Now is the Time For Renewable Energy
Updated: May 23, 2020
During the current global economic downturn and reduction in productivity (1), there are important opportunities to invest in renewable energies through subsidies, stimulus packages and recovery strategies. While many factors and decisions remain unknown, these tools can be used to align short-term and long-term goals despite current barriers.
The current situation initially seems unfavourable for renewable energy. Firstly, the current price of oil is very low: U.S crude oil prices actually recently went into the negatives for the first time in history (1). This is due to concurrent decrease in demand for oil as economies all around the world are slowing down (2), and increased supply as Saudi Arabia and Russia engage in a price war and continue to produce high amounts of crude oil (3). Transitioning to renewable energies usually becomes less attractive at lowered oil prices - there is less pressure to invest in alternative fuels, compared to when oil prices are high, and renewables are therefore less competitive in the market (4). Further, COVID-19-induced economic slowdown will likely create additional obstacles to producing renewable energies at the desired scale. For example, China is the main global producer of many components of renewable technologies (5). Since the beginning of national lockdowns to prevent the spread of COVID-19, the global production of batteries, solar panels, and electric cars has begun to slow (6).
At the same time, the low price of oil creates opportunities for investment in renewable energies. The total amount of federal and provincial subsidies for the oil and gas industry in Canada is in the billions (7). These subsidies are intended to make energy more affordable for the poorest and most under-served members of our country (5). So, the current severe drop in oil prices brings the opportunity to lower, remove, or redirect subsidies from fossil fuels to renewables without making oil too unaffordable for these communities, and minimizes social disruption (5, 8).
Governments also have an important opportunity to invest in renewable energies while they are planning and implementing their stimulus and recovery packages. These stimulus and recovery packages will be at a scale to shape the economy for years to come (8). Therefore, it makes sense that the short-term priorities of addressing this crisis should align with long-term priorities, such as federal and international climate goals (8). Since the last time there was a need for a stimulus package, solar and wind are now more developed technologies and are the cheapest source of electricity in almost every country (5,8). Other clean energy technologies, such as hydrogen power and carbon capture, need to be scaled up in order to bring their prices down (5). The currently low and declining interest rates make financing these larger projects more affordable (5), and it is estimated that every dollar invested in renewable energy globally would deliver a return between three and eight dollars (9). Therefore, investing in renewable energies can create the joint benefits of stimulating the economy while advancing towards climate goals.
In conclusion, despite lowered pressure to conserve oil and invest in alternative fuels when prices are low, and reductions in production of renewable energy components, there are opportunities to advance the transition to renewable energies through subsidies and stimulus and recovery packages. Investing in renewable energies can also help the government grow their assets, stimulate the economy, and reach national and international climate goals.
1: Jones L, Palumbo D, & Brown D. Coronavirus: A visual guide to the economic impact. BBC News, 2020. Available from https://www.bbc.com/news/business-51706225
2: Harris K. Trudeau announces aid for struggling energy sector, including $1.7B to clean up orphan wells. CBC News, 2020. Available from https://www.cbc.ca/news/politics/financial-aid-covid19-trudeau-1.5535629
3: Worland J. What Coronavirus Means for the Possibility of a Carbon-Free Economy. TIME Magazine, 2020. Avaialable from https://time.com/5808581/coronavirus-green-stimulus/
4: Silverstein K. Oil And Gas Companies See Opportunity In Offshore Wind Energy. Forbes Magazine, 2020. Available from https://www.forbes.com/sites/kensilverstein/2020/03/16/oil-and-gas-companies-see-opportunity-in-offshore-wind-energy/#3d0964ee2ede
5: Birol F. Put clean energy at the heart of stimulus plans to counter the coronavirus crisis. International Energy Association, 2020. Available from https://www.iea.org/commentaries/put-clean-energy-at-the-heart-of-stimulus-plans-to-counter-the-coronavirus-crisis
6: Mortillaro N. Global lockdowns might reduce CO2 emissions but won't halt climate crisis, scientists say. CBC News, 2020. Available from https://www.cbc.ca/news/technology/covid19-co2-emissions-1.5521271?fbclid=IwAR0-LN6YA99Dp7L8lPBCmP2vQshQpw5sWSk1KptVYebbH8QBnqOh1o5Sr2w
7: Unpacking Canada’s Fossil Fuel Subsidies. International Institute for Sustainable Development, 2020. Available from https://www.iisd.org/faq/unpacking-canadas-fossil-fuel-subsidies/
8: La Camera F. Staying on Course: Renewable Energy in the Time of COVID-19. International Renewable Energy Association, 2020. Available from https://www.irena.org/newsroom/pressreleases/2020/Apr/Staying-on-Course-Renewable-Energy-in-the-time-of-COVID19
9: Ambrose J. Green energy could drive Covid-19 recovery with $100tn boost. The Guardian, 2020. Available from https://www.theguardian.com/environment/2020/apr/20/green-energy-could-drive-covid-19-recovery-international-renewable-energy-agency