Renewables face three main challenges from coronavirus crisis

Renewables face three main challenges from coronavirus crisis

BAKU, Azerbaijan, April 16

By Leman Zeynalova - Trend:

Falling costs and strong policy support have made renewables increasingly attractive and competitive in many economies, but they now face three main challenges from the coronavirus crisis, Trend reports citing the International Energy Agency (IEA).

These challenges are: supply chain disruptions that can lead to delays in completing projects; the risk of being unable to benefit from government incentives that end this year; the likely decrease in investment because of pressure on public and private budgets combined with uncertainty over future electricity demand.

IEA believes that more than ever, governments will be central in tackling these challenges and determining the pace of deployment of renewables in the near future.

"Economic stimulus packages aimed at getting the global economy back on track will be particularly important. When designing these packages, governments should bear in mind the structural benefits that renewables can bring in terms of economic development and job creation while also reducing emissions and fostering technology innovation," the agency said in its report.

Considering the unprecedented economic impact of the coronavirus crisis, the growth of renewable capacity additions this year may very well slow down for the first time in history, said IEA.

"However, governments have the ability to change this trajectory with targeted policies that can enable renewables to grow sustainably in the coming years."

Right now, policy makers are naturally focused on dealing with the huge public health challenges created by the coronavirus pandemic and taking the necessary measures to prevent a widespread financial crisis. They are also stepping in to try to urgently address the rapid spread of economic difficulties affecting households and businesses. As governments continue to work on repairing the economic damage and spurring renewed activity in the week and months ahead, there are a number of actions that can achieve these goals while also helping the deployment of renewable energy.

First, policy makers can extend deadlines for commissioning projects beyond 2020 in order to account for delays due to supply chain disruptions or labour constraints. This will enable renewable project developers to avoid financial penalties that may weaken their financial situation in a difficult economic context while allowing them to keeping previous incentives for which they had qualified.

Second, governments can include specific financing measures and incentives for renewable projects in upcoming stimulus packages. These should focus on reducing the risks for capital-intensive utility-scale solar PV and wind projects under dire macroeconomic conditions, especially for small developers. This will require the continuation and extension of existing policy measures that have shown they can accelerate cost-effective deployment. Additional economic incentives such as tax credits, investment grants and specific loan schemes would be necessary to maintain demand for the highly vulnerable distributed solar PV sector. These incentives can be combined with energy efficiency policies.

Third, short-term policy actions on renewables should align with a new medium- and long-term visions that aim to achieve a rapid peak in greenhouse gas emissions this decade and a steep decline thereafter. Renewables and energy efficiency will play the leading roles in advancing clean energy transitions, but they need a continued and coherent long-term policy vision. In that sense, stimulus packages should also channel funds to new renewable energy technologies that are not fully commercialised but have significant cost reduction potential, such as floating offshore wind farms, marine technologies and low-carbon hydrogen production.

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Follow the author on Twitter: @Lyaman_Zeyn

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