Green Energy Could Help to Cope Price VolatilityBy Dalia Maria de León | Tue, 03/24/2020 - 16:49
The current worldwide measures to offset the COVID-19 pandemic is set to effectively lock down sections of the economy by keeping people apart to slow the spreading of the virus. This could cause factories and businesses to close or cut capacity.
According to the Electric Power Research Institute (EPRI), there has been a significant decline in electricity demand due to limited industrial activity. Daily news reports show that it has been an extremely volatile few weeks in the power and gas markets and now the pandemic is having a huge impact on the broader commodity scene.
The Commission for Environmental Cooperation, on its analysis paper Renewable Energy as a Hedge Against Fuel Price Fluctuation, says that the fact that even small demand-supply mismatches can trigger big price effects is important not just for analyzing market disruptions, but also for fighting climate change.
Over the past weeks, several initiatives worldwide have taken place and companies have placed their bets on renewables as one of the best options for power generation during the COVID-19 pandemic. According to Professor Phil Hart, Director of Energy and Power at Cranfield University, the scale of renewables in the UK system will be helpful during the crisis. The size of renewable plants is generally much smaller and the national power system will be better able to handle the withdrawal of multiple smaller sites, he said. “The risks to the UK’s power supply will remain minimal as long as the country avoids cuts to basic supply and stations do not watch all staff fall ill,” said Hart. Maintenance regimes at individual renewable plants are less risky in terms of complying with COVID-19-related measures, according to Hart, so the risk of being shut down as the crisis wears on is less.
Similarly, Jamie Banks, PPA CEO at New Stream Renewables, said that short term fixed-price PPAs are the best option for power generators facing the economic uncertainty driven by the COVID-19 outbreak. “Just look at the carbon price over the last 24 hours or so. It is our view that price uncertainty will remain over the coming weeks, potentially months, which will create significant potential downside price risk for our PPA generators.”