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The New Energy Letter: May 2020

NEL-may20

At the current time it’s difficult to think about the energy transition without thinking about the current COVID-19 crisis. The economic downturn affects all parts of the economy, depresses energy demand, and impacts the whole energy value chain. But what specifically does it mean for the transition from old to new energy? We’ve identified five key points

  1. Digitalisation will accelerate. Companies with digital customer channels are less affected. Automated processes, such as those used by demand side flexibility providers, are carrying on as normal. Connected home propositions built around peace of mind may get more traction. These are just three examples.
  2. ‘As a Service’ business models will gain more traction. Upfront capital will be harder to find for businesses and individuals alike. From electrification of fleets to new heating systems, propositions that remove upfront payments will be well positioned.
  3. Subsidies & incentives are under pressure, but there are opportunities for ‘green’ stimulus packages. On one hand, government spending on the energy transition will come under pressure. Business models dependent on subsidies and incentives may suffer. On the other hand, if stimulus to kick-start economic growth have a green tinge to them, this could open new opportunities. Finally, historically low oil prices may be a once in a generation opportunity to reduce the US$500 trillion global subsidies that fossil fuels receive.
  4. Innovation without a big price tag. Grand, shiny, expensive innovation projects have gradually been going out of fashion as companies focus on rapid, agile, fail-fast approaches to innovation. The crisis will accelerate this. Big new projects won’t be big priorities for most companies; but low-cost innovation will enable companies to keep pushing forward on the transition to new energy.
  5. A further boost for localisation of energy. The current crisis has highlighted the fragility of our global, just-in-time supply chains and interconnected economies. One scenario for how we come out of the crisis is an increased focus on resilience, localisation and decentralisation. This backdrop would add a further boost for the rapidly emerging community and local energy sectors.

The current crisis is affecting us all – and our thoughts go out to those directly affected by the virus. The speed of the impact has been staggering. It has meant decisions are being taken incredibly quickly, organisations and people are adapting amazingly, and innovative approaches are being developed in days rather than months.

The fundamentals driving the energy transition are unchanged. The pace and pathways of the transition will undoubtedly be affected; amidst the terrible impact of the crisis, I am convinced we will learn, adapt and innovate in ways that we couldn’t have imagined before as we carry on striving to create a new energy future. 

 

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