Energy, record investment collapse: renewables are saved


ROME – Not even the energy industry escapes the negative consequences of the coronavirus. Although, in some respects, it has proved to be one of the most “resilient” sectors to the economic crisis caused by the virus, for the current year it is expected that overall investments in the world will drop by 20% compared to 2019, causing markets to fail 400 billion.

“This is the largest drop ever in the history of the energy sector”: this is what the International Energy Agency (IEA) writes, in its latest report just published. The IEA launches an alarm aimed directly at policy makers: with prices at historic lows of the most polluting energy sources, there could be serious delays on the CO2 reduction targets to limit the impact of climate change. And this despite the fact that renewable sources are proving less subject to the reduction of investment compared to sources linked to hydrocarbons.

Energy, 500 billion less

After a good start in the first two months of the year, with investments growing by 2 per cent (the best start in the last six seasons), the lockdown has frozen most of the new projects, with the companies in the sector especially concerned to manage the plants and networks to guarantee the service. According to the International Energy Agency, it is expected that at the end of the year 20% of the planned investments will fall. “This is the largest drop ever that has affected the entire system” with a drop from 1,900 to 1,500 billion overall, as IEA chief Fatih Birol pointed out to the Financial Times.

The intersection of declining energy demand, low commodity prices and rising bills are not going to result in more than $ 1,000 billion in 2020 for government and industry revenues Oil, as expected, accounts for most of the decline. With an unprecedented consequence: for the first time, global spending by crude oil consumers is set to drop below electricity spending.

The collapse of shale oil

Not for nothing, investments in hydrocarbons (both oil and gas) recorded the highest drop ever, even exceeding one third of what was spent last year. In particular, the heaviest consequences will fall on the American shale oil sector. For coal, the Agency talks about a 15% drop in global investments, while renewables are the most resilient, seeing “only” spending commitments falling by 10 percent.

Despite this, the very low price of the raw material could lead to a delay in the decarbonisation processes. Birol is convinced of this, who told the Financial Times that “emerging countries could be forced to resort to less efficient and more polluting technologies”. While the agency’s report reveals how much renewables projects have been postponed to next year and investments will touch the lowest point in the past three years.

“Ensuring network security”

Birol’s alarm also affects networks, precisely because they have proven to be fundamental for guaranteeing supplies throughout the lock down period. “Electricity grids have been a vital basis for the emergency response to the health crisis – and for the economic and social activities that have been able to continue to be blocked,” he stressed. “These grids need to be tough and smart to protect themselves from future shocks but also to accommodate the growing share of wind and solar energy. Today’s investment trends are clear warning signs for future electricity security.”

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Mario Calabresi
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