2020 has been an unusual time, with the coronavirus pandemic having an immediate and significant impact on all aspects of the energy sector – oil and gas, electricity, emissions, and mobility. While the sudden effects may be a flash in the pan as most of the world returns to normalcy, COVID-19 will undoubtedly catalyze the energy transition, as it provided stakeholders a snapshot into the future of demand.
Earlier this year, the Lux Energy Team revealed four new storylines for the Owning the Energy Transition program – Evolution of Energy Networks, Decarbonization of Industry, Optimal Use of Resources, and Future Energy for Mobility. In addition, a series of predictions for the year were made by the team relating to industry trends, technology developments, and major milestones. With the significant impact COVID-19 has had on the energy sector so far, it is pertinent that we evaluate the ramifications COVID-19 has had or will have on the four key storylines and their respective predictions. The Lux Energy Team's four storyline leads share their thoughts:
Tim Grejtak | Evolution of Energy Networks
"COVID-19 provided a view of the future of the global energy landscape – notably reduced oil and gas demand and greater supply of solar and wind energy in the grid. The pandemic highlighted the risks of disruptions to our current energy infrastructure and supply chain. In response, countries and companies are aggressively diversifying their business portfolios to avoid the risk of underutilized and, eventually, stranded assets in order to capitalize on opportunities provided by increasing renewable energies, both at home and overseas."
Runeel Daliah | Decarbonization of Industry
"COVID-19 momentarily pushed aside global warming from the political discourse, but deprioritizing climate change mitigation efforts in favor of near-term financial recovery would be a mistake – decarbonization is an unavoidable megatrend that will continue to loom over the global industrial sector. Countries and companies that will successfully emerge in a post-COVID world will be the ones that can skillfully reallocate resources to manage the crisis without veering off from their original timeline for carbon neutrality."
Yuan-Sheng Yu | Optimal Use of Resources
"The aftermath of COVID-19 is likely to shake the economic fabric of the energy sector. Countries will make the optimal use of domestic resources an even greater priority in the post-COVID future as they seek energy security while still maintaining progress toward decarbonization. This will accelerate the deployment and development of energy technologies, and countries with post-COVID stimulus plans prioritizing both will not only improve self-resilience but position themselves as global leaders in the new energy landscape."
Christopher Robinson | Future Energy for Mobility
"COVID-19 had an immediate impact on mobility; as the world sheltered in place, demand cratered in the aviation, marine, and automotive sectors – creating an immediate reduction in emissions. Long-term, COVID-19 will likely have a negative impact on demand for mobility as more people work from home and replace work travel with virtual meetings, but the magnitude of that shift remains very much unclear. What is clear, however, is that the push to reduce and eliminate emissions from the transportation sector has not been impacted."
Many have labeled COVID-19 a black swan event. Undoubtedly, it came about unexpectedly and has had a severe impact on every aspect of life across the world. But for the energy industry, not so much – this has been a white swan event. Were there major effects? Absolutely. The decrease in oil demand, high penetration of renewables, and reduction of CO2 emissions threw the industry into unprecedented times. But was it a surprise? No. These impacts are a glimpse into what the energy transition has projected to occur for several years and is a reality many countries and companies are working toward.
The temporary changes have served as a good stress test, providing a preview of the more permanent challenges the industry will face in the next decade. Companies must learn from this period to make themselves more resilient in the energy transition. At the same time, countries currently planning their post-COVID recovery must capitalize on the opportunity and accelerate the energy transition, ensuring improved resiliency and greater agility and insulating themselves from the macroeconomic impacts of the volatile conventional energy sector. With the potential of trillions of dollars directed toward low- and zero-carbon energy infrastructure, companies must prepare to align their corporate strategy to capitalize on what will likely be an acceleration of the energy transition in the years to come.
- Press Release: COVID-19 Accelerates The Energy Transition: Adapt or Perish