Introduction
As the first half of 2021 is completed, it is clear to everyone that the latest crisis, that of the Covid-19 pandemic, widely affected, and still does, not only plenty of geographical areas of the world, but also several different sectors as well, causing a general social and economic disorder worldwide. That being said, the pandemic burst out brought significant impacts on the energy sector too, even though the potential long term implications on the energy transition may seem unclear for now. Nevertheless, the recent crisis came to remind us how much energy matters and more importantly to highlight the various complex links between international or regional policy and the multiple national agendas.
A key step in order to start making sense out of what has been happening recently, is to look at the bigger picture. Thus, it makes sense that several governments have been focusing their concerns primarily on dealing with this new health crisis and on mitigating the risks arising from a potential global economic contraction triggered as a side-effect of the lockdown-led recessions. However, the need to deal with another dangerous crisis remains of high importance, as governments also need to address the challenges of climate change in parallel. All these, under the threat of a new financial crisis, which could cause important structural changes in the energy sector, including the slowdown of the transition process, the weakening of energy international trade and the increase of the risks connected to energy investments.
At the same time, changes in working routines, travel bans and moving restrictions resulted in a decrease of energy demand from the sector of transportation. Thus, the following decline in global demand for oil and gas affected their prices as well, leading to significant increase in their prices respectively. As a result, the reduction of CO2 emissions was also notable in the process. However, even if such reduction seems like good news when it comes to climate goals, in fact, it is mainly a short-term effect. Experts claim that this decline would be required to happen every year from now on in order to deliver the Paris ambition of keeping global warming below 2°C above pre-industrial levels.
In general, the impacts have been manageable leading to an all in all stability regarding the development of investment plans. Apart from this, companies operating in Central and Eastern Europe have been affected mainly by some changes regarding the supplies prices but have not yet been in need of altering current activities and/or future plans. On the other hand, Western European companies are experiencing a different, more severe, situation in core business, especially in supply capacities. Besides, during the first quarter of 2020 energy demand fell by 3.8% compared to the same period of 2019. This led to important rises in the price of conventional fossil fuels that the countries of this area import in high quantities.
On the contrary, within the same period the need for renewable energy sources was increased by 1.5% and led to the realization that so far renewable energy sources have been resilient to the crisis caused by Covid-19. In addition, it is expected that their presence in the energy mix of the region’s countries will further grow, as the data regarding the energy mix of the year 2020 for the EU also proved. According to this, RES surpassed for the first time the share of conventional fossil fuels in the energy mix of the EU (36%; 37%). For instance, in Germany, the average proportion of net electricity generated from renewable sources rose above 55% in the first half of 2020, compared to 47% for the same period in 2019.
Impacts of the financial crisis on the energy sector, in the production of natural gas and in oil related activities, are a long-term concern; hence an economic recession might have a more narrow impact. Certain promising policy and market instruments might boost new investments into transmission infrastructures, even under these conditions, in liberalized electricity markets. In the short-term, there is not a significant impact on investments when it comes to energy supply. Urgent steps should be taken to find more secure and conventional rules for the functioning of financial sectors both at international and state level. As far as the electricity sector is concerned, it could be disastrous if the financial crisis would result in a suspension of investments into generating capacity and a network of infrastructure as well.
The European policy
In parallel to these, the steps taken by the European Union in the broader framework of energy and climate policy are worth-mentioning. More specifically, in December 2019 the European Commission presented its ambitious plan to make the European Union a climate neutral economy by 2050. Within the framework of this plan, the European Commission set a package of proposed initiatives in order to achieve this goal, the very well-known European Green Deal. Since the presentation of the EU Green Deal many steps have been followed towards the broader implementation of a greener policy in a variety of pillars across the economic activities in the Union.
More specifically, the EU Green Deal was from its very beginning divided in specific policy areas, such as that of biodiversity, including measures to protect our fragile ecosystem; the strategy “From Farm to Fork”, promoting ways to ensure more sustainable food systems; the sector of sustainable agriculture, under which common agricultural policy (CAP) is planned to lead in a more sustainable management of the Union’s rural areas; the area of clean energy, for which further RES penetration and the support on respective investments is promoted; that of sustainable industry, where ways to ensure more sustainable and more environmentally-respectful production cycles are being developed; the sector of building and renovating, where the need for a cleaner construction sector is being highlighted; the sector of sustainable mobility, based on the promotion of greener and more sustainable means of transport; the goal of pollution elimination, including measures to rapidly and efficiently cut pollution; and the broader policy area of climate action in order to turn the EU economy into being climate neutral by 2050.
Following this planning, the European Commission initiated certain actions on implementing the new framework at the beginning of 2020, right about at the moment when the Covid-19 pandemic burst out and affected policy priorities worldwide. The European Union along with most of its Member States suffered the severe consequences of the pandemic and the loss of over half a million lives. When Member States were seriously hit and saw the number of cases and deaths increasing rapidly, such as the cases of Italy and Spain at the very beginning of the crisis in the EU, it became clear that the main effort should be given into supporting those hit and finding the means towards the recovery from this crisis.
As the climate crisis also remained a present and in fact a growing threat as well, it was clear at that moment that putting the transition towards climate neutrality into a less prioritized place would be significantly wrong. In that sense, the Commission proceeded in presenting step by step the new framework gradually, of which some key points are:
- The EU Green Deal Investment Plan — presented in January 2020 — concerns EU funding in order to facilitate the necessary investments towards a green and inclusive economy. Its three dimensions include Funding, Enabling and Practical Support by the European Commission to the respective investments.
- The Just Transition Mechanism — also presented in January 2020 — consists of the key tool to ensure that the transition will take place in a fair way, under inclusiveness and equality. Even though all EU regions require funding, this mechanism will work to provide targeted support in order to mobilize more than 100 billion euros for the period 2021–2027 in the regions most severely affected by the transition. The main income sources of the mechanism are a Just Transition Fund, a dedicated just transition scheme under InvestEU and a public sector loan facility with the EIB backed by the EU budget.
- The Climate Law — the Commission suggested and works on, since March 2020, a set of measures dedicated to keep track of the EU Member States’ progress and provide guidance into adjusting their actions accordingly. It shall be based on already existing systems like the National Energy and Climate Plans each Member States submits to the EU, while it includes a legally binding target of net zero GHG emissions by 2050. The Climate Law was recently given the European Parliament’s green light.
- Revision of Directives — Several important Directives of the EU have been through revision during the past year in order to further expand the policy targets of the Member States towards the energy transition and the climate neutrality. Such Directives have been, indicatively, the Renewable Energy Directive (2018/2001/EU) and the Energy Efficiency Directive (EU 2018/2002).
Apart from these, the European Commission planned in parallel the EU recovery package from the pandemic and it was decided in June 2020 that the EU Green Deal should guide the recovery towards green growth and a more resilient EU. Thus, when the Next Generation EU, as the recovery package was called, was presented in last July and further developed since then and until the end of 2020, it was concluded that under the agreement the Commission will be able to borrow up to €750 billion on the markets and the funds may be used for back-to-back loans and for expenditure channeled through the MFF (Multinational Financial Framework) programmes. In fact, capital raised on the financial markets will be repaid by 2058, while the amounts available under the NGEU will be allocated to seven individual programmes, as following, among which of course, the Just Transition Fund to facilitate the inclusive and fair transition in the Union:
● Recovery and Resilience Facility: €672.5 billion (loans: €360 billion, grants: €312.5 billion)
● ReactEU: €47.5 billion
● Horizon Europe: € 5 billion
● InvestEU: €5.6 billion
● Rural Development: €7.5 billion
● Just Transition Fund (JTF): €10 billion
● RescEU: €1.9 billion
Of course, the European Union and its Member States still have a long way to go, since the fight against the Covid-19 pandemic seems to be long-lasting and the fight against the climate crisis becomes more and more urgent and challenging.
Greece
At this point, it would be useful to note a few points regarding the effects of the recent situation in Greece. In particular, lately, the Greek electricity machine is characterised through the reducing intake of traditional fuels primarily based totally in big components on lignite which turned into strategically selected for power manufacturing after the oil disaster of the 70s. Another fundamental function of Greece is that it is distinctly dependent on imports, which consist of Crude Oil, Oil Products and Natural Gas. Furthermore, the electricity quarter in Greece has a better contribution to gross cost brought and employment than in maximum EU nations and is poised to develop notably withinside the coming years, pushed through some of large factors.
Given its excessive dependency on oil and natural gas imports, Greece can be stricken by the autumn in oil expenses and the bad effect on international oil and natural gas markets amid the unfolding of SARS–CoV-2. Initially, Greece may be definitely stricken by the falling oil import expenses and accordingly the following decrease home oil expenses and manufacturing costs, however this high quality impact can be offset through decrease home and outside demand. Governments the world over could make the maximum of the present day disaster to push ahead their inexperienced electricity plans and undertake sustainable answers subsidized through easy and inexperienced electricity technologies. In this respect, the present day disaster may be visible as a possibility for renewable electricity transitions in lots of countries, along with Greece.
More specifically, when it comes to the energy consumption in Greece as it was monitored before the Covid-19 pandemic, the TFC or also referred to as secondary energy supply, which is the final consumption of fuels (e.g. electricity, natural gas, oil products) by end users, without the transformation sector (e.g. power generation and refining) (IEA definition), accounted in 2017 for c. 72% of TPES due to transformation and losses. In addition, TFC had been reduced by 24% in a decade (2007–2017), slightly higher than TPES, mainly because of the cuts on oil products over the same period, as a result of the extended Greek economic crisis. Oil (oil products and refined petroleum) was substantially reduced by 39% over 2007- 2017, accounting for 53% of TFC in 2017, from over 2/3 of TFC in 2007. Electricity in TFC was only slightly (-2%) decreased in 2017 compared to 2007, but its share in TFC increased to 28% from 22%. Natural gas use represented 9% of TFC in 2017, up by 82% since 2007. Renewable energy (RES, biofuels and waste) accounted for 8% of total final consumption in 2017, up from 6% in 2007.
Following the Covid-19 pandemic, it is interesting to examine the impacts on Gross Energy Consumption. Initially, the sharp decline during 2020 is attributed to the drop of the general demand mainly for natural gas, oil and coal. By 2022, energy consumption has been anticipated to return to prior projections and to follow a downward trend due to improvements achieved in energy efficiency. In addition, RES shares are not strictly affected by the pandemic and continue their gradually increasing penetration into the system, at the same time that coal consumption seems to be reduced at historical levels after the recent government’s decision to phase-out all lignite units by 2028, or as it is ideally aimed by 2025. In the long term, the gap between the two projections will probably progressively decrease, reaching at almost identical levels before 2022.
Then, the impacts on Primary Energy Production of Greece are also important to be reviewed. In that sense, by the end of 2025, RES is expected to represent 75% of total energy produced in Greece, since both coal and oil are expected to follow a downward trend. In order to succeed in increased penetration of RES, flexible and quick-response technologies such as Batteries and Demand Response mechanisms are necessary. In 2019, coal consumption represented 45% out of total domestic energy production, while RES stood at 48% and oil at 6%. Covid-19 notably affected the future projections of primary energy production in Greece since the updated estimates for 2020 are concluding to a 20% reduction. Additionally, based on the National Plan for Climate & Energy, oil production in Greece is expected to depict a stable share of 6% throughout the projected period.
Finally, another field highly affected has been that of Electricity, since the consequences of the Covid-19 outbreak towards the companies and employees of the electricity market are numerous as well. First of all, part of the commercial, business and supply chain activities have been suspended. In parallel, plenty of job positions have been affected, and this negatively impacts monetary output and prosperity. Aiming to ensure security of supply, the majority of electricity companies took instant measures throughout the generation chain and at the most critical infrastructures. Indicatively, the companies characterized specific areas (such as, unit control rooms and mines) as critical with controlled entry and mandatory use of protective equipment for the personnel.
Under this prism, some issues have been reported so far in the supply chain too. Besides, the regular and constant operation of companies that supply the facilities with materials for continuous consumption (chemicals, lubricants, etc.) or other critical materials, particularly when they are necessary for the implementation of station maintenance, is vital for the smooth functioning of thermal plants. This issue becomes of higher importance in the case of supplies coming from different international locations or when there is a need for spare parts to be shipped abroad for inspection and reconstruction. Another hassle might arise from the travel limitations that may lead to negative impacts on the availability of units on non-interconnected islands. During the summer season, where typically a demand peak is observed, the availability of units may be reduced to a greater extent.
In total, the economic crisis during the last decade significantly affected the total demand for electricity which, compared to the levels of 2008, dropped by almost 11% in 2014. The projections primarily based totally at the extended demand for electricity during 2019, forecasted that by 2021 the demand would equal 56.5000 GWh. However, following the outbreak of Covid-19, this scenario was revised for 2023, meaning that the anticipated growth in electricity demand will fall short by 2 years. This negative effect from the electricity market is at some point reflected on the adverse outcome that is anticipated in the aggregate consumption in Greece. This U-shaped return, depicted above, could be easily altered to a V-shaped return or even an L-shaped based on the resurgence of the Covid-19 crisis.
Conclusion
All in all, as the above aims on examining how the situation developed following to the Covid-19 pandemic burst out during the past year, it is significant to note that as this crisis proceeds leading to more extended or tighter lockdowns across all countries, the potential impacts of it are still variable and safer conclusions will be reached once examining the whole situation in the long term. What is undeniably true though, is that this challenge demands that the efforts states make towards the energy transition need to be maximized in order to be successful, since more and more factors raising the risks involved are emerging.
Sources:
Abu-Rayash, A. and Dincer, I., 2020, Analysis of the electricity demand trends amidst the COVID-19 coronavirus pandemic. Energy Research & Social Science, [Online]. Volume 68, 101682. Available at: https://www.sciencedirect.com/science/article/pii/S2214629620302577 [Accessed 27 February 2021].
Agency, I. E., n.d. https://www.iea.org/countries/greece. [Online] Available at: https://www.iea.org [Accessed 15 March 2021].
DNV, 2020, The impact of COVID-19 on the energy transition, [ONLINE] Available at: https://www.dnv.com/energy-transition/impact-of-covid19-on-the-energy-transition.html , [Accessed 16 February 2021].
Halbrügge, S., Schott, P., Weibelzahl, M., Ulrich Buhl, H., Fridgen, G., and Schöpf, M., 2021, How did the German and other European electricity systems react to the COVID-19 pandemic?, Applied Energy, [Online], Volume 285, 116370, Available at: https://www.sciencedirect.com/science/article/pii/S0306261920317475 [Accessed 7 March 2021].
Hellenic Association, 2020. https://www.haee.gr/FileServer?file=ca430e84-31ec-4fa8-8153-ac3f6eb16b70 . [Online] Available at: https://www.haee.gr [Accessed 15 February 2021].
IEA, 2020, The impact of the Covid-19 crisis on clean energy progress, [ONLINE] Available at: https://www.iea.org/articles/the-impact-of-the-covid-19-crisis-on-clean-energy-progress . [Accessed 19 February 2021].
M. Mofijur, I.M. Rizwanul Fattah, Md Asraful Alam, A.B.M. Saiful Islam, Hwai Chyuan Ong, S.M. Ashrafur Rahman, G. Najafi, S.F. Ahmed, Md. Alhaz Uddin and T.M.I. Mahlia, 2021, Impact of COVID-19 on the social, economic, environmental and energy domains: Lessons learnt from a global pandemic. Sustainable Production and Consumption, [Online]. Volume 26, Pages 343–359, Available at: https://www.sciencedirect.com/science/article/pii/S2352550920313567 [Accessed 7 March 2021].
Severo, E., De Guimarães, J. and Dellarmelin, M., 2021, Impact of the COVID-19 pandemic on environmental awareness, sustainable consumption and social responsibility: Evidence from generations in Brazil and Portugal, Journal of Cleaner Production, [Online], Volume 286, 124947, Available at: https://www.sciencedirect.com/science/article/pii/S095965262034991X [Accessed 7 March 2021].
World Energy Council, 2008. Available at: https://unece.org/fileadmin/DAM/energy/se/pp/EnCom17/20Nov/6_Slavov.pdf . [Accessed April 9, 2021].
World Energy Covid Scenarios. World Energy Council. Available at: https://www.worldenergy.org/transition-toolkit/world-energy-scenarios/covid19-crisis-scenarios [Accessed April 9, 2021].
World Health Organization, 2021. Coronavirus. [ONLINE] Available at: https://www.who.int/health-topics/coronavirus#tab=tab_1 . [Accessed 21 March 2021].
Comments
Post a Comment