How renewable energy could power Britain’s economic recovery
Harnessing power from sun, wind and sea could spur UK’s post-pandemic economy while tackling climate crisis, say experts
In the first months of 2020 Britain relied on renewable energy like never before. The power generated by clean energy projects eclipsed fossil fuels for the first time ever, making up almost half the electricity used to keep the lights on.
As the UK emerges from the financial maelstrom of the coronavirus pandemic, analysts, economists and environmentalists argue that the renewable energy industry could – and should – play a greater role, powering a green economic recovery too.
The companies harnessing energy from the sun, wind and sea hold the potential to spur the UK’s economy by attracting billions in investment and creating thousands of green jobs across the UK’s regions while accelerating Britain’s climate ambitions.
Britain’s traditional economic engines – the banks and financial services firms – had continued to flounder, leaving GDP growth struggling below 1% while the economic value of offshore wind climbed by almost 17% and the solar industry’s growth was almost 7%.
The CBI report concluded that the so-called “choice” between going green or going for growth was a false one because green business was already on track to become a major pillar of Britain’s future growth.
“After the last financial crisis, the UK’s green economy contributed substantially to new fiscal growth, supporting tens of thousands of jobs and finding new export markets around the world,” says Nathan Bennett of RenewableUK.
“Once again, our industry will play a proactive role in getting the economy back on track, as we move out of lockdown. Renewables are a UK-wide opportunity to have a sustainable, forward-looking recovery and to boost productivity across the economy.”
Today, much of the risk shouldered by renewable energy investors a decade ago has fallen away alongside plummeting technology costs. The UK’s commitment to pursuing a carbon-neutral economy by 2050 alongside its established financial support frameworks offer far more certainty to willing investors than in the past.
The investment case for renewables is flattered further by the relative gloom shrouding investment opportunities elsewhere: fossil fuels have fallen from favour among a growing number of investors due to climate concerns and the collapse of global market prices for oil, gas and coal in recent weeks.
Oil investors may have been able to count on returns on equity of about 25% when prices hovered at $100 a barrel, according to Bloomberg Intelligence, but today that figure is below 10% and falling. The returns on equity invested in offshore wind is 11%, and for solar it is 8% despite falling electricity bills.
Economists believe the renewable energy industry’s hard-fought financial clout combined with public policy support could create an economic and employment juggernaut capable of spurring the UK’s post-pandemic recovery while tackling the climate crisis too.
“The climate emergency has not gone away,” says Bennett. “If anything, the Covid-19 pandemic has underlined the need to make sure our economy is sustainable and resilient in the long term
*Globally renewable energy could power an economic recovery from Covid-19 by spurring global GDP gains of almost $100tn (£80tn) between now and 2050, compared with a business-as-usual scenario, according to the International Renewable Energy Agency (Irena).
Renewable energy transition to accelerate on drop in power demand
SAN FRANCISCO - (Bloomberg) --The global plunge in electricity demand will drag on long after nations lift stay-at-home orders, leading to the biggest annual drop since the Great Depression and fundamentally reshaping power markets.
As economies struggle to recover, worldwide electricity consumption will decline 5% in 2020, the most in more than eight decades, according to the International Energy Agency. In the U.S. last week, government analysts projected the nation’s biggest drop on record. And in Europe, analysts say a full recovery could take years.
The prolonged slowdown will increase economic pressure on older, uneconomic power plants -- especially those that burn coal -- and help speed the transition toward cleaner and cheaper wind and solar. It will also contribute to the biggest annual decline in greenhouse gasses from energy ever recorded.
“This unprecedented drop in demand is foreshadowing the grid of the future,” said Steve Cicala, an economics professor at the University of Chicago. The world is “getting an early look at what high penetrations of renewables will do.”
Lower demand is pitting generators against each other in a fight to produce the cheapest power possible. Wind and solar farms have an upper hand in many regions because they don’t need to buy fuel. Natural gas, which is trading near historic lows, remains competitive. Coal power, which is more expensive, is shouldering the majority of the cuts as generators scale back.
“Renewables will be the biggest beneficiaries,” said Joshua Rhodes, a research fellow at the University of Texas at Austin Energy Institute.
As coal and oil use ebb, energy emissions are set to drop by a record 8% this year, according to the IEA.
While wind and solar are producing a larger share of power, they’re not unscathed. Power auctions are being suspended in France, Brazil, Saudi Arabia and elsewhere, sapping the need for additional clean-energy projects. For the first time in two decades, the number of new wind and solar farms globally is set to decline this year, the IEA said in a report Wednesday.
Some of the steepest drops in electricity consumption will be in Europe, where 2020 demand is forecast to fall 8%, according to the IEA. In Germany, companies including RWE AG and Uniper SE are running coal generators less and relying more on gas plants. Electricite de France SA warned low demand will mean output from its nuclear reactors will fall by more than a fifth this year.
A similar dynamic is playing out in the U.S. retail power sales across the 50 states will sink 4.5% this year, the most since the U.S. Energy Information Administration began keeping records in 1949. Coal is on pace for the first time ever to produce less electricity nationwide than renewable energy.
In Asia, power consumption is forecast to rebound faster. Nations where industrial production accounts for a large chunk of the economy, such as China and India, also had some of the strictest lockdowns -- a combination that hammered demand, according to BloombergNEF analyst Ali Asghar. While the IEA sees demand in China, the world’s top energy user, falling this year, official estimates put consumption in May already above last year’s levels and on course to grow as much as 3% in 2020.
Eventually, global demand for power will resume growing as nations turn more to electricity to power cars, heat homes and more, analysts said. But for now, the power sector faces a long, slow recovery.
“I don’t think we are going to turn everything on tomorrow,” Melissa Lott, a senior research scholar at Columbia University’s Center on Global Energy Policy. “I don’t see how that happens.”
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