As economies around the world move from “disaster preparation” to “recovery preparation”, the low carbon and renewable sector has been earmarked as a means by which to target government support in a manner consistent with medium and long-term policy targets – such the UK’s own net zero 2050 objectives. While it is far too soon to comment on the long-term implications for the energy sector, or to take a view as to what the post-COVID era will look like, we are already seeing some high-profile policy announcements.
The Committee on Climate Change has called upon the leaders of the nations of the UK to utilise climate investments to support economic recovery and jobs (see Energy Spectrum 713). Furthermore, the UK government has already pledged £2bn to support low carbon transport, including a supplemental £10mn for EV charging infrastructure.
In addition, the International Renewable Energy Agency highlights the potential for low carbon investment as a means by which to catalyse economic growth in the wake of COVID-19. However, the International Energy Agency has warned of the potential for a sharp rebound in both energy use and emissions unless investment is made in low carbon technologies to aid economic growth and the pursuit of a clean energy transition – particularly given controversy regarding financial support to carbon-intensive industries at a time of decarbonisation.
The energy sector in the UK is not immune to the challenges faced by the economy as a whole, and there is the core issue of what a post-lockdown energy consumer will look like, and how that will affect the nature and structure of the energy system.
The use of decentralised technologies has been highlighted as an important element in a post-COVID energy system, and will facilitate greater participation by individuals and communities while resulting in greater self-reliance from an energy perspective. Although such a move will not eliminate problems with supply chains of the type that all industries are experiencing during lockdown, the use of such a decentralised approach may mitigate this.
Lockdown conditions and their implications followed hot on the heels of the OPEC-Russia induced collapse in oil prices, given that wind and solar are not typically subject to the same degree of geopolitical dynamics with which the oil market is synonymous, they may be particularly attractive to investors seeking comparative stability.
With the UK government committing fiscal and monetary support to the economy on a never-before-seen scale, state intervention on this scale may be further enhanced by targeted public incentives to help businesses contribute to the low carbon transition while supporting the economy. As such, the market conditions experienced over the last two months may be important steps on the journey to 2050, and with resultant market opportunities and price drivers that will accompany this.