COVID-19 Implications for Energy: Interview with José Antonio Vargas Lleras

COVID-19 Implications for Energy: Interview with José Antonio Vargas Lleras

President of Codensa S.A., Chair of the World Energy Council Communications and Strategy Committee and Chairman of the Council's Colombian Member Committee

Mr Vargas Lleras currently serves as the Chairman of Codensa and Emgesa, ENEL Group Companies, leaders in energy generation and distribution in Colombia. Before joining Codensa in 2006 he held the post of General Manager of the Bogota Energy Company (EEB). Mr Vargas Lleras has been Secretary General to the President of Colombia and Ambassador of Colombia to the European Union, Kingdom of Belgium, and the Great Duchy of Luxembourg. He has also been Commercial Representative of the Colombian government to Spain and Mediterranean Europe. On the international level, he has been Vice President and President of the Regional Electricity Integration Commission (CIER).

In your opinion, what will be the top three long-term implications and structural changes in the energy sector in your region or country as a result of the COVID-19 pandemic?

First, I believe the steps we have taken in terms of digitalisation will be irreversible and this is clearly one of the long-term implications of this crisis. This is something which will shape the world in the future and in particular the way we operate our business.

As an example, in Colombia during the last 4-5 years the number of customers which paid their electricity bills through digital platforms did not go beyond 15%. With the crisis, we have seen an incredible increase in the number of customers using these platforms and in just a few weeks we are seeing 40% of customers using them. This increased digitalisation and interaction through platforms with customers will allow our companies to have much more efficient operations which will translate into lower costs and eventually into lower prices for customers. I am convinced this process will lead to re-evaluating the need for physical contact points with customers, such as the service offices, and we will see a dramatic drop in the number of this kind of space in the near future, not only in the electricity sector but throughout the economy. This crisis has proved we can interact with customers in different and more efficient ways. Digital engagement is something that will stay and continue to grow in the coming years.

A second implication for countries like Colombia, whose government revenues have a high dependence on oil exports, is that our economies will need to diversify. The oil price shock has a very clear link with the COVID crisis, the demand shock caused by lockdowns around the world has triggered the price fall to unprecedented levels, having enormous impacts on fiscal budgets of oil exporting countries. This is a signal for our economy to start diversifying and stop depending on volatile international commodity prices as the main source of revenue. I see in the coming years important structural changes for our economy which has traditionally been commodity export oriented, bringing new opportunities to other sectors and making our economy more resilient to crises like this one.

Finally, I believe this crisis will accelerate the pace of energy transition around the world. In the coming years we will see investments in oil and gas being very tight due to the recent price crash, whereas I believe investments in cleaner technologies will continue to grow and these technologies will become more cost-effective. Renewable energies, in countries like mine, will allow us to have a more resilient energy system, capable of withstanding shocks and providing reliable, affordable and cleaner energy to all.

I believe this crisis has showed us it is possible to live in greener and more sustainable cities, with much better air quality. Pollution levels around the world have dropped significantly due to lower transport use and we shouldn’t go back to where we were. This will be a great opportunity for clean transport technologies to replace the use of combustion engines. This, together with the digitalisation trend mentioned above, will accelerate the energy transition around the world.

What are the lessons that you have learned at this stage of the crisis in your country or region? Any crisis management tips you would like to share with our global community?

The first lesson I would like to point out is that we have learned to work remotely. This was something which was previously at a very early stage of development in countries like Colombia, but the crisis has triggered an unprecedented change in this. Many companies in the country have seen operations with 80-100% of staff working remotely and business running smoothly. This will certainly lead to many changes in the future, with companies probably downsising their office space and being much more flexible with remote working policies, leading to greater cost efficiencies in many areas.

Another lesson we have learned is that government, private sector and regulators can work together in a very agile and coordinated manner. During the crisis we have seen how this collaboration has led to very quick decisions that benefit customers and the market. Before the crisis any discussion of this nature would take months or even years. We must learn from these new ways of collaborating and working for the future and make sure we continue to work together in an agile manner.

A final lesson of this crisis is that many companies have moved from saying the customer is at the centre of the company and decisions, to really making this a reality. During the crisis the decisions and actions in many sectors have been guided by the customer, which was not something we did in the past. The crisis has allowed us to build much more customer centric organisations.

What are the main positive spill-over effects of COVID-19 in your country or region, if any?

COVID has made visible many structural faults in my country. With the crisis, all the inequalities have become much clearer, the fragility of employment and lack of savings in our society are more evident as well as the lack of preparedness of the state to shocks like this. Our health and education systems are very fragile. Our economies will be impoverished, and analysts expect this crisis to cost us about 10 years of development. In sum, the crisis has made evident the fact that we are a poor country with a state that has a lack of resources allowing it to respond appropriately to a shock of this magnitude. It is as if they had opened a curtain which allowed us to see a panorama that before the crisis, we couldn’t see in such a clear way. I hope this will be the chance to rethink many things, and for our country to start building more equitable systems and society.

How can we emerge from the COVID-19 shock as a more resilient society and continue to accelerate the pace of successful energy transition?

I believe COVID has had impacts on all aspects of our lives, and this will have long term effects in the way we act and think. We will all have a more resilient criteria going forward, in particular in the way we will plan and decide, and we will have a time of reflection as to how we will behave in sharp crises. In short, this crisis will leave a scar on our society.