Arrested Development: Global Renewables Market to Fall for First Time in 20 Years, IEA Says

Global deployment of renewable energyin 2020 will fall short of
last year’s tally, the first interruption of year-on-year growth in
nearly two decades, according to the International Energy
Agency.

New
data from the IEA
 released Wednesday reaffirms earlier
forecasts of lower wind and solar installations in 2020 due to
coronavirus impacts. Supply chain bottlenecks, social distancing
requirements and, in some cases, financing hold-ups, have made
project delivery tougher.

The IEA has trimmed 15 percent from its solar outlook and now
expects 90 gigawatts of new capacity built this year, down from 110
gigawatts last year. The global solar market will rebound in 2021
but will still fall short of the 2019 level, the IEA says. The
global onshore wind market is also expected to weaken compared to
previous expectations for 2020-21, and see a slower recovery than
solar. 

While many global renewables auctions or tenders have simply
been delayed, the IEA notes that others have been paused
indefinitely, “creating significant uncertainty and increasing
risk for investors and finance.â€

The absolute figures put forward by the IEA in its forecasts are
often considered too conservative by many in the renewables
industry, but relative changes in those figures are seen as
a barometer for the market’s health.

‘Resilient’ renewables in era of energy volatility

On the whole, however, the renewables market has been remarkably
resilient in the face of a global health crisis, especially
compared to other energy sectors. Cliff-edge conclusions to subsidy
programs and the sudden re-routing of supply chains by trade
disputes have coached the industry for the crisis it now faces, at
least to some extent.

“The resilience of renewable electricity to the impacts of the
COVID-19 crisis is good news but cannot be taken for granted,â€
IEA executive director Fatih Birol said in a statement. 

“Countries are continuing to build new wind turbines and solar
plants, but at a much slower pace. Even before the COVID-19
pandemic struck, the world needed to significantly accelerate the
deployment of renewables to have a chance of meeting its energy and
climate goals,” Birol said.

Many experts feel the coronavirus dislocation will have a
long-term positive impact on how investors view renewables relative
to other energy markets, a possibility acknowledged by the IEA. Low
oil prices make renewables a
comparatively more attractive investment
.

Despite the crisis, “the hedging value of renewables to both
electricity price volatility and climate liabilities remains
intact,” the IEA report says. “Once operational, renewables
projects with long-term power purchase contracts can provide stable
revenues to investors while sheltering buyers from future
electricity and fuel price volatility.”

That energy market volatility has been unprecedented in recent
months. WTI oil prices turned negative for the first time in April
and natural gas prices have at times been half their pre-COVID-19
levels.

China and U.S. buck the trend

The largest two individual nations for renewables deployment,
China and the U.S., both remain on track to surpass their 2019
deployment totals, according to the IEA. The ongoing strength in
those two giant markets partially masks serious difficulties
elsewhere, like Europe, where new installations are expected to
decline by a third.

In Europe, slumps in wholesale power pricing related to the
coronavirus outbreak have impacted the revenues wind and solar
assets can hope to achieve on the open market. New research on the
U.K. market from Cornwall Insight shows solar and onshore wind
pricing falling below £20 ($24.48) per megawatt-hour this
spring.

With China phasing out its subsidy support at the end of the
calendar year, and the U.S. winding down tax credit support,
developers were already working to complete swollen project
pipelines. Flexibility on completion dates in both countries is
expected to allow many delayed projects to access support
regardless.

Concessions on the tax credits helped the U.S. take the
top spot
in global accounting firm EY’s latest Renewable
Energy Country Attractiveness Index released this week.

Source: FS – GreenTech Media
Arrested Development: Global Renewables Market to Fall for
First Time in 20 Years, IEA Says