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Oil Companies Are Collapsing Due to Coronavirus, but Wind and Solar Energy Keep…

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Oil Companies Are Collapsing Due to Coronavirus, but Wind and Solar Energy Keep...

A few years ago, the type of double-digit drop in oil and gas prices that the world is now facing due to the coronavirus pandemic may have increased the use of fossil fuels and harmed renewable energy sources such as wind and solar farms.

This is not happening.

In fact, renewable energy sources are expected to account for almost 21% of the electricity the United States uses for the first time this year, against 18% last year and 10% in 2010, according to a forecast published last week. And while work on some solar and wind power projects has been delayed by the outbreak, executives and industry analysts expect renewable business to continue to grow in 2020 and next year, even when oil, gas and coal companies struggle financially or seek bankruptcy protection.

In many parts of the world, including California and Texas, wind turbines and solar panels now produce electricity cheaper than natural gas and coal. This made them attractive to both electricity utilities and investors. It also helps that, while oil prices have halved since the pandemic, forcing most state governments to order people to stay at home, natural gas and coal prices have not fallen nearly as much.

Even the decline in electricity usage in recent weeks, as companies have stopped operations, could help renewable energy, according to analysts at Raymond James & Associates. This is because utility companies, as revenue grows, try to get more electricity from wind and solar farms, which cost little to operate and less from plants powered by fossil fuels.

"Renewable energies are on a growth path today that I think will not be delayed in the long run," said Dan Reicher, founding executive director of the Steyer-Taylor Center for Energy Policy and Finance at Stanford University and assistant secretary of energy in the Clinton administration. "This will be an obstacle on the road."

Obviously, the economic slowdown caused by the fight against the coronavirus is affecting parts of the renewable energy sector, as well as the rest of the economy. Companies that until recently added workers are laying off people and postponing investments. Among the hardest hit are small businesses that sell solar panels for roofs. Their orders have dropped sharply as customers postpone installations to avoid possible contact with the virus.

Luminalt, a San Francisco-based solar and electricity storage company that employs 42 people, recently said most of its installers to look for unemployment benefits, since the company's residential jobs – typically six a week – virtually disappeared. Jeanine Cotter, Luminalt's executive director, told workers that the company would cover its benefits, but that there was no money to pay them all.

Half a dozen employees are installing solar energy in an affordable housing project that has kept them working, and some who handle business operations are working from home. Cotter, however, is concerned about some installers who joined the company through the San Francisco workforce development program and depend on weekly wages to survive.

"Revenue has stopped," said Cotter, who helped found the business 15 years ago. "It is very confusing now."

The Association of Solar Energy Industries, a trade group, estimates that half of the sector's 250,000 workers could lose their jobs at least temporarily because of the coronavirus outbreak. The association downgraded projected growth by up to a third of the more than 19 gigawatts of new solar capacity expected this year.

But independent experts, including Wood Mackenzie, an energy research and consultancy, say these projections may be overly pessimistic. "It's too early to call," Ravi Manghani, head of solar research at Wood Mackenzie. "The situation is changing daily."

Your company estimates that solar and wind power will continue to increase capacity this year and next. New wind installations may fall by only about 3% compared to previous projections, mainly because wind turbines are usually assembled outside urban areas, and many states considered construction an essential activity during the pandemic.

In a report last week, analysts at Raymond James estimated that renewable energy sources would supply 20.7% of the country's electricity this year and at least 20% by 2022.

Although hydroelectric power plants have long helped homes and energy companies, solar and wind power have emerged as the main sources of energy only in the last 15 years. A sharp drop in the price of solar panels has helped the industry to expand. Last year, solar capacity increased 23% over the previous year. The company added 13.3 gigawatts, beating the new generation of wind power and natural gas, according to industry data.

"We have detected all projections," said Caton Fenz, chief executive of ConnectGen, a Houston-based developer of wind, solar and electricity storage. "We are riding a long-term wave," he said. "We just can't do specific things because of the pandemic, but I think it doesn't affect the broader trajectory."

His 22-month-old company has 3,000 megawatts – the equivalent of three large power plants – under development in 11 states. About 40% are wind projects, 40% are solar and the rest are electricity storage.

Among the company's sponsors is 547 Energy, an investment company specializing in renewable energy. Gabriel Alonso, who runs 547 Energy, said his company received funding from Quantum Energy Partners, which had long invested in oil and natural gas.

"As an investor in clean energy and renewable energy, the fundamentals that led us to invest have not changed," said Alonso.

Even when the pandemic spread, Alonso's company won an offer last week for part of a new electricity project in Greece. Your company will develop a wind farm in the northern regions of Imathia and Kozani. The auction on Thursday was part of a larger effort by Greece to withdraw fossil fuel plants and replace them with renewable sources.

Many renewable companies have projects around the world and have benefited from the government's efforts to deal with climate change. This helped to reduce the costs of wind and solar equipment and made the industry more resistant to economic fluctuations.

In addition, because developers can build wind and solar farms more quickly than natural gas, coal and nuclear power plants, Alonso said, renewable energies have become more attractive financially. In tough economic times like these, he said, private equity investors like Quantum are eager to take advantage of deals that can grow quickly and start making money.

That said, solar companies, in particular, are concerned that the disruptions caused by the pandemic are serious enough to be seeking help from Congress. Renewable energy lobbyists are asking lawmakers to make it easier for their industry to take advantage of the tax credits the government provides for wind and solar energy.

Developers often enter into partnerships with banks and other financial institutions that can use tax credits more efficiently than contractors who build renewable energy projects. Banks receive tax credit and a portion of the project's cash flow typically for six to 10 years.

But as demand for loans increased as companies across the economy struggled, banks were less able to finance new projects, said Josh Goldstein, chief operating officer at 8minute Solar Energy, a developer of large solar farms. Solar and wind industry officials want Congress to simplify the process of obtaining tax credits and make credits refundable so that their businesses can directly benefit.

"Your credit committees are in crisis," Goldstein said of the banks. "This interruption can have a particularly damaging effect."

8 minutes Solar was recently forced to suspend work on Lotus Solar Project, a 67-megawatt solar farm north of Fresno, California, which it is building for Allianz Global Investors. Officials said it was not clear whether the job, which employed about 50 people, was considered "essential".

But the Department of Homeland Security added electricity production to its list of essential activities last month, stating the legal advice 8minute received and the company sent workers back to complete construction.

The solar industry is expected to add more panels in 2020 than in any previous year, said Abigail Hopper, president of the Solar Energy Industries Association. This is not going to happen now, but the industry is still ready to add capacity.

"We believe that, in the long run, we are well positioned to outperform historic generators," said Hopper.


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