The world may be battling through several different crises (health, economic, climate) all at the same time, but it may not be as bad as it seems. Oddly enough, one crisis is canceling out another; the coronavirus pandemic lockdowns are accelerating the shift towards renewables. They have caused many fossil fuel plants to shut down, which means the worst-case climate scenarios are less likely. Those predictions were based on coal remaining a primary source of fuel for electricity for the rest of the century. However, it appears that coal use has hit its peak earlier than expected and is now on the decline.
Renewable energy has become a safer choice for investors and a cheaper one for consumers. An analysis by the Carbon Tracker Initiative found that electricity from wind and solar plants will be less expensive in every major market across the globe by 2030 at the latest. Industry observers predict the global coal industry will “never recover” from the effects of the COVID-19 pandemic.
The falling demand for electricity has caused many utilities to cut back on coal first because it’s more expensive than wind, solar, and gas. The situation pre-pandemic was already dire due to constant bombardment of climate activism and divestment campaigns. The lockdowns exasperated the industry’s frailties even further by expunging billions from coal market valuations.
Around the world, records are being made of renewables trumping coal in electricity production, even in the United States! Meanwhile, in Europe, the UK has gone longer than a month without burning a single lump of coal and Portugal for nearly two months.
The chair of Global Carbon Project, Rob Jackson, said that coal would likely never again reach the global peak seen in 2013:
Covid-19 will slash coal emissions so much this year that the industry will never recover, even with a continued build-out in India and elsewhere. The crash in natural gas prices, record-cheap solar and wind power, and climate and health concerns have undercut the industry permanently.
In Southeast Asia (Vietnam, Indonesia, and the Philippines), the pandemic has caused multiple major coal projects to be put on hold.
Even financial institutions have decided to sever ties with coal. BNP Paribas is one of them. The head of sustainability research of the French bank, Mark Lewis, said:
The economics of coal were already under structural pressure before the pandemic. And coming out of it these pressures will still be there – but now compounded by the impact of the pandemic.
The public health benefits of cleaner air will be front and center after weeks of lockdown that have prompted blue skies and clean air in Asia’s megalopolises. This pressure from the finance sector will only accelerate going forward, pushing the cost of capital for coal projects even higher.
Of course, coal isn’t going to disappear by tomorrow, but the balance has shifted for the better. Ted Nace, director of Global Energy Monitor, said:
Coal is definitely on the downturn and this pandemic is going to accelerate that. Demand should come back to some degree next year. But there is a very strong argument that it is not going to just bounce back.
But to make sure the scale stays tipped in renewables favor, governments will have to intervene. Carlos Fernández Alvarez, a lead coal analyst at the International Energy Agency, said:
[Although] coal had been hit hardest by the pandemic; the decline could be temporary unless governments invest in renewables to pull economies out of the lockdown. We have to look at this structurally. If there is high energy demand again in the future, it will probably be coal that picks up the slack because it is the marginal supplier.
For now, the rise of renewable energy and collapse in demand for fossil fuels means clean electricity will triumph this year, and carbon emissions will fall. Fatih Birol, the IEA’s executive director, said:
The plunge in demand for nearly all major fuels is staggering, especially for coal, oil, and gas. Only renewables are holding up during the previously unheard-of slump in electricity use. It is still too early to determine the longer-term impacts. But the energy industry that emerges from this crisis will be significantly different from the one that came before.
An estimated 3 billion ton drop in carbon emissions is expected. The drastic fall in global energy demand this year will be the equivalent of losing the energy demand of India – the world’s third-largest energy consumer. Renewable energy has been the only source resilient to this shock – the most significant energy disruption since WWII.
