Will renewable energy supersede fossil fuels in a post-coronavirus world?
While the Covid-19 remains the most immediate threat to our health and the global economy, there are still some who argue that the so-called ‘climate emergency’ should remain the biggest concern amongst legislators.
This is certainly likely to remain the case post Covid-19, while it can also be argued that the subsequent economic fallout may also encourage governments to shift their approach to fossil fuels and increase investment in renewable energies.
We’ll explore this further below, while asking whether Covid-19 could ultimately be the trigger that causes renewable energies such as wind and solar to supersede fossil fuels.
Just How Dominant are Fossil Fuels?
For the time being, it’s fair to surmise that fossil fuels continue to dominate the energy sector in developed economies such as the U.S. and the UK.
This is despite considerable deductions in coal consumption, which have dragged global usage (outside of emerging economic behemoths such as China and India).
However, this development has created an interesting and conflicted market climate, as while the use of fossil fuels in the U.S. alone fell to its lowest levels since 1902, energy sources such as coal, gas and oil still account for 80% of the total energy market.
This trend is not expected to change in the Western world for the foreseeable future, particularly with lucrative industries such as manufacturing and transport still heavily reliant on fossil fuels.
These industries alone account for 21% and 14% of the world’s total harmful emissions, and it’s thought that they couldn’t currently be sustained in their entirety by renewable energy sources.
Are We Seeing a More Seismic Shift Towards Renewable Energy?
Of course, this shouldn’t detract from the fact that many western nations are making a definite (if gradual shift) towards renewable energy usage, with the UK pledging to achieve carbon-neutral status by the year 2050.
There’s also a growing emphasis on renewable energy in some developing economies, with a number of South Asia economies investing increased amounts in developing inexhaustible and repeatable sources such as wind, solar, hydro and even biomass. Of course, this has as much to do with location as it does intent, with most South Asian nations having direct access to variable climactic conditions and several renewable energy sources.
It’s also fair to say that the markets surrounding energy sources such as oil have also experienced significant demand destruction, partially as a result of Covid-19 and also an excess of supply that has spiralled out of control in recent years.
The latter issue has lasted for several years now, despite attempts by the OECD to cap production levels across the globe and stabilise prices. With the coronavirus outbreak having now triggered a global decline in demand, it’s no surprise that Tickmill have reported that the price of WTI Crude oil has sunk as low as 24.72 per barrel.
With some estimates suggesting that it may take more than a year for oil prices to return to manageable 2019 levels (and even longer to reach the previous level of demand), it would not be a surprise if governments and businesses took the opportunity to invest in renewable energy sources.
In this respect, the fallout from Covid-19 and the disruption caused to the status quo could well help usher in change in the global energy markets, while increasing demand for relatively advanced renewable sources such as wind and solar.