The global spread of COVID-19, next to the human health crisis it has caused, has brought about a global slowdown affecting sectors and activities like tourism, transportation, employment, energy demand, and consequently, the global economy. Regarding the energy sector, this economic disruption might be the one that drives the final nail into the coffin of the fossil fuels industry that in turn can lead to the creation of even more investment opportunities for the expansion of renewable energy technologies. When the focus is on Europe, the situation is no different. As Jordi Francesh, Head of Asset Management at Glennmont Partners put it:
“Covid-19 is going to have a massive impact on the European economy in the years to come. However, one of the few positive notes during this tragic experience has been the resilience of Clean energy assets and solar PV in particular. Solar Asset management activities have been relatively unaffected and investment in new sites has experienced an acceleration.”
What can we expect?
Like other parts of the world, Europe has also started to show the signs of recovery from COVID-19, which has been supported by the ongoing relaxation of lockdown measures in many of the European countries in recent weeks. As a result, many experts in the European solar field started to analyze the short to mid-term effects of COVID-19 on the European solar market. This, of course, will largely depend on the recovery packages of both the EU and the individual member states as well as the incidental return of the pandemic with a second wave, but most of the experts seem to agree that the impacts of COVID-19 will be short-lived in the solar space. For example:
“The impact of COVID-19 will be felt across all European industries. In the solar sector, we will see a short-term delay in projects due to the supply of materials, as well as a demand slowdown due to the European lockdown. However, in the medium- to long-term, the sector looks to undergo a quick recovery, especially if national energy and climate ambitions are maintained. For now, we must ensure that any European stimulus package favors clean energy technologies, making it a green recovery with solar and renewables as the backbone, which can further bring local clean jobs and vast economic and environmental benefits.”
Now, the short-term delays in the European solar projects, as described by Schema, were anticipated by SolarPower Europe’s latest report on the Global Market Outlook for Solar Power (2020-2024). According to their analysis, 11 of the 27 EU states will deploy less solar power in 2020 than in 2019. From this, it is not clear whether or not the EU’s solar capacity additions will reach the 2019 levels (16.7 GW-EU28), but if we look at Europe as a whole, the annual solar capacity additions are expected to fall by 29% from 22.9 GW in 2019 to 16.1 GW in 2020.
The global picture
Regarding the solar market developments of other regions, the same report expects to see the annual solar installations of 2020 to go up in the Americas and the Asia-Pacific regions by 5% and 4%, respectively. In the region of the Middle East and Africa, SolarPower Europe expects the largest fall in the market with a reduction of 31% from 6.8 GW solar installed in 2019 to 4.7 GW in 2020. However, the size of this emerging market is relatively small compared to the long-established solar market in Europe. Therefore, when we take a stock of the global solar market development, we can conclude that it is mainly the expected market shrinkage of Europe that could lead to the anticipated decrease in the annual global solar installations for the first time in history, as described by SolarPower Europe.
In addition, if a comparison is made between the latest and earlier (pre-COVID-19) solar installation forecasts of the major solar market analysts, the short-term impacts of COVID-19 on the global solar development is even more prominent. In the midst of the pandemic, the solar development forecasts of IHS Markit, BloombergNEF, International Energy Agency, Wood Mackenzie and SolarPower Europe were all amended. Among these forecasts, it was the market analysis of IHS Markit, which made the biggest amendment with reducing its 2020 forecast from 142 GW in December 2019 to 109 GW in April 2020. On the other hand, the most “optimistic” forecast comes from SolarPower Europe. Their new medium scenario anticipates 112 GW of solar installations in 2020, down from 144 GW in their previous Global Market Outlook report.
Green(er) recovery?
But now, back to Europe. As it was already mentioned, the role of the EU and the national governments are critical when it comes to the development of economic recovery packages that support not only the quick and smooth economic recovery but its decarbonization as well. Luckily, the COVID-19 recovery instrument of the EU puts a high emphasis on the support of renewable energy technologies. The recently proposed recovery instrument, ‘Next Generation EU’, is a two-year €750 billion package that aims to revive the EU’s economy in a sustainable manner. It is firmly in line with the objectives of the ‘European Green Deal’, which main goals are to restore biodiversity and to achieve a resource-efficient and climate-neutral EU economy by 2050. Within the second pillar of the ‘Next Generation EU’ recovery plan is the ‘Strategic Investment Facility’, which is a particularly important grant with a budget of €150 billion for the development of renewables and energy storage technologies.
With such support, it is not a big surprise that SolarPower Europe expects the solar industry of the EU to be back on the growth path it has shown in recent years as soon as 2021. The ‘Next Generation EU’ recovery instrument will certainly bring new solar projects into the member states, which will help the solar industry overcome the financial challenges triggered by COVID-19, while it will also create jobs, promote health and get us closer to the ultimate goal of a decarbonized economy.
Regional differences
However, there are some additional factors to consider. The solar industries of different member states have had a wide variety of issues to deal with both before and during the pandemic. For example, the solar industry of Italy was already in an unfavorable position due to the design of the country’s renewable energy auctions, which seems to promote wind energy over solar energy. On top of that, Italy was the first EU country that was hit hard by the spread of the virus, and as such, they had to implement very stringent lockdown measures that posed even more difficulties to the already suffering Italian solar industry. To get a detailed picture of the solar market development of Italy, read the New crisis, same struggles article dedicated to this topic.
On the contrary, Germany has not been affected as hard as Italy, and as a result, the impacts of COVID-19 on its solar market demand was weaker. This is supported by the results of a market analysis conducted by EUPD Research. According to this analysis, which is based on bi-weekly measurements, the impact of COVID-19 on the German solar market demand has been weaker than expected in every single measurement since the introduction of lockdown measures in March. This observation is backed up by the county’s solar installation data over the first quarter of 2020. Despite the lockdown measures, Germany installed 1.48 GW of solar during this period, which is comparable to the capacity additions in 2019-Q1 (1.55 GW).
When analyzing the market demand of other European core markets, EUPD Research found some promising trends. While Spain, Italy and France had all suffered from stronger impacts than initially expected at the beginning of the pandemic in March, the gradual recovery of the French market meant that by May, it was only Spain and Italy, where stronger impacts were measured. Furthermore, according to their expected values for June, the Italian market will also undergo a significant market recovery. After all, it seems that following a shocking slowdown, the EU solar industry has already started to show the signs of a brighter future.
Endnotes
PV Europe (2020) EU COVID-19 recovery strategy with strong focus on renewables. Retrieved from https://www.pveurope.eu/News/Markets-Money/EU-COVID-19-recovery-strategy-with-strong-focus-on-renewables
Power Technology (2020) Italy’s auction scheme to drive renewable energy installations. Retrieved from https://www.power-technology.com/comment/italy-auction-scheme-renewable-energy/#:~:text=Italy%20has%20introduced%20an%20auction,incentives%20through%20the%20auction%20scheme.
SolarPower Europe (2020) Global Market Outlook for Solar Power 2020-2024. Retrieved from https://www.solarpowereurope.org/global-market-outlook-2020-2024/
SolarPower Europe (2020) Impact of COVID-19 on European solar sector and steps to a green recovery. Retrieved from https://www.solarpowereurope.org/impact-of-covid-19-on-european-solar-sector/
UN News (2020) Throughout COVID-19 recovery, 'plummeting’ clean energy costs can help climate action. Retrieved from https://news.un.org/en/story/2020/06/1066082
Warren, B. (2020) RECAI 55: Renewable energy is set to play a central role in the post COVID-19 economic recovery, but the global picture is mixed. EY. Retrieved from https://www.ey.com/en_gl/power-utilities/in-the-wake-of-a-human-crisis-do-climate-goals-take-a-back-seat
