This is an extract from a recent report “Impacts of COVID-19 on Renewable Energy Development in APEC Economies” by APEC Energy Working Group. This extract highlights the impact of COVID -19 on Renewable Energy in APEC Economies with special focus on China.
Impacts on renewable energy project development and plant operation
With the widespread of the COVID-19 virus globally, the governments around the world had to react in order to limit the spread, such as locking down the entire economy, or certain states or cities, and imposing restrictive movement orders on people. Many non-essential businesses and activities were forced to halt operations, and workers were made to work from home. The economy was negatively affected as well, and energy sector was one of the areas that was getting the hard hit. It was estimated that by mid-April 2020, the economies with complete lockdown saw their weekly energy demand plunged by as much as 25%. The US experienced the largest drop in energy demand in 2020, which was around 10%. Following the drop in demand in 2020, global energy demand has rebound strongly since the second half of 2020, led by China, before encountering high energy prices as a result of the war in Ukraine started in early 2022.
The global electricity demand experienced a large decline in 2020, which was the first year of the pandemic. In the Asia Pacific region, electricity demand still as a whole grew in 2020, which is the first full year of the pandemic. The economies such as China, which initially faced a significant decline in energy demand during Q1/2020, have been experiencing a strong growth since Q3/2020.
The pandemic has also completely changed the daily demand profiles in many economies where the system operators were required to adapt how they utilise power generation resources in the systems.
The COVID-19 pandemic also affected the growth in renewable generation capacity across the region. The pandemic has intensified the challenges of financing, project grid integration and policy uncertainty of renewable development in many economies. However, compared to other energy technologies, solar and wind power generation still achieved growth in terms of capacity addition. Energy policy deadlines in some economies, such as in China (FiT and competitive auctions) and Viet Nam (FiT) resulted in significant renewable energy generation capacity additions in 2020.
It has been noted that, despite the challenges faced from the pandemic, the global investment in new renewable capacity showed a remarkable level of resilience. As part of the response to the COVID-19, many governments have allocated funds to support investment in renewable energy.
Amongst the renewables, solar power was the only source that recorded a growth in investment in 2020, while others fell with varying degrees. As solar makes up nearly half of global renewable energy capacity investment in 2020, any changes in its investment result in a significant impact. Possible reasons for the increase could be the potential of adopting solar on residential rooftops as it is much cheaper to install as compared to investing in larger projects such as large scale solar and wind. On top of which, energy policies in some economies indicated the requirement to include solar PV on new buildings, such as the case of the United States.
During the COVID-19 pandemic, layoffs and retrenchment in the energy sector were common, particularly in oil and gas supply. In 2020, the renewable energy sector had a total employment of 12 million workers, approximately 500,000 more than 2019. Out of which, 30% of the jobs were related to solar technology. The increase of employment was contributed to the worldwide increase of renewable addition in 2020, 10% up from 2019.
Renewable jobs related to project planning and design, operation and maintenance received little impact from the COVID-19. Higher impact was towards renewable jobs that are related to transportation, engineering construction and installation, as well as manufacturing due to the classification of non-essential services which resulted in some factories being ordered to close during the lockdown. The supply parts shortage from Viet Nam and China were observed due to the border controls particularly during the peak period of infection. Energy sector employment has recovered strongly and has now exceeded the pre COVID-19 given the rapid growth in clean energy industry in most economies. More than half of energy sector employment in the Asia Pacific region has been the result of rapid growth energy infrastructure and lower-cost labour, which China accounts for almost 30% of the energy workforce worldwide.
Impacts on technology development and industry supply chain
There were challenges faced during the initial period of the pandemic. Travel restrictions and border closures have strained supply chains, resulting in supply shortages and causing project delays. During 2020 the number of new renewable power installations declined for the first time in about 20 years, reflecting the severe supply chain disruptions caused by lockdown measures and limited international movement over the period.
The impact of technology development and renewable industry supply chain among APEC economies and the rest of the world have been influenced by the situation in China, as it is the world’s largest producers of some key equipment of the industry, including wind turbines and solar panel. There was a supply shock when factories were forced to halt operations in January and February 2020. Coupled with border controls in China during the same period, economies with ongoing solar projects which required solar PV units from China had to pause their installation operations.
The Renewable Power Generation Costs report from IRENA suggested a few reasons that contributed to the fall in costs. Firstly, many projects commissioned in 2021 had already placed orders before the increased costs as the overall equipment costs increase affected late 2020 and early 2021. Also, there were technology improvements such as having more energy efficient PV modules and larger wind turbines, and continuous improvements in manufacturing efficiency and scale.
Impact on electricity supply and demand in China
China is among the largest economies globally, accounting for over 20% of the world’s electricity demand and generation. China was the first economy that experienced the impact of COVID-19 on the energy sector, arising from the restriction measures that limit economic activities as well as domestic and international movement. With lockdown measures to contain the spread of virus, electricity demand dropped sharply by almost 10% in Q1 2020 year on year. Overall, the industry sector was the most hit.
China was also the first economy that began recovery form the COVID-19 pandemic that started from Q2 2020 when energy consumption started to pick up, which was supported by economic stimulus measures which eventually led to the overall annual energy demand growth. The main contribution for the demand growth was from the industry sector, the largest contributor to the economic worth.
Impact on renewable energy project development and investment
China has the highest installed renewable capacity globally as shown below.
China has a major share in the global PV component manufacturing capacity and is one of the economies where most manufacturing of the wind industry takes place, along with EU, the US and India. China is the leading producer of solar PV equipment, including cells and panels, and has the largest installation market which contributed to around 58% of the employment in the solar PV sector worldwide, or some 2.3 million jobs.
The impacts of the COVID-19 on renewable project development and investments were felt in China as well as in global market. Some of the impacts from the COVID-19 include blocked logistics, operation delay on the industrial chain, and low turnover efficiency where these impacts have led to price increases in the industrial chain and subsequently resulted in a decline in the growth rate for the downstream demand.
For the case of the market for solar PV, the price of silicon material had risen sharply in 2021 due to supply chain interruptions and rising commodity prices that resulted in a lower-than expected demand for new photovoltaic installations over the year. The manufacturing capacity experienced gradual recovery since 2021, but due to the rebound of the pandemic in Jilin, Shanghai, and Guangdong in China in 2022, normal photovoltaic business activities have been restricted, and the terminal photovoltaic installation market has also been affected by the strict control of personnel flow.
For the wind market, the main supplier of blade adhesives is situated in Shanghai. Although the supply chain had experienced temporary delivery difficulties in 2020 due to the impact of the pandemic, the low price of wind turbines in China started to rebound in early 2022. However, due to COVID-19 variant Omicron, static management and control were carried out in Shanghai from March to June 2022, which affected the full completion of some wind power projects.
Impact on jobs in renewable sector in China
The employment growth in the energy sector of China ranks the largest as compared to Brazil, India, the United States, and the European Union. China remained its leading role in renewable energy employment worldwide with a share of 38% of the world’s total employment in 2019. Despite the effects of the COVID-19, China further extended its global lead at 39% for renewable energy employment in 2020. China’s employment in the energy field increased from 4.4 million jobs in 2019 to 4.7 million jobs in 2020.
The reason for the large number of new employees in China was due to the resilience towards the impacts of the COVID-19, which added 136 GW of renewable capacity in 2021.
Amongst the estimated total number of 800 factories worldwide that produce wind-turbine components, 45% of them are in located in China. In addition, close to 40% of the total number of generators manufacturing plants are in China, with a similar share in Europe.
Recovery policies and strategies:
• Strategies of the members’ governments are the foundation for fostering energy-system transformation. They provide a long-term policy signal by setting roadmaps with the targets, technology priorities, and timelines, which is the first step towards creating a stable planning horizon to provide directions and some certainty for the stakeholders, particularly investors.
• Technology push policies take the form of public financing which include the grants or loans from government to support innovation of new technologies, which are the dominant early-stage form to support the efforts such as R&D and demonstration projects in order to scale up the applications.
• Demand-pull policies play a key role in creating demand for renewable energy and low-carbon technologies and switching from unabated fossil-fuel technologies. Examples include binding targets and obligations on certain sectors such as biofuel blending mandates, renewable capacity quota. This type of policies also involves pricing instruments such as FiT, tax incentives. FiTs has been the most widely used financial mechanism for driving the deployment of renewables.
• Fiscal policies can increase the competitiveness of low-emission alternatives against conventional fossil-fuel based options. Review and reform of the tax systems and budgetary expenditures also form part of a holistic policy package to transform energy systems.
• Public and private partnership provides a platform for the policymakers and commercial stakeholders to cooperate and coordinate the efforts to achieve carbon neutrality targets.
Many APEC member economies also introduced the COVID-19 packages with substantial funds towards innovation, research and development.
With the experiences from the COVID-19 pandemic and the current energy crisis, the common themes from most economies are to increase energy security, reduce costs and enhance environmental sustainability. Several economies have also used this unique opportunity to accelerate the transition of energy systems towards clean energy with relevant policies to support the investment in renewable energy including R&D, demonstration projects and strategies to foster job creation and re-skill existing workforce for the renewable industry.
Case study on recovery policies: China
The leadership in China has imposed different citywide lockdowns and multiple control measures since 23 January 2020, when the COVID-19 first broke out. Within the 12 weeks following the outbreak of the COVID-19, there was a 32% decline, or CNY329.84 billion decrease, in offline consumption in 214 cities in China. China is the first economy affected by the outbreak of the COVID-19 virus but due to the strict enforcement of the “dynamic zerocase” policy that was established after the rapid spread of the virus, the economy effectively contained the spread of the virus.
In terms of environment sustainability, the long-term goal is that, by 2060, China will have fully established a green, low-carbon and circular economy and a clean, low-carbon, safe and efficient energy system. It has been planned that China will reach the peak of carbon emissions by 2030, and achieve carbon neutrality before 2060.
The policy in the near term focuses on 2025 targets as China would have created an initial framework for the green, low-carbon and circular economy and expected to have a substantial improvement on energy efficiency of key industries as highlighted in the 14th Five-Year Plan 2021-2026. The energy consumption per unit of GDP is targeted to decline 13.5% from the 2020 level while carbon emissions per unit of GDP is expected to decrease 18% from the 2020 level. The share of non-fossil energy consumption will reach around 20%. Based on the targets, the share of non-fossil energy power generation should be lowered to 39% by 2025. Towards the mid-term, China will see significant accomplishments from the comprehensive green transformation in economic and social development, with energy efficiency in key energy consuming industries reaching the advanced international levels by 2030.
In response to the impact of the COVID-19 pandemic, the Chinese government has invested huge sums of money to stimulate economic recovery over the period of 2020-2022. Investments for social recovery over the pandemic include vaccines, subsidies for resumption of work, subsidies for enterprises operation, and social security. In 2020, China introduced and implemented a large-scale COVID-19 rescue policy to hedge the impact of the pandemic with greater policy strength and ensure proper development in clean energy sector. China has implemented large-scale tax and fee reductions in stages, and along with institutional arrangements, there was a reduction of the financial burden on market players by more than USD 357.5 billion during the year.
The 14th Five-Year Plan (FYP) that focuses on the overall energy sector covering the period 2021-2025 was officially endorsed in March 2021 and has addressed issues on the impact of the COVID-19 pandemic. This FYP clarifies China’s energy development policy, sets the main goals and tasks as well as measures to promote green development and renewable energy. In June 2022, the 14th FYP of Renewable Energy was announced by the National Development Reform Committee (NDRC) to support the growth of renewables.
Globally, China is the largest economy that emits greenhouse gases (GHGs), accounting for around 25% of world’s total emissions.
Furthermore, there was an allocation of USD2.984 billion on water pollution prevention and control, with an increase of 10.2% from the prior spending, which was mainly aimed at the prevention and control of water pollution in key river basins such as the Yangtze River. Special funds for soil pollution prevention and control were allocated amounting to USD 600 million, an increase of 10%, to support the control on soil pollution and restoration purposes. In addition, in September 2022, the Chinese government issued the third batch of central infrastructure investment budgets for pollution control and energy conservation and carbon reduction with a total value of USD 33 million.
The complete report can be accessed here