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The Covid-19 crisis is hurting but not halting global growth in renewable power capacity

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The world is set to build fewer wind turbines, solar plants and other installations that produce renewable electricity this year because of the impact of the Covid-19 crisis, marking the first annual decline in new additions in 20 years, according to the International Energy Agency. But their growth is expected to resume next year as most of the delayed projects come online and assuming a continuation of supportive government policies.

Renewable power sources have so far showed impressive resilience despite the disruptions and changes caused by the coronavirus pandemic, with their share of the electricity mix increasing in many markets. But the world is set to add 167 GW gigawatts (GW) of renewable power capacity this year, 13% less than in 2019, according to the IEA’s Renewable Market Update report, which was released today.

The decline reflects possible delays in construction activity due to supply chain disruptions, lockdown measures and social distancing guidelines, as well as emerging financing challenges. But despite the slowdown in new additions, overall global renewable power capacity still grows by 6% in 2020, surpassing the total power capacity of North America and Europe combined.

Next year, renewable power additions are forecast to rebound to the level reached in 2019, with significant support coming from the partial commissioning of two mega hydropower projects in China. But despite the rebound, growth for 2020 and 2021 combined is expected to be 10% lower than the IEA had previously forecast before the coronavirus outbreak. Almost all mature markets are affected by downward revisions, except the United States where investors are rushing to finish projects before tax credits expire. After exceptional growth last year, Europe’s new additions are set to fall by one-third in 2020, their largest annual decline since 1996. A partial recovery is expected next year.

“The resilience of renewable electricity to the impacts of the Covid-19 crisis is good news but cannot be taken for granted,” said Dr Fatih Birol, the IEA Executive Director. “Countries are continuing to build new wind turbines and solar plants, but at a much slower pace. Even before the Covid-19 pandemic struck, the world needed to significantly accelerate the deployment of renewables to have a chance of meeting its energy and climate goals. Amid today’s extraordinary health and economic challenges, governments must not lose sight of the essential task of stepping up clean energy transitions to enable us to emerge from the crisis on a secure and sustainable path.”

Solar PV accounts for more than half of the forecast expansion in renewable power in 2020 and 2021, but its additions decline from 110 GW in 2019 to over 90 GW in 2020. Large-scale solar PV projects are expected to rebound in 2021, but overall installations are unlikely to surpass 2019 levels. This is because of a significantly slower recovery of distributed solar PV as households and small businesses review investment plans. Commissioning delays caused by the Covid-19 crisis have slowed the pace of onshore wind installations this year, but they should be mostly compensated for in 2021, as the majority of projects in the pipeline are already financed and under construction. However, uncertainty remains over projects that had planned to secure their financing this year and become operational next year. The impact of the crisis on offshore wind deployment is set to remain limited in 2020 and 2021, since offshore projects have longer construction periods than onshore ones.

At the start of this year, renewables were already facing challenges in several markets in terms of financing, policy uncertainty and grid integration. Covid-19 is now intensifying those concerns. However, governments have the opportunity to reverse this trend by making investment in renewables a key part of stimulus packages designed to reinvigorate their economies. The priority should be on sectors that offer early opportunities to create jobs and economic activity while developing more efficient and resilient energy systems and reducing emissions. That includes a focus on buildings and transport, which would support both renewables and energy efficiency at a same time.

“The spectacular growth and cost reductions of renewables over the past two decades have been a big success story for global energy markets, driven by innovation in both technology and policies. But continuing cost declines will not be enough to protect renewables from a range of uncertainties that are being exacerbated by Covid-19,” said Dr Birol. “This underlines the critical importance of getting stimulus packages and policy strategies right in order to ensure investor confidence in the months and years ahead.”

The impact of the coronavirus pandemic on renewables extends well beyond the electricity sector. Successful transitions to clean energy will require decarbonising the rest of the economy as well, including transport fuels and the heating of buildings.

The Covid-19 crisis has radically changed the global context for biofuels, which are a key element in the shift to more sustainable transport. The sharp fall in demand for gasoline and diesel also hurts biofuel consumption driven by policies requiring suppliers to blend a set amount of biofuels with fossil transport fuels. Production of biofuels for transport is now expected to contract by 13% in 2020. If a rebound in transport fuel demand occurs in 2021, biofuel production could return to 2019 levels, but this would still be lower than the IEA’s pre-pandemic forecast.

The consumption of renewables for heating is also set to decline in 2020. The recent plunge in oil and gas prices is hurting the cost-competitiveness of renewable fuels and technologies that provide heating. Many planned investments to switch from fossil-fuel heating to renewable or electric alternatives are likely to be postponed or cancelled unless governments introduce stronger policy support.

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Sweden: Invest in skills and the digital economy to bolster the recovery from COVID-19

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Sweden’s economy is on the road to recovery from the shock of the COVID-19 crisis, yet risks remain. Moving ahead with a labour reform to facilitate adaptation in a fast-changing economic environment, and investing in digital skills and infrastructure, will be crucial to revive employment and build a sustainable recovery, according to the latest OECD Economic Survey of Sweden.

The pandemic triggered a severe recession in Sweden, despite mild distancing measures and swift government action to protect people and businesses. GDP fell by less than in many other European economies in 2020, thanks to reinforced short-time work, compensation to firms for lost revenue and measures to prop up the financial system, but unemployment still rose sharply. Solid public finances provided room for further stimulus in 2021 to buttress the recovery.

 The Survey recommends maintaining targeted support to people and firms until the pandemic subsides, then focusing on strengthening vocational training and skills and increasing investment in areas like high-speed internet and low-carbon transport. Addressing regional inequality, which is low but rising, should also be a priority as the recovery takes hold.

 The Survey shows that Sweden has been among the most resilient OECD countries in the face of a historic shock. Yet, like other economies, it faces challenges from demographic changes and the shift to green, digital economies. Investments in education and training, and labour reforms along the lines negotiated by the social partners, will support job creation and strengthen economic resilience. Building on Sweden’s leadership in digital innovation and diffusion will also be key for driving productivity.

 After a 3% contraction in 2020, interrupting several years of growth, the Survey projects a rebound in activity with 3.9% growth in 2021 and 3.4% in 2022 as industrial production resumes and exports recover. The recovery in world trade is bolstering the Swedish economy, however the country remains vulnerable to potential disruptions in global value chains.  

The pandemic has aggravated a mismatch in Sweden’s job market, with unfilled vacancies for highly qualified workers coinciding with high unemployment for low-skilled workers and immigrants. The public employment service needs strengthening to provide better support to jobseekers, including immigrants and women, and labour policies should strike the right balance between supporting businesses and workers and supporting transitions away from declining businesses towards growing sectors.

A rising share of youths and older people in the population, especially in remote areas, is affecting the finances of local governments, which provide the bulk of welfare services. Strengthening local government budgets and ensuring equal welfare provision across the country will require providing tax income to poorer regions more efficiently and raising the economic growth potential across regions through investments in innovation. Improving coordination between government entities and reinforcing the role of universities in local economic networks would help achieve that aim.

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Fewer women than men will regain work during COVID-19 recovery

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Generations of progress stands to be lost on women and girls' empowerment during the COVID-19 pandemic. Photo: ILO

Fewer women will regain jobs lost to the COVID-19 pandemic during the recovery period, than men, according to a new study released on Monday by the UN’s labour agency.  

In Building Forward Fairer: Women’s rights to work and at work at the core of the COVID-19 recovery, the International Labour Organization (ILO) highlights that between 2019 and 2020, women’s employment declined by 4.2 per cent globally, representing 54 million jobs, while men suffered a three per cent decline, or 60 million jobs. 

This means that there will be 13 million fewer women in employment this year compared to 2019, but the number of men in work will likely recover to levels seen two years ago. 

This means that only 43 per cent of the world’s working-age women will be employed in 2021, compared to 69 per cent of their male counterparts. 

The ILO paper suggests that women have seen disproportionate job and income losses because they are over-represented in the sectors hit hardest by lockdowns, such as accommodation, food services and manufacturing. 

Regional differences 

Not all regions have been affected in the same way. For example, the study revealed that women’s employment was hit hardest in the Americas, falling by more than nine per cent.  

This was followed by the Arab States at just over four per cent, then Asia-Pacific at 3.8 per cent, Europe at 2.5 per cent and Central Asia at 1.9 per cent. 

In Africa, men’s employment dropped by just 0.1 per cent between 2019 and 2020, while women’s employment decreased by 1.9 per cent. 

Mitigation efforts 

Throughout the pandemic, women faired considerably better in countries that took measures to prevent them from losing their jobs and allowed them to get back into the workforce as early as possible. 

In Chile and Colombia, for example, wage subsidies were applied to new hires, with higher subsidy rates for women.  

And Colombia and Senegal were among those nations which created or strengthened support for women entrepreneurs.  

Meanwhile, in Mexico and Kenya quotas were established to guarantee that women benefited from public employment programmes. 

Building forward 

To address these imbalances, gender-responsive strategies must be at the core of recovery efforts, says the agency. 

It is essential to invest in the care economy because the health, social work and education sectors are important job generators, especially for women, according to ILO. 

Moreover, care leave policies and flexible working arrangements can also encourage a more even division of work at home between women and men. 

The current gender gap can also be tackled by working towards universal access to comprehensive, adequate and sustainable social protection. 

Promoting equal pay for work of equal value is also a potentially decisive and important step. 

Domestic violence and work-related gender-based violence and harassment has worsened during the pandemic – further undermining women’s ability to be in the workforce – and the report highlights the need to eliminate the scourge immediately. 

Promoting women’s participation in decision-making bodies, and more effective social dialogue, would also make a major difference, said ILO. 

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Global electricity demand is growing faster than renewables

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Renewables are expanding quickly but not enough to satisfy a strong rebound in global electricity demand this year, resulting in a sharp rise in the use of coal power that risks pushing carbon dioxide emissions from the electricity sector to record levels next year, says a new report from the International Energy Agency.

After falling by about 1% in 2020 due to the impacts of the Covid-19 pandemic, global electricity demand is set to grow by close to 5% in 2021 and 4% in 2022 – driven by the global economic recovery – according to the latest edition of the IEA’s semi-annual Electricity Market Report released today. The majority of the increase in electricity demand is expected to come from the Asia Pacific region, primarily China and India.

Based on current policy settings and economic trends, electricity generation from renewables – including hydropower, wind and solar PV – is on track to grow strongly around the world over the next two years – by 8% in 2021 and by more than 6% in 2022. But even with this strong growth, renewables will only be able to meet around half the projected increase in global electricity demand over those two years, according to the new IEA report.

Fossil fuel-based electricity generation is set to cover 45% of additional demand in 2021 and 40% in 2022, with nuclear power accounting for the rest. As a result, carbon emissions from the electricity sector – which fell in both 2019 and 2020 – are forecast to increase by 3.5% in 2021 and by 2.5% in 2022, which would take them to an all-time high.

Renewable growth has exceeded demand growth in only two years: 2019 and 2020. But in those cases, it was largely due to exceptionally slow or declining demand, suggesting that renewables outpacing the rest of the electricity sector is not yet the new normal.

“Renewable power is growing impressively in many parts of the world, but it still isn’t where it needs to be to put us on a path to reaching net-zero emissions by mid-century,” said Keisuke Sadamori, the IEA Director of Energy Markets and Security. “As economies rebound, we’ve seen a surge in electricity generation from fossil fuels. To shift to a sustainable trajectory, we need to massively step up investment in clean energy technologies – especially renewables and energy efficiency.” 

In the pathway set out in IEA’s recent Roadmap to Net Zero by 2050, nearly three-quarters of global emissions reductions between 2020 and 2025 take place in the electricity sector. To achieve this decline, the pathway calls for coal-fired electricity generation to fall by more than 6% a year.

However, coal-fired electricity generation is set to increase by almost 5% this year and by a further 3% in 2022, potentially reaching an all-time high, according to the Electricity Market Report. Gas-fired generation, which declined 2% in 2020, is expected to increase by 1% in 2021 and by nearly 2% in 2022. The growth of gas lags that of coal because it plays a smaller role in the fast-growing economies in the Asia Pacific region and it faces competition from renewables in Europe and North America.

Since the IEA’s last Electricity Market Report in December 2020, extreme cold, heat and drought have caused serious strains and disruptions to electricity systems across the globe – in countries ranging from the United States and Mexico to China and Iraq. In response, the IEA is establishing an Electricity Security Event Scale to track and classify major power outages, based on the duration of the disruption and the number of affected customers. The Texas power crisis in February, where millions of customers were without power for up to four days because of icy weather, was assigned the most severe rating on this scale.

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