The pandemic is changing the world in many ways. In the global energy market, the renewables may take a great leap forward even though some projects may first be delayed. New data suggests that the share of solar and wind energy has been increasing in the grid around the globe.
At first sight, the current situation looks bad for renewable energy. Both the corona crisis and the collapse of oil prices make it so cheap to use fossil fuels for energy that one can ask if the price of renewable energy is competitive anymore. The crisis in the financial markets, as well as lower demand, should mean there will not be capital available for renewable energy investments. China and many other countries want to restart their economy as quickly as possible, and they think cheap coal energy is the best means to achieve that. In Europe, fossil fuel is doing better in energy production now that the price of carbon emission allowances has gone down. Prices of the allowances have gone down some 20 percent compared to last summer. 
Understand the bigger picture
According to the IEA, in most economies that have taken stringent confinement measures in response to the coronavirus, electricity demand has declined by around 15%, largely as a result of factories and businesses halting operations.
When energy consumption went down in Europe following the coronavirus outbreak, the energy produced with fossil fuels went out of the grid first. The share of renewable energy grew exceptionally high. For instance, Germany produced more than half of its electricity with renewable power in the first three months of 2020. The same situation can be seen elsewhere, as well. In India, the production of coal energy has gone down dramatically, while the use of other energy sources has been relatively stable. After developing a range of technologies in the 2010s and scaling up the renewable energy business, renewable energy is more competitive than ever before. After the initial investments, the renewable energy production costs are extremely low, because wind, sunshine and geothermal energy are, in essence, free.
The immediate impact of the current crisis on the construction of new renewable energy production sites has also been minimal. Even though there have been some problems with the supply chain, Chinese production of missing components has in most cases now restarted.
Unless governments intervene, in the current climate it will be difficult to access money for renewable energy investments. However, the same difficulties will be faced by the fossil fuel industry. In fact, the situation will be much worse for that sector.
Coal in troubles
The coal industry has the most significant problems. Coal, the dirtiest and usually the cheapest option for energy, is now the world’s most expensive fossil fuel. According to think tank Carbon Tracker, nearly half of all global coal plants will run at a loss this year. Even before the coronavirus, it was very difficult for the coal industry to compete with other fuels, and it has quickly lost its market share to gas and renewables in Europe as well as in the USA. It is also becoming more difficult to get new production financed. Globally, almost 130 significant financial institutions across banking, insurance and asset managers/owners now have in place policy exclusions or restrictions on investments in thermal coal mining and coal-fired power plants.
We are currently witnessing coal-based energy production, especially in China, but this is not because coal energy represents a low-cost option. Nearly 60% of China’s existing coal plant fleet is running at an underlying loss. Most of all, in China and in some other places, coal is seen as the most easily available fuel. It is easy to transport by train from existing mines to the production sites. It takes much longer to build new pipelines and other infrastructure for gas, for example. This kind of pressure will decrease with time.
Other fossil fuels having also issues
In a similar manner to the coal industry, it doesn’t make sense for shareholders to invest in oil production given the current oil prices. At least 10 per cent of present global oil production could become uneconomical if crude prices hold at the present level, which is the lowest for 17 years.
Even gas production is taking a hit. LNG prices are usually connected to oil prices, and that is also why the LNG industry is now facing significant difficulties. For instance, up to 42% of Australian gas resources have become uneconomical at the current LNG netback prices. Decisions on more than $80 bn of investments in the Australian LNG industry have now been delayed. Globally, more than a dozen proposed LNG export projects from the U.S. to Mozambique are at risk of being delayed or scrapped as crude sunk to levels that make most of them unprofitable.
Fossil fuels are also in a vulnerable situation in the market. This is because in many cases governments substantially subsidize fossil fuel consumption. According to the IMF, the fossil fuel industry received $5.2 trillion in subsidies in 2017. This amounts to 6.4 percent of the global gross domestic product. After the stimulus packets, governments will need to cut budgets. This encourages governments to end expensive fuel-subsidy regimes.
People feeling more vulnerable than for a long time
There are also some changes in customer behavior that have an impact on the future of the energy sector. The corona crisis has not yet led to major blackouts anywhere in the world. However, it has been effective in reminding us all about the dangers of being dependent on suppliers who are 'somewhere far away'. Often any kind of natural catastrophe or major event increases the awareness of energy delivery risks and leads to a growing demand for decentralized energy solutions. Many companies are now more prepared than before to invest in decentralized, localized energy production and energy storage solutions. These make your production less vulnerable to energy delivery failures along the transmission chain.
In this situation, the renewable energy business has a stronger proposition than fossil energy sectors. That’s why the renewable energy business is expected to keep growing, though more slowly than previously expected, while fossil fuel companies will lose their market share.
Growth is also expected for the distributed energy storage business. The more we use renewable energy, the more solutions we need to balance the changes in power production. And the crisis has taught us it is better to keep stored energy close to you – whether this is stored in batteries or as hydrogen.
The governments have the final word
From this point on, the speed of the development is very much in the hands of governments and the EU (in Europe). Different countries are launching enormous stimulus packages to speed up economic recovery. They are temporary, but they have a big impact on economic development because they are the biggest economic stimulus packages we have ever seen. Governments and citizens may now struggle to integrate climate priorities with pressing economic needs in recovery, and even in the EU, the governments have very different opinions about the best way forward. This could affect their investments, commitments and regulatory approaches – potentially for several years, depending on the depth of the crisis and hence the length of the recovery. However, governments should target and prioritise business areas that serve other goals of development. The role of governments is now extremely important because investors may delay their capital allocation to investments because of decreased wealth. Greening the economy must be a priority now. Climate change has not disappeared anywhere. Remember, the northern hemisphere winter of 2019–20 was the warmest ever on land.
For companies in the renewable energy business, the current corona and oil price crises are also an opportunity. Energy investments are always made with a long-term view, one that extends beyond the current crisis. Interest rates are at a record low at the moment. There will be demand and right now it is possible to borrow money for investments with relatively low-interest rates. Many Western governments are even able to borrow money with negative interest.