Commercial, Energy Efficiency, Industrial, Sourcing Renewables - June 29, 2020 - By Caitlin Marquis, Advanced Energy Economy
What COVID Means for Energy Goals and Sustainability Efforts, Today and Tomorrow
As companies adjust to a new normal during COVID-19, develop strategies to ride out the economic storm, and navigate various state reopening schedules and rules, sustainability teams face their own challenge: assessing whether and how the coronavirus pandemic and its economic fallout will affect progress toward their company’s renewable energy and greenhouse gas reduction goals. As the nation confronts issues of race and justice, they may also be questioning whether social justice priorities are sufficiently ingrained in their corporate sustainability strategies. For both, it may help to understand the pandemic’s short- and medium-term impact on the energy sector and what actions can—or should—be taken at the local, state, and national levels to achieve both sustainability and equity.
Since the pandemic started, Advanced Energy Economy (AEE) has focused its attention on how the pandemic is affecting the advanced energy industry and what solutions might stem the damage. Here, we offer observations on three topics: the impact of the pandemic, actions taken to date by decision-makers, and what lies ahead for an industry that is essential for companies to achieve their sustainability goals.
How COVID-19 is Affecting the Energy Industry
While the coronavirus pandemic is first and foremost a health crisis, it has brought with it an economic crisis that is affecting nearly every industry in one way or another. The energy sector has faced some unique challenges that have hit advanced energy companies—including renewable energy developers, energy efficiency providers, electric vehicle companies, and energy storage developers—especially hard, with potential implications for corporate sustainability efforts. A few months in, there are some takeaways:
- The strong and growing advanced energy workforce has taken a significant hit. Before the pandemic, the advanced energy industry stood 3.6 million workers strong. As of the end of May, that workforce was down by roughly 620,000 people. These jobs range from the manufacturing of component parts for energy efficiency, electric vehicles, solar panels, and wind turbines to sales, construction, and contractor jobs initiating and installing each of these advanced energy technologies.
- Developers and installers are experiencing project delays and pipeline disruptions. According to a survey of AEE member companies, supply chain disruptions, delays in construction and permitting, social distancing restrictions, and financing uncertainty are putting many existing and future projects in jeopardy. Since many companies in the advanced energy industry are either innovative startups or small, local businesses, the long-term impacts of even short-term disruptions could be significant. These are the developers and installers that companies rely on for renewable energy procurement and efficiency upgrades of facilities.
- Demand has shifted and emissions have fallen, but these impacts may be temporary. The sudden behavioral changes resulting from stay-at-home orders and advisories have shifted electricity use patterns, lowered overall electricity consumption, and reduced vehicle miles traveled, with substantial improvements in air quality in urban areas and the vicinity of dirtier power plants. (Harvard University researchers have found that long-term exposure to airborne pollution, such as that from fossil-fueled power plants and auto and diesel exhaust, which disproportionately impacts disadvantaged communities, increases mortality from COVID-19.) For many companies, these changes will result in automatic progress against greenhouse gas emission reduction targets, with daily global emissions dropping by 17% in early April. There is no guarantee that the emission reductions will persist when the pandemic is (finally) in the rearview mirror, however, and efforts may need to be redoubled to preserve gains and make further progress.
How Regulators and Lawmakers Have Responded
The pandemic has also disrupted regulatory and legislative bodies, which have responded in various ways to the challenges of both operations and priorities. In many cases, regulators have taken swift action to protect consumers and also to continue their work under changed circumstances. Across the country, state public utility commissions have taken steps to suspend utility disconnects of customers unable to pay their bills on time, and many PUCs and state and federal agencies have also moved their hearings, meetings, and filings online. Some have also opened COVID-specific proceedings to consider the impacts of the pandemic, and the Federal Energy Regulatory Commission recently announced a technical conference to do the same.
In contrast to regulatory agencies, state legislatures have been significantly hamstrung by an urgent public health crisis and by a shift to remote work. Legislatures have largely dropped any issues not directly related to public health and budgetary concerns for the time being. As social distancing restrictions are lifted, it remains to be seen which energy issues lawmakers will pick back up – and whether they will take the opportunity to redouble advanced energy and climate commitments or retreat from them.
What to Watch for in the Months Ahead
There are still many questions about the timing and shape of what we all hope will be a swift recovery from the pandemic, from both a health and economic perspective. For the energy sector, a few key questions in particular merit reflection, precisely because the answers will be shaped not only by the arc of the overall recovery but by advocacy and engagement happening now. For sustainability teams evaluating their own policy engagement on energy issues, here are some of the top issues to watch and weigh in on:
- Will Congress switch existing tax incentives to direct pay? Advanced energy developers whose projects are eligible for federal tax incentives are struggling to secure capital investment for these projects because the big tax equity lenders needed to monetize federal credits currently have significantly reduced tax liability. A direct payout of existing tax incentives would allow projects, including those being developed for offer to corporate purchasers, to secure financing needed to move forward—along with the associated jobs and investment—without increasing the cost to taxpayers.
- Will state and national leaders promote the role of advanced energy in an economic recovery? Policymakers deciding how to spend stimulus dollars can expect to see a good return on investments in advanced energy. Pre-pandemic, revenue, and job growth of the advanced energy industry outpaced that of the economy overall; post-pandemic, the industry has enormous potential as a driver of growth and recovery.
- Will state lawmakers and governors seeking to plug budget gaps succumb to pressure to back off sustainability commitments—or double down and reap the benefits? Advanced energy is the center point of a cost-effective, clean, equitable, and resilient energy system, which is exactly what is needed as the country recovers and looks toward the future. Yet states looking to close budget gaps may be tempted to make short-sighted cuts to advanced energy policies such as energy efficiency programs, which have upfront costs but deliver long-term savings. Companies engaged in accelerating the transition to a clean economy have a clear role to play in ensuring that policymakers tasked with rebuilding the economy seize the opportunity to invest in building a stronger, cleaner, and more resilient energy system.
What does all this mean for sustainability teams? For one, it means that the potential to fall behind on renewable energy targets is real. The advanced energy industry is reeling and may face ripple effects for months and years to come, affecting both public- and private-sector actors seeking to switch to advanced energy. Similarly, there is a risk that states and utilities could backslide on their clean energy goals, slowing progress on greenhouse gas reductions and associated improvements in air quality for vulnerable communities, and eroding the impact of corporate sustainability efforts that are intended to add to them.
However, there is also an opportunity to skip a few steps in the transition to an advanced energy future as we rebuild the economy. Persistent progress on corporate greenhouse gas and renewable energy strategies is one key lever that sustainability teams can pull to ensure that the train doesn’t slip off the tracks, but the role of policy engagement at the local, state, and federal level must not be overlooked. Advanced energy has an important role to play in a swift, lasting, and equitable recovery, but only if it’s given a chance. Support from the corporate sector, whose procurements have driven so much renewable energy development in recent years, could make the difference.
Caitlin Marquis is a Director at Advanced Energy Economy where she manages the policy engagement of the Advanced Energy Buyers Group, a coalition of leading companies that are working to expand their use of advanced energy. She leads the Buyers Group’s efforts on both regulatory and legislative engagement at the state, federal, and regional levels. AEE recently published a fact sheet, Electrifying Medium- and Heavy-Duty Vehicles, which presents an overview of the advantages of electric MDVs and HDVs, for both vehicle owners and the public, available at aee.net.
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