This post originally appeared on Forest2Market's Market Watch blog.
With much of the world now stuck at home for the foreseeable future, it’s no wonder some unintended effects of the COVID-19 virus are benefiting the environment. Due to the decrease in global energy use, the pandemic has caused significant changes in energy fuel supply and demand patterns that have resulted in clearer skies and cleaner air as part of the “new normal.”
A recent article by Power Technology notes: “The countries and cities with the highest COVID-19 impact are witnessing clear and sunny skies. The pollution in New York has reduced by nearly 50% due to the strict measures in place. In China, emissions fell nearly 25% during the start of the year as factories were shut, people were mandated to stay inside and the usage of coal fell nearly 40% on account of six of the largest power plants operated at minimal levels. In Europe, satellite images show a similar story with GHG emissions fading away over Italy, Spain and the UK.”
The COVID-19 pandemic is also impacting the renewable power industry. The U.S. Energy Information Administration (EIA) recently released a Short-Term Energy Outlook (STEO) reporting that COVID-19 and the current economic slowdown will likely impact the development of new generating capacity, as well as the demand (and price) of a number of other energy sources in the near term.
Per the Outlook:
- “The economic slowdown and stay-at-home orders are likely to affect U.S. electricity consumption over the next few months. EIA expects the largest impact will occur in the commercial sector where forecast retail sales of electricity fall by 4.7% in 2020 due to the closure of many businesses.
- EIA forecasts that total U.S. electric power sector generation will decline by 3% in 2020. Renewable energy sources account for the largest proportion of new generating capacity in 2020, driving EIA’s forecast that renewable generation by the electric power sector will grow by 11% this year. The forecast for lower overall electricity demand leads to an expected decline in fossil-fuel generation, especially at coal-fired power plants. EIA expects that coal generation will fall by 20% in 2020.
- Although EIA expects renewable energy to be the fastest growing source of electricity generation in 2020, the effects of COVID-19 and the resulting economic slowdown are likely to have an impact on new generating capacity builds over the next few months. EIA expects the electric power sector will add 19.4 gigawatts of new wind capacity and 12.6 gigawatts of utility-scale solar capacity in 2020. These annual wind and solar capacity additions are 5% and 10% lower, respectively, than expected in the previous STEO.
- After decreasing by 2.7% in 2019, EIA forecasts that energy-related carbon dioxide (CO2) emissions will decrease by 7.5% in 2020 as the result of the slowing economy and restrictions on business and travel activity related to COVID-19. In 2021, EIA forecasts that energy-related CO2 emissions will increase by 3.6%.”
What’s the near-term outlook for biomass energy sources specifically? Per a recent article by Biomass Magazine:
“The EIA currently forecasts that biomass will be used to generate 27.3 billion kilowatt hours (kWh) of electricity this year, down from 28.8 billion kWh in 2019. Production from biomass is expected to rebound to 280.8 billion kWh in 2021. Biomass capacity in the electric power sector is expected to reach 6,784 megawatts (MW) by the end of this year, down from 6,811 MW in 2019. Biomass capacity for 2020 is expected to include 4,025 MW of waste biomass capacity and 2,759 MW of wood biomass capacity.”
Cheap Fossil Energy Ahead
Due to the significant global uncertainty that extends across all industries right now, the STEO report also accounts or the unprecedented times we are in. The challenge for renewables gaining a foothold in the near term will be the global availability of other cheap, existing energy sources. Slack demand has driven prices through the floor in many cases, and halted production altogether in some instances because the economics simply don’t make sense.
- “EIA forecasts that the US will return to being a net importer of crude oil and petroleum products in the third quarter of 2020 and remain a net importer in most months through the end of the forecast period. This is a result of higher net imports of crude oil and lower net exports of petroleum products.
- EIA estimates global petroleum and liquid fuels consumption averaged 94.4 million barrels per day (b/d) in the first quarter of 2020, a decline of 5.6 million b/d from the same period in 2019. EIA expects global petroleum and liquid fuels demand will decrease by 5.2 million b/d in 2020 from an average of 100.7 million b/d last year before increasing by 6.4 million b/d in 2021.
- Lower global oil demand growth for 2020 in the April STEO reflects growing evidence of significant disruptions to global economic activity along with reduced expected travel globally because of COVID-19.
- EIA expects that global liquid fuels inventories will grow by an average of 3.9 million b/d in 2020 after falling by about 0.2 million b/d in 2019. EIA expects inventory builds will be largest in the first half of 2020, rising at a rate of 5.7 million b/d in the first quarter and increasing to builds of 11.4 million b/d in the second quarter as a result of widespread travel limitations and sharp reductions in economic activity.
The silver lining for consumers in this scenario is that the immediate reduction in global energy use has tapered production and drastically driven down price. Once summer travel resumes, drivers will be in for prices we haven’t experienced in decades. “For the April–September 2020 summer driving season, EIA forecasts U.S. regular gasoline retail prices will average $1.58 per gallon (gal), down from an average of $2.72/gal last summer (Summer Fuels Outlook).”
However, “cheap” fossil energy is but temporary and will only prolong the development of renewable energy options at scale.
For years, we have discussed the unlevel economic field that renewable energy providers are forced to play on. For carbon-neutral biopower to be broadly deployed in our power generation system, it is necessary for biomass renewable energy to become more economically competitive to fossil energy power generation. This can easily be accomplished if the use of fossil fuels were to carry the associated costs of net carbon addition, which it currently doesn’t have to do. Fossil energy continues to get a “free ride” while enjoying the benefits of favorable tax treatments.
