Inside Clean Energy: Four Charts Tell the Story of the Post-Covid Energy Transition

Solar power is on track to be the “new king” of global electricity markets.

Meanwhile, coal is in rapid retreat and oil demand is close to peaking, according to a new edition of the flagship forecast from the International Energy Agency.

The report shows how deeply the coronavirus has affected the global demand for energy, and how the idea of reaching net-zero emissions by 2050 is now firmly mainstream, even as it remains difficult to achieve.

I reached out to Joel Jaeger of the World Resources Institute, a global research nonprofit, to see what stood out to him in the report.

He noted that IEA is projecting that global carbon emissions from energy will be down 7 percent in 2020 compared to 2019, a giant decrease largely resulting from the economic devastation caused by the coronavirus pandemic.

The challenge, he said, will be to have big cuts in emissions continue even as the economy recovers.

“I don‘t want this to be a blip in 2020 and then emissions rebound afterward,” he said. “This is going to have to be a turning point in investment and in the energy mix.”

The Paris-based IEA grew out of the 1970s energy crisis, its purpose to help governments understand and manage the global energy supply, with a focus on dealing with oil. Environmental groups have long criticized the organization for being slow to recognize the growth of renewable energy and the decline of fossil fuels.

In recent years, the IEA has taken steps to address those concerns by adding new forecasts that show what would happen if governments became more aggressive in their efforts to cut emissions.

This year, the report includes four main scenarios:

• The “stated policies scenario” acts as a baseline, showing what would happen if governments continued with their current policies and the global economy recovered from coronavirus by 2021.

• The “delayed recovery scenario” projects what would happen to energy demand if the economy needed until 2023 to recover from the virus.

• The “sustainable development scenario” predicts what the effects would be of policies that met the targets of the Paris Agreement and other goals for energy access and air quality.

• The “net-zero emissions by 2050 case” is an amped-up version of the sustainable development scenario, showing what would be needed to get to net-zero by 2050.

Highlighting the IEA’s acknowledgement of the growth of renewable energy, the news release for this year’s report includes comments focusing on the growth of solar from Fatih Birol, IEA’s executive director.

“I see solar becoming the new king of the world’s electricity markets,” Birol said.

Jaeger said IEA is catching up with other prominent organizations—including the International Renewable Energy Agency and BloombergNEF—in recognizing solar’s growth and financial competitiveness.

“That’s still something significant because they could have just put their heads in the sand,” he said.

While solar is growing, coal is quickly moving in the opposite direction. One way of tracing the shift away from coal is to look at the drop in IEA’s forecast of coal demand in 2030, which is down 9 percent from the forecast issued last year. Coal is falling out of favor mainly because of competition from less expensive energy sources.

The situation is not quite as dire for oil. The IEA report says that it is too early to predict a rapid drop in oil demand. At the same time, the report projects that the era of growing oil demand will come to an end within 10 years. How soon within those 10 years will depend on many factors, including potential policy changes and the pace of the economic recovery.

One of the factors that could drive down oil demand is the growth of policies that encourage a switch to zero-emission vehicles like EVs.

The transition to zero-emission vehicles could be dizzying in its speed, going from near zero today to a 42 percent share by 2030 under the sustainable development scenario.

Taken as a whole, the report indicates that the rapid changes we’ve seen in the last few years may just be a warm-up for what is coming.

But for the energy transition to move fast enough to be in line with the net-zero scenario, many pieces would need to fall into place—and soon.

The report says that one of the most important factors will be the economic stimulus measures that governments are passing, and whether clean energy is at the core of those plans.

Jaeger agreed, saying it was difficult to overemphasize the importance of stimulus legislation, which he said will “have a huge impact on which of these scenarios we end up on.”

Here’s How Net Metering Vanished in Illinois

I wrote last month about how a big utility and the solar industry had found a way to compromise on rooftop solar policy in the Carolinas.

But such compromises remain the exception in much of the country. One example is in Illinois, where the utility Ameren declared this month that it will sharply reduce the rate it pays rooftop solar customers for excess electricity that the customers send back to the grid. This applies to new rooftop solar systems, while existing solar systems continue to fall under the previous rules.

“It’s a big mess,” said Brad Klein, a senior attorney for the Environmental Law & Policy Center in Chicago.

Most of the financial benefits of rooftop solar come from customers producing their own electricity and therefore not needing to buy from the utility. The controversy in Illinois is over a smaller source of benefits: Solar owners usually can get a credit when their system produces more electricity that the customers can use, and the excess gets sent out to the grid. Under a typical net metering policy, customers get a credit for the full retail price per unit of electricity.

Ameren, based in Missouri, serves most of Illinois outside of the Chicago metropolitan area. The company decided to reduce the level of credits for excess electricity based on a calculation that its customers’ use of rooftop solar has risen to the point that it hit a cap, approved by regulators three years ago, that allows the company to take this action.

But solar advocates say that Ameren’s math is incorrect and that an accurate calculation would give solar owners several more years before the cap is reached. One of the ideas behind the cap was that Illinois regulators would have years to come up with a replacement for net metering, but that hasn’t happened yet. 

In the meantime, the rooftop solar industry is facing the loss of the old system without a new method of compensation to replace it. Rooftop solar installers say that they are stuck in limbo, because customers don’t want to buy systems without knowing what the rules will be.

“It’s an example of a regulatory process that has really failed the people,” Klein told me. “It’s failing to follow the goals that the legislature set up to create an orderly transition from net metering to a successor in Illinois.”

His and other organizations have asked the Illinois Commerce Commission to immediately intervene, but it is likely to take weeks or longer to get an idea of how this might be resolved.

It was just two weeks ago that I wrote about Ameren announcing a plan to get to net-zero carbon dioxide emissions by 2050. The actions on net metering in Illinois are indicative of how it is possible and even common for utilities to be forward-thinking on climate while remaining hostile to rooftop solar.

In this case, Ameren says it is merely following the rules and not being antagonistic to rooftop solar, but the outcome, as Klein said, is a mess.

An earlier version of this article incorrectly described how much Ameren is reducing the credits to rooftop solar owners. The company is reducing them but not stopping them altogether.

Inside Clean Energy is ICN’s weekly bulletin of news and analysis about the energy transition. Send news tips and questions to [email protected].