Post-COVID recovery: An agenda for resilience, development and equality

COVID-19 AND ITS IMPACT ON THE GLOBAL ENERGY LANDSCAPE

Because of the lockdowns needed to slow the spread of the virus, the COVID-19 pandemic has disrupted production and supply chains and slashed the demand for a wide range of goods and services around the world. This, in turn, has caused contractions in economic activity and depressing many commodity prices.

THE ENERGY SECTOR As response measures took centre stage in many parts of the world, the impact of the economic slump started hitting the energy sector hard. By mid-April 2020, weekly energy demand had fallen 25% for countries in complete lockdown and 18% for those in partial lockdown.27 Energy needs for transport plunged. Global energy demand could contract some 6% for the year, over seven times more than in the 2008-09 financial crisis.


As a positive side-effect of the lockdown, carbon dioxide (CO2) emissions growth is likely to have stopped and turned negative for 2020. Daily emissions worldwide in the first week of April were 17% lower than a year earlier. The International Energy Agency expects global industrial emissions to fall about 8% compared to 2019, their largest annual drop since the Second World War. The European Union’s daily energy-related CO2 emissions for transportation fell a staggering 88% in early April relative to pre-crisis levels, while its emissions across the energy sector were down 40% and those for the whole economy 58%.

RENEWABLE ENERGY DEVELOPMENT
So far, the renewable energy sector has fared better than the rest of the energy sector. Still, the crisis has affected project schedules and industries considerably. Lockdown measures, along with dampening fuel and electricity demand, have caused delays opening new facilities or bringing new plants online. At the same time, the availability of finance has contracted and the risk appetite among investors has shrunk, affecting future investments and installations.

Investment A transformation of the global energy system compatible with internationally agreed climate and development objectives will require a significant scale-up of energy investment. But instead of rising, renewable energy investment dropped slightly in the first quarter of 2020, down 2.6% from the same period in 2019.73 New commitments further dropped in April and May – two-thirds lower than in the same period last year – indicating a considerable slowdown in activity in the second quarter of 2020.

Announced foreign direct investments in renewables and oil and gas
sector, first quarter 2005 to first quarter 2020 (USD million)

Employment The pandemic-triggered lockdowns that have had a major impact on employment in many sectors of the economy. Within the energy sector, renewables jobs have been affected as well, but less so than fossil fuel jobs. Although the pace of new installations will be slower in 2020 than previously forecast, construction of large-scale utility projects will proceed, though with some delays.

Renewables have weathered
the crisis, so far, better than
other energy industries
COVID-19 effects on employment in segments of the renewable energy
value chain

time in different countries, rather than all at once, but along with border closures have nonetheless led to disruptions in increasingly globalised operations, especially in solar
and wind. In China, factory closures in January and February led to a significant fall
in solar module production, but production largely resumed in March.98 Closures took
place later elsewhere, such as in India and in parts of Europe. These challenges have
given rise to calls for diversifying supply chain dependencies.

INVESTMENT AGENDA FOR 2030

Unprecedented government intervention has played a critical role in confronting the health crisis and related economic downturn. The shock of the pandemic has necessitated a kick-start, providing a rare and timely opportunity for structural changes that emphasise sustainability and deliver benefits with minimal negative effects. Governments must ensure that their recovery plans are sustainable, so that investments made now in people and infrastructure have longevity.

INVESTMENTS TO ACCELERATE THE ENERGY TRANSITION
The Transforming Energy Scenario would reduce CO2 emissions to levels consistent with global climate and energy objectives. But realising that goal will require a profound transition of energy supply and demand.

Shares of emissions and use of renewables, by sector, 2017 and 2030

Renewables and efficiency as key investment focus
Investments in the energy transition can be an attractive part of a recovery package. They can boost the economy over the next three years and beyond, while creating good jobs in a wide range of professions. Investments can be scaled up rapidly in several areas, accelerating the recovery. Short-term and longer-term opportunities can be sequenced with an eye to cascading investment flows into the areas needed for the transition to succeed. Recovery programmes also offer opportunities to take a comprehensive approach that will ensure that supply chains, enabling infrastructure and skills are in place when certain investments are made. Such a holistic approach would allow governments to tailor investment to meet a range of domestic policy agendas.

Energy transition investment under the Transforming Energy Scenario,
2019-2030

Investment opportunities by sector and technology In the context of the post-COVID recovery, the energy transformation pathway provides a clear direction for targeting investment over the next decade. A renewables-based energy system, supplemented by measures to promote energy efficiency and energy flexibility, has the potential to create significantly more socio-economic benefits than the current fossil-fuel based energy system.

Energy transition investment under the Transforming Energy Scenario,
annual averages, 2019-2030

EMPLOYMENT AND GROWTH BENEFITS TO 2030

Spurred by the need to overcome the COVID-19 pandemic with a green recovery investment push, an acceleration of the energy transition can bring substantial socioeconomic benefits, specifically the creation of much-needed jobs and economic benefits. This section discusses the employment intensity of renewables and the opportunities for job creation, particularly in solar and bioenergy. The analysis shows that job gains from the transition outpace job losses in fossil fuels globally and in all regions. The discussion also covers the benefits along the value chain, distributed across different occupational groups.

Employment intensity in transition-related investment
The so-called employment intensity of investment, meaning the employment generated for each unit of investment, varies from one technology to the next. Investing in energy transition technologies creates close to three times more jobs than fossil fuels do, for each million dollars of spending.

Global average employment intensities of investments in renewable
energy, energy efficiency and energy flexibility

Potential for medium-term job creation
The pathways to the energy transition analysed in IRENA’s Global Renewables Outlook: Energy Transformation 2050 reveal the considerable employment potential of green recovery programmes. Investing in the energy transition would lead to 100 million people being employed in the energy sector by 2030 under the Transforming Energy Scenario, up 74% from today’s 58 million – and 15 million more than under the Planned Energy Scenario, which is based on nations’ current plans and commitments.

Energy sector jobs in 2030 under the Transforming Energy Scenario,
globally and by region

Net gains in employment The new jobs created in transition-related technologies would substantially outweigh the job losses in the fossil fuel and nuclear sectors under both scenarios.

Solar and bioenergy labour demand
Addressing the unprecedented scale of unemployment resulting from the global pandemic calls for government intervention, both to save existing jobs and create new ones. Renewables can create 29.5 million jobs by 2030 under the Transforming Energy Scenario. Among renewable technologies, solar energy and bioenergy have the greatest potential – 11.7 and 10.9 million jobs, respectively, followed by wind energy jobs, at 3.7 million, and hydro at 3 million.

Renewable energy jobs in 2030 under the Transforming Energy Scenario,
globally, by region, and by technology

Employment requirements across the segments of the value chain for three renewable energy technologies illustrates the human resource requirements of segments of the value chain for
solar photovoltaic (PV) plants and onshore and offshore wind farms.

Employment along several important renewable value chains

Demand for key skills and job types
The design of green recovery programmes must also take into account existing
skills and potential skill gaps. The share of workers and technicians for wind and geothermal is 68% and 86%, respectively. When comparing wind with solar PV, we find a lower share of workers and technicians (68% versus 76%), and higher shares in experts (14% versus 11%),
engineers and higher degrees (12% versus 11%) and marketing and administrative personnel (6% versus 3%).

Distribution of solar (PV and solar water heaters), wind (onshore and
offshore) and geothermal jobs in 2030 under the Transforming Energy
Scenario, by occupational requirements

Triggering additional GDP growth The Global Renewables Outlook documents the potential of an ambitious energy transition to produce economic growth. Across the global economy, the Transforming Energy Scenario has a consistently positive effect compared with the Planned Energy Scenario, boosting global GDP by an additional average 1.3% per year between 2020 and 2030. The cumulative GDP gain would therefore amount to USD 16 trillion. The additional growth is initially driven by investment in the power sector and in energy efficiency. The impacts of investment would remain positive through 2030. Other factors at play would result from changes in consumer spending in response to changes in fiscal policy, price effects, other indirect and induced effects, and trade.

Elements of an enabling environment for off-grid renewable
energy solutions

Developing renewable energy industries
COVID-19 recovery packages need to be integrated into forward-looking industrial policies focused on energy transition technologies. Industrial policies will play a vital role in transforming the productive structures that underpin green industries, especially in developing countries that lack pre-existing related capabilities, where market forces may detract from welfare-optimal outcomes and where the broader trends dominating anti-poverty and recovery policies have favoured consumption jobs over production jobs.

Renewable energy project transactions involving institutional investors,
by technology, 2009–Q2 2019

Promote green bonds for renewables Green bonds can be an important instrument to mobilise financial resources in support of a global low-carbon economic recovery aligned with climate and sustainable objectives. Green bonds are particularly attractive to institutional
investors and have the potential to channel considerable additional private capital into renewable energy.

Breakdown of green bond issuances by use of proceeds, cumulative
volume, 2010-2019

The green bond market can be a bridge between providers of capital, such as institutional
investors, and sustainable assets, including renewable energy. Although progress to date has been impressive, cumulative issuances of green bonds are still below 1% of global bond issuances, leaving significant opportunity for further growth.

SHORT-TERM ENERGY TRANSITION MEASURES

Transitions are best managed through holistic planning. From the onset, policies should
drive outcomes toward sustainability and resilience. Such policies are the subject of the
six sections of this chapter. A comprehensive package of policy measures to produce recovery in the short term necessarily includes the use of public funds to direct investment – ideally into areas that will also contribute to the energy transition. Accomplishing both requires strict
conditions to ensure that any bailouts contribute to sustainability goals, reforms of fossil fuel pricing, and assurances that no new fossil fuel assets will be funded as old ones are retired. The short-term policy package should be aligned with the renewable energy targets and Nationally Determined Contributions (NDCs) defined under the 2015 Paris Agreement on Climate Change.

Using public finance strategically
The COVID-19 pandemic provides governments and investors with a historic opportunity
to accelerate the energy transition. Now more than ever, countries need to place energy
transition solutions at the centre of their stimulus and recovery measures. Governments
and development finance institutions should consider shifting public finance away from
fossil fuels and other polluting and harmful activities toward sustainable infrastructure
assets, such as renewables.

Human resource requirements for workers in solar PV and wind energy

Reskill fossil fuel workers for jobs in renewables The pandemic is hitting the fossil fuel sector harder than renewable energy, a prelude to the profound changes the energy transition will bring. While the energy transformation will have an overall net-positive impact on employment, millions of fossil fuel workers will need to find new jobs.

Changes in energy sector jobs resulting from transition-related
investment, 2021-2023
(Transforming Energy Scenario compared to Planned Energy Scenario)

The specifics vary from region to region and country to country – whether in terms of underlying structural conditions, the specific opportunities that can be pursued, or the
likely scope of policy ambition. Yet what emerges very clearly are the energy transition’s
contributions to annual GDP and welfare. Looking more deeply, these benefits reflect
the comparatively high employment intensities of renewables and other transition-related technologies; the vast potential for short-term employment; the opportunity for a net gain in jobs across the energy sector; the specific role that solar energy and biofuels can play in expanding employment; and the positive employment effects seen across different segments of the value chain.

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