Solar Feels the Pinch — but Demand Remains High
If you work in solar, you’ve felt the pinch.
The U.S. solar sector has lost more than 65,000 jobs since the COVID-19 crisis hit, according to SEIA. Even though a lot of that loss fell to the residential side, larger-scale solar providers (i.e., commercial, industrial and municipal) are facing their own problems: projects slowed or put on-hold; dramatic shifts in logistical execution and timing; and the reluctance of banks/financiers.
The silver lining is that, despite all the loss, the demand for renewable energy is increasing. A report recently released by the IEA projected that total energy demand will drop by 6% in 2020 … but that renewables will actually grow this year. “Only renewables are holding up during the previously unheard-of slump in electricity use,” said IEA Executive Director Dr. Fatih Birol.
“Even with a sharp decline in the pace of renewable energy growth, clean energy will still grow by 6% year over year.”
In a certain counterintuitive way, the COVID-19 crisis is helping clean energy providers. Suppressed overall energy demand is “pitting generators against each other in a fight to produce the cheapest power possible,” according to World Oil. “Wind and solar … have an upper hand in many regions because they don’t need to buy fuel.”
But the increased demand for clean energy is counterbalanced by other issues. Like execution.
Back in March, the SEIA published guidance for solar installers, EPCs and O&M service providers — featuring procedures, safety guidelines and additional resources — to help the industry move forward and ensure that “installations can be done safely in accordance with federal and state guidance.” But following that guidance has proved challenging to many. The logistics can be thorny, which has slowed the development of many new installations.
Another key issue holding the industry back has been financing. Many organizations that want to move forward with a solar project aren’t getting the support from banks that was common just four months ago. Per PV Magazine, “Banks will not be invincible to this looming recession, and with this in mind, any bank would be hesitant to offer [large amounts of] financing for [a new] energy project.”
This is an area where DSD, through its unique structure, has been able to help clients in a singular way. Through our partnership with BlackRock, DSD can provide the capital and take ownership of projects that may have had their financing fall through. With capabilities to handle everything in-house — from design to build to financing to operation — or take a project that’s already under-development at any point in the lifecycle, an organization’s project can continue progressing to operation where otherwise it may stall or, in the worst case be abandoned.
NOTE: Plus, with the 26% solar Investment Tax Credit (ITC) running out at year’s end, getting a new project started sooner than later can mean big savings for organizations that are seriously considering solar.
Looking long-term, it’s evident that the pinch we’re all feeling is temporary. The demand for clean energy is at an all-time high. And many see renewables as not just having a strong future post-COVID-19, but as an economic engine that can help lift us out of recession.
Many states, New York among them, are looking to renewables to create an influx of new capital and, by extension, new jobs — while driving down energy costs for its residents. Fortune magazine recently noted, “Even with a sharp decline in the pace of renewable energy growth, clean energy will still grow by 6% year over year.”
Beyond 2020, investment giants, like BlackRock’s Larry Fink, are betting on renewables to spur global GDP gains of almost $100T over the next thirty years. “With the impact of sustainability on investment returns increasing [at this rate],” wrote Fink in his annual letter to CEOs, “we believe that sustainable investing is the strongest foundation for client portfolios going forward.”
So, let’s all breathe through the pinch. Thought leaders in every public and private sector want solar. The challenge for us, as an industry, is to find nimble and creative ways to deliver.
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