Despite the Covid-19 crisis, here’s why I’m increasingly optimistic about the world’s clean energy future

This has been a grim year. A global pandemic and a brutal economic crisis have taken a heavy toll around the world. But in one important area – the speed of the shift towards cleaner energy – I see increasing grounds for optimism.

I’m not talking about the drop in global emissions caused by the slump in travel, trade and other economic activities. I’m referring to advances in technology, policies and business strategies that can help drive sustained declines in emissions in the years ahead – even as economies start growing again.

Five recent interlinked trends have great potential to prevent the worst ravages of climate change and ensure people worldwide have access to the energy and economic opportunities they need to enjoy healthier and more prosperous lives. 

Solar is leading renewables to new heights. The cost of solar power has been declining dramatically for years, and it has now become the cheapest option in many economies. China, Europe, India and the United States have driven solar’s rise in recent years. But solar projects are now springing up fast in many countries across the globe, ranging from Vietnam to the United Arab Emirates, and from Egypt to Brazil. Meanwhile, offshore wind has achieved game-changing technological leaps and cost declines that give it the potential to become a key source of clean power in many parts of the world.

Today’s crisis means interest rates will stay lower for longer. The main hurdle for many clean energy projects is securing initial investment, since the “fuels” themselves are free. The massive easing of monetary policy by central banks in response to the pandemic means wind, solar and electric vehicles should benefit from ultralow interest rates for an extended period in some regions.  Finding ways for all countries to access this cheaper capital will be critical.

More governments are throwing their weight behind clean energy. The European Union has made headlines with its plan to bring the region’s net emissions to zero by 2050. But many other governments around the world are responding to citizens’ concerns by ramping up ambitions, too. At the IEA Clean Energy Transitions Summit in July – the world’s largest energy and climate meeting of the year – 40 Ministers from advanced and emerging economies representing 80% of global energy consumption and carbon emissions highlighted their plans to make clean energy technologies an important part of economic recovery efforts. Emerging and developing economies now represent the majority of clean energy investment as they seek to address not just the dangers of climate change but also the grave problem of air pollution.

Companies are stepping up. Significant parts of the private sector have become much more proactive in seeking to reduce emissions. Several major oil companies have announced plans to turn themselves into lower-carbon energy businesses. They have a huge amount of work to do, but with their deep pockets, project management skills and engineering expertise, they could greatly advance offshore wind, hydrogen and carbon capture. Some of the world’s giant tech companies are also upping their game, investing in renewables and areas like energy storage and fuel cells.

Innovation is gathering steam. Most major economies expanded their public budgets for clean energy research and development in 2018 and 2019 much more rapidly than their rate of economic growth. Investment into clean energy start-ups by venture capital funds and companies reached a new high in 2019. Despite the economic disruption caused by Covid-19, we’re seeing serious efforts by governments and businesses to boost battery technologies and finally realise hydrogen’s massive potential. And a wide range of frontier technologies, including advanced nuclear reactors and electric aircraft, have succeeded in attracting private venture capital funding. Such moves are motivated not only by the need to tackle climate change but also the desire to be at the forefront of the industries of the future.

Alongside those positive trends, three significant challenges must be overcome.

Getting more countries and companies on board. The ambitious clean energy commitments and actions taken so far are a major step forward – but they are far from enough. Greater efforts need to be devoted to supporting fair, inclusive clean energy futures for all parts of the world. Similarly, huge parts of global industry have yet to make clean energy transitions a top priority. For example, the oil companies that have pledged to reduce their own emissions to net zero produce less than 10% of global oil output.

Not leaving anyone behind. The pandemic risks widening the divide between rich and poor. Hundreds of millions of people, mainly in Africa, still lack basic access to electricity. Solar power offers a tremendous opportunity to improve this situation. But many African economies are now struggling financially, with some facing full-blown debt crises, as a result of the global recession.

Tackling emissions from existing infrastructure. Attention is overwhelmingly focused on building new power plants, factories and transport networks with clean energy technologies. But if we don’t also address emissions from the world’s vast fleets of inefficient coal plants, steel foundries and cement factories – many of them recently built in emerging economies – we will have no chance of meeting our climate and energy goals.

Taking full advantage of the recent encouraging trends and overcoming these challenges will hinge on greater efforts from governments, companies, investors and citizens from around the world. We need the broadest possible coalition and cannot afford to discard any clean energy technologies.

I believe this grand coalition is coming together, lifting my hope that we can make a major leap towards the clean and resilient energy systems we need.

As the global authority on energy, with expertise across all fuels and technologies, the IEA works with governments around the world and companies throughout the energy industry. With this growing sense of optimism, we will lead the way on accelerating clean energy transitions that can bring about a secure and sustainable future for all.