Energy Economy Topic Introduction

May 11, 2020

Since the dawn of the Industrial Revolution, the energy and economic growth of a nation have remained strongly related. However, the advancement in technological efficiency, penetration of renewable power, increased electrification, and shift in nations from industrial to service-based economy is going to drive the decoupling of energy and economic growth. Moreover, with the existing stress on global resources and climate, the decoupling is of utmost importance if the global economy has to continue growing, sustainably.

The energy sector is already undergoing a major transformation by adopting new technologies and innovative solutions to be more efficient. For instance, Virtual power plants and aggregators are bringing new market actors with new potential to the table. The proliferation of zero marginal cost generators is pushing wholesale power prices down in Germany and elsewhere. The industrialisation of AI algorithms is creating new opportunities and business models. Developments like these have opened new frontiers for economic activity and are paving the way for low energy intensity economies.

The recent event of Covid-19 breakout, however, has unquestionably disrupted the energy transition process. Energy markets around the globe have been shocked by reduced demand, causing low, sometimes even negative, prices in both electricity and fossil fuel markets. Businesses are going bankrupt and people are losing jobs. The implication of these, and other effects, are largely yet to be seen. Will there be support from national governments for clean energy projects? How will low fossil fuel prices affect investment in renewables? Many of the industry experts are currently focused on these exact questions.

 

Keep an eye on Community this month as we explore the topic of energy markets, and dive into these questions.


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