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Early figures suggest coronavirus could drive sector-wide energy slowdown

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At the time of writing, the vast majority of countries in the world have confirmed cases of COVID-19, the novel coronavirus declared a pandemic by the World Health Organization on 11 March. 

While the disease initially wreaked havoc on global markets, it’s not yet known how it might impact renewable energy supply chains and project pipelines. However, all early signs point to a potentially significant slowdown in sector activity. 

Clean energy research group BloombergNEF (BNEF) has already slashed its global solar demand forecast for this year from 121–152 GW to 108–143 GW. If the prediction comes to pass, it will make 2020 the first negative year for solar capacity addition since at least the 1980s. In a 12 March briefing, BNEF researchers also predicted that electric vehicle demand would be hit hard by the coronavirus because the global automotive market is very sensitive to macroeconomic conditions. 

However, BNEF remains positive about the outlook for wind energy – stating that it still anticipates record-high installation volumes this year. Trade association WindEurope is not quite so optimistic. Its own first analysis suggests that the coronavirus outbreak will have moderate effects on global supply chains serving the European wind market. Logistical delays are already starting to become apparent, though it’s still too early to fully assess the impacts on the sector’s production and revenues. 

‘A knock-on effect of a slowdown in China’s manufacturing output is already visible in other countries,’ says WindEurope CEO Giles Dickson. ‘The wind industry is, of course, not the only industry feeling the pinch from quarantines, travel restrictions and closed factories. Vehicle and vessel manufacturers, solar PV panel and battery producers are being similarly affected.’ 

The virus is also likely to postpone the development of new wind farm projects, potentially leading developers to miss deployment deadlines stipulated in countries’ auction systems. Under normal circumstances, such delays would result in financial penalties. 

‘Governments should be flexible on how they apply their rules,’ Dickson says. ‘And if ongoing auctions are undersubscribed because developers can’t bid in time, governments should award what they can and auction the non-awarded volumes at a later stage.’ 

Meanwhile, the International Energy Agency has predicted that global oil demand will fall in 2020 – the first full-year decline in over 10 years – because of the profound contraction in Chinese economic activity. COVID-19 first emerged in the central Chinese city of Wuhan late last year and resulted in countrywide quarantine and lockdown measures. China accounted for 80% of global oil demand growth last year. 

Europe is now considered the epicentre of the outbreak and the resulting drop in global transport, industrial and commercial activity now points to a fall in oil demand of 2.5mn barrels per day (mb/d) compared to the first quarter of last year. According to IEA data, which remains incomplete, an estimated annual decline of 4.2 mb/d was observed in February, of which 3.6 mb/d was in China. 

‘The coronavirus crisis is affecting a wide range of energy markets – including coal, gas and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels,’ says Dr Fatih Birol, the IEA’s Executive Director. 

Early figures also indicate that, perhaps predictably, reductions in the combustion of fossil fuels have also led to a fall in emissions from the economies hit hardest by the coronavirus. From 3 February to 1 March, China’s CO2 emissions were down by at least 25% because of measures to contain the disease’s spread, according to figures from the Centre for Research on Energy and Clean Air reported by CNN. 

Falls in oil and steel production, as well as a 70% reduction in domestic flights, led to the drop. However, the most significant contributor was thought to be a decline in coal use – driven by China’s shrinking electricity demand at the height of quarantine measures. However, this isn’t necessarily good news for the climate, as any injection of post-viral economic stimulus could drive pollution back up again.

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