The Covid-19 pandemic and the resulting economic fallout have had various impacts on the clean energy transition, with some sectors being more affected than others. Earlier this year, the International Energy Agency (IEA) warned of slowing progress towards sustainable energy goals due to Covid-19 and reversed progress in many areas crucial to getting to zero. net, such as energy efficiency, clean cooking or access to electricity. However, there is one sector that has shown remarkable resilience since the start of the pandemic and which has been able to maintain, and even accelerate, its rapid growth since 2020: green energy infrastructure.

This does not mean that the sector has been immune to the difficult environment of the last two and a half years. With global value chains severely disrupted by Covid-19 shutdowns and geopolitical friction, many renewable energy projects have experienced significant delays in installations.

Orders for new solar panels or battery systems for grid-scale applications can now take anywhere from a few months to two years. More than 315 projects in the United States, for example, are underway canceled or postponed to 2022 due to supply chain constraints, according to the Washington DC-based Solar Energy Industries Association trade group.

NextEra, one of the largest green infrastructure developers and equity investors in the United States, recently announced that about 2.1 to 2.8 GW of its solar and storage projects will have to be postponed from 2022 to 2023.

At the same time, renewable energy developers are grappling with soaring metal prices. The price of polysilicon, a key material in the solar photovoltaic value chain, experienced record growth of 300% since January 2020. Another key substance used in electric vehicles as well as grid-scale energy storage applications, lithium carbonate, was traded in the Asia-Pacific market at US$72.15/kg in June 2022, a rapid rise from US$6.75/kg in December 2020.

In an industry heavily dependent on minerals and metals that are often purchased and shipped across continents, such cost increases threaten to inflate the costs of transitioning from fossil energy systems to carbon-free energy systems.

Delivery delays and price spikes have highlighted the need for more diverse supply chains, but they have also failed to undermine the green infrastructure boom. On the contrary, renewable energy capacity additions hit a record high last year, with around 270 GW of renewables becoming operational globally in 2021.

The trend is expected to continue in 2022, with renewable energy capacity additions expected to increase an additional 8%, with solar representing approximately 60% of new installations. Similar trends can be seen in the labor market, with renewable energy jobs in the United States growth in 2021 after a drop in 2020 due to the Covid-19 pandemic.

This clean energy development is underpinned by increased M&A activity in the sector and significant inflows of private capital. Global Sustainable Funds hit a record high of $3.9 trillion in the third quarter of 2021, doubling in just 12 months.

In 2021, U.S. battery storage, smart grid and energy efficiency start-ups attracted record $10.1 billion in venture funding, a big jump from $2.6 billion in 2020. In Europe, unprecedented deal activity in 2021 saw many renewable energy platforms trades at huge premiums.

In 2022, global investments in clean energy are should be in the lead $2.4 trillion, well above pre-Covid levels. Investor appetite for renewable energy projects does not seem to be weakening.

What is driving this boom?

Several factors are responsible for this growth. First, simple economic considerations favor building more renewables. The falling costs of most clean technologies now make a strong business case for renewable energy, as many clean energy technologies reduce the costs of even the cheapest fossil fuels. In the first half of 2022, the levelized costs of electricity (LCOE) of solar PV and onshore wind were 45 MWh and $46/MWh, respectively, while the LCOE of new coal and gas was 47 $/MWh and $81/MWh, according to BloombergNEF. . The costs of storing lithium-ion batteries, a key technology to provide grid flexibility and enable greater adoption of renewable energy, dropped 97% over the past three decades since its first commercial application in 1991.

Second, government commitment and green stimulus packages are paramount to making green infrastructure projects bankable from a private sector perspective. The renewed emphasis on green and resilient post-pandemic growth, coupled with more ambitious net zero targets announced by countries in recent years, has helped to build confidence in the sector and keep the renewable energy boom afloat despite the economic downturn.

Russia’s invasion of Ukraine highlighted the need for more diversified energy supply chains. Cheap renewables can help reduce global reliance on Russian fossil fuels while creating clean and resilient power systems.

The jury is still out on how deep and long the current recession will be and its lasting implications for the green energy sector. In times of economic uncertainty, tailored government incentives and regulatory improvements become increasingly important. The passage of the Cut Inflation Act by the US Senate, which allocates $369 billion to reduce greenhouse gas emissions, is a step in the right direction, but there is still much to be done. do globally.

Encouraging local production of supply chain components, availability of finance, or streamlining renewable energy licensing and grid interconnection processes are just some of the areas that can help mitigate the impact. of the recession on the energy sector.

About the Author

Ivana Smolenova is a renewable energy investor with expertise in renewable energy and energy storage financing, mergers and acquisitions, innovation and policy. She previously worked at the World Bank in DC on energy storage innovation, and major infrastructure projects in Asia, Latin America, and Easternot Europe. More recently she works to Pelion Green Future, a Munich-based investment fund developing +5 GW of renewable energy and energy storage projects globally. Before that, Smolenova worked as a program officer at the Institute for Security Studies in Prague and studied at Columbia University in New York.

The views and opinions expressed in this article are those of the author and do not necessarily reflect those of photo magazine.

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