in Southeast Asia to unlock new economic growth possibilities and emissions reductions.’’

This year’s ministerial marks the tenth anniversary of IEA-ASEAN energy cooperation, which was established with a Memorandum of Understanding at the 2011 AMEM in Brunei’s capital, Bandar Seri Begawan. The Ministers and Dr Birol welcomed the adoption of a Commemorative Statement on IEA-ASEAN Energy Cooperation. 

The IEA has significantly scaled up its work with ASEAN and its Member States over the past six years. Indonesia and Thailand became IEA Association Countries in 2015, and Singapore did so the following year. In 2019, under Thailand’s Chairmanship, the IEA was named a Strategic Partner of ASEAN.

The IEA is committed to continue working with ASEAN and its Member States on key energy priorities, including energy security, energy efficiency, clean energy, energy investments and decarbonisation. 

“On this, the tenth anniversary of our collaboration, the IEA is more determined than ever to continue to work hand in hand with our partners in the region to help achieve your energy goals,’’ Dr Birol said. “I very much look forward to the next ten years.” 

The ASEAN Chair in 2022 will be held by Cambodia.

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Indonesia’s First Pumped Storage Hydropower Plant to Support Energy Transition

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The World Bank’s Board of Executive Directors today approved a US$380 million loan to develop Indonesia’s first pumped storage hydropower plant, aiming to improve power generation capacity during peak demand, while supporting the country’s energy transition and decarbonization goals.

“The Indonesian government is committed to reduce greenhouse gas emissions through, among others,  development of renewable energy, energy conservation, and use of clean energy technology. Emission reduction in the energy sector will be driven by new and renewable energy generation and application of energy efficiency,” said Arifin Tasrif, Minister of Energy and Mineral Resources of the Republic of Indonesia.

Over 80 percent of the power generated for the Java-Bali grid, which supplies electricity to 70 percent of the country’s population, comes from fossil fuels. A key measure to support Indonesia’s decarbonization agenda is the development of energy storage to enable integration of renewable energy into the grid. Pumped storage hydropower plays a crucial role in this approach.

The financing will support the construction of the Upper Cisokan pumped storage hydropower plant, to be located between Jakarta and Bandung, with an expected capacity of 1,040 MW. The facility will have significant power generation capacity to meet peak demand, provide significant storage capacity to enable a larger penetration of renewable energies and, because of its close location to two large demand centers, will alleviate increasing transmission loads on the grid. As a result, a more environmentally friendly and reliable supply of electricity will benefit consumers in Java and Bali.

“We are excited about this project as it will be the first of its kind for Indonesia. It represents a turning point for Indonesia’s decarbonization pathway. The World Bank will continue to support Indonesia in its efforts to achieve resilient, sustainable, and inclusive development that will benefit the people of Indonesia now and in the future,” said Satu Kahkonen, World Bank Country Director for Indonesia and Timor-Leste.

Pumped storage hydropower makes use of two water reservoirs at different elevations. At times of low electricity demand or when there is abundant generation from clean power sources, such as solar energy, power from the grid is used to pump water to the upper reservoir. Power is generated during peak demand, usually evening hours, as water moves down to the lower reservoir using a turbine, when electricity generation costs are high.

The project will help enhance the system flexibility and efficiency in balancing supply and demand, and therefore improve the reliability and quality of electricity services in Java and Bali. It also aims to support the government to integrate variable renewable energy into the Java-Bali grid, and to do so in an environmentally and socially sustainable manner.

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Iran determined to boost oil exports despite sanctions

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Iranian Oil Minister Javad Oji has said the Islamic Republic is determined to increase its oil exports despite the U.S. sanctions on the country’s oil industry, adding that the use of oil sanctions as a “political tool” would harm the market.

“There is strong will in Iran to increase oil exports despite the unjust and illegal U.S. sanctions; I promise that good things will happen regarding Iran’s oil sales in the coming months,” Oji told the state TV.

As reported by IRIB, Oji noted that Iran can barter its crude oil for goods or even for services and investment not only in the oil industry but also in other sectors as well.

“Oil sales have dropped dramatically since the imposition of unjust sanctions, but this capacity exists in the Oil Ministry and all the industry’s departments to increase oil sales,” the minister said.

Iranian oil exports have plunged under U.S. sanctions, which were reimposed three years ago after Washington abandoned Tehran’s 2015 nuclear deal with six powers.

“Iran will return to its pre-sanctions crude production level as soon as U.S. sanctions on Iran are lifted,” Oji said.

“We are against using oil as a political tool that would harm the oil market.”

Since April 9, Tehran and six world powers have been in talks to revive the nuclear pact. The sixth round of the negotiations adjourned on June 20. The next round of talks has yet to be scheduled.

Oji said Iran backed a decision made by the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, on Wednesday to stick to a policy from July of phasing out record output cuts by adding 400,000 barrels per day (bpd) a month to the market.

Iran has been gradually boosting crude oil production to get ready for a strong comeback into the global market as the talks with world powers over the nuclear deal show signs of progress.

According to a Bloomberg report, National Iranian Oil Company (NIOC) officials have stated that the country’s oil fields are going through overhaul operations and connections with oil buyers are being re-established.

“In the most optimistic estimates, the country could return to pre-sanctions production levels of almost four million barrels a day in as little as three months,” the report published in May stated.

EF/MA

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