The International Energy Agency’s (IEA) latest report ‘Renewables 2020′ forecasts the impact of COVID-19 on the renewable sector.
According to the report, the renewables used for generating electricity will grow by 7% in 2020, which is in sharp contrast to other fuels. While the global energy demand is set to decline by 5%, increasing access to the grid and the continuous installation of new projects point to strong renewable electricity growth.
The report said that India would be the largest contributor to the renewable upswing in 2021, and the country’s annual additions are expected to double in 2021 compared to 2020. Many auctioned projects are expected to become operational in 2021, which will lead to growth next year.
The ongoing COVID-19 pandemic has affected the renewable sector significantly but driven by new capacity additions, the renewable power sector has defied the pandemic and continued to grow. The solar industry remains stable as utility projects’ expansion compensated for the decline in rooftop installations.
From February, nearly 100 countries – mainly in Europe, Asia, and North America – implemented lockdown measures to contain the pandemic. These safety regulations and mobility restrictions also disrupted supply chains and delayed renewable projects’ construction.
According to the latest report, renewable capacity additions are on track for an increase of nearly 10% in 2021 globally. The United States, India, and some European countries have permitted developers to complete the projects several months after the auction deadlines that fell at the end of 2020.
In the United States, renewable capacity additions almost doubled in the first half of 2020 compared to last year, mainly driven by wind developers’ rush to commission projects to meet federal tax incentive deadlines.
In Europe, although new renewable energy capacity additions were lower in the first half of 2020 than in 2019, the installation pace increased in the second quarter. The ASEAN region installed nearly 60% less capacity during the first half of 2020 compared to the same period last year.
The report suggests that there will be a small decline in renewable capacity additions in 2022 because of policy uncertainties. The onshore wind and solar subsidies expire this year in China. The policy framework for 2021-25 will be announced by the end of next year, creating an atmosphere of uncertainty regarding the expansion of the country’s renewable sector.
In India, the situation is no different because of the financial condition of the DISCOMs, which might lead to a slowdown in 2022.
In the first half of 2020, around 13 countries auctioned nearly 50 GW of new renewable capacity to become operational during 2021-24. China’s solar auction awarded 25 GW in June 2020, marking the global trend. Despite a sharp downturn in construction activities, India auctioned nearly 11.3 GW of solar and almost 1 GW of wind capacity.
Solar Continues to Shine
The report adds that global solar capacity additions are expected to reach nearly 107 GW in 2020. The average annual solar capacity additions during 2023‑25 are expected to be in the range of 130 GW to 165 GW. In the next five years, utility-scale solar projects’ generation costs are expected to decline another 36%, making solar the most cost-effective energy source in most countries.
In 2020, utility-scale additions are expected to increase by nearly 3%, owing to record additions in the United States. China is expected to construct over 33% more solar capacity than in 2019, as developers rush to complete projects before the end of subsidies. The report predicts that installations in India will decline for the second straight year in 2020 as DISCOMs’ financial health challenges persist, and COVID‑19 will impede construction activity.
In India, the COVID-19 crisis has compromised distribution companies’ (DISCOMs’) financial viability. From January to June 2020, total overdue payments owed by DISCOMs rose 28% for all electricity generators and 10% for renewable electricity projects.
Wind to Catch Speed
For wind energy, the report predicts that the annual net wind capacity additions will reach 65 GW in 2020, 8% more than in 2019. The share of offshore capacity in total wind additions will reach almost 15% in 2022 – 50% higher than in 2019.
India’s wind capacity additions are expected to drop almost 60% from the 2019 level in 2020, falling to only 1 GW – the smallest increase since 2009. In the first half of 2020, India added only 0.3 GW of wind capacity, as supply chain disruptions and lockdowns disrupted the construction activities and delayed project commissioning.
Global Electricity Demand
The report indicates that solar power and onshore wind are already the cheapest ways of adding new electricity-generating projects in most countries today. Overall, renewables are set to account for 95% of the net increase in global power capacity through 2025.
Renewables will overtake coal to become the largest source of electricity generation worldwide in 2025. By that time, they are expected to supply one-third of the world’s electricity.
“With global electricity demand expected to contract this year, the share of renewables in electricity generation is forecast to increase a record 2.3 percentage points from 2019 to reach 27% in 2020. Electricity generation from renewables will expand almost 50% in the next five years to nearly 9 745 TWh,” the report adds.
Renewable Heat Consumption
As per the report, the decrease in economic activity due to the pandemic is forecast to impact the industrial segment’s heat consumption.
The decrease in economic activities due to the pandemic will impact heat consumption in the industrial segment (-4.2%) more than in the residential segment (-1.8%).
Global renewable heat consumption is projected to be 20% higher in 2025 than in 2019, with a more robust increase in the residential segment than in industry. Despite this rise, the report adds that renewables will represent only 12% of global heat consumption by 2025, as the overall market is expected to expand, driven by industrial activity.
The IEA, in its recently published ‘World Energy Outlook 2020’ report, suggested that the global energy demand is set to drop by 5% in 2020, energy-related CO2 emissions by 7%, and energy investment by 18% because of the COVID-19 pandemic. The report noted that solar PV is estimated to grow by an average of 13% per year between 2020 and 2030, while meeting around one-third of the world’s electricity demand.
Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). More articles from Rakesh Ranjan.