Change Is On The Horizon

Challenging Yet Hopeful Times

Crises force change, whether they are economic crises, public health crises or political crises—or a combination of all three. And while less dramatic than the demonstrations in the streets of our cities, the energy sector in the United States is under pressure.

Since March, electricity use has fallen enough to upend market dynamics. This has accelerated the decline of the U.S. coal industry, creating opportunities for other energy sources. Natural gas has also had a rough go of it. Who would have thought six months ago that tankers would be arriving at the Sabine Pass terminal in Louisiana to offload liquefied natural gas (LNG), instead of filling up there? A superabundance of gas in Europe is overflowing everywhere, even to the United States.

Perhaps the biggest blow has come to the oil industry. From late January through the end of April, oil has decreased from more than $60 per barrel to less than the cost of a 12-pack of craft beer. The damage to market capitalizations of oil companies has been no less harsh; and while oil prices and stock prices have recovered somewhat in the last six weeks, they are nowhere near pre-crisis levels.

Among the major energy sources, solar and wind have fared the best during this pandemic. The zero marginal cost nature of solar and wind means they continue to operate in wholesale power markets even as other fossil-fuel based generators must shut down due to diminishing electricity demand and depressed prices. And for the first time in more than a century, U.S. renewable energy sources generated more primary energy than coal during the first quarter of 2020. The solar industry is competitively positioned for the future and as costs continue to fall, we will emerge from these crises stronger and more sophisticated, and ready to take a bigger share of the global energy market.

However, the solar sector has also not emerged from this without its own disruptions. The interruption of business that this pandemic brought with it has been hard to quantify, but numbers released by SEIA show that a full quarter of the solar workforce has been furloughed in recent months, in what was supposed to be a boom year.

Yet recently, solar companies from the residential sector are reporting a spike in interest in new projects with batteries as homeowners look to offset energy usage as they spend more time at home while also seeking reliability amid uncertainty. And while there has been a recent 40% drop in the commercial and industrial sector due to the Covid-19 pandemic, as the economy continues to re-open many postponed projects are making renewed progress.

The good news is solar demand is returning quickly. Because this is what solar offers: security, economic certainty and resiliency. Change is on the horizon.