Renewable Energy under-threat due to Covid-19 pandemic

By Nesia Mhaka

The COVID-19 pandemic is a horrific global tragedy, with more than 200,000 lives already lost with more deaths likely to happen in the coming months. 

Alongside the human tragedies, the economic devastation around the world is taking an enormous toll on the livelihoods and financial stability of hundreds of millions of people. Recovering from this catastrophe will take years for countless families and businesses.

As terrifying and destructive as this global health crisis is, it is just a preview of the increasingly severe disruptions that climate change will bring. 

In Southern Africa, for example, the lockdown measures to contain COVID-19 have led to economic contraction and a significant drop in the renewable energy sector.

Although 2020-2021 was projected as booming years for renewable energy by the International Energy Agency (IEA), the recent COVID-19 outbreak has affected the energy industry with uncertainty. 

The impact on the electricity and renewable energy sectors in Africa is being felt across the continent as the virus spreads worldwide.  This has affected projects which are under construction due to postponements in the delivery of key components while others are simply not being manufactured because the manufacturing facilities are closed.

This is hampering construction programmes and increasing costs as energy sectors attempt to procure parts elsewhere.

The renewable energy sector in most African countries is heavily dependent on imported raw materials from other regions, mainly China. In general, , more than 40 % of the supply chain relies on supplies  from China and other South-east Asian countries such as Vietnam and Thailand. And, due to the closure of borders, the production of renewable energy will be delayed. 

Contractors who rely on international workers are also affected as travel restrictions and quarantine measures are imposed and lead to local labour shortages.

For projects that are commissioned, power generators are required to shut down or work at reduced capacity if their plant workers are subjected to quarantine measures and cannot be on site.

At the same time, there is a significant drop in demand in the affected countries because the energy consumption of the main users, for example, production facilities is reduced, which leads to cash flow problems.

Risks for early-stage projects

Projects which are in the procurement phase are predominantly vulnerable to the effects of COVID-19, which is likely to increase prices and affect the profitability of the operating utility companies due to supply shortages. 

In addition, renewable energy mainly operates using tender processes and now because of the COVID-19 pandemic, the ability of the parties to participate in processes are compromised, especially if contractors cannot get to the site to properly assess the risks of a competitive bid.

COVID-19 outbreak has already slowed down African production of solar modules and materials and delayed projects in countries like South Africa and Zimbabwe, among others.

Renewable energy experts say production disruptions in China could lead to a significant decline in renewable energy sources by year-or-two.

Delays in construction

If further disruptions occur, this will lead to delays in construction and the parties risk delays in important milestone dates. This can also result in project developers being penalised or, in some cases, losing tariffs, tax incentives, or other sources of income. 

Speaking during an energy meeting recently, renewable energy expert, Robbie McNamara, said due to the COVID-19 pandemic, the renewable energy industry will be affected largely.

“Disrupted supply chains, paused procurement phases, halted production, delayed projects, the list goes on. If this is not taken seriously, millions of people could be affected by this outbreak,” he said.

Speaking to Greennergyzim, energy expert at Renewable Energy Centre in Zimbabwe, Dr Gibson Mandishona, said COVID-19 affects every aspect of renewable energy from the supply chain down to the installers.

He said however, corporate demand coming out of the quarantine will provide more immediate certainty about where the renewable market is headed.

“It’s not a surprise that investors in the renewable energy market are holding cash on hand to weather this current crisis. Given all the global uncertainty, this is causing a downstream cash flow issue for subcontractors who rely on these investments to support their business,” he said.

He notes that despite the uncertainty at this time, there are no other long-term solutions on the market that can generate new energy as cheap and as clean as renewable energy.  

“As long as capital can be secured for future projects and the interest rates remain at these incredible lows to promote price-locking, it’s not a matter of if renewable energy construction will rebound but of when, it may be faster than most expect,” he said.

Post Author: Chido Luciasi

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