Amongst the many metaphors the COVID-19 pandemic conjures up is that of the outgoing tide revealing features of the landscape that have long existed without our being highly conscious of them.  Most obviously, the risk of viral contagion that was always present became painfully exposed early on, as did an unfortunate unreadiness to respond to such a scenario on the part of some states and health systems.  The fundamental importance of supply chains also came into view as countries struggled to secure face masks and other protective equipment.  On the other hand, the power of states was also revealed in their ability to enforce lockdowns, and for some states, their capacity and willingness to borrow in order to bankroll welfare and other spending programmes.  As economic activity rapidly contracted, and emissions of fine particulates accordingly plunged, it became evident to many just how polluted our air had been, and how welcome it is to have clean air.  Existing power grids were shown to struggle (but manage, for the period) with higher proportions of renewables as fossil fired power stations were turned off.  More abstractly, human adaptability rose into view as people have adjusted to new modes of work and restrictions on their behaviour and movement.  Much of this newly-revealed terrain will affect how the energy sector is shaped by the pandemic, and have implications for the fight against climate change.  The picture is complicated and mixed, with some factors acting to quicken the path to decarbonisation and others to slow it, and the future is contingent on the choices that will be made in the coming months, as well as how economies recover.

Given how much we have mentally adapted to the pandemic situation, it is not straight forward to remember the pre-pandemic world, but it is worth recalling.  In 2019, greenhouse gas emissions flatlined as natural gas and renewables replaced coal in the USA, coal firing fell further in Europe, and the energy intensities of various major industries declined across the world.  A peak in Chinese emissions, which would truly set the world on a downwards trajectory, was expected in the mid-2020s, or even before.  The international trade in LNG was increasing as producing nations such as the USA, Qatar, Australia, and Russia built export terminals, although a supply glut was being reached.  Oil producers were surviving, if not thriving, on prices in the region of US$65/barrel for Brent crude, well below the US$100+ prices between 2011 and 2015, but above the US$50 prices of 2015-2018.  The idea of hydrogen as an energy vector and fuel was gaining global attention, with the International Energy Agency (IEA) producing a report on how to encourage the ‘hydrogen economy’ at the request of the G20.  A number of carbon capture and storage (CCS) projects were launched, some spurred on by the 45Q tax credits offered by the US government, although overall deployment of CCS was far more sluggish than desired.  Ammonia was another energy vector/fuel under investigation, and pilot plants were underway to make zero-carbon steel, while the cement industry plotted how to completely decarbonise.  The cost of installing renewables was continuing to fall, and many companies and nations were setting ambitious decarbonisation targets, such as the 2050 ‘net-zero’ goals of the countries such as the UK, and companies including Repsol, Shell and BP.

The arrival of COVID-19 had almost immediate impacts on the energy sector.  Demand for oil dropped rapidly, and the price followed, compounded by a production quota dispute between Saudi Arabia and Russia.  Brent crude reached as low as US$25/barrel, while momentarily the futures price for West Texas Intermediate turned negative as storage sites became scarce.  Coal prices followed a similar trajectory, as did natural gas, though their relative declines were smaller.  Concerns were raised that utilities might turn to firing dirtier fuels, rather than deploying more renewables, because they were cheaper.  Electricity demand in numerous countries dropped 10-25%, and as utilities shut their fossil-fired plants down because of a lack of demand, some grids, such as the British one, struggled to cope with the resultant higher proportions of renewables (in the realm of 60%) that they experienced.  Skies cleared dramatically in India, China, and across the world, and animals ventured into areas they had not been seen in for years – while, curiously, support for green political parties at the national level in Europe fell – perhaps as voters sought security in traditional parties.  Governments began to announce their intentions to come out of the pandemic cleaner, while companies further strengthened their green commitments.  At the same time, analysis by the IEA found that spending in the energy sector would fall by around 20% (or almost US$400 billion) in 2020, with IEA chief Fatih Birol talking of his worry that the “slowdown in spending on key clean energy technologies … risks undermining the much-needed transition to more resilient and sustainable energy systems”.  Spending cuts were to be felt most heavily in the oil and gas sector, but also in the coal, gas, energy efficiency, grid infrastructure and renewables sectors.  At least four major hydrogen projects were declared (in Portugal, China, Denmark and the UK) along with other governments announcing significant funding, and Keynesian-type economic recovery spending packages being announced, with a significant proportion having green strings attached.  In June, the IEA released work it had conducted in conjunction with the International Monetary Fund – a three-year plan consisting of around 30 policies to put the world on the way to a swift transition to a clean economy.  Its policies cover the energy efficiency of buildings, grid infrastructure, power generation and storage, creating significant employment and reducing energy-related greenhouse gas emissions by around 13% from 2019 levels.

Parts of what was exposed by the tide going out was perhaps misleading, looking more solid than they were to touch.  The eagerness on the part of states to reopen, even when infection rates in many of them are still relatively high, is evidence that they cannot afford to drastically restrict their economies for long, and still need fossil fuels to power them.  While BP chief executive Bernard Looney spoke of clear skies having an impact on people’s expectations of the future, returns to work in China and Europe have brought back air pollution, showing that even if human adaptability is outstanding, the adaptability of infrastructure is not.  For the power sector, the same challenges to decarbonisation remain:

• The need to make CCS economic and retrofit it to gas- and coal-fired power plants (which will continue to make up significant portions of the electricity-generating sector for decades to come, particularly but not only in Asia), as well as to cement making, some steel making, petrochemical and other industries.  This will include setting up shared transport and storage infrastructure.
• The need to develop zero-carbon fuels that store energy efficiently and can be produced from excess renewable energies when climatic conditions are conducive to high generation.  The leading contender is hydrogen, and ammonia is also a solid prospect for particular applications.  Such fuels (which can also serve as energy vectors) are likely to prove more versatile and sustainable than batteries and other electrical energy storage devices, being able to store more energy in less volume (although, clearly, batteries will also play a role in energy storage).
• The upgrading of grid infrastructure to be able to handle higher proportions of energy from renewable sources and to increase interconnection across large geographical areas to be able to better balance the intermittency of such generation.  Transmission infrastructure in some areas needs renewal anyway, having been allowed to decay into a condition that has sparked wildfires, such as in California and Australia.
• To increase the deployment of renewables, and further develop geothermal and other less common technologies.
• To increase the efficiencies of existing power plants while decreasing their emissions of particulates, oxides of nitrogen and sulphur, and heavy metals.
• To develop low- or zero-carbon alternative power generation processes involving fossil fuels, such as the Allam-Fetvedt cycle, so that there are significant sources of power with low intermittency.  It is possible such processes would become cheaper than conventional fossil-fuelled power stations with CCS.
• To make nuclear power more affordable, faster to construct and safer over the long term (perhaps co-producing heat and/or hydrogen along with, or instead of, electricity).

Considering the above, it seems to me that the key factors that will determine how quickly the power sector will transition to low to zero emissions are:

• National, sub-national, and international political commitments in regards to climate change.
• How carbon markets and border taxes are modified and/or instituted to incentivise clean technology adoption by the private sector.
• The extent to which states and research organisations fund and otherwise support research, development and deployment of carbon capture, utilisation, transport and storage technology.
• As above but for early hydrogen projects for production, storage and transport, as well as the extent to which other zero-carbon energy vectors are given similar support.
• Just how badly the finances of oil and gas companies and utilities are affected in the short and medium term, and what capacity they will have to fund their transitions to low-/zero-carbon-equivalent operation.  (Utilities’ finances are unlikely to have been as badly affected as those of oil and gas companies.)  These companies will face a dilemma of balancing the need to recover profitability while knowing that they must spend to decarbonise their businesses so as to survive in the long term (and with the ‘long term’ perhaps much less distant than was the case before the COVID-19 pandemic).
• The level of spending on upgrading grid infrastructure, and how this could be funded.
• Whether companies can find financial efficiencies in energy conversion efficiencies.
• The willingness of states to spend on other areas such as nuclear power and alternative fossil fuel processes.

While it remains true that the impact of climate change on nations will be varied, with the possibility of it being positive on some, such as Russia and Canada, the economic case for global action has been strengthening, particularly as much technical work has opened up new decarbonisation pathways.  The US presidential election in November will, no doubt, have some influence on global political action, but in the medium and long term global political will is likely to increase.  It is in every nation’s interest to reduce emissions of NO_x, SO_x, particulates, etc.  (which usually go hand-in-hand with carbon emissions) to improve the health of their citizens.

Action to institute effective carbon markets and border taxes is less certain.  China’s national carbon market is expected to launch next year, and the European Commission (EC) may impose a carbon border tax which would be influential globally in incentivising industry to decarbonise.  Many businesses, including fossil-fuel-based businesses, have called for more widespread or globalised carbon markets.  On the other hand, long experience with the EU Emissions Trading Scheme has shown that markets must be constructed carefully and monitored to deliver the intended outcomes, and political will for carbon markets in countries that do not already have them appears to be limited.

The large spending programmes announced by governments across the world to stimulate economic activity – amounting to an estimated US$9 trillion, though estimates vary – are the biggest source of hope for a faster transition to a decarbonised power sector.  Here, a strengthening of political will has been evident and influential.  A significant portion – notably the €750 billion economic recovery fund outlined by the EC – has already been tied to decarbonisation targets, and in the UK it is likely they will also be.  South Korea’s recovery plan is based on its ‘Green New Deal’, while China and Japan’s packages have mild to moderate support for decarbonisation (concurrent, in China’s case, with approving new coal-fired power plants).  The USA’s plan will probably not be finalised until next year, while Russia and Brazil are not likely to be leaders, and other countries such as Australia have yet to release medium-term plans.  Still, it appears that more will be spent by governments on infrastructure over the next few years than otherwise would have been the case, with a firm commitment on the part of a significant number of governments to orient the spending towards decarbonisation.  (Work has been done, however, that suggests some spending might lock-in long-term emissions, and the decisions made by governments in the coming 6-12 months will be vital.)  The development of the ‘hydrogen economy’, in particular, seems to have received a boost since the advent of the pandemic – the projects announced would have been in the works before the onset of COVID-19, but the decision to go ahead with them could well have been influenced by the strengthening of political will.  This does not seem to have been quite as much the case as with CCS, perhaps because its public perception is less positive, although some hydrogen projects include CCS, and some stand-alone CCS projects are also finding governmental support.

Research institutes’ ability to fund work could be curtailed, as many universities’ income from foreign students shrivels for a year or two, and partnerships with the private sector dwindle.  States may step in to some extent to help funding, but with so many other spending commitments this may not make up the shortfall.  This would be most unfortunate, because lab-scale research is essential to the task of decarbonisation.

Oil and gas companies have collectively announced expenditure cuts of US$244 billion, according to the IEA.  Much of this will be for exploration and new production facilities, which means less oil and gas supply in the future than otherwise would have been.  The complex changing demand for oil, with growing middle classes in developing nations buying oil-consuming vehicles and increased petrochemical production increasing demand, but a shift to electric vehicles and a focus on fuel efficiency reducing demand, means that the long-term demand for oil will rise somewhat before gradually declining.  A prediction in March this year by the IEA that the 2020 demand for oil would be only 0.1% lower than in 2019, as opposed to their pre-pandemic estimate of a 0.8% increase, gives the strong impression that the pandemic will not lead to an early death for oil, even though many firms have already failed.  Those oil and gas companies that make it through the pandemic will once again see sizeable profits in the medium term, especially as supply will bottleneck because of this year’s lack of production capacity investment.  Because decarbonisation is in their long-term business interests, my sense is that the decline in revenue through the pandemic will not hugely impact investment in CCS and hydrogen energy technologies on the part of oil and gas companies that intended to invest in these areas, and that a return to profit in coming years will alleviate, to some extent at least, the impact there has been.  Nevertheless, it is difficult to imagine that the spending shortfalls will not have an impact.

The success or failure of decarbonisation efforts will ultimately be reflected in global emissions data over the long term.  Greenhouse gas emissions in 2020 will show a marked fall, estimated in the region of 4-7%, a relative drop not seen since the end of the Second World War.  Following the flatlining in 2019, this will give an impression to some that global emissions will continue to fall, which will lead to dismay when in relative terms they will rise again as the global economy slowly recovers.  Because of supply chain concerns, some manufacturing will be de-globalised, most particularly in relation to the medical sector, but perhaps to some extent for other essential goods.  The overall effect might be slight increases in industrial power demand in what are sometimes described as post-industrial economies, which, because their energy sectors are usually cleaner, will lead to a small absolute reduction in global GHG emissions.  Overall, I would guess that GHG emissions will start to fall again in the mid-2020s, if predictions of the Chinese peak prove accurate, and it is possible that the 2018-19 peak will be the highest in absolute terms of the ‘Anthropocene’.  If the right decisions are made in the coming months by states that are yet to set a clear direction for investment in decarbonisation, recovery spending and the strengthening of political will towards decarbonisation (for which there is widespread support) will push the world to faster decarbonisation, lessening the impact from reduced private sector spending, and ultimately leading to a world that decarbonises sooner.