How is the Coronavirus Pandemic Affecting the Renewable Energy Industry?
As coronavirus disease 2019 (COVID-19) continues to sweep the globe, putting hundreds of thousands of lives at risk and threatening to collapse economies, one of the only silver linings has been the current benefits to the environment.
As countries try to contain viral spread by restricting travel and social interaction, cities have seen all-time lows in air pollution levels and researchers are reporting the sharpest decline in greenhouse gas emissions since records began.
With the lockdown measures imposed on billions across the world bringing a halt to “business as usual,” an associated estimated fall in global energy demand of 6% has meant this year’s carbon emissions are set to decline by around 8%.
The International Energy Agency (IEA) says the demand for renewables is expected to surge, as social distancing and lockdown measures taken in almost every country propel a shift towards more reliable and cleaner sources of energy such as wind, hydropower and solar photovoltaic (solar PV; where solar light energy is converted into electrical energy).
Fast-Forwarding Renewable Systems 10 years into the Future
Fatih Birol, Executive Director of the IEA, said:
“The recent drop in electricity demand fast-forwarded some power systems 10 years into the future, suddenly giving them levels of wind and solar power they wouldn’t have had otherwise without another decade of investment in renewables.”
In China, the world’s largest consumer of electricity, factory shutdowns and the associated reduction in the use of industrial electricity means 2020 will likely see a cut in energy consumption equivalent to the amount of power used across the whole of Chile.
In European countries such as the UK, Spain and Italy, where offices, factories, bars, restaurants and theaters remain closed, energy use has fallen by an average of 10%.
Fossil fuel sources have been the most affected by reduced demand, with coal, for example, becoming the most expensive energy source, while cleaner, renewable sources have become increasingly more affordable.
In April 2020, for example, Austria and Sweden announced the closure of their last remaining coal-fired plants. On 29th April, the UK’s grid operator declared that the country had not used coal for around 18 days straight, which has not been done since the Industrial Revolution.
Birol said: “The plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas.”
Natural resources and energy consulting company, Wood Mackenzie, says COVID-19 is now threatening as much as $210 billion of planned investment in oil and gas.
This backtrack in investment will eventually lead to the recovery of gas and oil prices as supply decreases over time, but it could also have a knock-on effect for renewables, providing this sector with a valuable window of opportunity to gain a stronger foothold in the market.
Renewable energy sources have been given a boost, with overall demand expected to grow by 1% this year and particularly the need for renewable electricity, which is expected to increase by 5%.
“COVID-19 is a terrible thing, but it doesn’t impact how much the sun shines or the wind blows,” says Simon Eaves, managing director of asset management company, Capital Dynamics. “Renewable energy is clearly robust in this market.”
Eaves, who manages over $6.4bn in clean energy assets, says plans are soon going ahead to buy a solar-powered farm in Spain that will supply almost 30,000 households.
Emphasizing how cost-effective renewables have become, the capital of the United Arab Emirates, Abu Dhabi, recently announced an unprecedented low-cost solar installation that will generate as much energy as a nuclear reactor.
The wind and solar sectors have not entirely avoided the impact of COVID-19. The completion of various clean energy construction projects is being delayed by disrupted supply chains and the risk posed by specific government incentives ending this year.
COVID-19 Presents both an Opportunity and a Threat in the Renewables Sector
The reduced global energy demand resulting from COVID-19-related lockdown measures has opened opportunities for the renewables sector to accelerate and strengthen its position in the energy industry. At the same time, the crisis has threatened the supply chains, people-to-people interactions and financial incentives that are imperative to the sector’s expansion.
Governments and companies introducing the policies and financial incentives required to support clean energy projects and technologies could maintain the momentum of the renewables sector. They could play a significant role in contributing to economic recovery from the crisis, while simultaneously securing a more reliable, clean energy future that will increase the world’s chances of meeting climate change targets.