Covid-19 lockdowns have significantly disrupted the demand side of the renewable energy supply chain. Although China and European countries have slowly resumed operations and eased lockdown restrictions, the impact of the global economic slowdown will dent the renewables market.
GlobalData’s latest report, ‘Thematic Research: Renewable Energy’, highlights that reduced demand increases uncertainty to project finance, which, in turn, impacts development timelines and stunts growth.”
Power purchase agreements (PPAs) have and will continue to be integral in supporting the deployment of renewable energy without government subsidies, and for corporations to attain their sustainability goals. Project developers are reliant on cash flows from PPAs, which, in certain cases, could represent their entire revenue stream and act as collateral for loans to support future projects. Reduced industrial activity due to lockdowns has resulted in decreased commercial and industrial power consumption, which affects existing PPAs.
Amid the Covid-19 crisis, China has emerged as a leader in terms of solar photovoltaic (PV) installations and the production of solar PV panels. The country has the largest installed solar power capacity of more than 205GW, contributing more than 35% of the global installations. China’s annual installation was expected to be around 30GW in 2020, however, the outbreak is likely to impact solar installations during the year. Even though China managed to get the virus under control in two months, disruption has already been witnessed to the flow of its wind supply chain. Further, key manufacturing hubs for the global wind power sector such as India and the European North American regions are still in the midst of the crisis.
The industry has seen visible impact in terms of lost production – particularly in the European countries that faced more strict lockdown regulations such as Spain and Italy. However, all of Europe’s wind turbine and component factories have now been re-opened after easing of restrictions throughout Europe. A total 96% of the European wind factories are open at this stage of the Covid-19 pandemic. In the event of a second wave, it is expected that there will again be suspension of production at few sites, leading to delays in projects.