ScottMadden

ScottMadden is a management consulting firm focused on Transmission & Distribution, the Grid Edge, Generation, Energy Markets, Rates & Regulation, Enterprise Sustainability, and Corporate Services. We have served hundreds of utilities, large and small.

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COVID-19: What Could it Mean for Renewable and Grid Edge Technologies?

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Co-Authored by: Paul Quinlan

“China Reports First Death from New Virus” - New York Times Headline (Page A6), January 11, 2020

After finding their footing last decade, renewable and grid edge technologies were poised for continued success in 2020. Notable trendlines included integrated resource plans identifying renewables as cost competitive, battery storage costs plummeting, and automakers scaling electric vehicle production.

In just a matter of weeks, the COVID-19 pandemic has altered everything from social interactions to global supply chains. Stay-at-home orders are pervasive, while automakers retool to manufacture life-saving ventilators. 

While electric utilities and the service they provide will remain essential throughout the pandemic response, the near-term impact on renewable and grid edge technologies is less certain.

The following are some of the renewable and grid edge trends that we are monitoring as the industry responds to these challenging times:

  • Decline in carbon emissions: Hitting pause on the global economy will result in a significant decrease in carbon emissions in 2020. However, these declines are likely short-lived due to pent up travel demand. Without structural changes, carbon emissions quickly rebound following an economic shock (see chart).

Source: Anthropocene & Global Carbon Project

 

  • Challenges to renewable energy project finance: A big question for the renewable energy projects will be the availability of tax equity financing. Large tax equity players have noted minimal impact at these early stages, but it is unclear how this may change if economic conditions worsen. During the Great Recession, the U.S. Treasury offered cash grants in lieu of tax credits through the Section 1603 program. This may be one of the items considered in a “phase four” legislation from Congress.
  • Delays in renewable energy construction: Electric utilities are universally considered an essential service. They must continue to operate and provide service during extended stay-at-home directives. However, it remains unclear how jurisdictions will treat renewable energy projects under construction. Social-distancing requirements and permitting delays could result in construction delays for renewable projects under development. With a significant portion of the renewable energy supply chain based in Asia, supply chain disruptions may also trigger delays. Any construction delays could, in turn, impact eligibility for renewable energy tax credits.
  • Potential loss of public policy momentum: Numerous states have increased renewable energy portfolio standards or adopted 100% clean energy standards in recent years. Legislative efforts to further expand clean energy may stall as state legislators adjourn, suspend, or postpone sessions due to the coronavirus. Upon their return, lawmakers will need to address cratered budgets and prioritize public health and economic responses.
  • Scrutiny of rate case proceedings: A number of jurisdictions have frozen previously approved rate increases. This may result in restrictions on grid edge investments, such as “make ready” investments for electric vehicles. The scale and timing of these investments may receive closer scrutiny as public utility commissions consider how to mitigate economic impacts on customers. Utilities may need to consider cost recovery strategies and messaging to commissions as they pursue grid edge investments post-crisis.
  • Decline in consumer demand: An economic downturn will dampen consumer spending. In this environment, consumers may be less willing or able to make large investments, thereby impacting residential solar and storage markets. An overall decline in automotive sales is expected, and consumers may also be less willing to pay a premium for electric vehicles.

The current environment will challenge the renewable and grid edge industries in the near-term. However, companies developing solid projects or offering innovative solutions are likely to succeed over time.

The long-term outlook for renewable and grid edge technologies remains bright. The challenges of COVID-19 will eventually pass. And when they do, renewable and grid edge technologies will remain well-positioned for continued growth.

If we can help you and your team think through these and the many other challenges presented by COVID-19, please let us know. We are working through these issues with our clients today.

About ScottMadden’s Energy Practice

We know energy from the ground up. Since 1983, we have served as energy consultants for hundreds of utilities, large and small, including all of the top 20. We focus on Transmission & Distribution, the Grid Edge, Generation, Energy Markets, Rates & Regulation, Enterprise Sustainability, and Corporate Services. Our broad, deep utility expertise is not theoretical—it is experience based. We have helped our clients develop and implement strategies, improve critical operations, reorganize departments and entire companies, and implement myriad initiatives.

About ScottMadden, Inc.

ScottMadden is the management consulting firm that does what it takes to get it done right. We consult in two main areas—Energy and Corporate & Shared Services. We deliver a broad array of consulting services ranging from strategic planning through implementation across many industries, business units, and functions. To learn more, visit www.scottmadden.com | Twitter | Facebook | LinkedIn.

Cristin Lyons's picture

Thank Cristin for the Post!

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ScottMadden
ScottMadden is a management consulting firm focused on Transmission & Distribution, the Grid Edge, Generation, Energy Markets, Rates & Regulation, Enterprise Sustainability, and Corporate Services. We have served hundreds of utilities, large and small.

Discussions

Matt Chester's picture
Matt Chester on Apr 21, 2020 4:00 pm GMT

Potential loss of public policy momentum: Numerous states have increased renewable energy portfolio standards or adopted 100% clean energy standards in recent years. Legislative efforts to further expand clean energy may stall as state legislators adjourn, suspend, or postpone sessions due to the coronavirus. Upon their return, lawmakers will need to address cratered budgets and prioritize public health and economic responses.

This is a very real one, and as we look towards November elections it seems likely that clean energy may fall even lower on the priority list, which is disappointing given how high the topic had been elevated a year ago thanks to talk/debate on the Green New Deal.

Cristin-- do you have any advice for how advocates for clean energy and decarbonization can keep on the necessary pressure on their political leaders when focus is quite understandably diverted elsewhere? 

Cristin Lyons's picture
Cristin Lyons on Apr 23, 2020 6:53 pm GMT

We expect a continued interest and growing focus on the cost and performance of clean enrgy. The cost of renewable technologies continue to decline and the addition of storage allows the resources to meet specific grid needs (i.e., dispatch for evening peak).

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