The price of coal was already depressed before the corona virus crisis, and the demand curtailment in China during the lockdowns was accompanied by a production drop in other producing countries, including India, balancing the market. The drop in oil prices has helped reduce the cost of coal output.

Output by Coal India was down by nearly 2 percent between April 2019 and February this year, while the offtake was down by 3.7 percent. As per the prevailing import policy of India, coal can be freely imported under Open General Licence by the consumers themselves based on their needs and commercial prudence.

The large drops in the currency value of the major coal exporting countries like Australia and Russia have had a significant on coal prices and margins. In mid-March, the Australian dollar hit a 17-year low as international investors sought the traditional safety of US dollars; the Russian ruble has also reached new record lows due to the collapsing oil price.

International coal trades are priced in US dollars, whereas the majority of production costs are generally denominated in local currency terms. Therefore, a weaker exchange rate versus the US dollar usually means higher local currency revenues or lower costs when converted to US dollars for producers.

A possible outcome of the Covid-19 crisis is seen as an unexpected subtle shift in public opinion and policy regarding the speed of transition towards a low carbon power generating future. This is clearly in favour of coal.

In a post-pandemic world, coal could turn out to be a cheap and reliable source of energy to rebuild the economy. Also, in economies struggling to bounce back, there may be less scope for absorbing the unemployment associated with the end of coal mining and power generation. These factors could potentially lead to a slowing of the rate of the energy transition.

The full extent of the impact of Covid-19 on the renewable energy market is just beginning to reveal itself. Initial reactions focused on possible mass production shutdowns and supply chain bottlenecks in China. The lion’s share of renewable asset components is sourced from China, and projects under construction or in the procurement phase appeared particularly exposed when Covid-19 first struck.

Renewable energy projects have already taken a hit from the Covid-19 impact on the economy. A Rystad Energy analysis shows that forecast growth in newly commissioned solar and wind projects will now be wiped out for 2020 and cut by a further 10 percent next year as the US dollar surges and currencies fall across the globe.

Before the novel coronavirus epidemic, the projections were for an expected 140 gigawatts (GW) of global solar PV additions and 75 GW of wind capacity additions in 2020, a year-on-year increase of 15 percent and 6 percent respectively. But the new scenario indicates a truncated growth due to government restrictions on movement as part of national lockdowns that will impact construction timeframes, bringing this year’s commissioned projects to be on par with 2019 at best.

In 2019, about 126 GW of solar and 71 GW of wind capacity were commissioned. The effect of the virus is expected to be felt even more from 2021, as investment decisions get affected due to capital expenditure reductions and fewer number of commissioned projects, leading to the curtailment of capacity by at least 20 GW, or 10 percent lower than the current year.

The macro-economic knock-on effects are expected to spill into 2021 and beyond, with companies pausing on procuring solar PV projects which would have been commissioned in and after 2021. Countries most impacted in this sector will be from emerging markets in Asia, the Middle East, India and Latin America, where the bulk of solar growth had previously been expected.

India’s green energy trajectory, with around 3 GW of solar projects costing Rs 16,000 crore already in the pipeline, is expected to be significantly impacted by the coronavirus outbreak. Power project developers in India, who source solar modules from China, have already declared plan to declare force majeure on meeting project completion deadlines because of supply disruptions caused by the coronavirus outbreak.

India had planned to increase its renewable energy capacity to more than 175GW by 2022, with 100GW of that coming from solar energy. Policy confusion and other factors had already put question marks over the targets, but with the virus posing a new threat, the plans appear to be jeopardy. (IPA Service)