Coronavirus could cut solar demand for first time in 30 years

Source: By Parker M. Shea, E&E News reporter • Posted: Sunday, March 15, 2020

PV solar panels. Photo credit: First Solar Inc

Analysts at BloombergNEF dampened their outlook for global clean energy growth in light of disruptions from the new coronavirus. First Solar Inc.

The novel coronavirus could plunge global solar demand for the first time since the 1980s and hit electric vehicle battery sales, according to a report yesterday.

Bloomberg New Energy Finance also said there’s “considerable downside risk” to forecasts for wind installations, while battery demand could be 9 gigawatt-hours lower than expected, the firm said. The analysis firm reduced its projections for global solar this year by about 10 gigawatts, from 121-152 GW to 108-143 GW. In 2019, global solar demand was 114 GW.

“As of March 12, 2020, it appears likely that the coronavirus outbreak will be a significant global crisis, triggering an economic slowdown,” the report said. “Chinese factories are restarting, so the pressure on supply of key components and equipment is likely to ease. Although there are short-term bottlenecks to delivery, we are currently more concerned about demand, as policy makers may divert attention away from clean energy to more pressing concerns.”

The global auto market could be one of the hardest-hit industries, BNEF said, adding that EV sales will likely suffer this year. The auto demand in China in January and February combined was 44% lower than the same two-month period in 2019. The Chinese automobile market has been contracting for several months, but it remains one of the biggest buyer markets in the world.

The global EV battery market, which is highly reliant on Chinese supply chains and manufacturing, was interrupted due to productivity declines in the first months of the year, but BNEF notes that most laborers have returned to work, and the supply bottleneck should ease.

Meanwhile, the firm had projected before the virus outbreak that EV lithium-ion battery demand would be 74 GWh, but it reduced its projections to 71 GWh in an optimistic scenario and 65 GWh at the low end. Both figures still outperform 2019.

New wind power would likely persevere to secure a record year as previously expected, but the United States and China are the two wind markets most likely to miss expectations, BNEF said.

Both countries have production incentives — in the United States, the extended production tax credit — that have driven a rush to build before the end of 2020 and thus create tight construction schedules that are vulnerable to supply disruptions from productivity losses in China the past two months (Energywire, March 10).

BNEF Analyst Ali Izadi-Najafabadi said in an email that there is a “glimmer of hope” for renewables. “As governments launch stimulus measures they could actually increase support for renewable similar to what they did after the 2007-8 financial crisis (for example the American Recovery and Reinvestment Act),” Izadi-Najafabadi said.

Republicans on Capitol Hill are floating the idea of government purchases of crude oil and royalty relief for the oil and gas producers as part of an incubating stimulus package (E&E Daily, March 12).

But Democrats have pushed back, with some arguing that massive green energy investments via the Green New Deal are the best way to address the crisis (Climatewire, March 12).

There is some precedent in the aftermath of the 2008 financial crisis, when the government enacted the American Recovery and Reinvestment Act of 2009. The stimulus package resulted in more than $31 billion of investment directly into clean energy projects by the Department of the Interior.

“Central bank stimulus will have an effect, and could be tailored to help clean energy — but may well end up supporting polluting sectors,” BNEF’s report stated.

‘Can we secure another supplier?’

Productivity declines due to the virus have rippled through global supply chains across multiple sectors, and many U.S. industries have taken a hit because of reliance on Chinese suppliers.

“The short-term interruption to production in China has highlighted the need for diversified supply chains and strengthened the case for localized manufacturing in Asia, Europe and the U.S., especially for batteries,” the report said.

Economic analysts have pointed to supply shortages for key electrical components that hurt the EV, battery, wind and solar industries. Currently, the United States is dependent on China for virtually all its rare earth minerals and many components for wind turbines and solar panels, for example.

Nives Dol&154;ak and Aseem Prakash, both University of Washington professors, wrote in Forbes last week that the coronavirus proves that America’s consolidated reliance on China for vital rare earth minerals could put America’s clean energy transition in jeopardy. Dol&154;ak and Prakash said they do not think the United States should become isolationist with respect to critical minerals but rather that it should diversify the countries it relies on for its supply chains.

“The question you have to ask: In the event this supply is disrupted, can we secure another supplier?” Prakash, who studies environmental policy, told E&E News. “You simply can’t wait 10 years for a new mine to get commissioned. … We have to make sure we have flexible supply chains. It can be perfectly globalized — that’s not a problem — but to what extent are these minerals location-specific?”

In the case of rare earth minerals, the professors note, China controls 70% of the global market, and the United States is completely dependent on imports for its supplies. Rare earth minerals are vital for EVs and a variety of other technologies.

The coronavirus is the second major event during the Trump presidency that’s threatened U.S. access to Chinese rare earth minerals. Last year, when tensions were high after the president declared a trade war, the People’s Daily, the official newspaper of the Communist Party of China, published threats that China would cut off rare earth mineral supplies.

“When we’re talking about these issues, we should not lose the perspective that there are things that may be more urgent and that we have to respond to immediately, but that doesn’t mean we shouldn’t pay attention to these long-term adjustments or medium-term adjustments,” Dol&154;ak said, “specifically because we are all adopting these more aggressive targets on reducing carbon dioxide emissions.”