COVID-19 has hammered global energy markets, but renewable energy is taking the opportunity to capture a new record share of electricity generation. Energy producers everywhere have been hit hard by the enormous drop in electricity demand, but renewable energy has managed the declines the best, in part due to their lack of variable costs. Coal and natural gas tend to be pushed out of the market first due to operating costs, opening the door for renewables and potentially leading to the expediting of a transition from fossil fuels to renewables.
During the second quarter of this year, renewables in the European Union (EU) accounted for 44% of their power generation, up 6.8% from the same time frame a year ago and hit a daily peak of 53% of power generation. The power grids responded well to fluctuating energy flows, as summed up by Rory McCarthy, an energy storage senior analyst for Wood Mackenzie who stated, “This has been a real test of how resilient the grids are, and we know they coped because the lights stayed on.” Proponents of renewable energy will point to this period as a reason to give governments added confidence that renewables can consistently supply large and complex power grids, but skeptics still like to see how these grids will respond in the middle of winter with limited sunlight as well as how they’ll respond to increased demand when the global economy recovers.
While there are remaining questions about storage and supply issues with renewables, that isn’t stopping the EU from investing 500 billion euros into a green stimulus package focused heavily on electric vehicles and electric vehicle infrastructure. Democratic Presidential nominee Joe Biden has proposed a $2 trillion investment in clean energy, although this has not been formalized it still highlights the growing shift towards a future of renewables. Large oil companies such as Royal Dutch Shell are also investing in renewables, largely to mitigate investment risk. According to Royal Dutch Shell’s CEO Ben van Beurden, they do not want to be caught in a “disorderly transition” if global governments make abrupt policy changes.
While the renewable energy sector has been hit hard by COVID-19 like every energy sector, they’ve lost a net 500,000 jobs during the past few months, they have still managed to grab large swaths of market share that position them well for the future and could expedite the global transition away from fossil fuels.