The repercussions of the Covid-19 pandemic on industry are being felt across the world. The coronavirus crisis has caused significant disruption to industry as supply chains slow and the renewable energy sector is not immune to this turmoil.
As a world leader in the production of photovoltaic panels, China’s coronavirus outbreak has had an alarming effect on the supply chain of key equipment for solar and wind farms in China and beyond. Despite the Chinese people now gradually returning to work the virus remains a real threat to the growth of the global solar-energy revolution.
As it became apparent that the world was in the midst of a pandemic, the clean energy analyst, BloomberfNEF (BNEF) was compelled to lower its expectations for the solar, battery and electric vehicle (EV) markets. They were one of the first to raise alarm bells that the escalating pandemic could threaten the urgent efforts being made to combat climate change.
BNEF lowered its forecast range for solar capacity from 121GW-152GW to 108GW-143GW. Their forecast accentuated the possibility that Covid-19 might have such an effect on demand that 2020 could turn out to be the first time in several decades that annual demand falls below that of the previous year.
In mid-March as countries struggled to respond to the Covid-19 emergency the International Energy Agency (IEA) warned that the crisis should not be allowed to hinder the green energy shift the world needs in the long-term.
The IEA, executive director, Fatih Birol, spoke out in a social media post saying that the impacts from the pandemic though severe were likely to be temporary and must not be allowed to put in jeopardy the “inescapable challenge” of climate change and global emissions.
Fatih Birol said:
“The coronavirus crisis is already doing significant damage around the world. Rather than compounding the tragedy by allowing it to hinder clean energy transitions, we need to seize the opportunity to help accelerate them.”
BNEF’s analysis is a concern as the ongoing economic slowdown is almost certain to have a sizeable impact on global attempts to roll out clean energy sources and wean the world off its reliance on fossil fuels. It is also possible that the global pandemic could lead to carbon-intensive stimulus packages in some countries.
BNEF said that it would continue to
monitor the impact the effect of the virus on clean energy markets during the
course of the pandemic.
Fatih Birol, added a serious warning to the IEA’s update:
“There is nothing to celebrate in a likely decline in emissions driven by economic crisis because in the absence of the right policies and structural measures this decline will not be sustainable. Governments should not allow today’s crisis to compromise the clean energy transition.”
On 19th March Professor Phil Hart, director of Energy and Power at Cranfield University said that he thought that the UK’s power grid should have ‘no challenges’ keeping the lights on despite the closing down of schools, the upsurge of remote working and the additional household loads caused by the lockdown. The professor believes that the scale of renewables in the UK system will be ‘helpful’ during the crisis.
“The size of renewable plants is generally much smaller, and the national power system will be better able to handle withdrawal of multiple smaller sites.”
At the same time analysts advised renewable energy developers dealing with COVID-19 economic uncertainty to use short-term fixed power purchase agreements (PPAs).
Jamie Banks, PPA manager at consultancy New Stream Renewables, said that this PPA modality would offer green energy players ‘price certainty and protection’ as well as leaving the opportunity open to revise PPA prices upwards contingent upon prices recovering.
The PPA manager added:
“It is our view that price uncertainty will remain over the coming weeks, potentially months and this will create significant potential downside price risk for our PPA generators.”
There is some good news for thousands of British homeowners who will be paid to use electricity during the day for the first time, as wind and solar projects produce a surge in clean energy during the lockdown.
Normally, negative electricity prices are only available to households overnight when demand is typically at its lowest.
However, at this point in time, some homes will be able to earn money while using clean electricity during the day for the first time as a direct result of the Coronavirus lockdown and the bright spring weather.
Notably, on 5th April, windfarms contributed almost 40% of the UK’s electricity, while solar power made up almost a fifth of the power system. Fossil fuels made up less than 15% of electricity, of which only 1.1% came from coal plants.
According to a new report from industry analysts EnAppSys, the novel Coronavirus repressed energy demand as the UK went into lockdown in the second half of March which has helped renewables reach parity with carbon-intensive energy sources.
The fall in energy demand by around 10% is due to the shutdown of pubs, restaurants, companies and factories across the country and has led to the lowest electricity market prices in 10 years.
The output of renewables rose in the last quarter as a result of extreme weather conditions which led to a consistently high level of wind generation. Power output generated by wind farms exceeded 10GW for 63% of the quarter and 5GW for 85% of the same period.
Coinciding with the significant drop off in demand as the country moved into lockdown due to the Coronavirus, resulted in renewables not only exceeding levels of gas or coal-fired generation for a whole quarter for the first time, but also exceeding levels of total fossil fuel generation (i.e. gas and coal) by 36%.
Paul Verrill, director of EnAppSys, said:
“This represents a significant milestone for Britain’s power industry. Whilst the ‘stay at home’ measures reduced demand in the last weeks of March, which increased the contribution of renewables, wind farms generated significantly more power than gas-fired plants, which historically have been the dominant fuel type for electricity generation in Great Britain for some years now. With weather likely to return to more typical patterns in future quarters, the 45% of electricity generation from renewable sources in the quarter is likely to be a temporary high. However, given recent trends which show that renewables are becoming an increasingly dominant player in Britain’s power mix, the continued build of offshore wind farms and the resurgence in onshore wind should see these levels being achieved more often in the longer term. In the shorter term, as coronavirus measures continue, reduced electricity demand will lead to renewables providing a significant contribution to the GB energy mix.”
Analysts at Raymond James & Associates believe that the decline in electricity use in recent weeks could help renewables as utilities, while their revenue suffers, try to get more electricity from wind and solar farms which cost little to operate and less from power plants fuelled by fossil fuels.
There is no doubt that the economic slowdown caused by the pandemic is conversely effecting parts of the renewable energy industry just as it is the rest of the economy. Businesses are laying people off rather than taking on new workers and putting off investments. Smaller companies selling solar panels for rooftops are the worst hit. Their orders have dropped steeply as customers put off installations for the time being in order to avoid potential contact with the virus.
Wood Mackenzie projected that 3 GW of solar photovoltaic and wind installations in India could be delayed due to the lockdown currently in place there.
Robert Liew, a principal analyst at the research and consultancy firm, said in a statement.
“The timing of the lockdown is unfortunate as Q1 (the first quarter) is typically one of the busiest periods for wind project installations. The lockdown will delay some projects until summer, and if the lockdown is extended past April, wind farm construction could be further delayed into the monsoon season, where wind installations are typically at their lowest.”
Wood Mackenzie said that solar photovoltaic installations in India were “expected to be hit hard” because the sector was “heavily dependent” on Chinese photovoltaic module imports, which had experienced disruption because of the virus.
Globally, the wind industry is definitely facing challenges. Toward the end of March, the Global Wind Energy Council said its forecast of continued growth across the next five years — more than 355 GW of additions — would “undoubtedly be impacted by the ongoing COVID-19 pandemic, due to disruptions to global supply chains and project execution in 2020.”
The GWEC added that it was however “too soon to predict the extent” of the coronavirus’ impact on both energy markets and the wider global economy.
Europe’s supply chain also “experienced some disruptions” in February related to components and materials coming from China. According to WindEurope, supplies are now “ramping back up again.”
On a regional level the pandemic has already had an impact as although the majority of wind turbine and component factories in Europe are continuing to operate, 18 manufacturing sites have been closed according to WindEurope. All these facilities are based in Spain or Italy both of which have been particularly hard hit by the pandemic. Some companies have temporarily stopped activity while taking precautionary steps to strengthen sanitary measures within the sites and guarantee full compliance with government recommendations.
February saw Europe’s supply chain experiencing some disruptions related to components and materials coming from China. On a more positive note according to WindEurope supplies are now “ramping back up again.”
Staying on this positive theme, a 500 megawatt solar photovoltaic plant, described by Spanish utility Iberdrola as “Europe’s largest,” sent its first megawatt hour of energy to the grid in early April, a welcome bright spot for the industry in turbulent times.
Despite what appears to be the indomitable spread of Covid-19 the renewable energy business is expected to keep growing albeit more slowly. This is in direct contrast to fossil fuel companies which are being hammered by low oil and gas prices.
Even a few years ago, the kind of double-digit drop in oil and gas prices the world is experiencing now because of the coronavirus pandemic may have led to an increase in the use of fossil fuels and the demise of renewable energy sources like wind and solar farms. However, this is not what’s happening.