Here's why we can't let the coronavirus undermine transitions to cleaner energy

  • The COVID-19 pandemic is slowing down economic activity.
  • Governments should take the opportunity to launch sustainable stimulus packages focused on clean energy technologies, writes Fatih Birol, Executive Director at the International Energy Agency.

The impact of the coronavirus around the world and the resulting turmoil in global markets are dominating global attention. As governments respond to these interlinked crises, they must not lose sight of a major challenge of our time: clean energy transitions.

The coronavirus is turning into an unprecedented international crisis, with serious repercussions for people’s health and economic activity. Although they may be severe, the effects are likely to be temporary. Meanwhile, the threat posed by climate change, which requires us to reduce global emissions significantly this decade, will remain. We should not allow today’s crisis to compromise our efforts to tackle the world’s inescapable challenge.

Governments are drawing up stimulus plans in an effort to counter the economic damage from the coronavirus. These stimulus packages offer an excellent opportunity to ensure that the essential task of building a secure and sustainable energy future doesn’t get lost amid the flurry of immediate priorities.

Large-scale investment to boost the development, deployment and integration of clean energy technologies – such as solar, wind, hydrogen, batteries and carbon capture (CCUS) – should be a central part of governments’ plans because it will bring the twin benefits of stimulating economies and accelerating clean energy transitions. The progress this will achieve in transforming countries’ energy infrastructure won’t be temporary – it can make a lasting difference to our future.

Coronavirus Covid-19 virus infection China Hubei Wuhan contagion spread

Image: C2ES

The costs of key renewable technologies, such as solar and wind, are far lower than during previous periods when governments launched stimulus packages. And the technology for both solar and wind is in a much better shape than in the past. Meanwhile, hydrogen and carbon capture are in need of major investment to scale them up and bring down costs. This could be helped by current interest rate levels, which were already low and are declining further, making the financing of big projects more affordable. Governments can make clean energy even more attractive to private investors by providing guarantees and contracts to reduce financial risks.

Taking these steps is extremely important because the combination of the coronavirus and volatile market conditions will distract the attention of policy makers, business leaders and investors away from clean energy transitions. This situation is a test of governments and companies’ commitment. Observers will quickly notice if their emphasis on clean energy transitions fades when market conditions become more challenging.

The sharp decline in the oil market may well undermine clean energy transitions by reducing the impetus for energy efficiency policies. Without measures by governments, cheaper energy always leads consumers to use it less efficiently. It reduces the appeal of buying more efficient cars or retrofitting homes and offices to save energy. This would be very bad news, since improvements in energy efficiency, a vital element for reaching international climate goals, have already been weakening in recent years.

Governments can address this by pursuing policies that have already proved successful previously, such as measures to improve the energy efficiency of buildings, which create jobs, reduce energy bills and help the environment.

The recent steep drop in oil prices is also a great opportunity for countries to lower or remove subsidies for fossil fuel consumption. There are around USD 400 billion of these subsidies worldwide today, and more than 40% of them are to make oil products cheaper.

There can be good reasons for governments to make energy more affordable, particularly for the poorest and most vulnerable groups. But many subsidies are inefficiently targeted, disproportionally benefiting wealthier segments of the population that use much more of the subsidised fuel. In practice, the effect of most subsidies is to encourage consumers to waste energy, adding needlessly to emissions and straining government budgets that could otherwise be prioritising education or health care.

The coronavirus brings other dangers for clean energy transitions. China, the country most heavily affected by the virus initially, is the main global production source of many clean energy technologies, such as solar panels, wind turbines and batteries for electric cars. The Chinese economy was severely disrupted during the government’s efforts to contain the virus, especially in February, causing potential supply chain bottlenecks for some technologies and components.

This is why governments need to make sure they keep clean energy transitions front of mind as they respond to this fast-evolving crisis. IEA analysis shows that governments directly or indirectly drive more than 70% of global energy investments. They have a historic opportunity today to steer those investments onto a more sustainable path.

As the IEA announced last month, global energy-related CO2 emissions stopped growing last year even as the world economy expanded by nearly 3%. We need to make sure 2019 is remembered as the definitive peak in global emissions, and that means taking action now to put them into sustained decline this decade.

We may well see CO2 emissions fall this year as a result of the impact of the coronavirus on economic activity, particularly transport. But it is very important to understand that this would not be the result of governments and companies adopting new policies and strategies. It would most likely be a short-term blip that could well be followed by a rebound in emissions growth as economic activity ramps back up.

Real, sustained reductions in emissions will happen only if governments and companies fulfil the commitments that they have already announced – or that they will hopefully announce very soon.

Governments can use the current situation to step up their climate ambitions and launch sustainable stimulus packages focused on clean energy technologies. The coronavirus crisis is already doing significant damage around the world. Rather than compounding the tragedy by allowing it to hinder clean energy transitions, we need to seize the opportunity to help accelerate them.

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Why Clean Energy Stocks Popped Double Digits Tuesday | The Motley Fool

What happened 

Shares of clean energy stocks made a strong recovery Tuesday as the market and oil prices both moved higher. Ballard Power Systems Inc (NASDAQ:BLDP) jumped 17% by the close, FuelCell Energy Inc (NASDAQ:FCEL) finished higher by 12%, and Clean Energy Fuels Corp (NASDAQ:CLNE) closed up 13% on the day.

So what

The two macro trends early in trading were the market overall rising as investors bought back into a market that’s plunged over the last few weeks. The other big factor affecting clean energy was a big jump in oil prices Tuesday.

Hydrogen symbol made of leaves floating over field

Image source: Getty Images.

Oil is indirectly a competitor for Ballard, FuelCell Energy, and Clean Energy Fuels, so when oil prices were plunging that was bad news for their businesses. Now that oil is rising a bit, it’s an incremental tailwind. 

Clean Energy Fuels is most likely to be affected because it’s trying to get trucks and bus fleets to switch from diesel to natural gas fuels. The biggest pitch the company makes is that long-term there are cost savings from natural gas, which has remained cheap even when oil prices rose over the past decade. But if oil, and therefore diesel, prices go down, it won’t make as much sense to make the switch to natural gas. 

Ballard is making hydrogen products that can be powered by oil, so cheap oil is a hindrance but still doesn’t change the cleaner energy hydrogen can provide. And FuelCell Energy, while cleaner than oil power plants, is primarily selling to facilities as an auxiliary or backup power source, and it’s often consuming natural gas that’s common in the power plant business. 

Now what

The stock market moves this week shouldn’t be taken too seriously by investors, especially in the clean energy space. Oil prices go up and down, and long-term the price of oil shouldn’t matter if clean energy technologies are going to win. 

I would pay more attention to the long-term performance of these companies as indicators of where these renewable energy stocks are going. And that’s where my bigger concern comes in. All three are losing money, and until those losses become profits they don’t have sustainable businesses. That’s where I would like to see progress in 2020. 

Sound investments to decarbonize the world’s industries

As cutting-edge technology vaults the global economy into the Fourth Industrial Revolution, the processes we use to turn raw materials into everyday products are still astoundingly reliant on the same dirty-burning fossil fuels that our grandparents used a century ago.

Manufacturing still relies on extracting millions of tons of raw material from the ground every day and refining it into cement, steel, polymer and countless other finished products by burning carbon fuel to super-high temperatures and emitting tons of planet-warming greenhouse gases (GHG). According to a recent IEA Tracking Industry report, direct industrial GHG emissions rose to 24 percent of global emissions, and unless something is done to decarbonize, there will be no chance of addressing the climate change challenge.

So, what can financial institutions do? IFC, for one, is sensitive to the critical role that manufacturers play in improving living standards, providing jobs and bolstering economic growth around the world and has developed a comprehensive strategy that addresses every link of the value chain, encouraging countries to produce a greater diversity of products using more sustainable processes.

The strategy emphasizes low-carbon growth through the selection of the best available technology and the use of cleaner fuels and renewable power. It encourages manufacturers to reduce their use of natural resources by applying circular economy principles, as well as by conducting a systematic greening of their supply chains and selectively substituting imports to reduce transport-related emissions.

The World Bank Group, including IFC, has established a major new set of climate targets (PDF) for 2021-2025, doubling its current five-year investments to around $200 billion in support for countries to take ambitious climate action.

Innovative solutions

To further encourage such investments, IFC set an internal price on carbon at $40–80/metric ton of carbon dioxide equivalent in 2020, rising to $50–100 in 2030 and continuing in a similar trajectory beyond. Making extensive use of financial and advisory support services to help investee companies recognize the reputational value of sustainability and good global citizenship, IFC also uses innovative tools such as green bonds, green loans and blended finance to marshal decarbonization investments.

These efforts are already influencing IFC’s investments. In Nigeria, where a high percentage of natural gas is flared in the country’s oil fields, for example, IFC is helping to monetize the wasted gas by investing in fertilizer plants that use the flared gas to produce nitrogen fertilizers. The production of fertilizers results in a significant amount of carbon dioxide emissions, but by using gas that otherwise would be flared, the overall GHG emissions are significantly reduced.

Guided by a set of best practices in the cement sector, IFC has invested in various waste heat recovery projects in middle-income countries such as Turkey and India. IFC also has financed several projects that use alternate fuels and raw materials (PDF) to manufacture cement.

In the steel sector, IFC is promoting investments in projects that will procure locally collected scrap for the operation of energy-efficient greenfield induction furnace or Electric Arc Furnace-based mini-mill scrap-based steel plants. Recent investments in the glass industry emphasize the use of cullet or recycled glass and the production of energy-efficient glass products for use in cars and buildings.

The $2.5 trillion fashion industry is responsible for around 10 percent of global GHG emissions. Several global fashion brands are moving toward sustainable practices. Levi Strauss & Co has been at the forefront of this trend. Levi Strauss and IFC are working with 42 designated Levi Strauss suppliers and mills to reduce GHG emissions by helping suppliers identify and implement appropriate renewable energy and water-saving interventions across 10 countries.

While these initiatives are noteworthy, much more needs to be done. There are two major challenges to reducing GHG emissions in industry: high-temperature heat requirements currently can be met only by using fossil fuels; and the reduction of non-fuel or process-related GHG emissions from ammonia, cement, ethylene and steel sectors that comprise almost 45 percent of overall emissions. These non-fuel emissions can be reduced only through major changes to raw materials and processes.

Meeting these challenges will require accelerated effort towards circular economy innovations to refashion products and processes, changes in human behavior, deeper energy efficiency improvements, electrification using renewable energy, use of hydrogen and biomass as feedstock or fuel, and carbon capture.

According to OECD estimates (PDF), a low emission pathway will require an additional 10 percent in overall infrastructure investment needs over the next 15 years. The good news is that the additional costs could be offset over time with fuel savings.

We are entering a period of unprecedented climate change disruptions that will redefine our comfort zones, challenge our perceptions and change the way we consume and produce. The very health of the planet hangs in the balance and increasing decarbonization of industry guided by sound investments is a critical part of the solution.

Andrew Cuomo’s latest power grab will let him ram through wind farms

Gov. Andrew Cuomo late last month amended his state-budget proposal to let him ram through approval of wind and solar “farms” over local objections. It’s a classic Cuomo power grab — outrageous both on the merits and in how he aims to pull it off.

As Robert Bryce has noted in The Post, many upstate and Long Island communities have been fighting to stop proposed solar- and (especially) wind-power plants that residents fear would scar or otherwise harm their communities.

But Cuomo is committed to the insane goal of having 70 percent of New York’s energy come from renewable sources by 2030. So he’s looking to cut the public out of the plant-approval process, which now requires an OK by a board that includes two local representatives.

His proposal would also allow the fast-tracking of “renewable” projects, further limiting the public’s ability to fight back before, say, a massive number of hideous wind turbines have been erected in a community.

Whatever the merits, this has nothing to do with the state budget; the gov aims to get it done in the budget simply to avoid real public debate. And by announcing it just weeks before the budget must pass, he gave critics even less time to try stopping it.

As Gerry Geist, director of the state Association of Towns, told the Lockport Union-Sun & Journal, Cuomo’s move would let him ignore local zoning laws and “you ought to make the case [publicly] if you’re going to go in that direction.”

Republican legislators will fight this, but they’re the minority in the Assembly and Senate. Count this as yet another test of whether “moderate” Democratic lawmakers from Long Island and the Hudson Valley are willing to sell out their constituents, as they did with last year’s no-bail law.

Why Is Everyone Talking About First Solar Stock? | The Motley Fool

First Solar (NASDAQ:FSLR)surprised investors with a fourth-quarter loss, and its results had a lot of information to unpack. But the company’s earnings and guidance are just a few of the reasons the company is a major topic of conversation in the renewables investing community. Here’s a look at some of the factors that could affect the company’s prospects as a long-term investment.

Solar panels produce electricity.

Image source: Getty Images.

Major changes are coming

First Solar’s surprising Q4 loss was largely the result of timing issues tied to asset sales and revenue recognition, and adverse weather, including a typhoon in Japan that damaged projects.The company has also seen some hiccups related to closing out manufacturing of its Series 4 solar modules in favor of ramping up production of the higher-capacity Series 6 version. 

The company manufactures the modules used to build solar projects and also develops and builds the projects itself, but said at the time of its Q4 results it is considering a sale of its development arm.

On the company’s Q4 conference call, management said challenges related to the business over the last few months have had  “significant impact” with respect to revenue and gross margin. “These challenges relate to both project sale and completion timing as well as higher expected cost due to adverse weather impact,” Chief Executive Officer Mark Widmar said. 

A sale could be a positive, not only for the potential boost to the company’s already robust balance sheet, but also to refine the company’s focus. Unloading the unit would allow First Solar to focus on its primary business, module production, particularly during the critical time when it launches its Series 6 model, which the company said is “largely sold out through the second quarter of 2021.”  

The company has been working to expand its manufacturing footprint for the Series 6 modules, which it touts as having higher energy yields at a more competitive cost. For 2020 the company expects to produce 5.7 gigawatts of Series 6 volume, which would represent a year-over-year increase of over 50%. “On the demand side, we ended 2019 with net bookings of 6.1 gigawatts and the current contracted backlog of 12.4 gigawatts,” the company said on its earnings conference call. “Our opportunity pipeline continues to grow going into 2020 with the global opportunity set of 18.1 gigawatts including mid-to-late stage opportunities 8.2 gigawatts.” 

A class action lawsuit is settled

Earlier this year First Solar disclosed the settlement of a class-action lawsuit. The suit, brought by a hedge fund controlled by Maverick Capital, alleged the company misled investors about the extent of manufacturing difficulties that ultimately affected earnings and share price for those who bought shares between April 2008 and February 2012. First Solar settled the suit for $350 million but did not admit wrongdoing.

It will pay out the settlement in the first quarter. The significant amount paid out by First Solar in the suit may not do a lot for investor confidence, but it is a positive for the company going forward because it eliminates one uncertainty that has been lingering for a few years. 

Is it time to invest?

First Solar recently marked 20 years since it launched operations. During that time it has underperformed the S&P 500 slightly, even as it benefited from federal subsidies for renewable energy and an unprecedented clean energy development boom. Over the past year things have been worse, with the company off by roughly 20 percentage points. Investors would be wise not to panic based on Q4’s surprises as the company was hurt by a typhoon, an issue that should not affect earnings on a recurring basis. It also saw problems in the development unit it is now looking to sell. More concerning is the fact that the company has been around for more than 20 years but does not yet pay a dividend despite excess cash on the balance sheet, and has failed to consistently turn a profit.

On the other hand, renewables demand shows no signs of slowing down, particularly as more corporations switch to 100% clean energy and states increase renewable energy mandates. So as the company puts a long-standing lawsuit behind it, pursues a significant sale, and prepares to launch a new line of panels, its best days could be ahead and it may be ready to show investors more stability and reward. Would-be investors would be wise to keep the company in their sights until the initial ramp-up of Series 6 panel production is complete to see if the launch translates into improved profitability for First Solar.