- Rystad Energy expects large scale solar and wind power capacity of up to 3 GW to face delays or cancellations in Australia due to the pandemic
- Inability to achieve financial closure will be a big factor as lenders will be uncomfortable lending at cheaper rates
- Capex has also gone up which will put pressure on developers will be required to meet the tariff laid down in PPAs
COVID-19 pandemic impact hasn’t spared any region or industry and the thriving Australian renewables market is no exception as Norway’s Rystad Energy sees financial close of up to 3 GW of large scale wind and solar PV capacity being postponed or cancelled in the country. And the ones in the solar PV segment that are likely to bear the most impact are UPC, Neoen, Wollar Solar and Canadian Solar, as per its estimates.
As per Rystad Energy, the delays and cancellations are mainly due to the falling Australian dollar that has gone down 20% relative to the US dollar since the beginning of January 2020 leading to increase in capital expenditure for both utility scale PV and wind projects. As capex has increased with rising hardware costs, it sees developers facing the challenge of profitably meeting power purchase agreement (PPA) pricing. On the financing front, securing debt will be tough too as financiers will not be tempted to lend money on cheap rates.
Geographically, New South Wales (NSW) will be the state that will be the ‘biggest loser’ as 65% of solar PV and 67% of wind projects in the stated pipeline are located in the state that are yet to reach a financial close.
Rystad Energy counts UPC, Neoen, Wollar Solar and Canadian Solar
among solar PV companies to be severely impacted by COVID-19 delaying PV projects in Australia. (Source: Rystad Energy RenewableCube)
Just to offer a perspective how fast things are changing under a coronavirus impacted world, in January 2020 around the time China realized the gravity of the situation and shut its epicenter Wuhan to the outside world, Rystad Energy expected Australia to add 3.6 GW of utility scale PV and wind power capacity in 2020 with solar’s share being 1.96 GW. Its research claimed close to 1.5 GW large scale PV to enter construction within 2020.
“At the beginning of 2020 Rystad Energy expected that 2 to 3 GWac worth of renewable projects would achieve financial close and begin construction this year, including 1.1 GWac of wind and 1 to 2 GWac of PV. At present, 530 MWac of PV capacity and 210 MWac of wind capacity has taken financial close and has either already begun construction or will do so in 2020. The impact of Covid-19 on project economics will likely delay or cancel the financial close of the remaining projects,” warns Rystad Energy.
It does accept though that COVID-19 has made matters worse, Australian renewable energy industry hasn’t been devoid of problems of its own that range from network capacity availability, commissioning issues, marginal loss factors (MLF) and system strength availability. Rystad Energy analysts explain, “With the additional challenge of Covid-19, the pace of construction has only slowed further since the end of the first quarter and developers now face a quagmire of infrastructural and economic obstacles.”
The research firm at the end of March 2020 lowered its global renewable energy forecast for 2020 expecting forecast growth in newly commissioned solar and wind projects to be wiped out, expecting another 10% decline in additions in 2021.
