The Covid-19 Crisis and Clean Energy Progress

Part of Tracking Clean Energy Progress

Energy integration

Energy integration technologies enable deeper decarbonisation in all sectors. They are cross-cutting technologies that ordinarily rely on complex supply chains and require a holistic approach with co-ordinated support measures, planning and operations to keep pace with the energy transition.

In addition, early-stage smart grid, demand-response, hydrogen and direct air capture technologies need to be widely demonstrated to reach a significant scale of deployment. The impact the ongoing crisis is likely to have on these technologies is likely to depend on the speed and extent that co-ordination across value chains can be restored and the appetite for large-scale, capital intensive demonstrations.

Energy storage

Energy storage was already losing momentum at the beginning of the Covid‑19 crisis: for the first time in nearly a decade, annual installations of energy storage technologies fell year-on-year in 2019. Wavering policy support in key markets and uncertainties around battery safety impacted growth, with grid-scale installations falling by 20%. The 2020 crisis is likely to compound these effects, as battery production has a particularly complex supply chain from cells, to modules, to packs and installers.

Smart grids and demand response

Smart grids and demand response programmes around the world were already hampered by regulatory clashes and unsupportive policy frameworks, with global capacity expanding a paltry 5% in 2019 while investment in smart grids flatlined.

With electricity demand declining, existing system flexibility is likely to be adequate, which will reduce the market for these technologies until demand-pull is fully restored.


The impact of the crisis on global supply chains will likely have the greatest effect on hydrogen technologies, for which a well-co‑ordinated supply chain and significant capital are required for demonstration.

Practically all current hydrogen demand is in oil refining, the chemical sector and steel manufacturing, all of which have been highly impacted by the Covid-19 outbreak. The IEA forecasts lower gasoline (‑9%), diesel (‑6%) and jet fuel (‑26%) consumption in 2020, while demand for key chemicals produced using hydrogen (e.g. methanol) has dropped 7%.

The production and use of low-carbon forms of hydrogen had gained unprecedented momentum before the Covid‑19 crisis. Hydrogen fuel-cell vehicle sales accelerated impressively in 2019, and the early 2020s were expected to be record years for the deployment of electrolyser capacity. These trends may now be at risk due to slackening demonstration of key end-use technologies and delayed (or even cancelled) low-carbon production projects.

It is essential to ensure that hydrogen technology momentum is not lost during the Covid-19 crisis, and stimulus packages could help secure this objective. Supporting the deployment of CCUS infrastructure and electrolysis manufacturing would not only help maintain momentum, but would accelerate the uptake of hydrogen for sector integration while creating the employment necessary for economic recovery.

Direct air capture

Several small-scale direct air capture plants are currently operating around the world, including commercial facilities that sell the captured CO2. Plans to scale up DAC deployment include a 1‑MtCO2/year facility being developed by Carbon Engineering and Occidental Petroleum in the United States, which could be operational by the mid-2020s.

The Covid-19 impact on direct air capture development and deployment remains uncertain, but supportive policies could help sustain recent progress. In the United States, large-scale direct air capture facilities are eligible for both the 45Q tax credit (which provides USD 50/tCO2 for geological storage and USD 35/tCO2 used in EOR) and the California Low Carbon Fuel Standard, with credits trading at an average of USD 180/tCO2 in 2019. Direct air capture research also received a boost in March 2020 when the US Department of Energy earmarked USD 22 million in research and development grants.

Commercial interest in direct air capture remains strong across a number of sectors (including oil and gas, industrial production, food and beverages, and agriculture), as they recognise the potential of direct air capture to provide non-fossil-based CO2 for their operations or to offer a future offset for emissions. In the IEA SDS, almost 10 MtCO2 could be captured from the air by 2030 , requiring a substantial scale-up from today’s levels.