What Keeps the Renewable Energy Industry?

Ongoing supply chain disruptions are halting the growth of renewable energy, as higher prices, lack of supply and general uncertainty surrounding Covid’s future are hampering the development of several green energy projects. China, a huge production hub for global exports, has been battling growing cases of Covid in recent months, leading the government to lock up Shanghai for more than a month. It has also placed firm restrictions on Beijing and other areas, targeting “zero Covid”. So much blockage and uncertainty around restrictions has caused the Chinese supply chain to weaken significantly. But it is not the only country fighting to strengthen its supply chain to pre-pandemic levels.

In addition to the loss of products from China, the rising cost of materials, such as steel, has slowed the development of several renewable energy projects worldwide. Steel is a key component in wind turbine blades. But many companies are struggling to keep up with wind power project costs, as the price of steel has risen by about 50 percent long before the Russian invasion of Ukraine.

Fraser McLachlan, CEO of Global Renewable Insurer GCube, declared “You almost have the perfect storm right now … We see delays of at least six months to get replacements and such things from China, sometimes more.”

Rising energy prices are hitting companies, governments and consumers from every angle. The shortage of oil and gas, exacerbated by international sanctions on Russian energy, has raised fossil fuel prices. Meanwhile, rising mineral and metal prices, as well as disruptions to the supply chain, mean that the cost of the clean energy transition is rising more and more. With more confinement in China and uncertainty about what Covid’s future holds in other parts of the world, the production of both fossil fuels and various forms of renewable energy looks increasingly precarious.

In addition, many are beginning to question the dependence of European powers on China’s supply chain, not only because of delays in Covid-19 but also because of the awareness of how heavily dependent the Russian region is for its energy and other goods. China has already become a major player in renewable energy, providing many of the core components for green energy development. In addition, many Chinese companies have invested heavily in renewable energy projects worldwide.

While Europe continues to become accustomed to Russian oil and gas, currently its main focus, it must also consider the long-term implications of coming to rely heavily on China as a replacement for Russia. China is an authoritarian power, with much of the revenue of state-owned companies going to the Chinese People’s Liberation Army. While it is clear that China is playing a vital role in the renewable energy transition, thanks to its strong manufacturing industry, Europe must consider the potential effects of once again becoming overly dependent on any power.

Related: Why The World Can’t Kick King Coal

The impact of supply chain disruptions and rising prices is evident in some parts of the world, with the US solar industry particularly hard hit. The national solar industry is waiting for a slowdown in project expansion in 2022 due to supply chain delays as well as possible tariffs being launched on solar panels imported from four Southeast Asian states. The introduction of tariffs could further hinder an industry that is already experiencing the negative impact of Covid disruptions. With energy companies struggling to find the materials needed to complete their green energy projects, it’s no surprise that many have relied on China’s superpower manufacturing to deliver as many components as possible.

But the worst could yet come, as China is open to more lock-in to achieve its zero-Kovid goal. Fitch Ratings declared “Therefore [of restrictions], freight traffic volume in the Shanghai metropolitan area plunged in early April and remains 80 percent below the late March. Shanghai handles one-fifth of China’s port volumes, ”in early May. If locks were extended, this trend is likely to continue.

However, it is important to note that despite rising costs, the price of solar and wind power has decreased considerably in recent years due to the scale of new projects. The introduction of giant windmills and mega solar parks have helped reduce long-term costs considerably. Fraser McLachlan explains, “You look at where the sun was just a few years ago, it’s $ 6 megawatts.” And “now you’re looking at $ 1.5m megawatt.”

So while concerns about rising prices for minerals, metals and other renewable energy components remain a problem, it’s worth remembering how long power companies have been reducing the cost of renewable energy over the last decade. Although supply chain disruptions may cause a slowdown in green energy development, the rising cost of renewables is likely to be temporary and should not discourage governments and energy companies from investing heavily in a necessary green transition, in line with COP26 climate summit goals.

By Felicity Bradstock for Oilprice.com

More Main Interpretations Of Oilprice.com:

Leave a Reply

Your email address will not be published.