The renewable energy industry has weathered the effects of the pandemic according to the Financial Times of London, which reports one industry insider saying, “the pandemic does not affect whether the sun shines or the wind blows”.
While the price of oil is at a record low, and oil companies are slashing dividends, in Abu Dhabi and Dubai two projects have obtained record low costs although of course they were in train long before the pandemic hit.
Solar is at its cheapest ever
A planned 2GW solar photovoltaic project – which will be one of the world’s largest when completed by mid-2022 – has received a bid of just 1.35 U.S. cents (2.08 Australian cents) per kilowatt hour, the world’s cheapest price.
Prices in Dubai and Portugal are under 1.7 US cents (2.62 Australian cents) per kWh.
The IEA has said renewable energy is the only sector that will achieve growth in 2020, projected at 5 per cent, against the backdrop of declining demand for power worldwide – an average 25 per cent decline in energy demand per week in lockdown countries, and in partial lockdown an average 18 per cent decline.
However, the FT’s optimistic view for renewables is not shared by other observers.
Wood Mackenzie estimated mid-April that 2020 global solar and energy storage installations are expected to drop nearly 20 per cent compared to pre-COVID-19 projections. Wind turbine installations are expected to decline by 4.9 gigawatts (GW), a 6 per cent decrease.
Declining renewable energy installations and energy efficiency measures led to 106,000 lost jobs in March alone in the United States, compared to 51,000 drilling and refining jobs lost over the same time period.
15 per cent of the total US clean energy workforce could be lost over the coming months — more than a half-million jobs, it says.
Investor confidence high
However, this could be temporary, for, as Wood Mackenzie has reported more recently, “Investor interest in power and renewable energy remains high, as can be seen from the close last month of BlackRock’s Global Energy and Power Infrastructure Fund III. It raised $5.1 billion (A$7.86 billion), well above its original target of $3.5 billion (A$5.40 billion).”
Yes, demand for electricity has reduced worldwide during the lockdown, but typically it is solar and wind power that get bought first before other forms of generated power. It is the natural gas and coal plants that get switched off.
And although prices have reduced for electricity during lockdowns, many renewable electricity projects have long-term contracts that protect them from price volatility.
Three reasons to invest
Jennifer Layke, global director, energy at the World Resources Institute, and Norma Hutchinson, her research analyst, argue that there are three good reasons to invest in renewables:
- Clean energy yields an economic return three to eight times higher than the initial investment.
- The instability of fossil fuel prices presents a global opportunity to accelerate the shift to clean energy.
- Ambitious investment in renewable energy and energy efficiency could lead to 63 million new jobs by 2050 – 78 million if new grid stabilisation jobs are added.
To reach net zero carbon by 2050, US$5.2 trillion (A$8.02 trillion) of annual subsidies, tax breaks and uncharged external impacts (such as on air pollution and climate) of fossil fuel production and use must be removed, which will have a devastating effect on dividends for investors in the sector.
Over 100 leading players in renewable energy, gathered under the IRENA Coalition for Action, have jointly called on governments to implement a rapid and sustained economic recovery that aligns with climate and sustainability objectives. IRENA is the International Renewable Energy Agency.
They say that aligning COVID-19 recovery efforts with the Paris Agreement and the 2030 Agenda for Sustainable Development would result in massive socio-economic gains and are calling on governments to:
- Revisit deadlines for renewable energy projects that face contractual obligations for near-term delivery;
- Designate the renewable energy industry and related infrastructure as a critical and essential sector;
- Prioritise renewable energy in any stimulus measures and commit to phasing out support for fossil fuels;
- Provide public financial support to safeguard the industry and mobilise private investment in renewable energy; and
- Revise labour and education policies to foster a just transition and help workers make the shift into renewable energy jobs.
Their evidence is published in the first Global Renewables Outlook, released by IRENA at the end of April. It puts the cost of deep decarbonisation at up to US$130 trillion (A$200.40 trillion), but the socio-economic benefits would boost cumulative global GDP by US$98 trillion (A$151.09 trillion) above business-as-usual between now and 2050.
Renewable energy jobs would increase by a factor of four to 42 million, jobs in energy efficiency would reach 21 million, and 15 million would work in system flexibility.
IRENA’s director-general Francesco La Camera said: “Governments can achieve multiple economic and social objectives in the pursuit of a resilient future that leaves nobody behind.”
And by the way, recent surprising survey results show that America is united on wanting a low carbon future by 2050.
According to Layke, “we should invest in things that strengthen the health and well-being of our citizens; and we must look at reducing economic and infrastructure vulnerability. Propping up old, polluting industries is not a solution.”
The polluting industries themselves call for investment in a low carbon future
The World Resources Institute and the renewables industry would say that though. Perhaps the most compelling evidence of the financial sense of investing now in renewables is this: that a coalition of 40 global businesses – including energy majors such as BP, Iberdrola, Orsted, and Shell – last week called on governments to support “a massive wave of investments in renewable electricity” and other low-carbon energy solutions when devising recovery plans from the COVID-19 pandemic.
“Today, we call on governments of the world to spend economic stimulus spending wisely and invest in the economy of the future,” the coalition said. It includes Allianz, BP, Dalmia Cement, Iberdrola, Envision, Heathrow Airport, HSBC, Orsted, Schneider Electric, Shell, and SNAM.
The Energy Transitions Commission outlined seven key priorities for the upcoming wave of economic stimulus:
- Unleash massive investment in renewable power systems
- Boost the construction sector via green buildings and green infrastructure
- Support the automotive sector while pursuing clean air
- Make the second wave of support to businesses conditional to climate commitments
- Provide targeted support to innovative low-carbon activities
- Accelerate the transition of the fossil fuels industry
- Don’t let carbon pricing and regulations spiral down.
“History has shown that making clean energy a priority in stimulus packages can be a driver of job creation in the following years,” the alliance argues, citing US spending after the 2008 financial crash, which created 900,000 jobs over a five-year period by prioritising clean energy spending.
They’re backed by 50 CEOs from the banking and insurance sector – including household names such as BNP Paribas, AXA, Allianz, and Santander.
In a joint letter, this coalition calls for recovery efforts to focus in three sectors:
- energy retrofits of dwellings, buildings and offices in the public and private sectors;
- development of decarbonised mobility, electric vehicles, soft mobility infrastructure and public transport;
- expansion and storage of renewable and decarbonised electrical energies or heat.
In Europe, MEPs are calling for a green covid-19 recovery deal too.
With all these voices vying to counter the lobbying power of dirty industries, who are calling for post-pandemic bail-outs, and noting the buoyancy of the renewables industry, the balance of probability is that this industry will be central to most governments’ economic recovery strategies.
David Thorpe is the author of Passive Solar Architecture Pocket Reference, ‘One Planet’ Cities: Sustaining Humanity within Planetary Limits. He also runs online courses such as Post-Graduate Certificate in One Planet Governance. He is based in the UK.