Covid-19 and the energy sector

Assessing the consequences of the Covid-19 pandemic for the Energy Master programme courses

Rachel Guyet and Francois Bafoil, Programme Directors of the Master in Global Energy Transition and Governance, discuss the consequences the pandemic will have for their teaching of the Master programme.

 I. The Master in Global Energy Transition and Governance

The Master in Global Energy Transition and Governance aims to analyse the energy developments and innovations (fossil and renewable) which, over the last few decades, have developed along four closely interrelated dimensions:

• the geopolitical dimension which identifies the fields of energy production, distribution, supply and consumption on an international scale;
• the European policy which has defined climate and renewable energy objectives and launched its Green Deal;
• the micro dimension which focuses on local exchanges involving innovations and new partnerships, but also the increase in inequalities of all kinds;
• and the economic dimension which analyses the changes in the energy market under the effect of liberalisation policies but also subsidies, the introduction of carbon prices and the impact of renewables on prices.

Each country and each supranational region (EU, ASEAN, SASEC, among others, but also sectoral organisations such as the OPEC) implement them according to specific governance. These combine the supranational, state and sub-state levels, involving public, private and civil society actors. At each level, conflicts arise. They reveal the great variety of interests involved, the formation of alliances, but often lead to confrontations and wars to secure the ownership of the resource. To sum up, the key words of the programme's reflection are: governance and multi-level governance, innovation, partnerships, conflicts, compromise and inequalities.

If we were to summarize the major trends at the origin of the profound transformations that have affected markets since the 1980s, we could easily isolate four of them:

• trade liberalisation;
• new technologies;
• the shift from fossil fuels to renewable energies;
• and climate issues.

The effects of these transformations have affected the axes of vertical and horizontal governance by increasing tensions between centralised systems (such as production, but also electricity networks and storage, etc.) and decentralised systems  linked to innovation and the implementation of different renewable solutions. This is to say that before 2020, the energy field was subject to profound conflicts, the stakes of which concerned the security of supply and contracts, prices, but also sustainability, with climate issues and equity at the forefront. Security, price, availability, sustainability and equity were the new keywords of the reflection, in addition to the previous ones. 

Yet, the challenges identified in terms of safety, sustainability and equity have not found a definitive solution and the urgency to address them is becoming ever more pressing. Today, another challenge has emerged quite unexpectedly, a source of upheaval and potentially devastating conflicts, but also of resource redistribution and deepening of considerable inequalities: Covid-19. How can its effects in the energy field be assessed? What criteria should be used to capture them?  The scale of what is shaping up to be a disaster on a global scale is certainly difficult to estimate, and even less measurable at the present time. All energy sectors are now affected: production; investments; prices; businesses and consumers; to name but a few. However, we need to work on identifying the major risks. How can this be done?

II. Hypotheses 

Our response consists of looking at the main topics of the Master programme - liberalisation policies, technologies and innovation, renewables and climate change - through the hypothesis of a significant reduction in resources, both financial and human, at all levels. With what interrogations?

• Governance. The question is to identify the increasing tensions on partnerships between different levels; conflicts related to provision but above all to the redistribution of collective funds, whether between the State and the supranational region, and between the State and its sub-state components. The hypothesis here is that there will be a massive return of the State as the central actor in energy field (the State back in). As we can presume that the State will have to assume many costs, the question is to know what role will be given to other actors of governance? to private partners? to civil society? Will we be able to think about recovery without cooperation at the international level?
  The same question applies to investments. Will the current crisis lead to a strengthening of cooperation with the banking systems and investors, or will it lead to a narrowing of this cooperation? All regulation finds itself impacted here. Regarding regulation, should we think that it will take precedence over innovation? Will investments in renewables be maintained with the collapse of the oil price or will the cards be redistributed once again in favour of the dominant fossil model?
   
• Innovation. It covers vast areas in the energy field: from the technical field for non-mature technologies such as floating wind turbines or electric vehicles, to transport and networks, to so-called participatory innovations that encompass diversified financial arrangements at a local level and contribute to local democracy. However, these innovations are transforming the business models of companies and require them to adapt their organisational, economic and partnership structures, etc. They change relations with consumers, who are themselves facing a reduction in their purchasing power as a result of the crisis, and this affects their financial capacity to invest in new technologies. Many of them are driven by start-ups whose model was not yet consolidated before the pandemic. It is therefore the pursuit of innovation and the survival of these companies that is at stake today. Should we think that innovations will be set aside for a while to make better use of the resources acquired? But what is the risk of this question? The cancellation or postponement of climate commitments. Does it mean returning to the centralized energy model?
   
• Social acceptance. Already at the centre of reflections on renewables and the increase in the production of certain sources (coal, shale gas, etc.), the dimension of social acceptance will, one can assume, be sharpened following the decisions that will be taken in the direction of an increase either of traditional energies for reasons of short-term costs, or of renewable energies to meet climate commitments. Until now, social acceptance has been strengthened if the costs and benefits of the transition are evenly distributed, for instance through cooperatives or by opening the capital of renewable projects to citizens. If the energy transition movement continues, how will it be financed? Will citizens still be able and willing to participate? Being able to consume one’s produced energy can be a way of assuming energy autonomy in times of crisis. In this case, can the crisis reinforce such a wish?
   
• Redistribution. This social dimension opens the vast field of reflection on the increase in inequalities, particularly those linked to energy poverty. Today entire families have to stay home and must live, work and study in their homes, which is accompanied by an increase in energy needs but also a growing demand for internet-connected appliances. Pre-existing socio-economic inequalities are deepened by this crisis, but they further exacerbate the difficulties of access to energy services due to the risk of loss of income, housing quality and growing energy needs which result in rising bills. This “scissor effect” can only be compensated for with the intervention of the State and companies in favour of reinforced solidarity. If this solidarity is visible through civil society networks and emergency measures taken by public and private actors, could we consider a deeper change in redistribution and solidarity in energy matters, but also on a wider scale? Could we think of the State being back  in the energy sector to guarantee a form of public energy service? 

As we can see, seeking to integrate the consequences of the pandemic on the fields covered by the Energy Master programme compels us to deepen our reflections on governance, with in the forefront questions about the State's capacity to ensure security, peace, sustainability and redistribution.
 

III. The State back in

These various questions on the impacts of the Covid-19 crisis in the energy field all bring the question of bringing the state back in to the forefront of reflexion. More precisely, it is a question of strengthening it, because its return has already been recorded since the 2000s. At that time, a multipolar world succeeded the collapse of communism 30 years ago. A bipolar world replaced it in the 2000s. Should we conclude from this that there is an increased risk of tension between the "big actors" in the oil and gas field and consequently an increased risk of war in adjacent countries, direct theatres of war that the "big players" are waging from a distance: on the one hand, the USA and Saudi Arabia; on the other, Russia and Iran?

Facing these "big actors", China has developed a world-scale programme: the "One belt, one road" initiative in which energy has a major share. Endowed with a considerable budget, notably distributed in the form of unconditional loans, it is the gateway to China's global penetration by following maritime and continental trade routes, but also contributes to the debt of less developed countries. The spread of Covid19 is already affecting this global ambition, if only by considerably reducing China's internal capacities.

In the face of all these players, the EU has been an exception, having made the "Green deal" its flagship programme. In international relations marked by power relations between the two powers tending towards hegemony and illustrating the so-called "realistic" approach, the EU has sought to ensure that relations are marked more by shared values. Yet, the deeper the crisis deepens, the more neo-liberal approaches are devalued in the face of the new responsibilities assigned to states. The more states impose themselves as lenders of last resort, the greater the sovereignist pressures within them, and the less audible are the voices advocating cooperation and delegation of sovereignty. The stronger the State is back in, the less credible the EU is. 

The Covid-19 crisis in the energy field (and not only) raises acutely the question of democracy within the different states, and that of solidarity at the international, European, national and local levels.