COVID-19 will wipe out global renewables growth – report

Renewable energy projects will be hit by COVID-19’s effect on the economy.

That’s according to a Rystad Energy analysis showing forecast growth in newly commissioned solar and wind projects will now be wiped out for 2020 and cut by a further 10% next year as the US dollar surges and currencies fall across the globe, possibly impacting on EV charging as well.

“We expect these movements in the foreign exchange market to cause companies to pause contracting key components, which are typically procured in US dollars,” the Norway-based independent energy research and business intelligence company says.

“Renewable projects in Australia, Brazil, Mexico and South Africa will be especially impacted, as projects in the procurement phase could face capital cost increases of up to 36% due to the rapid depreciation of local currencies in these countries.”

Before the coronavirus pandemic, 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, Rystad says.

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, it adds.

“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 Sydney-based Rystad Energy renewables product manager Gero Farruggio.

Rystad says 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.

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 stabilised; panel prices have ultimately remained steady in recent weeks, the company says.

Rystad suggests utility wind is most at risk, as the percentage of wind development capex procured in US dollars is 25% higher than that of a utility solar PV.

Farruggio expect China and the US will be least impacted by exchange fluctuations, and solar installations there to remain fairly stable, despite some slowdown.

In Australia, where the 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 in the country is already built and in the commissioning phase and work will continue on these projects. However, the key determiner of success will be the process of grid connection.

“On the other hand, projects seeking financial close and currently procuring will surely stop, reducing the likelihood that the country 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, however, and we feel it is now unlikely that Australia will see a standalone wind farm reaching financial close in 2020.”