By: Ben Backwell, CEO, GWEC
Five key success factors for a Green Economic Recovery…and Five Key Tasks for the Wind Industry
It has been six months since the start in earnest of the COVID-19 pandemic and many voices are calling for society to accelerate investment in green energy to help economies recover. So far, however, there have been more words than actions. Here’s what I have learned during six months of hard work on advocacy, and the urgent actions we need to take to make Green Economic Recovery a reality.
Five ways governments can ensure a green recovery
1. Put the Energy Transition at the centre of recovery plans
There is broad consensus that the tragedy of the COVID-19 epidemic represents a chance to “build back better” and create a sustainable economic recovery. The need to overhaul the world’s energy systems and infrastructure represents an opportunity to invest large amounts of capital in assets which will provide lasting value for the future. A study the International Renewable Energy Agency shows that $1 spent to advance the global energy transition returns $3-8. Other studies show that clean energy infrastructure construction generates more than twice as many jobs per $1 million spent as fossil fuel projects. And investments in clean energy infrastructure are no regret – they will create the conditions for sustainable growth for generations to come.
2. Act now or miss the opportunity
The COVID-19 pandemic has caused a historic reduction in emissions over the last six months. But let’s not kid ourselves. These effects won’t last long – the latest data shows emissions quickly returning to post-COVID levels across major industrial economies. Government action in response to the coming post-COVID recession has been sluggish, and mistrust as well as a lack of international coordination has limited the effectiveness of actions so far. There has been much talk about green recovery, with some institutions like the European Union and countries like South Korea announcing significant green recovery plans – yet, many countries have not moved beyond vague statements of commitment for green energy. We need action not words. Every day that passes by increases the risk of a deep recession and of depressed power markets that could drastically slow down investment in the energy transition.
3. Concentrate on demand factors, not just supply
Most of the economic stimulus plans which have been announced or that are under consideration focus on increasing the flow of finance to the renewable energy sector. While improved financing facilities at attractive interest rates are welcome, they are not the main issue for wind and renewables. There was plenty of finance looking to find a home in wind energy before COVID-19, and interest rates had been at historic lows ever since the financial crisis in 2007-2008. The appetite from investors is already there, and we have plenty of shovel ready projects to invest in. What governments need to do is create stronger demand for renewable energy projects by speeding up procurement and tendering, making sure the market conditions are right to retire ageing fossil fuel plants which are on the grid, and ensuring that regulation allows us to build new projects, and fast.
4. Fixing regulation will have the biggest effect
The biggest factor that has hindered wind and renewables’ ability to ramp up and help head off dangerous climate change is regulation. From Germany to India to East Asia, governments are aiming to decarbonise their energy systems, and support from business and communities is strong. But regulatory frameworks often simply prevent projects to make sense financially, or in many cases from being built. Whether its permitting rules that allow endless legal challenges from unrepresentative activist groups, unhelpful red tape and restrictions, land access issues, unhelpful tender design that expose investors to unnecessary risk or favour incumbent fossil fuel interests, governments need work with the renewables industry to get a grip and move decisively to create fit-for-purpose regulation. The effects for economic recovery will speak for themselves. For wind alone, GWEC estimates that ramping up installed wind capacity to above 2TW of capacity by 2030 – the amount needed to get us on the IPCC trajectory – would create additional annual investment of $207bn or over $2tn.
5. Be proactive on power markets and create certainty
COVID-19 is going to have a big impact on power markets – and prices. The bigger the economic dip, the more likely it is that power prices will slump, and the harder it will be to forecast future prices. A slump in power demand and uncertainty about the future will make it much harder for companies to invest in generation projects, and this risks slowing down renewable energy deployment and leaving incumbent fossil fuel in place for longer than necessary. This could cause a serious dent in our ability to carry out the energy transition and head off catastrophic global warming. Governments need to closely watch power markets and be proactive, for instance by implementing or increasing carbon taxes and emissions restrictions, speeding up procurement round and putting into place schemes such as Contracts for Difference (CfDs), which provide long term price visibility for power operators and investors. Now is not the time to be hanging procurement on “merchant” or future wholesale price-based schemes and even less so to be introducing schemes such as “negative bidding”. Please listen to the wind industry and don’t do things that will make wind both more expensive and harder to build.
Five Key actions for the Wind Industry
1. Seize the moment
The wind industry needs to seize this moment and take a lead in helping to create a green economic recovery. We have the technology, we have at least tentative support from governments and – crucially – we have the support of people and communities around the world. Globally, studies show that 71% of the public believe that the climate crisis is as serious as the COVID-19 pandemic, and a majority in every country want a ‘green’ economic recovery, while the leading corporations in the world are crying out for more wind and solar power. But we could see momentum turn into despondency and support slip away, if we miss the opportunity and end up with economic recession instead of recovery. The wind industry needs to step up.
2. Tell our story effectively
Victory is not inevitable. There are multiple interest groups competing for attention and policy support, including powerful incumbent interests fighting to use the chaos caused by chaos to delay the energy transition and maintain outdated business models. So we need to tell a convincing story in a compelling way. We shouldn’t be pleading for help or think our interests are more important than anyone else’s. What we need to do is show how the interests of the wind industry coincide in every way with the interests of society as a whole and highlight the role we can play in helping recovery, improving quality of life and maintaining a sustainable and healthy planet. In short, we need to show what we can do for society and not what society can do for us.
3. Focus on the economic and social benefits
We need to focus strongly on the economic and social benefits that the wind industry can contribute by creating investment and jobs, fostering industrialisation, and strengthening and revitalising communities, as is the case with coastal communities and offshore wind, for example. It is not enough just to publish data and facts that support our case – although this is vital. We need to tell the human stories that are behind our industry’s success and build strong bonds of affinity and common interest across society. And we need to create hope for the young people who will inevitably pay the costs of economic stimulus in terms of long-term debt, by helping to create a sustainable future without dangerous climate change. Growth and climate change must be inextricably linked if we are to chart a more sustainable path for present and future generations.
4. Strengthen our advocacy to get results
We need to get serious as an industry and build a powerful advocacy network on a global scale. We live in volatile political times, and evidence suggests that the oil and gas lobby is out-spending wind energy on a ratio of at least 10 to 1. Many governments need extensive assistance to help them create the frameworks they need to attract investment into their power sectors.
As we have seen throughout the history of wind energy, our health as an industry depends on sometimes obscure, but significant changes in legislation and regulation. We can’t just rely on the goodwill of others to make our influence felt. Every dollar, euro, peso or renmimbi spent on advocacy and government affairs pays off ten-fold in terms of turbines sold, successful projects and carbon emissions avoided.
5. Go for growth, not retrenchment
What we do now defines the next 10 years. COVID-19 has hit the wind industry hard, and many companies’ margins were already being challenged by bad regulation, uneven growth and intense price competition. So it’s understandable that the immediate reaction of some is to batten down the hatches and focus on cost cutting. But we can’t just cost cut ourselves out of trouble.
The wind industry has been increasing its efficiency and bring down energy costs steadily over the past decade, to the point where it has become globally competitive with any other power source on the market. But if the market isn’t growing fast enough, then we find ourselves in a “race to the bottom” where we risk competing ourselves into oblivion, in a playing field that is still loaded in favour of incumbent, polluting power.
If we simply stay out of markets, we leave the playing field to others. What we need is market growth and stronger demand for our projects. And that means stepping up our efforts to work with governments and institutions to create frameworks for growth. The challenge is in front of us. I urge you to join with GWEC and our member associations to take up the challenge and work for the future we all deserve.
Find out more on how wind can be a cornerstone of economic recovery in the wind industry’s statement here.