The coronavirus pandemic has provided a glimpse into the challenges and opportunities posed by a more rapid transition to a 100 percent renewable energy future. In the early months of COVID-19, for example, electricity demand dropped, as many businesses closed and factories either halted or drastically scaled back their operations.
While electricity demand has faltered during the global pandemic, the share of wind and solar generation has continued to increase. Wind and solar produced 10 percent of global electricity between January and June in 2020. In the European Union, renewables accounted for 33 percent of all power generation. According to the International Energy Agency, the European Union’s renewable energy production was higher than fossil fuel generation between February and early July of this year.
While there are nuances depending on local circumstances, one significant takeaway is that the power system as a whole can handle a more rapid shift to renewables than previously thought by grid operators. “What we found was the energy system can cope really well with much more renewable power and that it’s possible to raise the ambitions around adding more clean energy,” said Sushil Purohit, president of Wärtsilä Energy.
The increased role of renewables has highlighted necessary investments to make the transition to a 100 percent renewable power system faster and more economically efficient. “If you look at Germany, which has invested in renewables for a long time, the price of flexibility went up nearly 470 percent from last year, and utilities had to pay €80 ($95) per megawatt-hour for neighboring countries, like Norway, to take power from them,” added Purohit. “That showed the importance of flexible generation and flexibility in the system.”
COVID-19 stimulus can accelerate the clean energy transition
Charting a more rapid and financially efficient transition to a 100 percent renewable future was a primary objective of Wärtsilä’s recent report, Aligning Stimulus with Energy Transformation, based on its Atlas modeling. “We wanted to share our expertise and knowledge on power system modeling to facilitate discussions and help people map the path to 100 percent renewables,” said Purohit.
In particular, the Atlas report examines how stimulus money aimed at spurring a COVID-19 economic recovery could also accelerate the transition to clean energy, and send global carbon emissions into structural decline.
The report relies on a database from Lappeenranta-Lahti University of Technology in Finland to model the cost-optimal mix of technologies to produce 100 percent of electricity from renewable sources as well as an analysis of over 200 energy stimulus policies in G20 countries provided by the Energy Policy Tracker. The report demonstrates how utilizing energy-related stimulus investments to support clean energy could speed decarbonization in five key countries: the U.S., the United Kingdom, Brazil, Germany and Australia.
Economic and decarbonization benefits of targeted stimulus
Many nations around the world discuss prioritizing clean energy. But the $400 billion allocation of COVID-19 energy stimulus in G20 countries does not reflect that objective. According to the report, 54 percent of the $400 billion pledged has been targeted to benefit fossil fuel-based energy, while 36 percent has been devoted to clean energy. In the U.S., more than 70 percent of the current $100 billion allocated for energy stimulus was pledged to fossil fuels, compared to less than 30 percent for clean energy.
Beyond the issue of decarbonization, this is a missed opportunity to spark near-term job creation. According to a report by McKinsey & Company, every $10 million of government spending on renewables creates 75 jobs, while the same amount invested in fossil fuels creates 27 jobs.
“From that perspective, it makes more sense to put this stimulus in clean energy because you want every penny of stimulus to work harder,” said Purohit. “Then, when COVID is over and you start to have a more normal economy, operating renewable energy won’t require as many jobs and you can put more of the labor force back into the larger economy.”
For the U.S., reallocating the $72 million of the COVID-19 energy stimulus currently earmarked for fossil fuels to clean energy would result in 544,000 new jobs, 175 percent more than would be produced in the traditional energy sector, according to the report. In addition, these investments would result in 107 gigawatts of new renewable energy capacity and a 6.5 percent increase in renewable electricity generation, from 17.5 percent to 24 percent.
A zero-emission electricity system with flexible capacity
Beyond analyzing how COVID-19 stimulus could generate more jobs and environmental benefits, the Wärtsilä report also illustrates what would be required to achieve a zero-emission electricity system by 2035.
The U.S. will need a $1.7 trillion investment to reach that goal in 15 years, the report concludes. Within that investment, there is a need for a significant influx of flexible capacity to aid the cost-optimal integration of 1,700 gigawatts of new renewable energy capacity. That flexible capacity includes 410 gigawatts of new energy storage, 116 gigawatts of flexible gas using renewable bio or synthetic fuels, and 151 gigawatts of new electrolyser capacity for power-to-gas fuel production.
“We can realize our ambition for renewables, and at the same time we have to put flexibility into the heart of the planning process,” said Purohit. “We have the technologies that are required today. This is an opportunity for us to accelerate the energy transition. Let’s run with passion and work together on the optimal plan, so we get it right from the beginning.”
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