Five years ago, as COVID lockdowns swept the globe, we witnessed an energy shock that destroyed oil demand, upended electricity demand patterns, and dropped global emissions by staggering levels overnight.
In this episode of Open Circuit, we revisit predictions made during those early uncertain days and examine three major paradoxes that emerged.
First, how staying home rewired our physical and digital lives in ways that created surprising energy impacts. While transportation emissions initially plummeted, the widely predicted “death of cities” never materialized. Instead, we saw a complex reshuffling of urban populations, longer but less frequent commutes, and a data center boom that transformed tech companies into sophisticated energy players.
Then we explore how renewables defied expectations, growing 45% in 2020 despite supply chain chaos and project delays. As oil prices whipsawed, the volatility demonstrated the appeal of zero-fuel-cost clean energy, sparking the biggest investment boom in history. Yet public renewable companies have since been hammered in markets, revealing a disconnect between deployment reality and investor sentiment.
Finally, we analyze how the pandemic fractured the global policy response. While the EU embedded climate into its recovery, the U.S. passed landmark clean energy legislation, and China accelerated both renewables and coal, the crisis also sparked deeper resistance to government intervention that continues to shape politics worldwide. Will the massive investments in decarbonization outweigh the policy whiplash we’re now seeing?
Credits: Co-hosted by Stephen Lacey, Jigar Shah, and Katherine Hamilton. Produced and edited by Stephen Lacey. Original music and engineering by Sean Marquand.
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Transcript
Stephen Lacey: Jigar, it’s the middle of the night for you there.
Jigar Shah: Well, I mean, 10 PM? I feel like, middle?
Stephen Lacey: Jigar’s off in some weird location recording in the middle of the night. Katherine’s isolated in her room sitting on the floor. I’m here trying to get away from my kid in the other room. It feels like the pandemic all over again.
Katherine Hamilton: A hundred percent. My job is just to keep our dogs from butting through my door with our heads.
Stephen Lacey: We’re going for total immersion here.
Stephen Lacey: From Latitude Media. This is Open Circuit. Five years ago, as lockdown swept the globe, we witnessed an energy shock, unlike anything since the 1970s oil crisis. Oil futures briefly turned negative. Electricity demand patterns were upended. And global emissions dropped by staggering levels overnight.
And in the months and years after, COVID created a series of fascinating paradoxes. This week we’re going to explore three that emerged from the pandemic: how staying home rewired our physical and digital lives in ways that created surprising energy impacts; then how market volatility ultimately sparked the biggest clean energy investment boom in history; and finally how the crisis produced dramatically different policy responses around the world.
I am Stephen Lacey, executive editor at Latitude Media. I’m joined by Jigar Shah and Katherine Hamilton. Jigar is a clean energy investor and former director of the DOE’S Loan programs office. So five years ago to the day we were remotely recording, my toddler was napping. I was trying to keep her quiet and I remember Jigar, you said that you had house guests from New York Seeking Refuge in Maryland. Did they ever leave?
Jigar Shah: They did. They did. It was my wife’s brother and his family. I think as soon as COVID became real, I was like, get out of Dodge. Bill De Blassio does not know what he’s doing in New York City. And he’s like, oh, I think it’ll be fine. I think the next morning he was like, I’m in a car, we’re heading on the down. And it was fantastic. As you know, I only have the one child, and so having his two cousins around I think made everything a lot easier.
Katherine Hamilton: Katherine Hamilton is the co-founder and chair of 38 North Solutions. Katherine, that episode that I mentioned, you mentioned your husband was working from home before the pandemic and suddenly you were crowding into his space. Did you and Dave end up being good office mates?
Yeah, we ended up making sure that our office spaces were very separate. It was the key. In fact, they’re two floors apart from each other, so now it all ended up working out.
Stephen Lacey: Katherine, what was your most spectacularly wrong prediction about COVID?
Katherine Hamilton: That it wouldn’t last very long, but I think that was everybody’s spectacularly wrong prediction. I also thought that, so I live like five minutes from National Airport and it was so quiet. It was actually just, and you could hear the birds and I was like, this is so nice. Everybody’s going to love this and want to keep it like this all the time.
Stephen Lacey: Jigar, did you have any spectacularly wrong predictions?
Jigar Shah: Well, spectacular is in the eye of the beholder, but I mean, I really did think that we could use the singing birds in the blue skies to encourage everyone to move faster. And I do think that in some ways we did, right? I mean, electric vehicle sales are way up and clean energy is dominant around the world, but not as fast as I wanted it to go.
Stephen Lacey: I really thought those “nature is healing” memes would do the trick.
Jigar Shah: Yeah.
Stephen Lacey: There was one prediction you made. I couldn’t find it, but in one of the episodes, I think you made an offhand remark, Jigar, that you thought this would encourage everyone to learn how to fix their own clothes from home.
Jigar Shah: Yes, make our own clothes and fix stuff, and that was spectacularly off. Everyone has been outsourcing like nobody’s business.
Katherine Hamilton: Oh no, except my family figured out that I could fix everything for them and they’re like, oh, well, we’ll just get her to do it and we’ll get her to cut all our hair, which I also learned how to do.
Stephen Lacey: I was one of those normies who just took up running and puzzles. I did however, buy 20 pounds of elk meat, which my dog developed an allergy to, and so I learned how to make a lot of recipes with dog grade elk meat that said on the package “not fit for human consumption.”
Jigar Shah: I think we’ve talked about this in the podcast before. You need to avoid mass purchases of meat.
Katherine Hamilton: I worry about the brain worms, man.
Jigar Shah: Exactly. Exactly.
Segment 1: Physical world paradox
Stephen Lacey: So five years ago we huddled around our microphones trying to make sense of a world that was grinding to a halt. Oil prices were crashing, renewables projects were pausing, people weren’t moving around, and we were all wondering how the moment was going to reshape energy. And half a decade later we can finally answer that question — and like nearly everything about the energy transition, it’s very complicated and full of contradictions.
So I want to split this conversation into three different categories. I want to explore paradoxes in the physical world in our digital lives, paradoxes in markets and investment, and paradoxes in policy. So let’s first start with the physical world and how we moved around and what happened to us as the world shut down.
So when the skies cleared over Beijing, Delhi, Los Angeles, there was this momentary fantasy, as Jigar described, that this collective pause might be a reset button for climate change.
Transportation emissions dropped by 50% during those early lockdowns. And without knowing how long the pandemic would last, many wondered if driving would ever rebound. But as some people fled urban centers, others boomed. And while hybrid work certainly persists, the average commute distance has actually increased in many regions. Meanwhile, public transit ridership is well below pre-pandemic levels in major cities.
And meanwhile, our digital lives generated their own energy paradox. Data center energy consumption soared as video conferencing streaming and eventually AI development created new power demands. So we didn’t just pause our energy intensive lifestyles during COVID, we rewired them in ways that continue to reshape consumption patterns today.
So I want to ask you both, and this is going to be a question that I ask across all these different categories, what was a prediction that you either made or you commonly heard back then, and then how did it actually play out? Katherine?
Katherine Hamilton: We didn’t have much information, so we didn’t exactly know how long it would last, but we certainly, I remember in that episode during COVID, that first episode, you said something like, I think we’re 45 days out from peak now. We were so far out from peak COVID in March of 2020, and I think part of it was we just didn’t really know.
But one thing that was stunning was that my kids’ school had immediately had online resources set up for them. All of my client work immediately shifted online. So while it was still unclear as to how long it would last, everything adjusted quite quickly.
Stephen Lacey: How did this have consequences for the way we were using energy?
Katherine Hamilton: Yeah, by April, so about a month into when it was really known that this was a pandemic of 2020, global electricity consumption decreased by 7.6%, which was more than the 7% drop during the 2008 financial crisis. So there was this initial decline, and then in the summer, consumption rose back up 2.1 to 3.5% compared to the predictions.
So there was reduced time spent at home because restrictions were eased a little bit. People were spending more time outside. I think that’s probably why it rebounded a bit. Then 2023 is when COVID, the pandemic, was officially over. 2023, had very mild weather, and now demand is surging. Of course, economic growth is occurring, cooling needs are increasing. The data center sector of course is expanding. So there are all these reasons that post-2023, we’ve seen an enormous continued rise in demand and expect more.
Stephen Lacey: Jigar, what did you think was going to happen? Or what predictions did you see emerging that you thought were compelling and how did they actually play out?
Jigar Shah: Well, beside the fact that I thought everybody would learn how to fix stuff and make their own clothes. Yeah, I mean the thing is that with demand reduction, we saw a lot of oil price reductions and I thought people would want to keep that going. And so they would actually come up with ways to pass policies for us to use less oil faster.
Some of that’s worked out, some of them, some of that most certainly hasn’t worked out. But I do think that folks understanding that energy security is now national security seems like a massive change that happened during COVID.
Katherine Hamilton: Well, it was interesting that Fatih Birol of the International Energy Agency, when he released the World Energy outlook in 2020, which was in November of 2020, I mean he really used COVID as kind of the jumping off point for what the next thing was going to be.
And he said, because of the uncertainty about the future of energy, this is a critical decade for emissions reduction and energy transition. And he said, we should not use low economic growth as our low emission strategy that instead we should really think carefully and deeply about how do we use go to net zero emissions by 2050. And they built this whole case for it.
And then in the next month he did a whole piece on renewable energy growth for 2020. So certainly people in the world were thinking about this as something that we could use as really a foundation and as an understanding of this is where we could be and we just need to really now double down on it.
Stephen Lacey: Yeah, I think that’s a really interesting point because while ultimately I think COVID brought a lot more anger and skepticism toward institutions, it certainly catalyzed a lot of collective government action over reorienting supply chains and investing in clean energy. And we’re going to talk a little bit more about what that looked like and what the legacy is. But I think part of that prediction or that hope did come true Jigar.
Jigar Shah: Yeah, I mean, I continue to believe in collective action. I just think that there’s this inexorable trend against community right now. I mean, there’s an epidemic of loneliness. There’s an epidemic of people bearing themselves and their phones and their devices and whatnot.
And I think COVID opened that window where people started taking care of their neighbors and checking in on loved ones and figuring out how to do things like wear masks or other things to try to protect other folks. And I think for that moment in time, there was this intense feeling that people should think of others and how their actions impact others.
And I do think that that memory hopefully continues to spread, right? Because I think that part is going to be very important. But there’s also been a little bit of an individualistic backlash that’s occurred as well.
Stephen Lacey: Just a little bit. One of the predictions that I focused on was the great urban exodus, mid 2020, we saw the headlines screaming that we would see the death of cities that they wouldn’t ever recover. Zillow searches for suburban homes went through the roof, couldn’t keep trucks in stock in major cities, rents and premium urban markets plummeted.
And the conventional wisdom was that remote remote work had permanently broken the gravitational pull of cities. And five years later, that reality looks way more nuanced. So it wasn’t so much of an urban exodus as it was a reshuffling because a lot of people left cities like San Francisco, New York, but Sunbelt cities like Austin, Phoenix, Nashville, boom through the pandemic.
And what emerged wasn’t this simple urban to suburban shift, but a really complex redistribution, the rise of secondary cities, the evolution of hybrid work models that still had some connection to urban cores.
And there was an interesting energy paradox to this because people spread out into larger homes with larger energy footprints. So we saw residential energy use rise, but we didn’t see the permanent suburbanization that was expected.
Commercial buildings, even though commercial real estate got wiped out, they still consumed a surprising amount of energy because even though they had lower occupancy, they needed to be heated and cooled and maintained. Commutes became less frequent, but they became much longer as people moved.
And then underlying all of this, you had to support this distributed activity with a massive amount of data center capacity. So I mentioned all this because what we saw right away was this rapid drop in per capita energy consumption with the shutdowns and then this quick increase as things opened up. But things don’t look radically different on the energy front. And I thought that was a very interesting prediction that felt quite dire that didn’t evolve in the way people thought it would.
Jigar Shah: Yeah, I think that’s right. I, but I also think that people think a lot more about their energy today than they did five years ago. And I think you’re seeing a big growth in backup power systems. And I think folks are recognizing that if they’re working from home, that access to electricity actually is how they make money. And so that’s been an interesting thing that we’ve seen since COVID, right, is that folks are actually more energy aware, I think.
Stephen Lacey: Alright. Who are the winners and losers in this area? Katherine?
Katherine Hamilton: Yeah, I think that the winners were all these digital resources that we were able to tap into. I think folks who worked outside. And I remember during that episode that we taped, I mentioned that across the street my neighbor was having solar installed, and those workers were just kept on keeping on because they could work outside. There was not an issue.
So I think folks that had outside jobs did pretty well and the losers were of course people, women, children who weren’t able to stay home from school, people who were already suffering from poverty had a really hard time. So I think from a human level there were quite a few losers, but certainly from a technology level, we were able to continue to grow and to be very connected technologically.
Stephen Lacey: I picked data centers as the undisputed champions of COVID. COVID didn’t just benefit data center infrastructure, it fundamentally transformed the trajectory and set the stage for the AI revolution. So when we saw the pandemic hit, we saw this massive surge in digital demand.
Microsoft reported that it experienced two years of digital transformation. In just two months. We had zoom exploding from 10 million daily users to 300 million practically overnight. Netflix and YouTube were going bananas, e-commerce surged. And so all that digital activity lives somewhere in data centers.
And while a lot of construction activity ground to a halt, data centers were designated as essential infrastructure. And so they kept building at a really steady clip capital that fled other sectors poured into data centers. They were kind of seen as pandemic proof assets. And what’s particularly interesting is how this surge changed tech company’s relationship with energy.
So companies like Amazon and Microsoft and Google had already been scaling up their energy teams, but it was at this moment that they started hiring a lot more people. They started to do more creative things, more sophisticated, they became more sophisticated energy players, and they started developing expertise in grid integration and advanced forecasting and larger scale project development.
And so that creativity moved into the AI era. And so when the AI boom started in earnest a couple of years ago, these companies had already built up this really deep roster of expertise to manage a lot of the power demands of large language models.
And so that groundwork laid during COVID from site selection to utility relationships to some of their climate targets became the foundation for AI deployment. Today we’re witnessing now with AI data centers the direct evolution of the digital acceleration from the lockdown years.
Jigar Shah: I think if you’re trying to compare this, I think the undisputed winner was clean energy, not data centers. I mean, I think when you think about just how much money went into clean energy in 2021 and 2022, I mean it was just massive.
I mean, the world has forever changed because thousands of companies got funded during that period of time. And now many of them will go out of business and some of them will have squandered that opportunity. But when you think about how many Teslas are going to come out of that funding, boom, it’ll dwarf whatever you think happened during data centers.
Segment 2: Infrastructure and investment paradox
Stephen Lacey: Well, that Jigar brings us perfectly into the next paradox, if you will — investment in infrastructure. And the pandemic looked like a disaster for energy infrastructure of all kinds. Projects were delayed, supply chains up financing froze. Yet five years later, renewables make up roughly 90% of all new generation being installed globally. Solar is pulling in a billion dollars of investment a day surpassing investment in oil.
But we also saw during COVID a resurgence of coal. And as demand for petroleum rebounded, oil majors promising to reinvent themselves in the wake of COVID largely abandoned their efforts. There are a few other ways the paradox played out.
First, while the initial shocks and fossil fuel prices plummeted, the recovery created a lot of volatility. And that volatility demonstrated the price stability of renewables with zero fuel costs, supply chain disruptions, spiking commodity prices, forced a real fundamental rethinking of manufacturing.
And then finally we had interest rates, which drove a lot of the growth. So that zero interest rate environment created unprecedented capital for clean energy projects, fueled this venture capital frenzy in climate tech. But then when rates rose dramatically post pandemic, it hurt startup valuations, it shrunk the climate tech capital stack and increased borrowing costs for debt dependent developers.
So there are a bunch of conflicting trends here. So Jigar, what was the prediction in energy markets or infrastructure development that you made, someone else made, or that you commonly heard and how did it actually play out?
Jigar Shah: Well, I think there were many people, including the oil majors and others that predicted that we would really reach peak oil demand. I think at the time BP had said that oil had peaked in 2019 in terms of oil demand.
And I think that largely has come true in the sense that while oil demand has rebounded and gone up a little, people are very afraid in the oil markets today that oil demand has peaked and that China is likely to start going down in terms of its oil consumption. India will continue to go up a little bit, but in general, you’re starting to see that the alternatives to oil have become a national imperative by most countries.
I mean India, top of that list, they do not want to import more oil. And they believe that the model that China has put forward is something that they can copy. And so I think when you think about the predictions, they were probably premature. We didn’t peak oil in 2019, but they weren’t far off.
I mean, the level of optimism right now and being able to reduce oil demand at the country level has given people a lot of confidence in trying. And you’re seeing that across the world.
Katherine Hamilton: And remember there was this big oil price war because the incredible drop in demand during COVID put enormous downward pressure on prices. So Saudi Arabia said to OPEC, let’s cut our production. And then Russia, who’s not part of OPEC, but in OPEC plus, which includes Russia, China in the US said, no, no, no, no, let’s increase it. Let’s increase our production and supply.
And then Saudi Arabia said, all right, we’ll increase it. And then what happened was in West Texas intermediate, we went from $18 a barrel to negative $37 a barrel. Now by the end of the year, it had adjusted back up to like $51 a barrel. But I do believe that that kind of volatility and just the kind of chaotic pricing price dropping out, it doesn’t help when you look forward to, alright, well how do we prevent volatility drops like this? Especially when you get into a situation where you have uncertainty in any kind of policy or politics.
Stephen Lacey: When demand came roaring back, oil company profits looked quite healthy and renewables started to take a hit in public markets. Jigar, why do investors seem to be enthusiastic about oil and not renewables? If you actually look at how the stock market has performed,
Jigar Shah: Well remember that the reverse was true, right? I mean, oil stocks were way down during COVID and renewables, stocks were way up. And so there certainly was a correction that occurred a couple years later. But I don’t think that that means that oil stocks are up.
I mean, oil stocks are up because of the Ukraine conflict and oil prices were temporarily high. And because Wall Street had taken over all the oil companies, they were far more disciplined finally. And they were printing money over 18 months. They finally made up for all the losses that they incurred since 2009.
But if you look at where we are now, I mean oil prices are much more likely to hit 50 bucks again than they are to go to 90. And so we had a short blip of time when oil prices looked robust and now with demand flattening. And Goldman Sachs just said that they thought oil prices were more likely to go down than up. The oil industry doesn’t look so healthy again.
Stephen Lacey: So one prediction that I saw very early in the pandemic was that renewable energy development was going to freeze and contract significantly. If you actually look at the analysis from Bloomberg Wood Mckenzie, IEA, they all predicted a really strong decline in renewable energy capacity additions.
And the logic was pretty sound supply chain disruptions, economic uncertainty, workforce limitations. We would likely see a lot of capital retreat from the space, and people not be able to get projects done. Of course, we saw factory closures in China, construction crews weren’t able to travel to project sites.
But what actually unfolded was the exact opposite. Instead of contracting, renewable deployment accelerated really dramatically and capacity grew 45% in 2020 in spite of the pandemic. And so the industry actually demonstrated pretty remarkable resilience. There were creative workarounds with supply chain issues.
Obviously low interest rates were a really important catalytic force, and investors saw renewables as a safe haven amid a lot of volatility in fossil fuel prices. So the prediction failure, I’ll say because it was a widespread prediction that renewables would contract revealed that the renewables industry really had achieved a level of momentum and economic fundamentals that made it far more resilient than a lot of people expected.
Jigar Shah: Well, I mean, I would say it a slightly different way, which is that the people who turned out to be the most competent in an ever-changing environment with crazy supply chains happened to be the renewable energy industry.
Go figure the smartest people in the entire world were working in renewable energy. And when all of these things went haywire, the people that were able to figure it out and actually get things deployed, even though folks were betting against them, was the renewable energy industry.
So I mean, look, I think it makes sense that these really sophisticated players who frankly I think we’re still being treated like they were small companies, turned out to be very large, sophisticated companies that knew what they were doing and figured out how to make lemonade out of lemons.
Katherine Hamilton: Yeah, I think that’s a really good point, Jigar, because the supply chain stuff should have just stopped everything in its tracks. I remember one tiny supply chain issue was I had a sleep sofa stuck in the Suez Canal when that boat ran around and I was like, oh my gosh, nothing’s getting through the Suez Canal.
But these renewable energy companies were able to come back quickly and were able to pivot. And maybe that’s because that’s always what they’ve had to do, is to scrape by with whatever they can hack into whatever they could use whatever policy and other mechanisms that they could get their hands on. And so maybe they just had a predilection for being able to be resilient in the face of something like COVID.
Stephen Lacey: Jigar, who were your winners and losers?
Jigar Shah: I think that the fossil fuel industry for as much as they looked like winners out of the Ukraine conflict and some of the things that came out of there, now are really looking challenged. I mean, even after this election, everybody wants to get off of molecules, everybody, I mean, just recording this from London and figuring out what’s going on in the EU, they’re all in on this.
I think we take for granted the fact that the volatility that Katherine talked about has caused everyone to put their smartest people on linking national security and energy security together. And when that happens, everyone is trying to figure out what to do to reduce molecule usage. Everyone, because from their perspective, this stuff is out of their control. And I think part of what came out of COVID was folks were like, we need to actually have a little more control.
We need to figure out how to map our supply chains, where our vulnerabilities are and how we actually protect our economy from these kinds of outside shocks to the system. And I think that that is turning out to be super important.
And then the other thing that’s turning out to be really interesting is that this whole concept of we just need the cheapest renewable energy and the cheapest stuff has also been one of the biggest losers. Folks want resilient stuff, local stuff. And you’re starting to see a lot of folks decide that they’re going to pay a premium if they have to, but they’re going to manufacture some of it locally.
They’re not going to allow their supply chains to be that fragile. And you start to see the huge change when you think about critical mineral supply chains or just solar panels or battery storage or some of these other things.
I mean, there were people that were talking about this before, but not people who were actually passing legislation or people who were actually negotiating trade deals Today, every single country is looking at this stuff going, wait, we’re that dependent on one country for stuff.
90% of all grid connections in the world are renewable energy and clean energy — 90% of all great connections in the world, not just the United States. I just think that this supply chain thing has allowed people to go down a rabbit hole. Some of them are still down that rabbit hole and they’re still studying every single angle.
And I think it’s just made people recognize that oil is really out of their control and what they control is electricity.
Stephen Lacey: Yeah, I totally agree. I agree that renewables were seen as a really important resiliency solution and a hedge against volatility, the kind of volatility we saw during the pandemic. And as a result, we saw $2.1 trillion invested in clean energy in 2024, an all time record.
And so the pandemic accelerated all of these trends that you’re talking about, the resilience, supply chains, local resiliency. The war in Ukraine amplified the rush toward clean energy in many regions, but yet paradoxically, public renewable energy companies have been hammered.
So you have policymakers, you have the industry talking about the value of clean energy during this very tumultuous period. But yet, if you look at the global Clean Energy Index — S&P’s global Clean Energy Index — it has gotten absolutely hammered over the last few years. It’s very interesting how undervalued you see clean energy in the public markets. And I wonder what you make of that disconnect, Jigar.
Jigar Shah: I think it was entirely predictable, right? I mean, when the stock prices of all these companies went through the roof in 2021, they thought that they were defying gravity and that they actually deserved those market capitalizations, and they spent money like drunken sailors.
But you know who didn’t spend money like drunken sailors? Project finance players. They still used real spreadsheets and bought the projects for exactly what they were worth based on discounted cash flows. So then those companies were like, oh, we’re still making the same amount of money that we were making before.
We’re not making more money. But we spent money like drunken sailors. And when the stock market realized that they spent way more money than they had and they made the same amount of money as they were making before, they were like, oh, you’re not as profitable as he used to be.
And so a lot of those companies are right-sizing themselves right now. I don’t think it matters because we’re still putting in as much solar as possible. And the pension funds and other big guys are still putting most of that $2.1 trillion to work every year.
And so some of them may be so disciplined that they’ll go out of business like SunEdison did, and others will actually pick up the pieces. They were disciplined either way. A lot of folks learned the valuable lesson, don’t spend money like drunken sailors and don’t believe your stock price in 2021.
Katherine Hamilton: Yeah, you still need the fundamentals to work.
Segment 3: Policy paradox
Stephen Lacey: Let’s wrap up with policy. So there’s some interesting things I want to talk about in policy, right? The pandemic forced this unprecedented government response worldwide, but we didn’t see a unified vision for recovery.
Obviously we saw the European Union embed climate into its recovery package. The US eventually passed the Inflation Reduction Act and the Bipartisan Infrastructure Act. There’s deep clean energy roots in the recovery planning.
But there were other nations that took opposite approaches, doubling down on fossil fuels. China saw an astonishing growth rate in renewables, but it also approved more coal plants in 2022 than in the previous five years. And then there were other several oil producing nations that used the crisis to retain and strengthen state control over energy resources.
And so what we saw is this really fractured global landscape, but beyond the spending patterns, I think the pandemic also sparked deeper political resistance to government intervention itself. And this resistance and anger is playing out in elections and policy debates worldwide.
And so there’s this real question that I have on what the long-term impact will ultimately be. Will the investments in decarbonization outweigh the policy whiplash that we are now seeing as a result of COVID? So Katherine, tell me about what the common prediction was during this time and how did it play out?
Katherine Hamilton: Yeah, it was interesting because I had mentioned Fatih Birol and him wanting to really double down on climate emission reduction and using COVID as a means to do it. And so certainly folks like the EU, they used like 37% of their COVID relief efforts, which was about 700 billion euros in this recovery fund to climate related initiatives. Unclear exactly what the benefit of all of that was, but it was a real statement.
And then there were other countries like Albania, Benin, Ecuador, Jordan, and Vietnam, and they really worked to align all their COVID recovery efforts with their climate goals. But then, as you say, a lot of the lower income climate vulnerable nations just didn’t have the resources to do that as they were trying to recover. And then South Korea, China and India, of course, they did a bunch of renewables and clean energy, but they also did a bunch of coal, so they kind of did everything.
So there was just a broad spectrum of folks. And the US did something really interesting, which we haven’t covered as much, although we covered it at the time, of course, because it’s been superseded by the Inflation Reduction Act and infrastructure bill and CHIPS act.
But there was in our $2.3 trillion COVID relief bill, a whole bunch of stuff about clean energy. So the solar investment tax credit got an extension. It was due up. The wind production tax credit got an extra year. Offshore wind got its own credit. We didn’t get the storage credit. It was heartbreaking at the time.
I remember I thought I would never recover from that until the Inflation Reduction Act was passed. But there was also the Energy Act of 2020 that was included in the COVID relief bill, and that was the Better Energy Storage Technologies Act, the BEST act that created the new long duration storage program under the Trump administration at DOE, there was tons of research bills that were put in there, and there were authorization bills.
So it was funding for those programs, but also some of it was just making sure that those programs actually existed and they’re about coming due now for reauthorization. So it’s an interesting time to be looking at that bill.
But one of the things that really struck me as a prediction at that time was that Senator Murkowski in the Senate who had really pushed for this Energy Act of 2020, said climate change and clean energy, it’s a really bipartisan issue. There’s just no difference. Climate is not a bad word anymore.
And we know that’s not true now. It has now really become so partisan. But at the time we thought it would be, oh, this is great. Everybody can get around this. And the first Trump administration was all on board and signed the bill. And so we were really thinking that this was going to be something where we’re going to get done in a bipartisan way and that would persist. And unfortunately that has not persisted.
Stephen Lacey: But what are okay words? Resiliency, dominance. And those were words that everyone was using in the post pandemic recovery. There was this interesting moment actually when the pandemic first shut everything down. There were questions about whether crisis austerity would put climate action on the back burner actually as governments focused on immediate economic survival.
And then more people started to feel hopeful that COVID would actually be an opportunity for a green recovery. And then the packages started to evolve. What did you think was going to happen, Katherine, at that moment when it was sort of unclear? You’re like an encyclopedia, by the way when you rattle up on these changes. But did you believe early in the process that that was possible, particularly here in the US?
Katherine Hamilton: Yeah, I mean, I thought that what we had done in the COVID Relief Act was not monumental. It was incremental, but it gave us a pathway to doing more. So it was a lot of the underlying and structural legislation that allowed us to build the Inflation Reduction Act by person, infrastructure, law, et cetera.
And so of course, I couldn’t foresee that because we didn’t have an administration that would’ve been supportive of the IRA, but I could have seen something like the bipartisan infrastructure bill passing had President Trump at that time been serious about infrastructure spending. He talked about it a lot, but he didn’t really make that happen. But I definitely thought this is a time for incremental improvement. It wasn’t sort of the rocket booster that we ended up getting in the Biden Administration.
Stephen Lacey: I had a lot of optimism that green industrial strategies would play a role in long-term recovery packages, but I didn’t realize how much political backlash we would see as a result. And I did feel like there was potentially the opportunity to create this large global cooperation on shared challenges that might feed into climate change. We’re all in it together spirit, but it gave way to vaccine nationalism to more supply chain competition, which ultimately ended up being a good thing and sort of increasingly fractured international politics.
And so the government in the US and elsewhere rewrote the rules of how the government inserts itself into energy markets. And so we have this period of green industrial nationalism, but I didn’t foresee the kind of backlash we would see as a result of those policies.
Jigar Shah: I think you’re misreading this whole thing, Stephen. I don’t think there’s any backlash to what we did. And in fact, I think everyone’s preserving it all. They want to use slightly different tools. But I think when you look at what the EU has announced this week and last week, I mean the EU was the last holdout, right? India and Brazil had local buying requirements. Now the EU is like, we need some local buying requirements.
I think when you think about how much every government is all in on industrial strategy now, it’s never going back. There’s no going back to global free trade and we’re just going to buy everything from one country. And I think you misread the coal consumption. The coal consumption is a move towards local. So this is not a move towards fossil fuels. This is saying every country is saying to the extent that we are living off of US LNG, we’d rather use our local fuels than US LNG. If to the extent that we’re importing oil, we’d like to use our local fuels instead of that.
And increasingly what they’re finding is that local fuels are actually renewable energy and nuclear power. And I think when you see China’s 30 nuclear plants actually get built over the next four years, I think you’re going to see them dramatically reduce coal consumption. And I just think that India has just decided that they’re going to go all in on nuclear as well as obviously solar and some of the other things that they’re doing.
I think that there is this optimism that I have right now that what happened in 2020 and 2021 has unleashed a set of solutions that are more local. And yes, temporarily there was more fossil fuels, but I think long-term it’s going to be way more clean energy. And I just think that this is an unstoppable force on almost every continent.
Stephen Lacey: I think you’re right about clean energy, and maybe I phrased it wrong. What I think is we did not build social cohesion and trust in government and the pandemic fractured how people view public health measures and emergency measures. And I think that that is going to have very serious consequences for the next stage of policy development for these technologies.
So it might not have been a direct result of the green industrial strategy per se, but I think the large-scale government intervention around crisis management caused a very serious anti-establishment backlash that will have huge consequences going forward.
Jigar Shah: Maybe. I mean, that’s why you got RFK JR at Health and Human Services. But I mean, you look at Chris Wright, he’s bragging today about how they’ve released money to the Palisades nuclear plant. And so when you think about the tools that we were given at the Department of Energy, this Department of Energy wants to use all those tools.
They might want to shift some of the sectors they want to work in, but they have not told me that they want to be less interventionalists. They’re saying, I want to intervene on nuclear power instead of intervening on this other stuff. I think these are disconnected things. I think when you think about health and some of these other pieces, I agree with you, institutions were under siege and they feel weak. And I think people don’t like the way public schools were managed during COVID.
People didn’t like the way that governors required certain restrictions and other governors. And so I think there’s a lot of truth to what you say. But I think on the industrial strategy side of things, I think Trump started in 2016 through his rhetoric. I don’t think they passed a lot of policy to support his rhetoric, even though his infrastructure week was every week.
I think the Biden administration passed a bunch of policies, and the Trump administration is kind of like, I don’t know, we’re going to say nasty things about this policy, but we kind of want to use it to do stuff that we want to do. And every single region of the world that I’m studying is going, that looks pretty cool. We should copy a form of that over in our country. And so I hear you on the feeling that people have towards institutions, but I see you and raise you than a lot of these folks are leaning in even more.
Katherine Hamilton: And I honestly think it’s a difference between carrots and sticks too. The Inflation Reduction Act did a ton of carrots. The tax credits were huge, and it really helped really incentivize new manufacturing in the United States as did the CHIPS Act. And that made everybody jealous around the world. So they all wanted to get in on the, well, we’ll bill local manufacturing too, but there are other grants and loan programs.
So those were all really good carrots. The sticks were things like the methane fee, and that’s getting rolled back. So there are regulatory pieces, which were more of the stick side, and those are really important too. And they’re being rolled back right now, unfortunately. So there are things that are positive and negative, but on the carrot side and creating the market and the conditions for building more manufacturing and more renewables in the US, that’s completely unstoppable.
Stephen Lacey: The Inflation Reduction Act put a target on the clean energy industries back in the Trump era. And then when you look at COVID, generally radicalizing, people like Elon Musk, who with his experience with California’s factory restrictions transformed him into this government cynic who’s leading the efforts to dismantle federal agencies.
The result is we’re witnessing attempts to obviously freeze IRA spending and try to freeze the industry, but a systematic dismantling of government capabilities essential for the energy transition. So FERC authority, EPA, enforcement powers permitting offices, scientific research programs.
And so I don’t think that the public backlash per se, as a result of IRA spending, but I think it created a politically troubling question about did it accelerate Trump’s aggression toward the clean energy industry? And are we actually emerging from this IRA spending with kind of a pyrrhic victory in that now we have an administration who’s going to not just freeze incentives, but tear down the very infrastructure needed to actually execute it. And so this is a very US-centric take, but I think there’s a very real question about what the long-term net benefit will be at the end of the Trump era.
Katherine Hamilton: The benefit of the Inflation reduction Act. Yeah, I don’t think they’re going to tear it all down.
Jigar Shah: When you think about what Trump cares about, it’s basically tariffs and immigration. Every other issue that he comments on, I don’t think he cares that much about. And I think that the Republican governors care a lot about the fact that the Inflation Reduction Act is basically an extension of their economic development office. And so every one of them is like, we’d like to leave all that in place, please. And so I think we’re going to be just fine.
Look, and I think the other thing is that our industry is so rock solid and so dominant right now. The amount of money available for our industry has never been higher, right? The amount of enthusiasm for investing in our industry has never been higher. Now, valuations have come down. Weak companies are going to go out of business. But I just think that the notion that this is a fragile industry that Trump can do something with, not when we’re 90% of all grid connections.
Stephen Lacey: I feel like I should end on a positive note too before listeners ask if I need help.
Jigar Shah: We all need help, Stephen. Open Circuit meetups.
Stephen Lacey: I do think that the supply chain reorientation story, that the pandemic exposing vulnerabilities and that triggering a reshaping of trade relationships and onshoring of manufacturing is going to have a huge generational impact in a positive way, particularly here in the US. So I think that is a really important story coming out of the pandemic.
Stephen Lacey: That’s going to do it. Katherine Hamilton and Jigar Shah are my co-hosts. Open Circuit is produced by Latitude Media. The show is edited by me. Sean Marquand is our technical director and he wrote our theme song. Anne Bailey is our senior podcast editor.
Latitude Media is supported by Prelude Ventures. Prelude backs visionaries accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at preludeventures.com.
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