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Despite proving more resilient than fossil fuels, investment in renewables looks set to be heavily hit by COVID-19 as investment in the energy sector plunges to lowest level in history.
Overally, global spending in the power sector is expected to fall by 10% in 2020 according to a new report by the International Energy Agency (IEA). One of the sectors likely to be the hardest hit is distributed PV due to lockdown measures affecting the area more than most.
This follows a similar trend to a recent market watch report produced by the agency that suggested residential solar installations will take longer to rebound from the COVID-19 slowdown than most renewables, making it unlikely solar PV will surpass 2019 levels over the next year.
Final investment decisions in utility-scale solar and wind has dropped back to the levels they were at three years ago in Q1 2020.
The report, World Energy Investment 2020, has therefore urged world countries to drive a doubling of renewable investment this decade, helping reverse a flatlining aggravated by the COVID-19 outbreak.
COVID-19 is being felt throughout the energy sector, with an “unparalleled decline [that] is staggering in both its scale and swiftness”.
Prior to COVID-19, the IEA was predicting investment into energy to grow by 2% throughout 2020. But now global investment is expected to plummet by 20% compared with last year, coming in at almost US$400 billion (£323 billion).
Dr Fatih Birol, the IEA’s executive director said that this “historic plunge” is “deeply troubling for many reasons".
“It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers. The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems.”
Beyond generation, investment in electricity networks are expected to fall 9% year-on-year in 2020. This will further compound a fallback seen last year in the sector, while aspects like flexibility and battery storage investment have stalled.
This has been keenly felt in the UK, where energy demand has seen around a 20% drop on average since the beginning of lockdown on 23 March. Due to this, National Grid ESO has found it challenging to keep the grid balanced, particularly over bank holidays and given recent surges in solar generation thanks to the sunny weather. It has had to bring in a number of tools, and it is predicted that it will cost the operator an additional ~£500 million in balancing costs.
The fall in demand, combined with lower prices and a rise in cases of non-payment of bills will cause revenues going to both industry and government will fall by $1 trillion (£811 billion) in 2020 globally.
While this knock-back for renewables is a concern, fossil fuels will feel the impact of COVID-19 more acutely according to the IEA. Investment in oil and gas is expected to fall by almost one-third worldwide this year. Shale gas will be particularly heavily hit, with investment anticipated to fall by 50% in 2020.
For the first time ever, consumer spending on oil worldwide is set to fall below the amount spent on electricity.
This dramatic fall will actually lead to the share of investment in renewables to grow, reaching towards 40%. But this is purely because fossil fuels have been hit harder, and in real terms it will still fall.