The International Energy Agency (IEA) has released a report on the market for renewable energy, concentrating on the impact that the Covid-19 crisis has had on the different parts of the market. The report focuses on generation of electricity from renewable sources, but it also discusses transport biofuels as well as production of heat from renewable sources, such as from heat pumps.
For heat pumps, as well as for other renewable energy equipment, such as distributed photovoltaic (PV) power generation, and solar thermal water heaters, Covid-19 poses a risk of delay or cancellation to investments made by individuals and small to medium-sized enterprises. Due to measures to prevent personal contact and access to houses or commercial buildings, as well as the financial shocks and economic uncertainty that households and small businesses are facing, they may postpone or abandon their plans to install heat pumps on their property.
In addition, and very importantly, current low oil and gas prices are affecting the cost-competitiveness of renewable heat fuels and technologies relative to fossil options. For instance, low fossil fuel prices have made oil boilers for residential heating more attractive in Germany in the past.
Renewable heat consumption in industry sees a similar trend, as reduced commercial, industrial and construction activities during lockdown results in a demand shock for most heat-intensive industries, in particular for large bioenergy consumers such as the cement and wood industries. Should a prolonged economic slowdown occur, such effects on industrial renewable heat consumption would be felt beyond 2020.
Policy support, however, could dampen the effects described above. In China, for instance, the “Coal to Electricity” programme may benefit from additional fiscal support, which would help maintain heat pump demand.
Regarding power generation, which is the subject of most of the report, the world is set to build fewer wind turbines, solar plants and other installations that produce renewable electricity this year because of the impact of the Covid-19 crisis, marking the first annual decline in new additions in 20 years. But their growth is expected to resume next year as most of the delayed projects come online and assuming a continuation of supportive government policies.
Renewable power sources have so far showed impressive resilience despite the disruptions and changes caused by the coronavirus pandemic, with their share of the electricity mix increasing in many markets. But the world is set to add 167 GW gigawatts (GW) of renewable power capacity this year, 13% less than in 2019. The decline reflects possible delays in construction activity due to supply chain disruptions, lockdown measures and social distancing guidelines, as well as emerging financing challenges. But despite the slowdown in new additions, overall global renewable power capacity still grows by 6% in 2020, surpassing the total power capacity of North America and Europe combined.
The report can be downloaded here: https://webstore.iea.org/login?ReturnUrl=%2fdownload%2fdirect%2f2999