News Archive - covid-19

The effect of Lockdown 2 on energy procurement strategy

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Whilst not as severe in its restrictions nor hopefully as long in duration as the first national lockdown in March, ‘Lockdown 2’ will inevitably lead to a nationwide reduction in energy use.

More businesses will either go to the wall or temporarily close their doors and encourage home-working wherever possible, leaving vast swathes of office floor space empty.

Meanwhile, non-essential retail outlets will put up the ‘Closed’ signs as of one minute past midnight on Thursday morning, and pubs, cafes and restaurants unable to provide takeaway food will also be left eerily quiet.

At the end of March, less than two weeks into the initial period of restrictions, electricity demand dropped by as much as a tenth as businesses were forced to close their doors as part of the measures introduced to curb the spread of coronavirus.

GB day-ahead electricity prices fell 10 per cent as a result compared to the previous week and the downward trend largely continued until lockdown restrictions slowly started to ease in mid-May when prices did a U-turn and increased again. Not all of these price wholesale price drops, however, were passed on to customers, at least not in the initial stages.

Whilst planning for the future is never easy at the best of times, let alone during the uncertainty of living through a global pandemic, an effective energy procurement strategy will help mitigate against some of the peaks and troughs.

Flexibility

Business energy deals offer a wide procurement window for tendering contracts and are more flexible than those available to domestic users in that they can be fixed from anything up to four years.

Business energy is also cheaper per unit of electricity and gas used, but it is important to be aware of associated non-energy costs, such as the Climate Change Levy (CCL), when considering which contract to sign.

Non-energy costs are those that are incurred around the purchase and supply of energy rather than the actual unit spend on gas and electricity and have risen incrementally in the last few years to form a larger percentage of the overall energy bill.

100 per cent accuracy in forecasting price changes is impossible given there are so many external factors involved, such as a change in government policy or unseasonable weather.

But, at Energy Management, we have the monitoring capability and in-house expertise to help clients make better-informed decisions about the type and length of the energy contract best suited to their needs.

If you’d like to use the latest lockdown period to do some energy ‘housekeeping’, please get in touch on 01225-867722.

World Energy Outlook sets out a vision for the future

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World Energy Outlook 2020 has shown how the response to the Covid-19 crisis can reshape the future of energy.

Amid deep disruption and uncertainty caused by the pandemic, the 464-page publication states a surge in well-designed energy policies is needed to put the world on track for a resilient energy system that can meet climate goals.

But whether this upheaval ultimately helps or hinders efforts to accelerate clean energy transitions and reach international energy and climate goals will depend on how governments respond to today’s challenges.

Pivotal period

The World Energy Outlook (WEO) 2020, the International Energy Agency’s flagship publication, focuses on the pivotal period of the next 10 years, exploring different pathways out of the crisis.

The new report provides the latest IEA analysis of the pandemic’s impact: global energy demand is set to drop by 5% in 2020, energy-related CO2 emissions by 7%, and energy investment by 18%.

The WEO’s established approach – comparing different scenarios that show how the energy sector could develop – is more valuable than ever in these uncertain times.

In the Stated Policies Scenario, which reflects today’s announced policy intentions and targets, global energy demand rebounds to its pre-crisis level in early 2023.

However, this does not happen until 2025 in the event of a prolonged pandemic and deeper slump, as shown in the Delayed Recovery Scenario at the bottom of this article.

Slower demand growth lowers the outlook for oil and gas prices compared with pre-crisis trends. But large falls in investment increase the risk of future market volatility.

Starring role for renewables

Renewables take starring roles in all our scenarios, with solar centre stage. Supportive policies and maturing technologies are enabling very cheap access to capital in leading markets.

Solar PV is now consistently cheaper than new coal- or gas-fired power plants in most countries, and solar projects now offer some of the lowest-cost electricity ever seen.

In the Stated Policies Scenario, renewables meet 80% of global electricity demand growth over the next decade. Hydropower remains the largest renewable source, but solar is the main source of growth, followed by onshore and offshore wind.

“I see solar becoming the new king of the world’s electricity markets. Based on today’s policy settings, it is on track to set new records for deployment every year after 2022,” said Dr Fatih Birol, the IEA Executive Director. “If governments and investors step up their clean energy efforts in line with our Sustainable Development Scenario, the growth of both solar and wind would be even more spectacular – and hugely encouraging for overcoming the world’s climate challenge.”

Weak linkThe WEO-2020 shows that the strong growth of renewables needs to be paired with robust investment in electricity grids. Without enough investment, grids will prove to be a weak link in the transformation of the power sector, with implications for the reliability and security of electricity supply.

Fossil fuels face varying challenges. Coal demand does not return to pre-crisis levels in the Stated Policies Scenario, with its share in the 2040 energy mix falling below 20% for the first time since the Industrial Revolution.

But demand for natural gas grows significantly, mainly in Asia, while oil remains vulnerable to the major economic uncertainties resulting from the pandemic.

“The era of global oil demand growth will come to an end in the next decade,” Dr Birol said. “But without a large shift in government policies, there is no sign of a rapid decline. Based on today’s policy settings, a global economic rebound would soon push oil demand back to pre-crisis levels.”

The worst effects of the crisis are felt among the most vulnerable. The pandemic has reversed several years of declines in the number of people in Sub-Saharan Africa without access to electricity. And a rise in poverty levels may have made basic electricity services unaffordable for more than 100 million people worldwide who had electricity connections.

Green shoots

Global emissions are set to bounce back more slowly than after the financial crisis of 2008-2009, but the world is still a long way from a sustainable recovery.

A step-change in clean energy investment offers a way to boost economic growth, create jobs and reduce emissions. This approach has not yet featured prominently in plans proposed to date, except in the European Union, the United Kingdom, Canada, Korea, New Zealand and a handful of other countries.

In the Sustainable Development Scenario, which shows how to put the world on track to achieving sustainable energy objectives in full, the complete implementation of the IEA Sustainable Recovery Plan moves the global energy economy onto a different post-crisis path.

Nuclear momentum

As well as the rapid growth of solar, wind and energy efficiency technologies, the next 10 years would see a major scaling up of hydrogen and carbon capture, utilisation and storage, and new momentum behind nuclear power.

“Despite a record drop in global emissions this year, the world is far from doing enough to put them into decisive decline. The economic downturn has temporarily suppressed emissions, but low economic growth is not a low-emissions strategy – it is a strategy that would only serve to further impoverish the world’s most vulnerable populations,” said Dr Birol.

“Only faster structural changes to the way we produce and consume energy can break the emissions trend for good. Governments have the capacity and the responsibility to take decisive actions to accelerate clean energy transitions and put the world on a path to reaching our climate goals, including net-zero emissions.”

A significant part of those efforts would have to focus on reducing emissions from existing energy infrastructure – such as coal plants, steel mills and cement factories. Otherwise, international climate goals will be pushed out of reach, regardless of actions in other areas.

Detailed new analysis in the WEO-2020 shows that if today’s energy infrastructure continues to operate in the same way as it has done so far, it would already lock in a temperature rise of 1.65 °C.

Despite such major challenges, the vision of a net-zero emissions world is increasingly coming into focus. The ambitious pathway mapped out in the Sustainable Development Scenario relies on countries and companies hitting their announced net-zero emissions targets on time and in full, bringing the entire world to net-zero by 2070.

Drastic action

Reaching that point two decades earlier, as in the new Net Zero Emissions by 2050 case, would demand a set of dramatic additional actions over the next 10 years.

Bringing about a 40% reduction in emissions by 2030 requires, for example, that low-emissions sources provide nearly 75% of global electricity generation in 2030, up from less than 40% in 2019 – and that more than 50% of passenger cars sold worldwide in 2030 are electric, up from 2.5% in 2019.

Electrification, innovation, behaviour changes and massive efficiency gains would all play roles. No part of the energy economy could lag behind, as it is unlikely that another would be able to move fast enough to make up the difference.

The different pathways in the WEO-2020

  • The Stated Policies Scenario (STEPS), in which Covid-19 is gradually brought under control in 2021 and the global economy returns to pre-crisis levels the same year. This scenario reflects all of today’s announced policy intentions and targets, insofar as they are backed up by detailed measures for their realisation.
  • The Delayed Recovery Scenario (DRS) is designed with the same policy assumptions as in the STEPS, but a prolonged pandemic causes lasting damage to economic prospects. The global economy returns to its pre-crisis size only in 2023, and the pandemic ushers in a decade with the lowest rate of energy demand growth since the 1930s.
  • In the Sustainable Development Scenario (SDS), a surge in clean energy policies and investment puts the energy system on track to achieve sustainable energy objectives in full, including the Paris Agreement, energy access and air quality goals. The assumptions on public health and the economy are the same as in the STEPS.
  • The new Net Zero Emissions by 2050 case (NZE2050) extends the SDS analysis. A rising number of countries and companies are targeting net-zero emissions, typically by mid-century. All of these are achieved in the SDS, putting global emissions on track for net-zero by 2070. The NZE2050 includes the first detailed IEA modelling of what would be needed in the next ten years to put global CO2 emissions on track for net-zero by 2050.

Source: iea.org

IEA report on Covid-19 impact

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Beyond the immediate impact on health, the current Covid-19 crisis has major implications for global economies, energy use and CO2 emissions.

Analysis of daily data through to mid-April by the International Energy Agency (IEA) shows that countries in full lockdown during this period experienced an average 25% decline in energy demand per week and countries in partial lockdown an average 18% decline.

Daily data collected for 30 countries until 14 April, representing over two-thirds of global energy demand, show that demand depression depends on duration and stringency of lockdowns.

Global energy demand declined by 3.8% in the first quarter of 2020, with most of the impact felt in March as confinement measures were enforced in Europe, North America and elsewhere.

At the start of 2020, it was forecast that global energy investment would grow by 2%; instead, it has fallen by 20% – a fall in spending of $400billion.

Covid-19 impact: the IEA’s sector-by-sector energy breakdown (for the first quarter of 2020)

  • Global coal demand was hit the hardest, falling by almost 8% compared with the first quarter of 2019. Three reasons converged to explain this drop. China – a coal-based economy – was the country the hardest hit by Covid‑19 in the first quarter; cheap gas and continued growth in renewables elsewhere challenged coal, and mild weather also capped coal use.
  • Oil demand was also hit strongly, down nearly 5% in the first quarter, mostly by curtailment in mobility and aviation, which account for nearly 60% of global oil demand. By the end of March, global road transport activity was almost 50% below the 2019 average and aviation 60% below.
  • The impact of the pandemic on gas demand was more moderate, at around 2%, as gas-based economies were not strongly affected in the first quarter of 2020.
  • Renewables were the only source that posted growth in demand, driven by larger installed capacity and priority dispatch.
  • Electricity demand has been significantly reduced as a result of lockdown measures, with knock-on effects on the power mix. Electricity demand has been depressed by 20% or more during periods of full lockdown in several countries, as upticks for residential demand are far outweighed by reductions in commercial and industrial operations. For weeks, the shape of demand resembled that of a prolonged Sunday. Demand reductions have lifted the share of renewables in the electricity supply, as their output is largely unaffected by demand. Demand fell for all other sources of electricity, including coal, gas and nuclear power.

Coronavirus and Globalisation: What’s next for supply chain sustainability?

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The coronavirus pandemic has left global economies at a standstill and knocked the confidence in global and connected trade.

The question has been asked: would businesses benefit from pivoting to more localised value chains, as France President Macron advocates, or do global supply chains enable a global shift towards a climate-resilient future?

While that is open to debate, the damage caused by the coronavirus is there for all to see, in hard figures. In what has been described as “an ugly” situation, the World Trade Organisation has forecast a decline in international trade and commerce of between 13% to 32% this year.

The World Trade Organisation has forecast a decline in international trade and commerce of between 13% to 32% this year

The virus is having a huge impact on transport and productivity with many supply chains being affected. Manufacturers are trying to shift the structure of their supply chains to make up for missed deliveries or inputting pivoting systems to make different products entirely.

PPE and hand sanitiser are two obvious examples where this is the case. Turning whiskey into wine was not an unfamiliar process before the outbreak, but how many distilleries would have imagined they’d end up making products that people would raise a glass to because they made them safe not happy?

The world has been turned upside down in so many respects.

Sustainability to suffer in the long run?

With this shift in supply chain structure comes concerns, that the short-term focus placed upon operational capacity and processes could unravel efforts to integrate suppliers into more sustainable practices.

As data from the Financial Times reveals, COVID-19 has unmasked an overt reliance on manufacturing suppliers located in China, with 300 of the world’s top 500 companies owning facilities in Wuhan, the city where the pandemic began.

It has become more and more apparent that, for many organisations, the globalisation of manufacturing has created a scenario where supply chains are unprepared for disruption.

This is due to either being very localised or spanning several different countries, it can even be to the point where end-user businesses won’t be aware of associated links to deforestation, human rights abuse and other environmental and ethical factors.