COVID-19: Accelerating a Better Energy Future for All
By Helima Croft
RBC Capital Markets, LLC
Originally published June 24, 2020 by RBC Capital Markets
As a result of the COVID-19 pandemic, the energy world is innovating to respond to new operating models, disrupted supply chains, and shifts in demand. To help energy organizations prepare for what comes next, on June 17th the World Energy Council convened energy experts from the global community, including RBC’s Helima Croft, Global Head of Commodity Strategy and MENA Research, as well as Alexander Novak, Russia’s Minister of Energy, to facilitate a deeper exchange of energy systems expertise and has identified a set of post-crisis scenarios.
World Energy Council Survey
Results of the World Energy Council survey have shown that a vital shift of global energy systems is underway, with an historic reallocation of investment already beginning - 80% of respondents are significantly shifting investments towards digitalization, R&D and ESG activities. Meanwhile, a third of organizations plan to shut down one or more business units.
COVID-19 vs. Russia’s Energy System
According to Alexander Novak, Russia’s Minister of Energy, Russia’s current energy system is one of the most diversified with reliance on gas, nuclear, hydro and coal. Regardless, COVID-19 has brought about fundamental shifts in consumer behavior as people will not use cars and planes as much given some of the biggest companies have made work from home a more permanent solution.
Previous forecasts will be revised and the recovery in demand should be a partial one vs. v-shaped. In terms of the Nord Stream pipeline, progress has been slowed due to protectionist policies but the truth is that 2 billion people globally still lack access to energy.
Response to Oil Price Volatility
According to RBC’s Helima Croft, recent oil price volatility has added urgency to nations to speed up economic diversification efforts. We have seen more mutual cooperation due to COVID-19 wherein nations have come together to realize codependence and the need to collaborate. Specifically, President Trump went from criticizing OPEC to helping get the historic 9.7 mb/d cut on April 13th across the finish line as sheer economics changed American energy politics.
Similarly, countries less far along in terms of economic development are purely focused on prices when determining which type of energy to rely on and this could be a hindrance to alternative energies being implemented, given continued affordability of oil, natural gas and other conventional sources.
Digital, Clean Solutions
Leonhard Birnbaum, CEO of the power provider E.ON, explained that the German coal to natural gas transition is fundamentally driven by economics and is not solely politics as you can only keep what is competitive. Future solutions will need to be digital and clean given some recent green bond issuances have been more successful than normal bond issuances.
Global Head, Commodity Strategy and MENA Research
RBC Capital Markets, LLC
Helima is a Managing Director and the Global Head of Commodity Strategy and MENA Research at RBC Capital Markets. She specializes in geopolitics and energy, leading a team of commodity strategists that cover energy, metals and cross-commodity investor activity. Helima is a member of the National Petroleum Council, a select group of individuals who advise, inform and make recommendations to the Secretary of Energy with respect to any matter relating to oil and natural gas. She also is a CNBC contributor, a member of the channel’s exclusive family of experts, is on the Board of Directors for the Atlantic Council, a Life Member of the Council on Foreign Relations, and is a member of the Oxford Energy Policy Club. Helima joined RBC Capital Markets from Barclays, where she was a Managing Director and Head of North American Commodities Research. Prior to that, she worked in Lehman’s Business Intelligence group, the Council on Foreign Relations and the Central Intelligence Agency, where she focused on geopolitics and commodities. Helima has received many industry accolades throughout her career and received her PhD in economic history from Princeton in 2001.