How COVID-19 is Impacting the Renewables Industry
The EIA projects that the U.S. is on track to produce more electricity this year from renewables than coal for first time on record. While 2019 total energy consumption saw renewables surpass coal, 2020 is the first time the electricity sector is expected to see the same achievement. While the coal industry in the U.S. has been shrinking over the past decade due to declining renewable costs and cheap natural gas, the COVID-19 pandemic is pushing the coal industry into uncharted territory. In the first four and a half months of 2020, wind, solar and hydroelectric dams in the U.S. have produced more electricity than coal on 90 individual days. In all of last year, that number, the previous record, only totaled 38 days.
Although we are currently seeing a strong showing from renewables, the industry as a whole is feeling the impact of the COVID-19 crisis.
Supply Chains Disrupted
Global renewable installation activities have slowed due to the various lock down measures taken in the U.S. and across the globe in response to the COVID-19 pandemic, the IEA reports. The number of renewable power installations globally is expected to decline this year – the first annual decline in deployment in almost 20 years.
The lock downs and social distancing requirements have disrupted global supply chains that wind and solar renewable energy projects are dependent on. China, for instance, the primary manufacturer of global solar panel supply, paused or reduced production in certain provinces early February. China is now producing again which will help solar development get back on track more quickly.
Wind energy is facing the more complex nature of its globally interconnected supply chain compared to solar PV. European turbine manufacturers had to deal with disruptions early on as the supply of parts from China was on hold in February. Then, facilities in Italy and Spain had to shut in compliance with their governments’ strict lock down measures. And component manufacturing facilities in India had to temporarily close when India tightened lock down guidelines in April.
Globally, the ability to start and complete new renewable projects in 2020 will be dependent on the pace of easing lock down restrictions and social distancing guidelines in different countries.
U.S. Jobs Lost
In the U.S., nearly 600,000 clean energy jobs were lost in March and April as the sector feels the effects of lock down and distancing requirements caused by the pandemic. The energy efficiency sector was hardest hit (around 70 percent of the newly unemployed) as those jobs typically require workers to go into homes for installations.
Renewable energy jobs, primarily solar and wind, made up around 96,000 of clean energy jobs lost, with the solar industry taking the bigger hit at around 65,000 – a loss that takes away five years of solar employment gains. Solar job losses are primarily from the commercial and residential sectors where, similar to energy efficiency work, employees’ access to homes and businesses has been limited during the pandemic.
U.S. Policy Uncertainties Soothed
During the first months of economic and social restrictions due to the pandemic, the renewables industry faced concerns about how supply chain delays would impact projects’ eligibility for federal tax credits, which are on their way out. At the end of May, the U.S. Treasury Department released guidance to wind and solar developers on its plans to modify rules of the Production Tax Credit (PTC) and Investment Tax Credit (ITC). Originally, wind developers would be required to complete construction by the end of 2020 to receive the full PTC, a challenge to those facing supply chain bottlenecks. Solar developers were required to begin construction or have invested a certain amount by a specific date in order to qualify for the ITC.
Now, with the new guidelines, onshore wind projects that began construction in 2016 and 2017 will have an additional year (five years instead of four) to finish construction and still receive PTC benefits. Solar developers will be allowed to retain ITC eligibility on equipment bought in 2019 to be delivered into October 2020. Though many of the supply chain disruptions have been weeks instead of months – not totally sidelining every project – the clarification of PTC and ITC guidelines gives a little breathing room for developers.
U.S. Still Sees New Renewable Capacity
Even though 2020 new renewable installations globally are expected to be less than 2019, the U.S. is still poised to surpass 2019 levels of new wind and utility-scale solar capacity this year. Currently, the EIA still expects 12.7 GW of utility-scale solar capacity and 20.4 GW of new wind capacity added to the electricity sector in 2020, though remaining uncertainties surrounding COVID-19 mean this could be subject to change.
While residential solar installations face the challenge of lockdown guidelines, utility scale solar PV projects have space for social distancing and can continue development. Wind projects, with the PTC extension, can now work through any supply delays that might have hindered on-time completion.
In the long run, renewable development is expected to bounce back after 2020 as lockdown measures are lifted and society finds its new normal. Renewables have shown resilience in the market where coal and oil have struggled. Despite the setbacks the clean energy industry is seeing so far this year, renewable energy and energy efficiency are necessary parts of a sustainable future.
With progressive legislation such as Local Law 97 in NYC and SMBs and large corporations alike embracing and accelerating sustainability reporting, there will be plenty of demand for new renewables in the new normal ahead.