Energy Sector in Times of COVID-19 Pandemic: Decide, Act, Move Fast

Diego Rivera: Zapata-style Landscape // Public domain

Recent decades have been a good reminder that whenever you think things cannot get any more complicated on the international level, they will. Old conflicts, conventional threats, and crises have not disappeared, nor have they been solved, while new dimensions with more complex problems are added and reach new depths. What to do?

If we want the future to be convenient, if we want the generation who started their first school year this autumn have a liveable environment by the time they finish the highschool there is no other option – we need to act.

What about the new crisis that hits as a surprise? My experience tells that if you are in a crisis the worst option would be not to use that crisis to make changes, to make the whole system more competitive, more resilient. The fight for the future jobs, future economy is already on its way. The COVID-19 crisis has only amplified the need to move faster.

The world’s population will grow and will likely reach 8.5 billion people by 2030, more than 9 billion people will be living in the world by mid-century, 70% of them living in cities. Compared to 2010, the world population will rise by a quarter, the quickest rise coming from the poorest regions. This is one of the megatrends we know will shape the world we live in 10 and 20 years.

Almost one billion additional consumers and increasing expectations of better life-quality push the demand for natural resources – starting from water and land to energy and construction materials. The European Commission’s Competence Centre on Foresights has projected that while the 20th century witnessed ten-folding of the global demand for materials, the demand is likely to double again by 2030, compared to 2010.

Overall, wealth generation speeds that trend, with China and India playing a leading role. According to the World Bank, China has become an upper-middle-income country as 850 million people have been lifted out of poverty since 1978.

While the life conditions of those people have improved compared to what those were before their per capita income is currently still only 25% of high-income countries and 373 million people live with less than $ 5.50 per day.

COVID-19 pandemic will (temporarily) slow down the economic development of China, but in the longer run the wealth generation and growing demand by hundreds of millions of people will impact remarkably the global demand for resources.

India, with its 1.2 billion people has set the goal to become a high-middle income country by 2030 – adding a push in the same direction.

Another remarkable megatrend that will shape societies more than most imagine is urbanization. Every 2nd person in the world lives in a city. According to the UN, around 5 billion people are cities habitants in ten years’ time. In 2000, there were 371 cities that had more than 1 million inhabitants.

Within 18 years, the number of cities that have more than 1 million people has grown to 548 and almost every fourth person in the world is already living in a city bigger than 1 million inhabitants.

Predictions show that by 2030 there will globally be 43 megacities (cities over 10 million people), 36 of them located in global south, in less developed regions.

Why it matters for the energy sector? According to the International Energy Agency around 64% of total global primary energy was consumed in urban areas in 2013.

As urbanization is continuing in a rapid speed it will also drive the further demand for energy resources. World energy consumption is expected to increase 39% by 2050.

Knowing all that and thinking about our energy sector, what could be three suggestions to make?

1. First, more focus on energy efficiency. It makes economic sense, it’s good for climate, it’s good for business, it’s good for consumers.

2. Second, developing a truly integrated European energy market and eliminating isolated areas. This will improve energy security, reduce the need for back-up power and lower the price of energy.

3. Third, use the technology innovation. It is perfect chance to make the technical switch. Make it the driver of green growth. It means smart jobs, saved resourced, more convinient life-environment. I give you one example from Estonia. We started to use digital signing few years ago. So there is no need to run with the papers form one office to the other, to drive from one city to the other. If we didn’t have the digital signing, we would produce a paper mountain in the height of the Eiffel tower. In a month. In a country with the size of that of Estonia.

So just think, what would be the effect in the whole Europe, if we could make this one change everywhere?

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Keit Pentus-Rosimannus
Academy of Liberalism