Just when renewable generation appeared ready to take-off, the coronavirus hit.

COVID-19 — the official name of the disease as announced by the World Health Organization on February 11, 2020 — already is disrupting global supply chains, U.S. markets, and daily activities. As the human health impact of the pandemic and society’s response reverberate through the economy, the question is starting to be asked, “How will the renewables sector be impacted?” Although COVID-19 can strengthen the call for resiliency and distributed renewable generation, there are at least five ways that the disease could ruin renewables in the near-term. Pay attention to the symptoms and take action to hunker down now in order to recover after the virus is contained.

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A Feverish Investment Pace

Renewables have been hot – representing more than a majority of new generation capacity coming online in 2019. The 2020 Annual Energy Outlook – published by the U.S. Energy Information Administration — projects that renewable energy would surpass the amount of coal-fired generation by the mid-2020s. Federal tax credits and state policies have fueled the acceleration of anticipated renewables through 2030 and beyond. This pace of renewable development may not be sustainable.

Policy Coughs and Congestion

Federal initiatives supporting fossil fuel generation, federal regulatory decisions siding with centralized markets versus competitive procurements, and delays in offshore wind approvals by the Bureau of Ocean Energy Management have challenged the rise of renewables. Rumors of a long overdue energy policy act in Congress could have settled the matter. At this point, however, COVID-19 is stuck in government’s gullet and sucking the air out of all policy initiatives other than those addressing the pandemic. As the nation and multiple states enter into crisis management, it will be difficult for energy and environmental policy to receive any attention in the near-term unless it is related to the coronavirus.

Tightening Supply Chains

As the disease expands exponentially, secondary and tertiary impacts on global supply chains are growing. General Electric confirmed that its GE Renewable Energy unit supply chain anticipates a negative impact of between $200 and $300 million on operating profit in the first quarter. Delivery delays could further push project operation dates beyond tax credit deadlines. The government can relieve some of the pain through a tax relief plan that extends tax credits, but direct intervention is required at a time when focus is elsewhere.

Difficulty Breathing

In the meantime, domestic fossil fuel prices are falling and the relative price of renewables is rising. Global declines in demand for oil coupled with a collapse of production quotas has dropped prices to levels not seen for twenty years, and they could fall even further. Natural gas prices, already below $2 per mmBtu for the past three months, are also gasping for breath. History has shown that if prices for fossil fuels stay this low, demand for renewables also falls.

Ongoing Aches and Pains

As the stock market continues its free-fall, a recession appears to be inevitable, which could adversely impact renewables. Protecting the environment traditionally has been considered a “luxury good” in economic parlance. As income rises, investment in protecting the environment becomes a greater proportion of overall spending. Although the call for renewables prevailed during recent market corrections, demand for clean energy traditionally declines with the economy.

Shuttered commercial and industrial load, as well as en masse quarantine measures, already are decreasing carbon emissions from automobiles, aircraft, and retailers. China experienced an estimated 25 percent decline in carbon emissions during the first quarter when the coronavirus hit. Adaption of work patterns also could have long-term implications, changing the way business is done, decreasing the nation’s carbon intensity through virtual offices, less commuting, and lower consumer expenditure. Renewables may have to wait for the economy to recover.

The Antidote

Despite the challenges discussed above, the pandemic ultimately could help renewables. As interest rates fall, renewable generation becomes more competitive. As oil prices fall, wells may be shut in, decreasing the supply of natural gas into the market, potentially raising natural gas and electricity prices. The perceived need to prepare for the next pandemic with self-sufficient, sustainable homes or microgrids could increase distribution-level demand for renewable resources. As global supply chains recover, they may become more robust, lowering the cost of delivered renewable generation equipment.

That said, an antidote is still more than one year away. Now is the time to be safe. Although symptoms could be mild, pay attention if you have a fever, cough, congestion, trouble breathing, sore throat, or aches. Failure to respond quickly could have devastating consequences. Have faith and know that this too shall pass.

Author: Tanya Bodell
Originally published on power-grid.com

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