How COVID-19 Is Affecting the Global "New Energies" Industry
COVID-19, also known as the 2019 novel coronavirus, is having a powerful impact on many industries worldwide — including the global "cleantech" industry. Investors and businesses alike need to take a hard look at how COVID-19 has the potential to impact cleantech development, deployment, and availability.
Right now, it's impossible to fully predict how the coronavirus will continue to impact any industry (including cleantech), especially if the virus's spread continues throughout the second quarter of the year. It's changing even from how things looked last week. On the other hand, by looking at current information, industry specialists can develop reasonable predictions that will help determine what steps they need to take to help maintain productivity.
It's important to remember not to panic, even as the coronavirus impact hits closer to home. Just like buying out a shelf full of hand sanitizer at the grocery store
probably isn't going to prevent you from getting the virus if you're exposed directly, pulling vitally-needed funds out of the solar industry won't help you avoid a potential hit. It could actually cause more problems than it solves.
Let's take a look at the real impact COVID-19 has had on the cleantech industry so far — and how it has the potential to impact it in the future.
1. The outbreak is interfering with supply lines for solar and wind farm equipment across the world.
Across China, many factories shut down completely in an effort to contain the spread of the coronavirus. Not only did rising numbers of sick individuals make it more difficult to safely staff factories, but many factories also chose to shut down outright to prevent their workers from spreading the virus further.
While these measures didn't ultimately prevent the virus from making its way out of China, it may have slowed its spread. However, I will save my moral comments for another time since it is way too early to pass judgment on how this mess started and whether it has been under or overhyped.
These factory shutdowns are having a significant impact on global solar and wind farm goals. That includes the goals that countries committed to meeting by the end of 2020.
Equipment shortages and closed factories are going to cause definite challenges. These challenges include:
There's a lack of stock moving out of factories and warehouses.
Without people available to move stock out of factories and warehouses, the components needed to improve solar and wind installations across the world cannot be moved out of those factories. Factory shutdowns mean that many installations are left waiting on vital parts. It also means that those parts could well be sitting in warehouses with no one to move them out.
Even as China begins to pick production back up again, many of these work sites are still left waiting on their components. It will take time for factories to be back up to normal production and start regular shipping across China again. Not only that, but many ports are also choosing to institute quarantines that could make it take even longer for those parts to reach their destinations.
Slowed factory production means those parts aren't being produced on time.
Factory shutdowns mean that those factories simply have not been producing needed parts throughout the shutdown. The longer those factories remain shut down, the longer it will take for them to get back up to speed. Even with shutdowns gradually ending across China, many factories are not operating at full capacity. This lack of production could cause continued delays for solar and wind farms that need those parts.
China produces a huge quantity of the materials used to help create solar installations across the world. Most of the top ten solar panel-producing companies in the world are located within China: seven out of ten are within China itself, one is in Hong Kong, and one is in Korea. The last one is located in the United States.
China is a solar giant. That means that the impact of COVID-19 on the solar industry, especially continuing solar developments, could be enormous.
2. Many factories lack the raw materials they need to continue solar production.
If you don't have raw materials, you aren't going to be able to put together products in any factory. Unfortunately, matter replicators are still something out of science fiction. And your average Chinese factory (or any factory around the world, for that matter) doesn't have access to technology that hasn't been invented yet.
Many factories are struggling to take the raw components and turn them into solar panels, solar cells, wind turbines, and other critical components. Others are having trouble getting those materials to begin with. Worldwide shipping slowdowns have made it difficult to get the materials needed to produce those vital components. As a result, it's become increasingly difficult to continue production at normal rates. Not only is this leading to additional delays in clean energy deployment, but it may also increase the immediate cost of manufacturing these systems.
In general, however, this seems to be a short-term problem. Many factories and facilities are already looking for new ways to get the materials and components they need.
Now, let's look at some positives that investors (and business owners) should keep in mind.
3. Production continues in spite of the delays.
Here's the good news: production isn't grinding to a complete halt as the world reacts to the coronavirus. While the clean energy sector is facing slowdowns due to COVID-19, the industry is certainly not coming to a standstill. Many businesses, in fact, are choosing to turn to other factories to continue and, in some cases, even boost production. Facilities in Vietnam, Hungary, and Mexico are stepping up to the challenge. They're upping their production in an effort to help companies and countries alike meet their clean energy goals.
As an investor, what does this mean? It could be the difference between a project realizing its return goals or missing them altogether. Have you looked at those force majeure clauses in the contracts (the ones we never read because "it never happens")?
You may have additional/alternative investment opportunities, especially as other global investors become increasingly concerned about the losses they may face as COVID-19 continues to sweep the world.
4. Many regions are still working toward their renewable energy goals.
Those renewable energy goals haven't gone away because of the spread of COVID-19. Many countries may find that they're no longer on track to reach their original clean energy goals, but that doesn't mean that they're giving up. In most cases, those goals will simply be delayed by COVID-19. "Delayed" is the operative word and maybe the loophole that not only investors and companies take to wiggle out of obligations, but perhaps countries as well. Is this the moment or will countries have resolve to push forward?
Once production and shipping return to normal around the world, will countries get their solar and wind production back on track, too? What say you?
In France, for example, it's been noted that production will be delayed by "a few weeks" due to the impact of COVID-19. Will this delay stop France from moving forward to reach its clean energy goals? Global shortages might even cause a new focus on the importance of localized energy.
5. Wind turbine production is suffering much less than solar in the aftermath of the coronavirus outbreak.
So far, the wind industry is facing far fewer roadblocks than the solar one (at least when it comes to COVID-19). Both Vestas Wind Systems A/S and Siemens Gamesa Renewable Energy SA have facilities in northern China. They're conveniently located near ports that make it easy to ship out goods from their factories. The World Health Organization has also issued no restrictions on shipping out of the major ports located near these facilities. That means that wind turbine production has, so far, been able to continue on schedule. While the factories did shut down as COVID-19 swept through this region, the factories resumed production in mid-February and have high hopes of being back to full capacity soon.
What Does COVID-19 Ultimately Mean for the Cleantech Industry?
As the coronavirus outbreak continues, it's important to keep an eye on what it may mean for the cleantech industry. You should also stay informed (but not scared) about how it may impact you, whether you're committed to investing in clean energy or looking for ways to improve clean energy across the world. Here are some potential long-term impacts:
The focus on research may slow down until regular production and material availability resumes.
Resources may shift to the areas that need them most. Right now, those are the areas most critical for meeting global clean energy goals on time. That doesn't mean that research will grind to a halt. But it may mean that it will be more difficult to acquire some of the material components they need until production returns to normal.
Global clean energy goals may shift.
Already, expectations for solar production targets have decreased in the aftermath of COVID-19. Many countries may have to shift their clean energy targets due to these global challenges.
Until the spread of COVID-19 is better understood, it's impossible to fully predict its impact.
No one can fully predict the overall potential impact of COVID-19. This pandemic may ultimately pose only a short-term disruption across many industries. Or it could go on to cause increasing problems. Whatever the case, it's important to rely on facts rather than panicking or spreading fear.
Globally, COVID-19 has the potential for immense impact. World organizations, however, are working hard to ensure supply chain resilience across the world — and that includes the supply chain in clean energy. Once the supply chain compensates for these potential challenges, it is likely that the cleantech field will settle back to normal patterns. If you think differently, or if you think there's something else investors need to consider, let me know about it.