Covid-19 forced many companies in Germany to stop or significantly reduce production. Restaurants, retailers and hotels also had to close their doors, and many workers began working from home. These trends had an impact on the energy sector. How has the sector come through the crisis so far, and how can it be more resilient to crises in the future?
Even before the Covid-19 crisis, the energy sector was in the midst of an unprecedented upheaval driven by the energy transition. Against the backdrop of the EU-wide ambition to be "climate-neutral" by 2050, business models are undergoing huge changes. In future, energy will be generated locally and digitally. In addition, the fluctuating nature of wind and sun will increase the complexity of the system and the demands placed on the various stakeholders.
In the midst of this development, the pandemic has become a global challenge and has brought with it several new problems, such as a lower demand for power, falling prices and lower solvency among businesses and private customers. Many power producers also face organisational challenges, because the personnel needed to operate a power plant can only work from home to a limited extent.
Renewable energies prove to be crisis-proof
In spite of all this, the sector seems to have weathered the crisis relatively well so far. "This applies in particular to the operators of renewable energy power plants, i.e. wind and solar parks. At the end of the day, the wind blows and the sun shines regardless of a pandemic, and prices are usually fixed for long periods of time", says Olaf Beyme, Head of Renewables & Power at ING.
For those who use conventional sources of energy (usually fossil fuels) to produce electricity, the situation is much more complicated. The sharp drop in demand in industry was not able to be offset in full by higher consumption by households. This subsequently led to a significant fall in prices at the European Energy Exchange (EEX). "If one of our customers finds themselves in economic difficulties as a result of the recent developments, we support them with short-term bridging loans, Kreditanstalt für Wiederaufbau (German Reconstruction Bank) loans and, if necessary, with more flexible repayment plans for existing loans. However, this was only necessary for a small number of our customers, as they were generally sufficiently and prudently funded", says Beyme. "All companies will now thoroughly examine how critical dependencies due to global supply chains can be reduced."
The trend toward sustainability reinforces the energy sector
Fundamentally, and regardless of the pandemic, the energy revolution offers many new opportunities in addition to the countless challenges. In principle, increasing decentralisation and the greater number of market participants increase resilience to crises. "Last but not least, the economic stimulus packages focus on climate-friendly technology – a possible boost for the entire sector", Beyme concludes.