This paper discusses the impact of the ongoing COVID-19 crisis on the energy sector and frames it in the broader perspective of the climate crisis and development aspirations. We present practical challenges and responses observed in several emerging economies and developing countries, and discuss how key patterns in those countries are relevant for the post-COVID energy transition. We conclude by offering three considerations on how governments can strengthen their NDC update and signal the highest possible climate ambition for the energy sector.
The effects of the COVID-19 crisis on the energy sector are substantial and diverse: a decline in energy demand, shifts in energy use, and the risk of energy poverty as a result of reduced income. Without adequate policy responses, the crisis is bound to lead to more energy insecurity for vulnerable households and businesses.
The COVID-19 pandemic hits a world in transition. As governments are moving from crisis response to economic recovery, climate and development goals should be front and centre.
There is a convincing call to push for a ‘green recovery’ and take the opportunity to ‘build back better’. In that regard, 2021 marks an important year for the Paris Agreement on climate change, and 2030 remains a steady beacon for the sustainable development goals (SDGs).
Here, we review energy-related government responses to the COVID-19 crisis in Indonesia, Kenya, Thailand, Mexico, and South Africa. While there is much variation between these countries, we observe a number of common challenges and responses:
- Households face sudden energy security concerns. Several countries offer free or discounted electricity, but often only for customers with entry-level connections.
- Businesses, especially in hard-hit sectors, experience cashflow problems; They see their income-generating activities reduce, but often cannot scale back energy expenses accordingly.
- Utilities and operators are receiving large capital injections to compensate for losses and more balance sheet stress is expected. State-owned utilities in poor financial shape are facing increased pressure to accept the prospect of accelerated fossil phase-out and reform.
- Energy businesses need short-term support to survive and long-term predictability to flourish.
A closer look at the power sector in Indonesia (as a case study) reveals that, like in many places, the crisis exaggerates and magnifies existing injustices and vulnerabilities in the energy system. Even though these weaknesses are often well known, the prospect of a green recovery makes discussions around “pre-existing conditions” more urgent than before.
Although COVID-19 crisis is still unfolding and for many countries the short-to-medium term outlook is unclear, it is of paramount importance that all countries submit an updated NDC that reflects their highest possible ambition and a long-term strategy that sets out a clear vision towards decarbonisation. We offer three considerations for governments to strengthen the energy aspect of their updated NDC pledge:
- Make green recovery a central tenet of the energy sector and integrate public support into NDC planning and implementation.
- Acknowledge that full decarbonisation is needed, and that the energy transition will need to accelerate significantly. Commit to realigning national and sector targets and strategies accordingly.
- Identify existing vulnerabilities and weaknesses in the energy system and commit to addressing these without delay to avoid transition roadblocks later on that cause or perpetuate social injustices.