By - Jim Vess

Coronavirus pandemic rattles energy markets from oil to wind to energy storage

Energize Weekly, April 22, 2020

Pandemic and recession are rippling through almost every corner of the energy sector from oil companies to wind, solar and energy storage manufacturers.

“Over half the world’s population is now under lockdown, as demand for power drops and the risk of global recession grows,” according energy consultant Wood Mackenzie. “A ‘return to normal’ will be shaped by the success of quarantines and design of recovery policies.”


The oil markets faced a triple whammy as the novel coronavirus pandemic, which has swept the world, and the economic slowdown it has engendered was compounded by an oil price war between Saudi Arabia and Russia.

The dispute led to the Saudis flooding the market and the price of Brent Crude falling to $14.25 a barrel on March 25. On April 9, the two countries reached an accord that called for a 9.7 million barrel a day cut in production for OPEC countries and other key producers.

Brent Crude prices have rebounded some and closed at about $28 a barrel on April 16. In January, the price had been $68 a barrel.

April global demand, however, is projected to be 29 million barrels a day lower than a year ago – a level last seen in 1995, according to the International Energy Agency’s (IEA) April market report.

“The global economy is under pressure in ways not seen since the Great Depression in the 1930s,” the IEA said. “Even assuming that travel restrictions are eased in the second half of the year, we expect that global oil demand in 2020 will fall by 9.3 million barrels a day versus 2019, erasing almost a decade of growth.”

The OPEC-Russia cuts, however, will not be enough to rebalance the market, Goldman Sachs said in a note last week. “A demand shock of this magnitude will overwhelm any supply response including any potential core-Organization of the Petroleum Exporting Countries output freeze or cut,” the investment bank said.

In the U.S., for the week of April 17, the number of oil and gas rigs have been cut by more than half to 529 compared with the same period in 2019, according to the Baker Hughes Rig Count.

Domestic production is also set to drop 2.3 percent to 8.5 million barrels a day between April and May, with declines across all oil-producing regions, though the largest production cut is projected for the Permian Basin in Texas and New Mexico, according to the U.S Energy Information Administration (EIA).

Those cuts may not be enough as on April 20 the price for May delivery of WTI plunged 300 percent and finished the trading day at negative $37.63 a barrel. May contracts expired on April 21 and the plunge was the biggest since 1983.

The anomalous price drop was the result of continued coronavirus-depressed demand, a lack of storage and traders rolling contracts to avoid taking deliveries. The June contract ended trading down 18 percent at $20.03 a barrel.

Natural gas and coal

Natural gas prices – in part because of ample storage after a mild winter and in part because of depressed demand – have also dropped from $2.20 a million British thermal units (BTUs) at the Henry Hub in January to as low as $1.60 in March. They have risen slightly, closing April 17 at $1.76.

The depressed oil and natural gas prices have been bad news for coal. Those competitive prices and a drop in electricity demand are punishing the coal market.

The EIA calculates that for the week of April 11, coal production was 9.3 million short tons – 8.8 percent less than the previous week and 35 percent lower than the comparable week in 2019.

Coal is powering just 15 percent of U.S. electricity generation, according to an analysis by the Rhodium Group. For several days of the past week, wind and solar generated more power than coal.

“That’s never happened before,” Trevor Houser, a Rhodium partner, told the news website, Axios.


Wind installations for 2020 are projected by Wood Mackenzie to decline from the consultant’s original forecast by 6.3 percent to 73 gigawatts (GW) as a result of the pandemic’s economic fallout.

“Europe and Asia, especially China and India, are the world’s two largest turbine manufacturing hubs. Disruption on the flow of global supply chain and the suspended operations in manufacturing facilities are expected to have negative impact on installations in 2020,” according to the Global Wind Energy Council (GWEC), an international industry trade group.

Wood Mackenzie said that India presents “additional downside risk” and that further risks exist in Asia “as travel restrictions and mitigation efforts impact Japan, Australia, Vietnam and others.”

In Spain, a March lockdown order to curb the novel coronavirus closed wind turbine factories, but on April 13, the country allowed 300,000 workers, including those at wind turbine factories, to return to work.

Nordex and LM Wind Power have reopened factories. Nordex had also begun reopening a factory in Lumbier, Spain, according to GWEC.

Vestas has also reopened its generator factory in Vivier, Spain and returned its blade factory in Daimiel to full capacity.

Still, factory shutdowns continue to ripple across the sector. “Siemens-Gamesa announced furloughs at U.S. blade and nacelle facilities,” Wood Mackenzie said. “An extended shutdown in India could impact U.S. operations as the market is a key supply hub.”


Solar installations are projected by Wood Mackenzie to drop 18 percent from start-of-the-year forecasts to 106.4 GW in 2020.

“In the absence of prolonged recession or profound changes to financing and utility procurement, 2021 will recover to be 3 percent below pre-coronavirus expected levels,” Wood Mackenzie said.

The impact on utility-scale projects will be to shift the timelines, but the residential and commercial markets will struggle, Wood Mackenzie said. The residential market could see as much as a 40 percent drop in its new capacity in 2020.

A survey by the Solar Energy Industries Association, a U.S. trade group, found the jobs of 55 percent of the workers surveyed were at risk – 6,212 had already been laid off or furloughed, and 12,524 were working for reduced pay or hours.

Clean energy jobs in general have been hard hit with the overall industry losing 106,400 jobs in March, according to a study done by BW Research Partnership for the American Council on Renewable Energy and E4TheFuture, a group promoting clean energy.

It represented a 3 percent overall drop and wiped out all the job gains made in 2019. “While the clean energy industry faced a significant initial drop in March, it appears that the situation is likely to get much worse,” the report said.

Energy Storage

A survey of 101 industry representatives by the Energy Storage Association (ESA), an industry trade group, found that 63 percent expected decreased revenues for the year, and a third expect a cut of 20 percent or more.

The forecast for installations by Wood Mackenzie for 2020 has been scaled back 20 percent, or 3 GW, to 12.6 GW. This would still represent year-over-year growth for the market.

“The COVID-19 pandemic has impacted the energy storage industry tremendously,” Kelly Speakes-Backman, CEO of the ESA, said in a statement. “While we still anticipate year-over-year growth, it is clear our industry is suffering with immediate and significant risks of workforce reductions and economic damage.”

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