As populations around the world deal with the psychological and economic effects of the covid-19 epidemic the transition to renewable energy is expected to slow to a halt.
Analysis from Rystad Energy shows forecast growth in newly commissioned solar and wind projects will be wiped out for 2020 and cut by a further 10% next year as the US dollar surges and currencies fall across the globe. Key components for projects are typically procured in US dollars, and as that currency rises they can be expected to become relatively more expensive.
In Australia, whose dollar hit a 17-year low, developers already appear to have cooled on orders that were otherwise imminent, Rystad says. Much of the 2GW utility PV solar expected to start in 2020 is already built and in the commissioning phase and work will continue on these projects. However, the key determinant of success will be the process of grid connection.
Projects seeking financial close and currently procuring will surely stop, Rystad’s analysis says, reducing the likelihood that Australia will achieve its goal of 1.8GW of utility solar PV capacity coming online in 2021. Given the longer lead times for wind energy, the 4.5GW of wind turbine capacity that is committed is still expected to come online between 2020 and 2021. The 1.5GW worth of approved projects scheduled for 2022 are at risk of delay.
“The foreign exchange impact will decimate the 2021 outlook for solar installations and the outlook from 2022 and beyond for wind installations, as orders for new equipment will halt from currency-hit emerging countries, which would otherwise account for much of this growth,” says Rystad Energy product manager for renewables Gero Farruggio.
Missing links in the supply chain
Before the novel coronavirus epidemic, Rystad Energy expected 140GW of global solar PV additions and 75GW of wind capacity additions in 2020, a year-on-year increase of 15% and 6% respectively. Eradication of this growth is due to government restrictions on movement that will impact construction timeframes, bringing this year’s commissioned projects on par with 2019.
In 2019, about 126GW of solar and 71GW of wind capacity were commissioned. The effect of the virus will be felt even more from 2021, when a reduced amount of financial investment decisions due to capital expenditure reductions, and the strengthening of the US dollar, will reduce commissioned projects by at least 20GW, or 10% versus this year.
Back to work
The lion’s share of renewable asset components is sourced from China, and projects under construction or in the procurement phase appeared particularly exposed when Covid-19 first struck, Rystad says. Yet thus far, it seems that global shipments have more-or-less arrived as expected, as Chinese panel and turbine suppliers returned to work relatively quickly, and production stabilized; panel prices have ultimately remained steady in recent weeks.