Editorial Feature

How is the Coronavirus Pandemic Affecting the Renewable Energy Industry?

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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.

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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.

Fueling Economic Recovery the Renewable Way

Director general of the global flight tracking service Flightrader24, Francesco La Camera, says the coronavirus crisis has exposed “the deep vulnerabilities of the current system.”

Birol argues that this is a lesson that governments can learn from by focusing on renewable technologies as a way to recover economic growth and meet climate targets at the same time.

“Investing in those areas can create jobs, make economies more competitive and steer the world towards a more resilient and cleaner energy future.”

Francesco La Camera, Director general, Flightradar24

According to a report from the International Renewable Energy Agency, accelerating investment in renewable energy could drive economic recovery from COVID-19, while simultaneously quadrupling the number of jobs in the sector.

Replacing fossil fuels with renewables could also help to reduce carbon emissions from the energy sector by as much as 70% by 2050.

Will the Push Towards Renewables Last?

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.

Birol says that governments must implement policies that will help avoid a delay in the shift from fossil fuels to renewables.

“We should not allow today’s crisis to compromise the clean energy transition,” he said. “We have an important window of opportunity.”

For several essential markets affected by COVID-19, incentives to invest in renewable projects expire by the end of 2020. In the United States, developers must find ways to connect wind and solar PV projects by the end of this year if they are to qualify for further incentives.

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Renewable energy construction projects are also being delayed in China and the United States, where wind energy will only be entitled to production subsidies if the plans have been commissioned by the end of the year.

However, governments do have the ability to counteract any slowdown in progress by implementing targeted policies that would mean the use of renewables will still grow sustainably.

They could extend project deadlines to beyond 2020, for example, or include specific budgeting measures and incentives in future stimulus packages.

What is the Renewable Energy Situation in the United States?

Since President Donald Trump took office, policies introduced by his administration have resulted in more than 600,000 jobs in the renewable sector being lost or compromised.

The pandemic’s rapid spread has already affected every part of the country, and the Solar Energy Industries Association (SEIA) has warned that the crisis could cause the solar energy sector to lose an estimated half of its workforce. Jobs are particularly at risk in this sector, where the person-to-person interaction required for residential installations, for example, is not permitted due to social distancing measures.

Furthermore, many energy storage projects are already being delayed and the wind energy sector is experiencing disruption to its supply chain and facing the threat of losing a third of its workforce.

Despite pleas from the renewables sector, Congress did not incorporate any funding of the industry in its third relief package, such as payments to keep companies buoyant or extended investment tax credits.

“This Crisis Impacts not just Companies, but Workers”

A letter from the SEIA, signed by hundreds and given to Trump and his allies said: “This crisis impacts not just companies but workers. It will be challenging for employers to continue employment without any revenue, and the longer the crisis goes, the more difficult it will get.”

The plea was dismissed by Congress, with some reports saying that clean energy tax extenders included in one version of the third coronavirus relief bill were eliminated from the final package.

In the meantime, Congress was advised by the Treasury to consider a bailout of the fossil fuel sector, which at one point amounted to $20 billion, despite the numerous federal subsidies already plowed into the industry. Although this stimulus package was eventually passed without any specifications for fossil fuel funding, the administration is still searching for ways to finance the bailout and has found ways to provide the industry with other forms of financial relief.

The growth in employment and investment in the industry could represent an enormous opportunity for any stimulus package in the future. However, the US’s choice to prioritize fossil fuels has meant a lack of workforce replenishment in this sector and possibly even an end to the creation of any clean energy jobs in the future.

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.

Ignacio Galán, from the Spanish renewables company Iberdrola, which owns Scottish Power, is just one example of a chief executive who has been doing just that. He says his company will continue to invest billions into renewable energy and electricity networks to help ensure clean energy is integrated into supply.

“A green recovery is essential as we emerge from the COVID-19 crisis. The world will benefit economically, environmentally and socially by focusing on clean energy."

Ignacio Galán, Chief Executive, Iberdrola

 Galán continues, “Aligning economic stimulus and policy packages with climate goals is crucial for a long-term viable and healthy economy."

References and Further Reading

Farmborough, H (2020). Why The Coronavirus Pandemic Is Creating A Surge In Renewable Energy. Forbes. Available at: https://www.forbes.com/sites/heatherfarmbrough/2020/05/05/why-the-coronavirus-pandemic-is-creating-a-surge-in-renewable-energy/#14a2e78f534b (Accessed on 7th May 2020).

Forst, R (2020) Coronavirus crisis fast-forwards green energy technology 10 years into the future. Euronews. Available at: https://www.euronews.com/living/2020/04/06/coronavirus-crisis-fast-forwards-renewable-green-energy-10-years-into-the-future  (Accessed on 7th May 2020).

Ambrose, J. Green energy could drive Covid-19 recovery with $100tn boost. The Guardian. Available at: https://www.theguardian.com/environment/2020/apr/20/green-energy-could-drive-covid-19-recovery-international-renewable-energy-agency (Accessed on 8th May 2020).

Bahar, H (2020) The coronavirus pandemic could derail renewable energy’s progress. Governments can help. IEA. Available at: https://www.iea.org/commentaries/the-coronavirus-pandemic-could-derail-renewable-energy-s-progress-governments-can-help (Accessed on 13th May 2020).

Majumder, B; Hardin, S; Moser, C (2020) The Impact of the Coronavirus on the Renewable Energy Industry. Center for American Progress. Available at: https://www.americanprogress.org/issues/green/news/2020/04/15/483219/impact-coronavirus-renewable-energy-industry/ (Accessed on 13th May 2020).

Russell, C (2020) Renewable energy wins over oil and gas in post-coronavirus world: Russell. Reuters. Available at: https://www.reuters.com/article/us-column-russell-health-coronavirus-cli-idUSKBN21P0L5  (Accessed on 8th May 2020).

Henriques, M (2020) Will Covid-19 have a lasting impact on the environment? BBC. Available at: https://www.bbc.com/future/article/20200326-covid-19-the-impact-of-coronavirus-on-the-environment (Accessed on 19th May 2020).

Rathi, A. (2020) The coronavirus pandemic is accelerating coal’s demise. [Online] The Economic Times. Available at: https://economictimes.indiatimes.com/news/international/business/the-coronavirus-pandemic-is-accelerating-coals-demise/articleshow/75428458.cms?from=mdr (Accessed on 27th May 2020).

Disclaimer: The views expressed here are those of the author expressed in their private capacity and do not necessarily represent the views of AZoM.com Limited T/A AZoNetwork the owner and operator of this website. This disclaimer forms part of the Terms and conditions of use of this website.

Sally Robertson

Written by

Sally Robertson

Sally has a Bachelor's Degree in Biomedical Sciences (B.Sc.). She is a specialist in reviewing and summarising the latest findings across all areas of medicine covered in major, high-impact, world-leading international medical journals, international press conferences and bulletins from governmental agencies and regulatory bodies. At News-Medical, Sally generates daily news features, life science articles and interview coverage.

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