Global deployment of renewable energy in 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 holdups, have made project delivery more challenging.
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 2020-2021 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.”
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 an 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 rerouting of supply chains due to trade disputes have helped to prepare 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,” 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 fallen to levels half that of 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, such as Europe, where new installations are expected to decline by one-third.
In Europe, slumps in wholesale power pricing related to the coronavirus outbreak have impacted the revenue levels 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 their overstuffed 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.