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Greater investment in clean, secure and sustainable electricity systems amid Covid-19 crisis

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Energy ministers and electricity industry CEOs from around the world took part in a roundtable discussion today about the impact of the Covid-19 crisis on the electricity sector and the need to mobilise investments for secure and sustainable power systems. The high-level virtual meeting was co-hosted by the International Energy Agency and the Government of the United Kingdom.

The discussion focused on the implications of the Covid-19 crisis for investments in the power sector that are needed to support clean energy transitions, as well as the opportunities for international co-operation and collaboration. The participants recognised the critical importance of the electricity sector in the response to the Covid-19 pandemic to keep essential services running, hospitals open, and communication flowing. They applauded the efforts of electricity companies and their employees in keeping the lights on despite the health risks involved.

Participants included 11 government ministers and 9 company CEOs, representing 5 continents and 60% of the global electricity system. The discussion was co-chaired by Dr Fatih Birol, the IEA Executive Director, and Kwasi Kwarteng, the United Kingdom’s Minister for Business, Energy and Clean Growth. The list of high-profile attendees and a link to the Chairs’ Summary can be found below.

“Resilient electricity systems are vital for modern societies today and for a sustainable energy future, but they need much greater investment,” Dr Birol said. “It was highly encouraging to see so many global energy leaders focused on this critical issue today. The IEA’s World Energy Investment 2020 report this week highlighted that global investment in the power sector is set to fall 10% this year, compounding previous declines. The drop in investment in electricity grids, an essential but often overlooked part of the shift to cleaner energy, is set to be even steeper. Renewables like wind and solar won’t be able to fulfil their great promise without robust infrastructure that reliably delivers the power they produce to consumers.”

Today’s roundtable discussion on electricity systems was one in a series leading up to the IEA Clean Energy Transitions Summit, which will take place on 9 July.

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ADB Approves $200 Million Loan to Modernize Power Supply, Distribution System in Nepal

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The Asian Development Bank (ADB) has approved a $200 million concessional loan to improve power supply and distribution systems in Nepal.

Nepal has made significant progress in electricity supply after years of chronic power shortages. However, its power transmission and distribution systems need further strengthening to increase network capacity, improve quality and reliability, and remove delays between generation hubs and load centers.

The project will finance, among others, the reinforcement and modernization of the power supply system in Kathmandu Valley, Bharatpur metropolitan area of Chitwan district in Bagmati Province and Pokhara of Kaski district in Gandaki Province, where supply interruptions are frequent and prolonged. The project also aims to support Province 2, where the quality of electricity supply is poor and about 20% of households are still without access to the national grid.

“The project will help sustain Nepal’s improved electricity supply momentum over the past two years. This will facilitate meeting future demand from commercial and industrial activities as well as from communities, particularly women, who can now benefit from electricity-based enterprises and focus on productive economic and social activities,” said ADB Principal Energy Specialist Jiwan Acharya. “It is also very timely because the project will create employment opportunities for skilled and unskilled labor during the construction phase as the country adopts measures to mitigate the socioeconomic impact of the coronavirus disease (COVID-19) pandemic.”

Complementing ADB’s loan, the Government of Norway is providing a $35 million cofinancing grant for the installation and upgrading of power distribution networks in Province 2 and various substations to evacuate hydropower in the country. In addition, it is providing a $5 million technical assistance grant for capacity development of the Nepal Electricity Authority to ensure that gender equality and social inclusion are strengthened, and new technologies are used to make electricity infrastructure resilient.

The project is aligned with the South Asia Subregional Economic Cooperation program on intraregional power trade through cross-border power exchange. The upgrading of substations in Khimti, Barhabise, and Lapsiphedi to 400 kilovolts will facilitate cross-border power exchange with India.

ADB and other development partners have been engaged in Nepal’s power system reform efforts, including the approval of the Nepal Electricity Regulatory Commission Act of 2017, which created the Electricity Regulatory Commission as an independent regulatory body with respect to tariff-setting and consumer protection.

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Urgent need to tackle impact of likely electric car battery production boom

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Demand for raw materials used in the production of electric car batteries is set to soar, prompting the UN trade body, UNCTAD, to call for the social and environmental impacts of the extraction of raw materials, which include human rights abuses, to be urgently addressed.

Electric cars are rapidly becoming more popular amongst consumers, and UNCTAD predicts that some 23 million will be sold over the coming decade: the market for rechargeable car batteries, currently estimated at $7 billion, is forecast to rise to $58 billion by 2024 .

The shift to electric mobility is in line with ongoing efforts to reduce the world’s dependence on fossil fuels, and reduce harmful greenhouse gas emissions responsible for climate change, but a new report from UNCTAD, warns that the raw materials used in electric car batteries, are highly concentrated in a small number of countries, which raises a number of concerns.

Drilling down in DRC, Chile

For example, two-thirds of all cobalt production happens in the Democratic Republic of the Congo (DRC). According the UN Children’s Fund (UNICEF), about 20 per cent of cobalt supplied from the DRC comes from artisanal mines, where human rights abuses have been reported, and up to 40,000 children work in extremely dangerous conditions in the mines for meagre income.

And in Chile, lithium mining uses nearly 65% of the water in the country’s Salar de Atamaca region, one of the driest desert areas in the world, to pump out brines from drilled wells. This has forced local quinoa farmers and llama herders to migrate and abandon ancestral settlements. It has also contributed to environment degradation, landscape damage and soil contamination, groundwater depletion and pollution.

Climb the value chain

Noting that “the rise in demand for the strategic raw materials used to manufacture electric car batteries will open more trade opportunities for the countries that supply these materials”, UNCTAD’s director of international trade, Pamela Coke-Hamilton, emphasised the importance, for these countries, to “develop their capacity to move up the value chain”.

In the DRC, this would mean building processing plants and refineries that would add value and, potentially, jobs within the country. However, for various reasons (including limited infrastructure, financing and a lack of appropriate policies), refining takes place in other countries, mainly Belgium, China, Finland, Norway and Zambia, which reap the economic benefit.

The report recommends that countries such as DRC provide “conducive environment to attract investment to establish new mines or expand existing ones”.

Diversify and thrive

UNCTAD also recommends that the industry find ways to reduce its dependence on critical raw materials. For example, scientists are researching the possibility of using widely-available silicon, instead of graphite (80% of natural graphite reserves are in China, Brazil and Turkey).

If the industry manages to become less reliant on materials concentrated in a small number of countries, says UNCTAD, there is more chance that prices of batteries will drop, leading to greater take-up of electric cars, and a shift away from fossil-fuel powered transport.

As for the environmental consequences of the batteries themselves, the report recommends the development of improved, more sustainable mining techniques, and the recycling of the raw materials used in spent Lithium-Ion batteries, a measure that would help deal with the expected increase in demand, and also create new business opportunities.

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The EU has opportunity to accelerate shift to cleaner and more resilient energy future

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The European Union is strengthening its efforts to make its energy systems cleaner and more resilient, reinforcing its global leadership in reducing greenhouse gas emissions, according to a new energy policy review by the International Energy Agency.

EU greenhouse gas emissions in 2019 were 23% lower than in 1990, meaning the bloc had already met its target of a 20% decline by 2020, according to the new IEA report. Cleaner electricity was the main driver behind the reduction, with the carbon intensity of European power generation now well below most other parts of the world. The EU is a leader in renewable energy technologies, notably offshore wind, and many of its Member States have policies in placed to phase out coal. However, greenhouse gas emissions in the EU transport sector are still rising, and the use of energy in buildings remains fossil-fuel intensive.

The new IEA report sets out recommendations to help the EU meet its 2030 targets for greenhouse gas emissions, renewables and energy efficiency as well as its longer-term decarbonisation goals. It finds that stronger policies than those currently in place will be needed to deliver on these ambitions and that the energy sector needs to be at the heart of those efforts, as it accounts for 75% of EU greenhouse gas emissions.

In December, the new European Commission led by President Ursula von der Leyen launched the European Green Deal in a bid to make the EU climate neutral by 2050. This plan quickly faced the added challenge of Covid-19, which has pushed the world into a sharp economic downturn. This crisis is a test of energy sector resilience and policy makers’ commitment to clean energy transitions. The EU energy sector has so far stood up well to the pressures it has been under, but the economic downturn continues to weigh on company and government balance sheets. Last month, the European Commission presented a massive recovery plan to counter the economic damage from Covid-19. The plan aims to achieve a resilient, inclusive and green recovery in Europe while laying the foundations for a low-carbon future.

“With its recovery plans, the EU has a real opportunity to boost economic activity, create jobs and support the long-term transformation of its energy sector,” said Dr Fatih Birol, IEA Executive Director, as he launched the new report with Kadri Simson, the European Commissioner for Energy. “The Sustainable Recovery Plan described in the IEA’s recent World Energy Outlook Special Report shows how to achieve these three objectives simultaneously. The IEA is working with the European Commission and EU Member States to design policies to repair the economic damage of the crisis while making their energy systems cleaner and more resilient.”  

“The IEA’s review of EU energy policy comes at a crucial moment, as we debate the investment priorities for our economic recovery and the future EU budget,” said Commissioner Simson. “The review supports the Commission’s firm commitment to a green recovery, which is at the heart of our proposal for a €750 billion recovery plan. We will continue to work closely with the IEA as we design European policies to transform our energy sector and at the same time provide jobs, growth and better quality of life.”

As EU Member States have different energy policies and approaches to decarbonisation, the IEA report concludes that strong cooperation will be needed under the framework of the National Energy and Climate Plans. It also recommends that the EU build on the bloc’s integrated energy market and cross-border trade and develop stronger carbon price signals.

“The European Green Deal represents an opportunity to strengthen economies across the continent by pooling investments in energy technologies that are likely to play a crucial role in the future,” Dr Birol said. “Hydrogen electrolysers and lithium-ion batteries could potentially be game-changers both for the EU and globally. I welcome the efforts by the European Commission to accelerate innovation and commercialisation in these key areas. ”

The IEA report also underscores that maintaining EU energy security remains critical, as the energy sector is vital for the health of citizens and economies. In particular, EU electricity systems and markets will need to accommodate growing shares of variable renewable energy. At the same time, risks such as extreme weather and cybersecurity threats are intensifying the challenges for designing and operating electricity systems.

The EU is facing the retirement of half its nuclear power generation capacity over the next five years unless decisions are taken to extend the lifetimes of the plants, which currently provide a major part of the continent’s low-carbon electricity. To support the phase-out of coal, natural gas is becoming essential to ensure the flexibility of electricity systems in Europe, but the region’s supply of gas will be largely dependent on imports. In this context, the IEA report finds that the EU cannot afford to reduce its energy diversity and needs to invest in electricity sector resilience.

The IEA report also points out that as the EU accounts for a relatively small share of global greenhouse gas emissions (8%), global climate action and global partnerships will be essential to amplify its climate ambitions. The IEA stands ready to continue to support EU efforts to strengthen clean energy transitions worldwide by sharing lessons and insights from European experiences across the globe.

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