As the novel coronavirus continues to plague economies, businesses including wind power companies are grappling with the implications of the outbreak. Although its impact on wind is relatively less than on solar power, supply chain disruptions and logistical challenges as well as scarcity of manpower have halted the construction of new wind power projects, putting at risk billions of dollars of investments. While governments have been taking measures to ensure that wind power project operations go on unhindered, the disruption caused in the wake of the Covid19 pandemic is expected to stay for a long time yet. REGlobal spoke to Ben Backwell, chief executive officer, Global Wind Energy Council, on the impact of Covid-19 on the global wind power industry and the future outlook. Excerpts…
What kind of impact are you seeing on the wind sector globally due to supply chain restrictions because of Covid-19?
There was a significant impact on equipment production in January and February, as China, the epicentre of Covid-19, was to contribute 98 per cent in terms of manufacturing. There are many wind turbine companies that have global supply chains and so they have significant equipment imports from China, India and some European countries. For instance, a lot of wind power companies were adapting to delays in equipment from China by using extra production from India, for the first part of the year. Now, we see them adapting in other ways. There have obviously been bottlenecks in terms of certain components, and the companies are tackling it by shuffling their supply chains. There have been delays in equipment deliveries and construction activities due to the restriction on transport and people movement. So, we think that the impact in 2020 is going to be quite significant. Even if things get back to normal rapidly, we expect a 15 per cent downward impact on our forecast for 2020. Now, the question for us is how much of that gets carried over into 2021? If supply chains become normal today, most of this project capacity would simply spill over into 2021.
It is worth remembering that 2020 was anticipated to be a very big year for the wind power industry. We were expecting more than 75 GW of global capacity installations. However, there is already significant tightness in the supply chain and we can see some shortage in components simply because of the fast pace at which we were building. Obviously, Covid-19 is worsening these bottlenecks. So, the question really is how long would it continue and that is impacting the confidence in current projects, and future auctions, all of which may get delayed or cancelled.
How are wind companies handling the operations and maintenance (O&M) aspect in the face of labour restrictions due to the lockdown?
The good thing is that operating wind farms is categorised under critical or essential services in most countries. Wind industries were in contact with their respective governments quite early on and agreed on satisfactory guidelines to continue to operate wind projects. That has happened in most countries despite a shortterm disruption because technicians cannot move around for conducting proper O&M.
In addition, the present technology has the ability to access wind turbines remotely and very efficiently for O&M, which helps to deal with this crisis. There have been changes in operating procedures to incorporate social distancing guidelines in offshore wind farms; so, where initially we had 12 technicians now we have four. This means that we have more trips and space but less people for O&M.
I think we have had more problems with under-construction projects. We still have some places where issues regarding the construction of wind power projects are being discussed with local associations and the government. However, in most countries, governments have been able to do things safely. In general, operations have continued but there will be a ripple effect due to supply chain disruptions, leading to delays in project completion. This brings up the question of power purchase agreements (PPAs) and it is very important that governments put in place arrangements so that commissioning deadlines are extended and developers do not end up paying penalties or get into legal trouble. In many countries, including India, this was done quite early on.
Do you see any impact on prices in the short term when this entire lockdown ends and the supply chain revives?
This could definitely happen and depends on how fast or in which regions the lockdown ends first. For quick economic recovery and making up for the lost time, companies might get the projects completed quickly. As a result, there is going to be a tightness in the supply chain. However, right now there is no clarity on how the exit from Covid will happen and whether the disease will be completely under control or whether there will be localised outbreaks. It seems that solar PV has been hit harder than wind because it is much more susceptible due to small-scale projects such as rooftop solar installations.
What have been the major developments in the offshore wind segment recently?
Offshore wind has been less impacted than onshore by Covid-19 because it has fewer but bigger projects. The offshore segment was growing very fast with 6.11 GW of capacity additions in 2019 due to a push from governments and international institutions. People realised that offshore wind can create a lot of capacity quickly on a large scale in a way that creates jobs and promotes manufacturing. Europe has very ambitious targets (450 GW), with huge capacity additions expected from countries such as the UK. Some international institutions have forecasted 1,000-1,200 GW of capacity additions globally. We would see most of that coming from Asia, with China being a large contributor. Other markets are also starting to take off including Taiwan, Vietnam, Japan and Korea. Even Australia and the Philippines have very good offshore wind resources, which they will eventually start capitalising on.
How do you see energy storage coming into play in the wind segment?
I think it depends on each country, on onshore or offshore and on the scale. We feel energy storage is playing a role and we are having discussions on the use of hydrogen as well, which could be used on a large scale. The offshore segment is looking at hydrogen with interest and it is expected to play a strong role. However, in many countries the penetration level of renewables is still too low to consider that measure.
Can you highlight some key policy gaps that exist in the wind regime of most of the countries?
Some countries do not have ambitious targets and they need a whole policy framework to be put in place. But in many countries that have ambitious targets, it is very difficult to build anything. India and Germany are two such countries with similar problems. Both have ambitious renewable energy targets but it is very hard to get things done. There are lots of regulatory constraints and it has to be made sure that regulations allow projects to be implemented from the legal point of view, with proper coordination between national- and state-level authorities. In the case of India, central and state governments need to ensure that wind capacity is allocated for auctions and there is access to land so that people can go ahead and build wind power projects, making sure that transmission infrastructure is put up at the right place to keep up with the expansion in wind power.
What we actually need is a strong regulatory regime to provide enough push so as to get conventional power out of the grid by making producers pay for pollution. This will allow more renewables to come into the electricity mix and replace conventional power quickly.
What is being done for managing end of life for wind farms and old turbines?
There are two parts, one has a regulatory aspect that encourages repowering. This allows projects to be re-engineered and continue to have access to power offtake because in many cases these are projects that have been built on different regimes so they need to adapt to the current frameworks. The second part pertains to industries’ sustainability, which we need to look at the end of life. We need to introduce certain economic benefits into our own recycling operations.
What is your perspective regarding the wind energy segment before and after the Covid-19 pandemic? What kind of changes are you expecting in the future?
I am not expecting dramatic changes but it is a challenge for the whole world because there was a huge momentum to address climate change issues before Covid-19. The problem of climate change will not go away as economies recover and it is really up to us to make our economies sustainable. I see Covid-19 as a chance to get things right and remake economies in a way that is sustainable. It is very important to remember that there will be a price for economic stimulus packages in terms of debt and that debt is going to be paid by future generations. So, it is really important that we give them a suitable outcome, in terms of an economy that is not polluting, not poisoning people and does not create an unsustainable planet.
“I see Covid-19 as a chance to get things right and remake economies in a way that is sustainable.”