We are well into the pandemic and lockdown in many regions, so it is natural to ask the question, “when will this end and when will we return to normal”... The problem is, “normal” was not sustainable, in so many ways. Those of us in the energy industry particularly know that to be true.
This article is part of our Future Cities Series where our experts explore the pressures facing our cities in the post-Covid era and map out the key issues and industry themes in re-thinking urban life.
The “business as usual” scenario put out by the International Energy Agency in its 2019 World Energy Outlook does not make for happy reading. It had us on a crash course towards over three degrees of temperature increase due to carbon dioxide emissions from fossil fuel consumption. The IEA also has a “sustainable development scenario” which keeps us within the Paris limits of 1.5 degrees. The only problem is that, according to the OECD, we would need to spend €6.3 trillion per year globally in each of the next 10 years for us to get there. To give you a feeling for how much money that is, the total size of the global economy is estimated at around $86 trillion. And so the challenge seems virtually impossible.
But here’s the point. The estimates from the IEA and OECD were based on projected rates of energy demand, which were based on projected behaviours of the world’s population (commuting, urban development, consuming etc). Those projections were made a few months before Covid-19 hit, and saw us increasing our energy demand by 25% between 2019 and 2040.
As my daughters would say, “Dad, those predictions are, like, so ten weeks ago”.
Since Covid-19 forced the “Great lock-down”, our behaviours have changed. For example, we’re now “zooming” to work and business meetings instead of travelling there physically. Online shopping, telemedicine, home delivered food are up… the list goes on. As a result of the accumulated changes in our behaviour, energy demand has plummeted (oil demand sank as low as a 30% reduction globally and daily power demand has been down by at least 15% in France, India, Italy, Spain, the United Kingdom and the US northwest), and taken our emissions down with them. On top of that, the share of renewables in the overall energy mix has risen.
The latest prediction is that global CO2 emissions will drop by 8% this year. In the UK alone, the change in electricity demand patterns has led to an average of 60% of our power now being carbon free (39% renewables and 21% nuclear), and the CO2 intensity of the UK power system has halved to around 100gCO2/kWh. Pollution levels have dropped by around 50% in London, leading to dramatically improved air quality. Similarly, cities from Delhi to Bangkok to Beijing have all seen an unprecedented decline in pollution levels.
Don’t get me wrong, there are many challenges that arise from the changes we are experiencing, and many stakeholders in the energy value chain are suffering. We can’t stay locked down forever, and no one would advocate for that.
But let’s be honest, there are many positive aspects of this lock-down. Many of us have been able to redirect the time spent commuting and travelling from one meeting into another into greater productivity, more personal time, more time with family, a greater community spirit etc. If this trend continues post-lockdown, this will undoubtedly lead to more custom for local businesses, leading to a decentralisation of wealth and more vibrancy in regional cities. The continued presence of Covid-19 in the years ahead may also cause many to re-think their desire to live in mega cities (which have been hit especially hard by the pandemic) and lead to a renaissance of the suburbs. This will have an impact on energy demand distribution, travelling profiles and a new way of looking at energy supply and demand across the country. It will certainly have an impact on the design of cities and other urban centres.
So, instead of spending all of those trillions each year on decarbonising our ever-expanding energy system, perhaps we’d be better-off redirecting some of this money towards the infrastructure and technologies which support the continuation of the behaviours which lower energy demand (from superfast fibre optic broadband, VR meeting technology, dedicated bicycle lanes, drone deliveries etc. etc. to innovations that have not even been considered yet). Given all of the potential benefits that we have witnessed during this pandemic, this now seems like an inevitable direction of travel and one which may help to redress some of the existing imbalance in our society.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021