The Economic Impact of COVID-19 on the Energy Sector

Published May 21, 2020

-3 min-

 

The Economic Impact of COVID-19 on the Energy Sector

Since the outbreak of COVID-19, life has changed at many levels: children have stopped going to school, some office employees have started to work from home while others kept going to their workplace taking the necessary precautions… Governments, – worldwide -, have taken strict measures to protect their citizens. This virus not only changed our daily life, impacted our health, but it has also brought us to an economical crisis. Indeed, the COVID-19 crisis is expected to plunge almost all G20 countries into a recession, according to analysis by the Economist Intelligence Unit.

People staying at home for two months, a significant reduction of mobility has been observed which led to a drop of energy consumption and greenhouse gas emissions. This is for sure good news for the environment, but life going back to normal these drops are not expected to be long-lasting.

Some Facts:

Oil demand having decreased, at the end of March, oil prices have plunged to a level last seen in 2002 in Europe.

On 30 March 2020, a barrel of Brent traded for US$23.50, a drop of 60 % since 24 February 2020, according to the European Parliamentary Research Service (ERPS).

On 20 April, crude finished at -37.63 a barrel, the first time it has gone below zero since 1983.

Electricity demand has fallen by about 20% in France and Italy.

Electricity consumption has dropped by 8.4% during weekdays in Belgium since mid-March.

Wholesale electricity prices across the EU have dropped to around €20 per MWh.

CO2 emissions in China temporarily dropped by about a quarter during the pandemic.

Belgium gas consumption in March decreased of about 28%, according Fluxys.

The gas consumption of the industrial sector in Belgium was precisely a drop of 13.7% in March.

Natural gas price in Belgium has nearly reached the lowest price of these last 15 years, – which was 11,69 euros/MWh in 2009.

The decline of fossil fuels prices is a serious threat for renewable energies as consumers will probably choose cheap fossil fuels over renewable energies. Consequently, it is expected to put investment in green energies at risk.

 

The Impact of the Pandemic on the European Green Deal and Climate

The coronavirus outbreak has changed EU’s calendar as well as the European Green Deal one, which is likely to slow down. However, the Green Deal will keep being Europe’s growth strategy for which, under the current proposal, the EU grants 25% of its budget. The Commission will take into account the impact of the COVID-19 crisis in the legislative proposal for the 2021-2027 multiannual financial framework.

Nevertheless, the EPRS announces in its report that “while the European Council explicitly advocated integrating the green transition into the roadmap and action plan for economic recovery and sustainable growth, some Member States make the case that dealing with the fallout from the COVID-19 crisis will make it more difficult to meet climate targets and move towards carbon neutrality”.

Even if the COVID-19 benefitted to climate, the economic recovery is likely to cause damage to the environment. Now, the European Commissions faces a double challenge: setting up a crisis recovery programme compatible with EU’s climate targets.

In Belgium, the government also wants to give weight to a green economic recovery. To do so, a team of more than 100 scientific experts drafted an action plan called Sophia made of 200 ecological transition measures.

Another way to support a green recovery is to keep on reducing carbon emissions. Energy efficiency is known to be an important tool in this matter. bcheck is an energy efficiency tool that fits into the circular economy, it helps you to optimize the use of your boilers and, by extension, optimizes your energy and economic bill. We believe that bcheck can be a real actor of a green / sustainable recovery. Don’t forget that bcheck can help for the reduction of gas consumption, and this at a lower cost. So even if the investments in green energies may decrease, that does not mean that nothing should be done: better consumption is already an important first step, don’t you think?

 

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Sources:

Erbach, G., Briefing: Impact of Coronavirus on Climate Action and the European Green Deal, European Parliament, April 2020, https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/649370/EPRS_BRI%282020%29649370_EN.pdf, Accessed May 19, 2020.

Luminuss Business Blog, Coronavirus: welke gevolgen op de energiemarkten, April 19, 2020, https://luminus-business-blog.be/2020/04/coronavirus-welke-gevolgen-op-de-energiemarkten, Accessed May 19, 2020.

CNN Business, Stocks sink as US oil prices fall below $0 a barrel, April 20,2020, https://edition.cnn.com/business/live-news/stock-market-news-042020/index.html, Accessed May 19, 2020.