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Covid crisis deepens energy efficiency slowdown, intensifying need for urgent action

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The already sluggish pace of global progress on energy efficiency is set to slow further this year as a result of the economic impacts of the Covid-19 crisis, deepening the challenge of reaching international energy and climate goals and making stronger government action critical, according to a new report by the International Energy Agency.

Global primary energy intensity – a key indicator of how efficiently the world’s economic activity uses energy – is expected to improve by less than 1% this year, the weakest rate since 2010, according to Energy Efficiency 2020, the latest edition the IEA’s annual update on efficiency trends. This is well below the level of progress needed to achieve the world’s shared goals for addressing climate change, reducing air pollution and increasing access to energy.

The disappointing trends are being exacerbated by a plunge in investments in energy-efficient buildings, equipment and vehicles amid the economic crisis triggered by the pandemic, the report finds. Purchases of new cars, which are more efficient than older models, have slowed, while construction of new, more efficient homes and other buildings is also expected to decelerate. In industry and commercial buildings, lower energy prices have extended payback periods for key efficiency measures by as much as 40%, reducing their attractiveness compared with other investments. Overall, investment in energy efficiency worldwide is on course to fall by 9% in 2020.

“Together with renewables, energy efficiency is one of the mainstays of global efforts to reach energy and climate goals. While our recent analysis shows encouraging momentum for renewables, I’m very concerned that improvements in global energy efficiency are now at their slowest rate in a decade,” said Dr Fatih Birol, the Executive Director of the IEA. “For governments that are serious about boosting energy efficiency, the litmus test will be the amount of resources they devote to it in their economic recovery packages, where efficiency measures can help drive economic growth and job creation.”

Improvements in energy efficiency can contribute around half of the reduction in energy-related greenhouse gas emissions that is required over the next two decades to put the world on a path to meeting international energy and climate goals, according to IEA analysis. But short-term trends resulting from the Covid-19 crisis are slowing improvements in the energy intensity of the global economy, meaning that every unit of economic output uses more energy than it would do otherwise. This is mainly because energy-intensive industries, such as metals manufacturing and chemicals, appear to have been less severely affected by the crisis than other, less intensive parts of the economy.

The stimulus packages governments are introducing as part of their economic recovery plans will heavily influence future efficiency trends. They have the potential to drive investments and structural changes that can reduce energy intensity across all sectors of the economy. More than 60% of the funding for energy efficiency-related measures in stimulus packages announced by governments to date has focused on either the buildings sector or on accelerating the shift to electric vehicles, including new vehicle charging infrastructure.

Many opportunities remain untapped, however, with IEA tracking revealing a spending imbalance across sectors. No announcements have been made to increase the penetration of super-efficient appliances, while spending on vehicle efficiency beyond electric vehicles is minimal to date. The planned spending is also imbalanced on a regional basis, with announcements from European countries dwarfing those from other parts of the world. Announced spending in Europe accounts for 86% of global public stimulus announcements for efficiency, with the remaining 14% split between the Asia-Pacific region and North America.

“We welcome plans by governments to boost spending on energy efficiency in response to the economic crisis, but what we have seen so far is uneven and far from enough,” said Dr Birol. “Energy efficiency should be at the top of to-do lists for governments pursuing a sustainable recovery – it is a jobs machine, it gets economic activity going, it saves consumers money, it modernises vital infrastructure and it reduces emissions. There’s no excuse not to put far more resources behind it.”

Spending on efficiency-related stimulus measures announced by governments worldwide to date is set to generate almost 2 million full-time jobs between 2021 and 2023, according to IEA analysis, mostly in the buildings sector and mainly in Europe. However, the IEA’s Sustainable Recovery Plan suggests further recovery efforts related to energy efficiency could create another 4 million jobs globally through enhanced public and private sector investment in buildings, transport and industry.

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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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