Wind and solar energy
Wind and Solar Energy continue to grow, while the oil companies are collapsing.
Contrary to fossil-fuel companies that have been hurt by low oil and gas prices, the renewable energy business is expected to grow, slowly.
It's possible that the dramatic drop in oil and gas prices the world is experiencing now because of the global coronavirus pandemic might have increased the use of fossil fuels and injured renewable energy sources.
But, nothing like that is happening.
The growth of the renewable sector
According to a forecast released last week, renewable energy sources are expected to contribute nearly 21 percent of electricity consumed throughout the United States for the first time this year, compared to 18 percent last year and 10 percent in 2010. Since some solar and wind projects have been delayed by the outbreak, the renewable sector is expected to grow in 2020 and next year even as oil, gas and coal companies struggle financially or consider bankruptcy protection.
Many parts of the world, such as California and Texas, now produce electricity more cheaply with wind turbines and solar panels than with natural gas and coal. These features make them attractive to both electric utilities and investors. Additionally, while oil prices have dropped more than halved since the pandemic forced many states to order people to remain at home, natural gas and coal prices have not fallen nearly as much.
According to Raymond James & Associates analysts, even the decline in the use of electricity in recent weeks caused by businesses ceasing operations could contribute to the growth of renewables. This is because utilities, as their revenues go down, have to try to get more electricity from renewable energy sources, which have a lower operating cost, and less from power plants burning fossil fuels.
“Renewables are on a growth trajectory today that I think isn’t going to be set back long term,” said Dan Reicher, the founding executive director of the Steyer-Taylor Center for Energy Policy and Finance at Stanford University and an assistant energy secretary in the Clinton administration. “This will be a bump in the road.”
A slowdown in the renewable industry as a result of the pandemic.
As it is true for other sectors of the economy, the fight against the coronavirus has caused economic slowdowns in the renewable energy sector. Businesses that were growing up until recently are cutting staff and putting off investments. Companies that sell solar panels for rooftops are among the hardest hit. Their orders dropped steeply as customers put off installations in order to avoid possible contamination with the virus.
Luminalt, a solar and electricity storage company based in San Francisco that employs 42 people, recently told most of its installers to seek unemployment benefits as the company’s residential jobs have all but evaporated. Jeanine Cotter, Luminalt’s chief executive, told workers that the company would cover their benefits but that there was no money coming in to pay all of them.
Some employees have been installing solar at an affordable housing project that keeps them employed, while some others are doing business-related work from home. But Cotter is concerned about some installers who joined the company through the San Francisco Workforce Development program and rely on week-end paychecks to survive.
An estimated half of the 250,000 solar workers could lose their jobs at least temporarily due to the coronavirus outbreak, according to the Solar Energy Industries Association, a trade group. The association has reduced the amount of solar capacity to be installed this year by as much as one-third.
However, independent analysts, including Wood Mackenzie, an energy research and consulting firm, said those projections may be too pessimistic. “It’s still too early to call,” Ravi Manghani, head of solar at research at Wood Mackenzie. “The situation is changing on a daily basis.”
The rainbow after the storm
This year and next, solar and wind power will add capacity, according to his firm. Many states have deemed construction indispensable during the pandemic, meaning they might not see a decline of about 3 percent in new wind installations, because wind turbines are typically situated outside urban areas.
Based on a report released last week, Raymond James analysts estimated that renewable energy sources would contribute 20.7 percent to the nation's energy supply this fiscal year and at least 20 percent by the year 2022.
Solar and wind power have emerged as major energy sources only in the last 15 years or so, though hydroelectric plants have powered homes and businesses for hundreds of years. In the past few years, the price of solar panels has dropped rapidly, helping this industry to grow rapidly. There was a 23 percent increase in solar capacity last year. According to industry data, it added 13.3 gigawatts, surpassing new wind and gas generation.
“We blew through all of the projections,” said Caton Fenz, chief executive of ConnectGen, a wind, solar and electricity-storage developer based in Houston. “We’re surfing a long-term wave,” he said. “We just can’t get specific things done because of the pandemic, but I don’t think that affects the broader trajectory.”
His 22-month-old company has 3,000 megawatts — three large power plants — under development in 11 states. Approximately 40 percent goes towards wind projects, 40 percent goes towards solar projects and the rest to energy storage.
An investment firm that specializes in renewable energy is one of 547 Energy's backers. According to Gabriel Alonso, who runs 547 Energy, the company has received funding from Quantum Energy Partners, which had invested in oil and natural gas for a long time.
“As an investor in clean energy, renewable energy, the fundamentals that drove us to invest have not changed,” Mr. Alonso said.
Even as the pandemic was spreading, Mr. Alonso’ company won the bid for a part of the new electricity project in Greece. A wind farm will be built by his company in Imathia and Kozani, two northern regions. The auction was part of Greece's larger effort to transition away from fossil fuels and replace them by renewables.
Government efforts to address climate change have benefited many renewable companies who have projects around the world. Due to this, the costs of wind and solar equipment have fallen over the past decade and the industry is more resilient to economic swings.
Mr. Alonso said that the renewables are also more appealing financially because they can be constructed much more rapidly, in comparison with coal, natural gas and nuclear plants. The sentiment is that in hard economic times like this, private equity investors like Quantum are eager to invest in businesses that can quickly scale up and start making money.
What about taxes ?
However, solar businesses in particular are concerned that the disruptions caused by the pandemic will be severe enough that Congress needs to act. A group of renewable energy lobbyists are seeking legislation that will make it easier for their industry to take advantage of tax credits that exist for wind and solar power.
Developers typically partner with banks and other financial institutions that are better able to utilize tax credits than the installers of renewable energy projects. Banks typically receive a tax credit and a percentage of the project's cash flow for six to ten years.
Due to the increased demand for loans, banks have been forced to lower their lending rates, said Josh Goldstein, CEO of 8minute Solar Energy, a developer of large solar farms. In addition to streamlining the tax credit process for companies in this sector, they want Congress to make the tax credits refundable and available to their businesses in order to benefit directly.
“Their credit committees are in crisis mode,” Mr. Goldstein said about banks. “This disruption can have a particularly damaging effect.”
What to expect in the solar industry
In recent days, 8minute Solar has been forced to suspend construction on the Lotus Solar Project, a 67-megawatt facility that it is constructing for Allianz Global Investors near Fresno, Calif. Officials confirmed the work, on which about 50 people were employed, wasn't considered "essential."
Yet, the Department of Homeland Security included electricity production on its list of essential activities last month, assuring 8minute that the business could proceed as usual.
According to Abigail Hopper, president of the Solar Energy Industries Association, the solar industry is expected to add more panels in 2020 than in any previous year. It's not going to happen now, but the market is poised to add capacity.
“We believe, over the long run, we are well positioned to outcompete incumbent generators,” Ms. Hopper said.