Fossil fuel industries are facing an existential crisis that the COVID-19 pandemic has amplified, potentially accelerating the global transition to cleaner energies and bringing about far-reaching consequences for economies in Sub-Saharan Africa.In 2020, energy consumption and demand are forecast to drop to levels not seen in 70 years, pushing the fossil fuels industry to the brink and opening a window for permanent, structural change in the world’s energy system. This is according to research commissioned by Bowmans. The research was conducted by Stellenbosch University’s Centre for Complex Systems in Transition. According to a report titled Energy transitions in South and East Africa: the potential and impact of renewable energy as a catalyst for change, investment in renewables has exceeded investment in fossil fuels every year since 2009. The report further states that by 2019, total annual investment in renewables was nearly $300 billion, twice the total investment in fossil fuels and nuclear combined. As a result, the estimated share of renewable energy in global electricity generation reached 26% by the end of 2018 and is expected to climb to 40% in 2020. This is being driven by growing investment and falling renewable energy prices, particularly for solar and wind. Per kWh, renewable energy is now cheaper than fossil fuels in most countries around the world, the report says.
Fossil fuel industry floundersMeanwhile, fossil fuels appear to be running out of steam, as shown by key performance measures such as energy returns on energy invested (EROI). In the 1930s, it took one barrel of oil to extract 100 barrels, an EROI ratio of 100:1. The EROI of oil now sits at between 6:1 and 3:1. The outbreak of the COVID-19 pandemic has compounded the woes of fossil fuels, demand for which is expected to drop 6% overall for 2020, with the United States losing up to 9% demand and the European Union around 11%. Given an impending global recession, will there be a reversal of fortunes in the flagging fossil fuel industry and less investment in renewables? The research findings acknowledge that the pandemic may have slowed the short-term prospects for the energy transition – while at the same time opening up a window of opportunity to ‘bounce forward’ to a sustainable energy future.
The report also notes that almost all recovery plans envisage an increase rather than a decrease in investments in renewable energy.