- What impact will COVID-19 have on the climate crisis?
- Oil firms could ramp up their investment in renewables.
- While start-ups face a difficult road ahead, there is huge opportunity for those firms who are well-positioned for the rebuilding to come.
The clean energy community has spent decades tackling a crisis that has been unfolding in slow motion. As temperatures rise and entire regions burn, entrepreneurs, investors and corporate leaders have developed and deployed terawatts of clean energy and made solar and wind the cheapest sources of electricity across two-thirds of the world.
In recent weeks, a completely different crisis has emerged in full force. The novel coronavirus is shutting down nations, overwhelming hospitals, and moving the world towards a global recession. Meanwhile, oil prices have plummeted - even turning negative - as reduced demand has converged with an increase in supply after the OPEC nations failed to reach an agreement earlier this month.
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Powerhouse, which I founded in 2013, is an innovation firm and venture fund that backs entrepreneurs who are building the future of energy and mobility. As we do our part to protect the health and wellbeing of our communities in the face of the coronavirus, our minds have also turned to the impact COVID-19 will have on the climate crisis and the entrepreneurs building technologies to address it.
Reshuffling the clean energy landscape
The immediate impacts of the virus were felt early in supply chain issues at start-ups, factories and corporations around the world. The virus and the oil price collapse have already caused the top-10 oil majors to slash their capital expenditures by nearly $30 billion, which could impact their spending on renewable portfolios. Conversely, oil price volatility could lead oil majors to increase their investments in renewables, which produce more stable returns. For the first time in history, some of the world’s largest oil and gas companies are seeing their wind and solar assets outperform their oil assets, and their investors are taking note.
For start-ups, the economic downturn has similarly led to a drop in investment, with CB Insights projecting seed-stage funding to drop 22% this quarter and Pitchbook expecting the crisis to hit mobility start-ups especially hard.
Many industry leaders had hoped for a clean energy stimulus that failed to materialize in the $2 trillion stimulus bill passed by the US Congress on 27 March. However, as BloombergNEF founder and senior contributor Michael Liebrech pointed out, the real opportunity lies in the economic rebuilding phase, during which it is essential that we don't bailout industries or business models that will not be viable in a low-carbon future. Subsequent bills should focus on downstream clean-energy technologies like storage, digitization and demand response, shoring up already-cheap wind and solar. In addition, a massive infrastructure investment plan that upgrades our electricity system and public transportation, and electrifies our industries could create immediate employment, generate long-term economic value, and shift the world towards a carbon-free future.
What's the World Economic Forum doing about the transition to clean energy?
Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.
Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.
Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.
Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.
To future-proof the global energy system, the Forum’s Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.
Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.
Is your organisation interested in working with the World Economic Forum? Find out more here.
Opportunities for start-ups on the tough road ahead
The coronavirus does not change the fact that wind and solar—unsubsidized—are cost-competitive or cheaper than fossil fuels almost everywhere in the world. While clean energy and mobility start-ups will be hit hard, they also may have the most to offer and gain during the crisis. As consumers and corporations look to save money and cut costs, start-ups that increase efficiency and utilize smart financial mechanisms are particularly well-positioned. For example:
Terabase, which reduces cost and deployment timelines by digitizing solar power plants, continues to see growth in their pipeline; their power purchase agreement (PPA) rates are lower than local fossil fuel production costs in markets where they operate including Qatar and Saudi Arabia.
Raptor Maps, which uses aerial imagery to help develop, construct, operate and rate utility-scale solar, is ensuring that renewable assets outperform oil and gas not just now but on an ongoing and long-term basis.
WattBuy, which enables residents in deregulated energy markets to compare and select electricity providers, has seen an uptick in customers looking to switch to cheaper energy plans. In almost every location in which WattBuy operates, 100% renewable rates are less than the average price from utilities.
Station A, which models and predicts the performance of clean energy assets, has set usage records this month. Their technology has identified $14.4 billion in positive annual bill savings opportunities across the US.
Energetic Insurance, which insures against barriers to financing clean energy, has seen demand for their commercial and industrial solar credit insurance spike in the past two weeks as developers and project owners seek to access financing and stabilize cash flows.
Despite these encouraging trends, it will not be an easy road ahead. We are heading towards a recession that may prove far worse than that of 2008, and many start-ups will fail along the way. But saving costs for clients and customers alike, combined with the unchanging trajectory of decreasing renewable and storage asset costs, will continue to create opportunity throughout the industry.
What the coronavirus crisis can tell us about the climate crisis
Some have written about the 'silver lining' of coronavirus, arguing that the current drop in emissions and air pollution should be celebrated - but this drop is a direct function of the halting of economic and social activities, and does not represent the liveable future that we need to build. Suggesting that short-term coronavirus-related emissions reductions are “good for climate change” sends a false message that human thriving and economic activity are incompatible with reducing emissions.
Rather, the coronavirus has shown us the scale of the response needed to fight the climate crisis. Neither crisis is being properly addressed, and both require a response of unprecedented urgency that directs our resources and political will to prevent millions of deaths.
No matter the crisis, people matter. You matter. From public health to clean energy, from organizing to innovating, the world needs people like you working on the most important issues of our time. Like the coronavirus, the climate crisis is not a distant threat. It is at our doorstep, affecting billions of lives right now.
To the nurses, doctors, and everyone on the front lines enabling us to have a livable future, your work has never been more meaningful. Both the virus and the climate crisis require all of us to give with the same level of selflessness and heroism.