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Pandemic Delivers Seismic Shock to Global Energy System: WEC

The World Energy Council (WEC) said it is now clear that the COVID-19 pandemic fundamentally will impact the world’s energy systems and the pace and direction of the global transition. According to the WEC’s just-released Second Global Survey of energy leaders, dramatic cuts in spending and a reallocation of funds into digital solutions and environmental sustainability are among the most significant changes likely to emerge as a result of the crisis.

The latest findings from 225 energy experts in 61 countries across six continents indicate that the coronavirus is driving a historic reallocation of investment in an energy industry that was under strain even before the pandemic. The pandemic exacerbated these weaknesses and led to the biggest-ever decline in energy demand and sharply lower oil and gas prices.

Key findings from the survey include the following.

  • A third of energy companies plan to shed jobs, which could mean 350,000 jobs at risk across the G7 economies.
  • One in three companies plans to shut one or more business units in response to the conditions caused by the pandemic.
  • Four out of five energy businesses plan drastic cost reductions.
  • Four in 10 energy organizations report cutting operational expenses (OPEX) by more than 10%.
  • An estimated reduction of $200 to $400 billion in capital expenditure (CAPEX) is expected based on pre-COVID estimates of total energy CAPEX $1.8 trillion and WEC survey findings.
  • 80% of organizations are making significant reallocation in investments toward digitalization, R&D programs, and environmental, social, and governance activities.

Shortly after the pandemic began to impact the global energy industry, the WEC launched an initiative, including a series of pulse surveys, to facilitate the exchange of best practices and provide tools for energy leaders to manage through the crisis and shape the post-crisis agenda. The ongoing surveys not only identify how the crisis has and continues to impact energy stakeholders around the world, but also have enabled the development of plausible and alternative scenarios of what might happen, said the council. 

The WEC identified a three-stage, respond-rebuild-recreate model being adopted by energy companies in response to the COVID crisis. Survey findings indicate that some energy firms are already entering the rebuild stage and reallocating capital and resources. The council also examined four plausible scenarios for what lies ahead, based on examination of a trust-ambition-control framework. The Pause scenario focuses on collaboration aiming at a return to normalcy. The Fast-Forward scenario emphasizes collaborative opportunities for transformation. The Rewind scenario turns away from globalization to repair the local economy, and the Re-Record scenario centers on bottom-up diverse experiments to create a human-centered transition. All are mentioned in the 2nd Global Summary Full Report and explained in detail and compared against epidemiology, economics, geopolitics, environment, society, and energy metrics in the COVID-19 Crisis Scenarios Summary.

A recording of the full broadcast of the 17 June online conference marking the launch of the WEC Road to Congress 2022 is available.

Pandemic Delivers Seismic Shock to Global Energy System: WEC

22 June 2020

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