According to a Wood Mackenzie analysis a coronavirus-led recession beyond 2020 could result in the delay or cancellation of up to 150 gigawatts (GW) of renewable projects in Asia Pacific from 2020 to 2024.
An extended recession could heavily impact demand in the region, which accounted for three-quarters of global growth from 2015 to 2019, causing an overcapacity that would limit investments in the power sector.
The consultancy projects 380TWh of demand loss in a two- to three-month disruption with strong recovery.
Markets going into recession, however, could result in the loss of 1000TWh by 2023, or about two years of growth in the region.
“The coming months will be crucial to determine if the region is moving towards a rapid recovery or extended recession future,” Research Director Alex Whitworth said in a statement.
An extended recession scenario is expected to reduce the competitiveness of renewables by making it harder to secure project funding.
In such a scenario, lower fossil fuel prices would mean renewables would not be able to compete with coal-fired power plants until beyond 2025, according to WoodMac.
“In our base case outlook, the impact on wind and solar installations in 2020 can be offset by stronger growth and support policies in 2021.
“However, if the situation worsens, renewables projects in India, Vietnam, the Philippines, Thailand, Indonesia, and Malaysia could be heavily impacted by increased financing costs, as well as forex risk due to high capex share of costs,” Mr Whitworth added.
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