l'Actualité du Solaire

The year was disrupted by the pandemic. The pandemic revealed a drop in demand, negative prices, and shutdowns of fossil fuel power plants. It also showed that renewable energy producers had weathered the health crisis well. On the other hand, they still have to fight against the production of fossil fuels because their installations are in operation, and perhaps against a newcomer!

The pandemic affected China, then Europe, then the world

The pandemic caused a drop in electricity demand and an increase in RE in the energy mix

The level of activity of companies varied from country to country, but did not affect their accounts.

Have renewable energies been the big winners of the pandemic?

Renewable energies have won a battle but not the war!

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The text

The year 2020 was hectic due to the spread of the epidemic in the spring. The violence of the economic shock caused by the containment led to financial adjustment measures. After a period of lull, the pandemic resumed this autumn, but some lessons were learned from the spring containment: the recent, but less restrictive measures slowed the spread of the virus but did not stop it, which is seen with the difficulty of reducing the rate of contamination and the uncertainties for the festive season.

The pandemic affected China, then Europe, then the world

The construction of residential solar power plants or installations was affected at the beginning of the year. In February, i.e. before the virus was confined to Europe, disruptions in Chinese factories resulted in activity being limited to 50% of their capacity, sometimes hampered by a lack of raw materials. Transport was reduced because there was an attempt to limit contacts from region to region. In addition, 86% of Chinese ports were disrupted, hindering exports of photovoltaic panels or components for construction sites, even before European containment.

The confinement introduced in France on 17 March has stopped many activities, trade, hotels, restaurants, travel, but also industry, construction... Beyond this catalogue, the two characteristics are the drop in the consumption ofBeyond this catalogue, the two characteristics are the drop in electricity consumption (to 15% during the second half of March in France), and the increase in the proportion of renewable energies in the energy mix, which has risen significantly because they have priority for injection into the network.

The pandemic caused a drop in electricity demand and an increase in RE in the energy mix.

The contribution of solar + wind power accounted for almost half of electricity demand in Germany (45%), a third in Spain (28%), the United Kingdom (32%) and Portugal (28%). If we add hydroelectricity, the share of renewable energy sources reaches 50% to 70% of electricity demand in Europe during these two months (France and the Netherlands stand out by being well below the European average). Portugal was probably the country that used the most RE during this period with a rate of 69%, of which 35% was hydropower.

The weak demand for energy led to a collapse in prices for both oil, which from $60 a barrel, fell back for a long time to around $20 and even had a negative price for a few days. Same phenomenon for electricity which recorded increasingly negative prices because there was too much energy in the network. While there were 77 hours of negative prices in France between 2012 and 2019, this number jumped to 93 hours in the first half of 2020. The consequence was the shutdown of many thermal power stations (coal but also natural gas). This phenomenon has shown what will happen with a multiplication of generators based on renewable energy.

This period also brought to reason a number of developers who were betting on selling their energy production on the wholesale market in order to make a profit margin for sure. As prices on the market collapsed or even became negative, those who wanted to sell their production lost their energy or were unable to monetize it as they wished. This stopped the conclusion of energy supply contracts and made developers more cautious.

The level of activity of the companies varied from country to country, but did not affect their accounts.

Some countries have tightly confined, while others, such as Germany, have adopted less strict guidelines. In this country, PV worksites have been able to continue.

During this period, information on the situation of the companies from the representative bodies was scarce. They are only obliged to present activity figures like listed companies: Neoen in the first half of 2020 increased its construction^assets by 25% during the period, but suffered a 29% drop in projects won, which is explained by the shutdown of a large number of administrations. On the other hand, Voltalia reports that the group increased the volume of contracts won during the period by a factor of 2.2 (compared with the previous year). This indicates that abroad, the pandemic was generally treated less severely than in France.

The consequence of the containment on energy demand, as well as the drop in kilowatt-hour prices during the period, was the discovery of the permanent production of a solar or wind power installation. There is no need for personnel or maintenance to operate it. This proved that installations made quarter after quarter could considerably increase turnover.

During the containment in France, major installers such as Neoen announced that the pandemic has no "notable effect" on the operation of the plants it operates. Voltalia acknowledges that "the pace ofcertain power plant construction is nevertheless, in some countries, slowed down or even temporarily stopped, without affecting financial objectives. However, the health and economic crisis is giving rise to new risks that make the company's environment less predictable. The main risks relate to the ability to carry out major ongoing and future power plant construction projects without delay, the ability of customers (mainly in development and project construction sales) to make progress in their decision-making processes, and possibly currency fluctuations".

Neoen reported a 33% increase in^first-half sales over the comparable period of 2019; Voltalia reported a 74% increase. Thus, the policy of obtaining new construction contracts is leading to significant growth for the companies. This phenomenon would be found among all non-listed developers.

If the first-half sales figures are flattering for these two companies, it is because the end of containment has led to an acceleration in the construction of power plants and installations, as well as the winning of new construction contracts, ensuring future activity.

Have renewable energies been the big winners of the pandemic?

Renewable energies have made it through the delicate period of containment. They have even shown qualities that make them the big winners of the containment period.

The public authorities of each country or of the European Union have bet on the development of renewable energies to revive the economy that has been damaged by the shutdown of activities. Announcements of recovery plans have multiplied invoking the energy transition, even if it is much more complex than the simple creation of solar or wind power plants.

In the second half of 2020, a pressure group claimed that the future was hydrogen. It recommended creating a new means of storing energy with this gas. Is this a way to divert attention away from renewable energies? Is it a return of nuclear power in the energy race, since it is the only one capable of producing energy continuously, the only way to produce hydrogen under homogeneous industrial conditions? Is it a strategic desire to be present on a new technology after having missed the emergence of batteries and communication technologies? Or is it the vision of a money pump in the form of large and regular subsidies?

Renewable energies have won a battle but not the war!

If renewable energies have proven their quality (production without human intervention and without fuel costs), they did not win the energy war this year: While in some countries the price of a megawatt-hour of solar energy ranges from $1.50 to $2.50, the price remains hung between €5 and €6 per MWh in Germany and France in calls for tender. The price must be lower or much lower in electricity supply agreements signed between a developer and a user, because the plants are larger (which reduces prices) and the customer is known. However, the price is a well-kept secret because it should allow high margins for the supplier.

The other aspect which indicates that RE has not won the war against other energy sources is the Lazard study of October 2020 which mentions that the power plants (coal, gas, atom) already in operation have a particularly low operating cost.

According to this study, a solar power plant based on silicon panels has a production cost of between $31 and $42 per MWh, while a plant using thin film has a cost of $29 to $38. This compares with nuclear power, which has a cost per MWh of $29; gas, $28; and coal, $41. Admittedly these are average figures and above all not specific to Europe. They only show that there is a big effort to be made in lowering PV production prices in order to eliminate competing power plants and to impose itself definitively.

The shortage of photovoltaic components in the first quarter of 2020 in Europe and around the world has created an awareness of the need to stop being totally dependent on China. Attempts are being made around the world to create a local industry, which will be the theme of next week's column.