NEWS Yale Environment360: How Renewable Energy Could Emerge on Top After the Pandemic

 

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The short-​​term prospects for wind and solar power look rocky amid the eco­nomic upheaval of the coro­n­avirus. But long term, renew­ables could emerge stronger than ever, espe­cially if gov­ern­ments inte­grate sup­port for clean energy into COVID-​​19 economic-​​recovery programs.

Before the COVID-​​19 pan­demic hit, renew­able energy was grow­ing steadily — but still not fast enough to meet the Paris Agreement’s car­bon reduc­tion goals, let alone to make the fur­ther strides needed to keep cli­mate change from spi­ral­ing out of control.

Now, the virus-​​induced eco­nomic shock is likely to slow the expan­sion of wind, solar, and other clean power sources, at least tem­porar­ily, experts say. But while lock­downs, social dis­tanc­ing require­ments, and finan­cial uncer­tain­ties have put some new projects on ice, the under­ly­ing strengths of renew­ables remain strong, and ana­lysts expect their eco­nomic advan­tage over volatile fos­sil fuels will only increase in the long term.

Whether the pan­demic ulti­mately puts clean energy on a faster track than before, though, depends to a large extent on the choices polit­i­cal lead­ers make now, ana­lysts say. Which means 2020 is shap­ing up to be a piv­otal moment for renew­ables — and the world’s hopes of check­ing warming.

Lead­ers must seize the oppor­tu­nity to design eco­nomic recov­ery pack­ages so they accel­er­ate a shift toward wind and solar power, rather than prop­ping up the fos­sil fuel econ­omy, said Francesco La Cam­era, director-​​general of the Inter­na­tional Renew­able Energy Agency, an inter­gov­ern­men­tal body.

Some 40 per­cent of wind and solar capac­ity that was sched­uled for the rest of 2020 has been delayed.

The only thing we have to be afraid of,” he said, “is that gov­ern­ments can be pushed by lob­by­ists to bail out sec­tors that belong to the past. And this is the real danger.”

As shut­downs aimed at stem­ming the viral spread have caused global energy demand to plum­met, renew­able sources have accounted for an increased share of power gen­er­a­tion. That is in part because the low cost of solar and wind power means they are often dis­patched to grids before other sources such as coal and nuclear power. The huge drop-​​off in demand, for both elec­tric­ity and trans­porta­tion fuels, has also pushed oil and gas prices to his­toric lows, and left fos­sil fuel com­pa­nies strug­gling to find stor­age space for huge gluts of product.

In the short term, how­ever, ana­lysts say that the global eco­nomic fall­out from the pan­demic will almost cer­tainly also be a drag on the growth of renew­ables. Stay-​​at-​​home orders halted pro­duc­tion at fac­to­ries mak­ing solar pan­els and wind tur­bine parts, and ship­ping delays have exac­er­bated sup­ply prob­lems. Con­struc­tion on some big arrays stopped, and social dis­tanc­ing require­ments have forced home solar com­pa­nies to post­pone rooftop instal­la­tions and sales visits.

The indus­try needed instal­la­tions to be speed­ing up rather than slow­ing down at this point” for coun­tries to bring carbon-​​cutting real­i­ties into line with their promises under the Paris Agree­ment, said Logan Goldie-​​Scot, head of clean power research at analy­sis firm BloombergNEF (BNEF). “Any­thing that makes that gap big­ger is hugely prob­lem­atic from an emis­sions perspective.”

BNEF has scaled back its pro­jec­tions for 2020 instal­la­tions by 12 per­cent for wind and 8 per­cent for solar, com­pared to what it antic­i­pated before the pan­demic. Renew­ables growth has been steady in recent years, and last fall, the Inter­na­tional Energy Agency (IEA) pre­dicted the world’s renew­able power sup­ply would grow by 50 per­cent over the next five years, adding new power gen­er­a­tion equiv­a­lent to the entire exist­ing elec­tric­ity capac­ity of the United States.

A worker installs solar panels on a house in Hayward, California amid the coronavirus outbreak.

A worker installs solar pan­els on a house in Hay­ward, Cal­i­for­nia amid the coro­n­avirus out­break. AP PHOTO /​ BEN MARGOT

We were expect­ing a boom year” in 2020, said Heymi Bahar, the IEA’s senior renew­ables ana­lyst. “So this becomes very bad timing.”

The big­ger ques­tion, experts say, is what hap­pens as coun­tries reopen. With cash tight, and eco­nomic trou­bles expected to keep energy demand below pre-​​COVID-​​19 lev­els, new wind and solar projects may find financ­ing hard to come by.

Auc­tions in which com­pa­nies bid to build such projects have been post­poned. Alto­gether, more than 40 per­cent of wind and solar capac­ity that was sched­uled to be com­mis­sioned from April to the end of this year has been delayed, said Goldie-​​Scot. “That’s an imme­di­ate setback.”

Home solar took a big­ger hit than utility-​​scale projects. Those rooftop sales are likely to con­tinue strug­gling, as the slow­down forces home­own­ers and small busi­nesses to restrict spend­ing on big-​​ticket items like solar arrays, even if, in the long run, they gen­er­ate sub­stan­tial savings.

Still, ana­lysts agree the renew­able energy sector’s fun­da­men­tals are strong. A lot has changed since the last global melt­down, the finan­cial cri­sis of 2007-​​08. Tech­nolo­gies have matured and prices dropped, to the point where renew­ables in most cases pro­vide cheaper energy than fos­sil fuels. Bat­tery stor­age, key to mak­ing clean power steady and reli­able, is improv­ing rapidly.

Renew­able gen­er­a­tion sources have become extra­or­di­nar­ily com­pet­i­tive from an eco­nomic stand­point,” said Dan Shreve, head of global wind energy research at con­sult­ing firm Wood Macken­zie. “It’s a ter­rific story. Do we expect any of that to change in the near term? No, I don’t think so.”

“Folks look­ing for a safe haven in a tur­bu­lent mar­ket may con­tinue to turn to [the renew­ables] sec­tor,” says one analyst.

Indeed, with oil com­pa­nies in a tail­spin, clean energy’s steadi­ness also increases its appeal to investors, in Shreve’s view. “Folks look­ing for a safe haven in a very tur­bu­lent mar­ket may con­tinue to turn to this sec­tor,” he said.

Even the breath­tak­ing drops in oil and gas prices may not be enough to under­mine wind and solar. While oil is cen­tral to trans­porta­tion, it doesn’t play a direct role in power gen­er­a­tion. And its low price will mean drilling is scaled back. Since nat­ural gas — which does go up against wind and solar in elec­tric­ity mar­kets — often flows from the ground along with oil, its sup­ply is likely to decline too, bring­ing its price back up.

Which means it won’t be com­pet­i­tive with renew­ables,” said Amy Myers Jaffe, direc­tor of the Pro­gram on Energy Secu­rity and Cli­mate Change at the Coun­cil on For­eign Relations.

Indeed, Shreve said nuclear and coal-​​fired power plants faced far stiffer head­winds than renew­ables. “That’s been the case for the last five years. It was expected to be the case for the next five years, regard­less of the COVID cri­sis,” he said. Early retire­ments of such plants, par­tic­u­larly the ones for which finances were already in trou­ble, could pick up pace, he said.

Another sec­tor likely to take a hit is elec­tric cars. That has less to do with low oil prices than with unem­ploy­ment slow­ing sales for all cars, Jaffe said. “If you believe that peo­ple were going to have the next car they buy be an elec­tric vehi­cle, if you delay by two or three years the next time they’re going to buy a new car,” that will slow the tran­si­tion, she said.

Fewer elec­tric cars means less power demand, which hurts the renew­ables out­look. But Jaffe said the pan­demic could has­ten the economy’s elec­tri­fi­ca­tion in other ways, includ­ing a long-​​term increase in remote work­ing, which would likely shift energy demand away from oil-​​based trans­porta­tion needs, and toward res­i­den­tial use, which is more heav­ily electric.

A wind turbine blade being built at a manufacturing plant in Haimen, Jiangsu province, China in 2019.

A wind tur­bine blade being built at a man­u­fac­tur­ing plant in Haimen, Jiangsu province, China in 2019. FEATURECHINA VIA AP IMAGES

In the big­ger pic­ture, what comes next depends on the virus, the econ­omy, and the path gov­ern­ments decide to chart. With vast amounts of stim­u­lus money likely to be poured into economies around the world, clean power advo­cates say it’s a his­toric oppor­tu­nity to speed the growth of a sec­tor whose for­tunes are cen­tral to hopes of stem­ming cli­mate change. La Cam­era said the renew­able energy sector’s big-​​picture strengths, and its resilience through the cri­sis so far, make him hopeful.

My impres­sion is that we are going to have a future that will be more decar­bonized than we could have imag­ined three months ago,” he said. “And in the end, this health and eco­nomic cri­sis will push us to a cleaner path for­ward.” Risks in the other direc­tion include not just direct gov­ern­ment sup­port to oil firms, but also reg­u­la­tory loos­en­ing like the Trump administration’s deci­sion to essen­tially sus­pend enforce­ment of air and water pol­lu­tion rules, or to relax lim­its on mer­cury and other toxic power plant emis­sions. Such moves save the indus­try vast sums it would oth­er­wise have to spend reduc­ing pol­lu­tion, said Daniel Kam­men, pro­fes­sor of energy at the Uni­ver­sity of Cal­i­for­nia, Berke­ley.

Even with­out a push to help fos­sil fuel com­pa­nies, COVID-​​19 could bump cli­mate change down the list of lead­ers’ priorities.

For now, most gov­ern­ments are still focused on imme­di­ate response to the health and jobs cri­sis. Longer-​​term mea­sures will come next, and coun­tries includ­ing South Korea and New Zealand are already talk­ing about incor­po­rat­ing cli­mate action into recov­ery plans. The Euro­pean Union may com­bine parts of its Green Deal — a plan for trans­form­ing nearly every sec­tor of its econ­omy to cut car­bon and improve qual­ity of life — with efforts to repair the pandemic’s dam­age. In the U.S., the fate of any ambi­tious renew­ables plan depends largely on whether Pres­i­dent Trump is reelected in November.

For the most part, coun­tries’ inter­est in green stim­u­lus plans aligns with their pre-​​coronavirus stance on cli­mate action. “We think they are more likely in coun­tries where there was already broad-​​based sup­port,” such as China and much of Europe, Goldie-​​Scot said.

What might green recov­ery efforts entail? Given clean power’s com­pet­i­tive­ness, com­pa­nies don’t really need direct sub­si­dies any­more, experts say. They would ben­e­fit from upgrades that make power grids smarter and more flex­i­ble, and there­fore bet­ter able to uti­lize renew­ables. Spend­ing to expand elec­tric vehi­cle charg­ing net­works is essen­tial, too, the ana­lysts say.

The U.S. and China both have year-​​end dead­lines when impor­tant tax and price incen­tives for renew­ables expire.

Access to credit will also be cru­cial, Bahar said. While it eas­ily com­petes with fos­sil fuels on cost, “the renew­ables indus­try just doesn’t have as deep pock­ets,” added Kammen.

Pol­icy changes mat­ter, as well. National, long-​​term carbon-​​cutting com­mit­ments would pro­vide some cer­tainty in fright­en­ing times. In the shorter term, the U.S. and China both have year-​​end dead­lines when impor­tant tax and price incen­tives expire; extend­ing those would help projects delayed by the pan­demic, ana­lysts say.

Green stim­u­lus advo­cates say cli­mate action is well-​​suited to cre­at­ing jobs, and if done right can also help rem­edy the stark eco­nomic, social, and racial inequal­i­ties the virus has exposed so vividly, par­tic­u­larly in the U.S.

A shift to cleaner energy promises health gains too. Many have taken note of the bet­ter air qual­ity lock­downs have brought, and Shreve said that could help peo­ple see the ben­e­fits of find­ing last­ing ways to reduce fos­sil fuel use.

The one bright spot in this crazy cri­sis is to have been able to walk out­side in places that have been noto­ri­ous for air pol­lu­tion, and see­ing clean skies, and hav­ing a dose of what could be,” he said.

Kam­men said he is hope­ful the pan­demic would ulti­mately speed the move to a cleaner economy.

COVID gives an oppor­tu­nity for gov­ern­ments and com­pa­nies to make that switch more strongly,” said Kam­men. “I don’t think this is going to be an easy good­bye, but I would def­i­nitely say we’re in the long good­bye to fos­sil fuels.”

For a link to the orig­i­nal story in Yale Environment360click here.

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