Up to 150GW of Asia-Pacific wind and solar growth could be lost over the next five years due to coronavirus impacts that delay competitiveness with coal and deal a blow to renewables in the key region for the energy transition, warned Wood Mackenzie.
The research group said that 1,000TWh of power demand could vanish to 2023 – equivalent to about two years’ growth in the region – if economies fail to bounce back quickly from the huge disruption caused by the pandemic.
Wood Mackenzie research director Alex Whitworth said: “The extent of the coronavirus impact on Asia Pacific markets is key to the future growth of the renewables sector.
“Over the last five years (2015 – 2019), the Asia Pacific region accounted for over three-quarters of global power demand growth, while leading the world in wind and solar capacity installations.
“The coming months will be crucial to determine if the region is moving towards a rapid recovery or extended recession future.”
Combined with tougher access to funding, higher cost of capital and renewed competition from lower fossil fuel prices, a long downturn could have a huge impact on the prospects of wind and solar in a part of the world where their replacement of polluting sources such as coal is vital to the global energy transition.
Although coal use is falling rapidly in many other markets, the highly-polluting fossil has remained entrenched in the power sectors of a number of Asia-Pacific nations.
Wood Mackenzie warned an extended recession with lower fossil fuel prices could mean renewables don’t become competitive with coal in most Asia-Pacific markets until after 2025, later than currently hoped.
Governments may have to rethink plans to phase-out subsidies, and therefore exposing renewables to market competition, if they want to keep their transitions on track, said Whitworth.
As reported by Recharge, the wind and solar sectors in key markets such as China are hoping governments will give them more time to meet existing project completion deadlines.
But that would only help projects already underway, and Recharge revealed on Tuesday how China's provinces are already slamming the brakes on further wind and solar expansion, because earlier growth targets have already been met.
There are also hopes that the growing tilt to Asia of activity in sectors like offshore wind will be accelerated by governments adding more support measures to promote regional growth.
But Wood Mackenzie warned that governments “may become overwhelmed with more pressing economic priorities, making it difficult to support the renewables sector with stimulus measures”.