The novel coronavirus outbreak has transformed life as we know it. Schools have closed, offices have moved to remote working models, bars and restaurants have been shuttered, conferences and other large gatherings have been cancelled, country-wide travel bans have been imposed, and leaders are pleading for calm amid scenes of panic buying as the world struggles to get a grip on the pandemic.
While the efforts to “flatten” the COVID-19 curve” are at the forefront of global consciousness, the pandemic is likely to have long-reaching consequences for the global economy, with the potential to trigger a worldwide slowdown or recession. It has already brought to the fore several unpleasant realities — that the most-affected countries are the ones closely integrated commercially with the Chinese economy; that the global economy will take a beating; and that global value chains will have to rethink their future strategies.
The crisis has started impacting all sectors including renewables, which is witnessing a major supply chain disruption. As stated earlier, countries and sectors with a significant dependence on China are the most affected as manufacturers in China are still some months away from resuming 100 per cent production. The ports and shipping industry will also take some time to resume operations. The ensuing impact in terms of price increase and supply delays will not just impact project cost economics but also derail growth targets. Global solar demand is expected to drop 16 per cent this year, according to a forecast by Bloomberg New Energy Finance, making 2020 the first slow year for solar capacity addition since the 1980s.
Making matters worse, the recent oil crash triggered by Saudi Arabia’s decision to start a price war has slowed down the transition to clean energy. Clean energy advocates believe that the current situation would be “a good test” of all the climate commitments that governments and companies have been making.
In fact, clean energy enthusiasts are pushing policymakers to leverage the opportunities arising from the current crisis, including historically low interest rates, plunging oil prices and looming job losses. Low interest rates will make investment in clean energy infrastructure cheaper. This includes solar and wind farms, transmission lines linking them to cities, charging stations for electric cars, and underground pipelines to transport captured carbon dioxide, hydrogen and advanced biofuels. Building this infrastructure will create a lot of blue-collar jobs when the economy may need them the most. If the right policies are put in place, the renewable energy sector will be able to make the best of this situation.