Clean Energy Can Drive Post-COVID-19 Recovery, Business Groups Say
Renewable energy proponents from some of Europe's major business sectors are pushing the European Union not to abandon ambitious plans to become carbon neutral by 2050 in the post-COVID-19 drive to rebuild pandemic-battered regional economies.
The push comes as severe virus impacts caused the sharpest one-month decline in March in key construction measures in Europe and the U.K. since the 2009 global recession, said IHS Markit on April 6.
The research firm says the overall decline in both reports was led by a slump in engineering work, "the fastest in eight years, " in Europe. In the U.K., "respondents are more pessimistic about the year ahead outlook than at any time since October 2008, almost exclusively attributed to the economic impact of the COVID-19 pandemic."
With current market metrics in focus, 31 groups representing Europe’s power, HVAC, building and transportation sectors urged EU parliaments and other entities, in a late March letter, to keep at the core of virus-recovery efforts renewable energy and energy efficiency commitments outlined in the Green Deal climate program proposed last December.
“Now, you have the power to use the Green Deal to restart Europe and drive its economy with a focus on energy efficiency and renewable energy across all sectors," the groups say. "Such investments are both labor-rich and shovel-ready."
The Green Deal, which aims to make the trading bloc climate-neutral by 2050, covers all sectors, but notably energy, transportation, buildings and production of industrial materials such as steel and cement, among others.
The push comes amid new price pressure on the global fossil-fuel industry, hitting some EU countries hard, and more sector lobbying to slow or stop Green Deal momentum. Politicians such as Czech Republic Prime Minister Andrej Babis are reportedly pushing for EU investment to focus only on post-COVID-19 economic recovery.
But EU heads of government, at the European Council summit on March 26, committed to “integrating … the green transition” in the region recovery plan.
With lockdown orders closing onshore and offshore wind turbine production in Spain and Italy, the continent-wide trade group WindEurope called on governments to allow for essential manufacturing to continue, “in particular for the production of components without which global wind energy supply chains will grind to a halt.”
Most of Europe’s wind turbine and component factories continue to operate to varying degrees, although 18 fabrication sites in Spain and Italy are shut, according to WindEurope.
Supplies form China were disrupted in February but are being restored. Sector proponents there had sought a three-month delay in a year-end subsidy deadline because of COVID-19 project delays, but so far it has not happened, says research consultant Bloomberg NEF.
Total global wind power capacity—on land and offshore—now is set to grow more slowly than previously expected because of COVID-19, says the consultant, with 9% growth forecast for 2020 compared to 24% previously predicted.
Offshore Wind Blowing
Swedish developer Vattenfall announced late last month it will drop out of bidding for the 700-MW Hollandse Kust Noord offshore wind tender in the Netherlands because of COVID-19 issues, although it will still build two earlier parts of the project it won that will generate 1.5 GW.
“We think there is a lot of uncertainty right now and feel it better to focus on our core activities, the assets we have got and to deliver the projects that we have in the pipeline,” the firm said. The government is proceeding with bidding for the newest project, set to close on April 30.
The analysts expect, however, that the offshore wind sector may still be relatively unscathed.
Spanish developer Iberdrola announced on March 31 plans to develop a mammoth floating wind project in the North Sea, as part of a consortium of firms from Spain, Germany, France, Norway and Denmark, which will use large 10-MW turbines. The project is part of the European Commission’s Horizon 2020 research program, which has committed almost 80 billion euros to fund projects from 2014 through this year.
Denmark’s Ørsted A/S, one of the world’s largest offshore wind developers, has been little affected by the pandemic so far, said CEO Hendrick Poulsen. Travel restrictions globally could yet disrupt supply chains, he admits, although “projects continue according to plan.”
Poulsen reports that Ørsted’s 900-MW Changhua 1 and 2a projects off the Taiwan coast remain unaffected, even though steelwork fabrication is taking place on the island and also in South Korea, an early COVID-19 hot spot. Project staff are working around travel restrictions by using video based quality assurance measures from Copenhagen, among other new strategies, he added.
Nearer home, Ørsted’s Borssele 1 & 2 projects 22 km off the Netherlands coast continue making good construction progress, with foundations two-thirds complete, said Poulsen.
Set to finish this year, the 100 turbine-farms will add 700 MW to the system. The company’s giant 1,400-MW Hornsea 2 project, with 165 turbines about 90 km of the east cost of England, still is in the fabrication phase ahead of the start of foundation installation.
Asked if Europe’s economic recovery would divert attention from renewables investments, Poulsen said he's "quite convinced that politicians will agree that spending … on green energy is a smart thing to do."
Since large amounts of money will need spending to revitalize economies, “we might as well spend [it] wisely,” he added.
Green Energy Goals
The EU’s current greenhouse gas reduction goal is to cut emissions by at least 40% below 1990 levels by 2030. Officials have estimated that target would require at least 32% of energy production to be from renewable sources. More ambitious plans to cut emissions by 50 to 55% by 2030 were published for review last month.
While welcomed by many, the Green Deal “fails to inspire on … size, composition and scope,” said former Greek finance minister Yanis Varoufakis, in a co-authored article in the U.K.’s Guardian newspaper. On investment, the deal is “mostly smoke and mirrors” and worth a fraction of the $1.7 trillion pumped into troubled European banks between 2009 and 2013.
After stripping away “reshuffled money,” the EU’s deal is actually worth $8.1 billion over seven years, added Varoufakis and co-writers.
Related to current market impacts in Europe and the U.K., IHS Markit reported April 6 that the construction purchasing managers' index for its eurozone segment fell to 33.5 in March, from 52.5 in February, as "public health measures to halt the spread of Covid-19 led to stoppages of work on site and a slump in new orders."
In a separate report for the U.K., the firm said virus effects pushed the index down to 39.3 in March from 52.6 in February, "the steepest fall in construction output since April 2009."
The European index is based on reports from 650 construction sector firms in Italy, Germany, Ireland and France and the U.K. index from 150 company responses, says IHS Markit.
The impacts also caused European firms to cut staff numbers for the first time since January 2017 with job shedding the fastest and steepest in a decade, said IHS Markit, which added that the drop in purchasing by firms was at the fastest rate recorded since the survey started about 20 years ago.
"Unsurprisingly, business sentiment was seriously dented, with eurozone construction firms expressing pessimism for the first time in nearly four-and-a-half years, hinting at challenging times in the months ahead, especially if the antivirus measures continue for a prolonged period,” says Bernard Aw, the firm's principal economist.