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Tuesday, 02 June, 2020

The Stimulating Effects of Clean Energy

Countries around the region have long understood that making a transition to clean energy and energy efficiency is critical if they hope to achieve their environmental goals and commitments. Now they are looking at another potential benefit of the energy transition—the role it could play in helping to stimulate a post-pandemic economic recovery.

As economies gradually begin to reopen, the energy sector has “an extraordinary opportunity for recovery and reinvention,” said Agustín Aguerre, Manager of the Infrastructure and Energy Sector at the Inter-American Development Bank (IDB).

Speaking at a recent webinar sponsored by the IDB, the Organization of American States (OAS), and the Americas Busines Dialogue (ABD)—Economic Recovery after Covid-19: The Role of the Energy Sector—Aguerre said he hoped the focus moving forward would be not just on getting past the current crisis but on “envisioning a new energy future for the region.”

Strengthening the Energy Agenda

Covid-19 was just beginning to appear on the region’s radar when energy ministers and other high-level officials from 29 countries met in Jamaica in February for the Fourth Ministerial Meeting of the Energy and Climate Partnership of the Americas (ECPA). (See recent ECPA story, Bringing Good Energy to the Region’s Energy Agenda.)

By less than a month later, most of the countries had implemented widespread quarantines or other restrictions to try to contain the spread of the virus.

The severe economic impacts of the pandemic that have emerged since then have only brought new urgency to the energy agenda, according to Juan Cruz Monticelli, who heads the OAS Sustainable Energy Section. The priorities discussed in Jamaica—such as the need to develop energy infrastructure, build resilience, create smart electric grids, promote electric mobility, improve energy efficiency, and turn toward cleaner energy sources—can become a “lever for economic recovery,” he said during the recent webinar.

As Juan Cruz Monticelli of the OAS put it, the post-pandemic environment will provide the chance to “reinforce countries’ energy plans, generate new employment, create new value chains, and position the national transitions to clean energy at the center of economic recovery and stimulus plans.”

Representatives of governments and the private sector who participated in the May 7 webinar agreed that the energy sector can help drive growth as economies in the region start to move again. (See related story in this issue, Renewables as an Engine of Job Growth.)

Panama had been developing a detailed energy transition agenda long before the pandemic hit, said Guadalupe González, Director of Electricity for the country’s National Secretariat of Energy. The plan now is to fast-track some of those initiatives, she added, “to be able to respond to the hundreds of thousands of Panamanians who need work, who need money coming into the household.”

Among the priorities for Panama: promoting growth in distributed generation, electric mobility, and energy efficiency, as well as continuing to aim for universal access to electricity. Resilience will be another area of focus, as the country seeks to improve its ability to react effectively not just to pandemics but to other disruptions or crises, González said.

Chile also plans to build on its existing plans for the energy sector, based on a “just energy transition,” one that involves society, creates employment, and makes a positive impact, according to Javiera Aldunate, Head of the International Office in Chile’s Energy Ministry.

As a country with a huge renewable energy potential—estimated at more than 70 times its domestic consumption—Chile had already been on a decarbonization track, including a planned phase-out of coal-fired plants. Aldunate said the Energy Ministry is now developing specific measures to contribute to the post-pandemic recovery, focusing on three areas: infrastructure (identifying public and private investments in renewable energy and energy efficiency projects); human capital (training the labor force for energy jobs of the future); and growth in consumer demand (promoting the use of renewable energy in homes and businesses). Other parts of the government are working on additional support measures, including tax incentives and subsidies, she added.

The idea of such initiatives is to help reactivate not only the energy sector but the whole economy, noted Aldunate. “Given the situation in Chile, with all its advantages in renewable energy, this is a golden opportunity,” she said.

Private Sector Recommendations

For the energy sector to be able to make a significant contribution to economic recovery, the public and private sector must work together more closely than ever, according to Juan Ignacio Rubiolo, an executive at The AES Corporation who spoke on behalf of the Americas Business Dialogue’s energy working group.

“Even though this pandemic has brought unique challenges, our group believes that without a doubt the energy sector is presented with a unique opportunity to be much more resilient, efficient, and environmentally friendly,” he said during the webinar. Rubiolo offered several of the group’s recommendations for the post-pandemic recovery process:

  • Ensure the liquidity of the energy sector. Many energy companies have seen a sharp decrease in cash flow during the economic slowdown, due to a drop in demand and measures taken by many governments allowing consumers to delay paying their electricity bills. (See previous ECPA story, Electric Utilities Feel the Side Effects.) The ABD encourages governments to work with the private sector—with support from multilateral institutions—to come up with mechanisms that will help energy companies and their supply chains get through this situation in robust shape.
  • Create employment through infrastructure projects. This is one area where the energy sector can contribute pragmatically to recovery, Rubiolo said. The first step should be to move quickly, with proper safety precautions in place, to reactivate projects currently on standby. The second priority, he said, is to accelerate new energy projects in the pipeline, finding ways to speed up the permitting process while still adhering to the legal and regulatory frameworks in place. Other steps include investing in energy efficiency, adopting new technologies, and developing skills in the labor market.
  • Implement social investment programs. Companies should work more closely with the communities where they operate, invest in their success, and create local jobs so that the recovery extends beyond just a company or a facility and benefits the whole community.

In closing remarks, IDB Energy Specialist Juan Paredes stressed the importance of ensuring that economic recovery goes hand in hand with a green agenda, “to be able to flatten that other curve, of greenhouse gas emissions.”

Noting that the International Energy Agency has projected a decline of up to 8% in global CO2 emissions for 2020—in part due to the economic downturn related to the Covid-19 pandemic—Paredes cautioned that economic stimulus programs should avoid carbon-intensive solutions. In the recovery from the 2008 financial crisis, he said, carbon emissions ended up spiking to unprecedented levels. However, he added, the situation is completely different now, with a strong, competitive renewable energy industry.

“We are left, then, with the lesson learned to not repeat what was done with stimulus programs at the end of the other crisis,” he said. “We want a recovery, but one that is sustainable and focused on long-term objectives.”




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