There’s been a strong clamor for cleaner energy sources long before the COVID-19 pandemic. Securing loans from financial institutions for thermal coal power plants has become difficult in recent years, thanks to the increasingly negative public opinion and falling demand for this energy type.
Just recently, Citigroup, the third-largest bank in the United States announced that it will quit providing underwriting and advisory services as it aims to eliminate exposure to the sector entirely by 2030. “Citi recognizes that emissions from fossil fuel sectors, in particular, must be drastically reduced in the coming decade,” the bank noted.
Citi’s move comes after the similar announcements made by other large financial institutions such as Sumitomo Mitsui Banking Corporation of Japan, South Africa’s ABSA bank, and Mizuho Financial Group.
The enforcement of lockdown, shelter at home, circuit breaker, or what we refer to as the Enhanced Community Quarantine in the Philippines will result in a global economic recession. And with this, we can expect many to advocate for the halting or slowing down of clean energy transition around the world. More so since oil prices are in negative territory and there’s slow demand for coal given the lower energy consumption
But as many experts stress, the COVID-19 pandemic and its effects on the economy is not a reason to back out on commitments to shift to renewable power. On the contrary, the pandemic is a wake-up call to push forward in meeting our environmental commitments, recognizing that the development of RE will help us become more climate-resilient and aid in reviving the economy in a post-COVID 19 world.
For one, a recent report by the International Renewable Energy Agency revealed that accelerating investments in renewable energy could fuel an economic recovery from the COVID-19 pandemic by spurring the global gross domestic product (GDP) by almost $98 trillion between now and 2050. Speeding up investments in RE would provide returns of $3 to $8 for every dollar invested, too.
The landmark report entitled “Global Renewable Outlook” also noted that heavy investments renewable power would also quadruple the number of jobs in the sector over the next three decades, thus improving global health and welfare scores globally.
IRENA Director-General Francisco La Camera stressed that “Governments are facing a difficult task of bringing the health emergency under control while introducing major stimulus and recovery measures. By accelerating renewables and making the energy transition an integral part of the wider recovery, governments can achieve multiple economic and social objectives in the pursuit of a resilient future that leaves nobody behin.,”
Perhaps to better understand the transformative power of RE, we could take a look at the case of the Caribbean region as discussed in an editorial entitled “Coronavirus: The Caribbean is the First Domino to Fall, but There is Hope”
The region, unfortunately, relies solely on tourism, a volatile sector, which is at a standstill. The region’s economy is near an economic collapse that will take time to rebuild. Just how bad is the economic effects of the pandemic? In a single day, Saint Lucia alone lost 13,000 jobs or equivalent to 16% of the labor force.
According to the authors, transitioning to a resilient economy via renewable power and with the help of multilateral stimulus is the only way to rebuild the economy of the Caribbean. A clean energy transition should be fast-tracked for a variety of reasons. First, the Caribbean countries have some of the highest power rates in the world because of their dependence on a centralized fossil fuel system. Second, the region is highly vulnerable to natural calamities which are becoming prevalent, thanks to climate change. And third, is the underutilized renewable energy sources. All these points to the fact that the Caribbean region has great potential to be the world’s first RE economy.
The economic recovery of the region hinges largely on affordable and sustainable power. And clean energy is the key to reducing operating costs and lowering of power rates for households and businesses. Renewable power will pave the way for new private investments outside tourism, namely in the manufacturing, agro-business, manufacturing and other high energy-consuming sectors A new resilient and green electricity infrastructure will create new jobs and stimulate economic activities, too.
A Rocky Mountain Institute (RMI) study showed that capital required to source 90% clean energy by 2030 of the 31 countries for the Caribbean will require $80 billion. In return, realizing the investment would mean a $9 billion savings annually in fuel costs and offsetting 240 million metric tons of CO2 per year.
There’s another reason why the Caribbean must develop modern energy systems, particularly micro-grid systems that allow the integration of renewables. The authors stressed: “When modern software controls and battery energy storage are added into micro-grid systems, renewables produce and store power flexibly, shifting effortlessly from heavy demand scenarios to low demand, where cheaper renewables are stretched even further.”
The case of the Caribbean region is highly similar to the Philippines. Not that we rely solely on tourism but rather, because, we are one of the countries that would benefit the same way with a quick shift to renewable power. After all, our country has one of the highest power rates in the world, we are one of the most vulnerable to natural disasters and we have underutilized renewable energy sources.
But the authors warn against arguing that fossil fuel power is the ‘cheaper option’. The sharp decline in crude oil prices, driven by oversupply and decreasing demand, will be short-lived as demand returns. It is expected that at current lows, many high-cost producers will shut down operations and some may go out of business. In a post-COVID world, with increasing global demand and a reduced number of suppliers, there will be upward pressure on oil prices.”
The same can be said of coal prices as demand has been falling even before COVID-19 was declared a pandemic. Plus, coal exports could be limited should Indonesia decide to close down their ports. As I have been saying, our reliance on fossil fuel power sources comes with a lot of risks, particularly volatility of global prices and foreign exchange fluctuations with costs being shouldered by consumers. And just like with the recommendations of the authors of the report, the Philippines should put their money on renewables to hedge against these risks. Our country would also benefit from more construction jobs brought about by higher investments in renewable power.
Evidence to debunk the myth that fossil power has the “least cost” has been available for many years, but have largely been ignored here in the Philippines. Contemplating our future with the effects of COVID-19 in mind also means securing our energy transition. Ignacio Galán, the chairman and CEO of the Spanish renewables giant, Iberdrola, which owns Scottish Power, said it best: “A green recovery is essential as we emerge from the COVID-19 crisis. The world will benefit economically, environmentally, and socially by focusing on clean energy. Aligning economic stimulus and policy packages with climate goals is crucial for a long-term viable and healthy economy.”