“What is happening now is a red flag warning for all those who thought that electricity prices would have stayed always high.”
That was the verdict on the Covid-19 crisis given by Antonio Delgado Rigal – chief executive of Spanish energy forecasting service AleaSoft.
Delgado Rigal told pv magazine it is impossible to forecast the extent of the unfolding social and economic crisis as there is no immediate end of it in sight.
Image: Aleasoft
“In all sectors of the economy we will be in shock, blocked for weeks until the end of the tunnel is seen, which means evaluating any issue related to PPAs [power purchase agreements] at the moment is too premature,” he said. “At some point we will hit bottom and the comeback will begin and at that moment we can calculate the depth and width of the coronavirus crisis on the sector.”
The most immediate consequence of the coronavirus outbreak for the unsubsidized solar market is a drop in deal prices due to falling spot prices and energy futures.
Delgado Rigal said a market environment in which gas and electricity consumption is falling and fuel prices are collapsing may offer opportunities for big energy consumers seeking cheap electricity. “As we have always said, the electricity market tends to balance,” said the analyst. “When market prices drop, it favors those who consume and discourages those who invest and produce.”
The Aleasoft chief predicted financing for unsubsidized solar projects will grind to a halt until more accurate forecasts can be made about the sector.
Project sales
“The PV projects that are facing more risks are those with a short-term vision and those whose developers have issues in finding financing,” said Delgado Rigal. “However, their developers will always have the chance of selling them.”
But activity will resume, added the analyst, for those able to weather the storm.
“There are months left, we have to be patient,” he said, adding projects left without funding would probably end up sold. “The big [investment] funds are preparing to enter the PV sector to buy cheap. When a good project financing is carried out, there is always the possibility that the market will fall and that it will rise again, which is why we insist on the importance of forecasts based on scientific models.”
In times of plenty, project developers should plan for periods when the price of electricity falls, as it inevitably will, periodically, according to the analyst. And there is one crucial difference to the fiscal policy response to the anticipated Covid-19 recession and that of the last crash, according to the Aleasoft boss.
“This crisis, unlike the financial crisis of 2008, will have bank liquidity, which is a big difference,” he said.
Covid-19
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As the countries across the globe continue to tackle the coronavirus (COVID – 19) pandemic, the businesses are facing an unprecedented situation. Concerns over fixed cost, employee retention, optimizing operational cost, and focus on revenue maximization despite the uncertainty over existing deals and contracts are some of the major issues that businesses across the globe are trying to mitigate.