L R AS Published on Monday 30 March 2020 - n° 315 - Categories:various sectors
What will happen after the coronavirus, according to Wood Mackensie
The next decade is expected to be characterized by cheap power in North American electricity markets. Competition among renewable energy developers will be fierce; cheap capital will be plentiful. Developers, financiers, power companies or buyers should be wary :
risks of electricity deliveries and uncertain returns The margin of error on project performance has narrowed considerably in recent years. Competition for supply contracts has become intense. The rate of return on projects depends on market developments after the conclusion of contracts that are expected to last 20 to 30 years. This means that developers are taking more and more short-term electricity delivery risks to win contracts while making their contracts uncertain in the distant future.
Infrastructure is also becoming a greater risk. In many regions where wind and solar development was concentrated in the 2010's, limited or weak grid infrastructure is approaching saturation. This infrastructure will require costly grid upgrades to accommodate new projects.
Policy changes will increase the value of energy Zero-carbon targets and renewable energy will increase the value of projects. The rapid emergence of storage coupled with wind or solar power is a manifestation of this development. The advantage will go to suppliers who are best positioned in an increasingly complex market.
The level of demand will become extremely important When energy costs are low or very low, growth in demand becomes fundamental. US energy growth is 1%. Will lower oil prices and the pandemic have an effect on demand?
GreenTech Media of 25 March
