Covid-19 Impact on Energy and Power Sector

COURSE: EE6509 RENEWABLE ENERGY SYSTEM IN SMART GRID

Quiz#2

Prof Hung Nguyen

NAME: SAHU ALOK

MATRICULATION: G2001486B

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IMPACT OF COVID-19 ON ENERGY AND POWER SECTOR
The WHO (world health organization) had declared COVID-19 as pandemic since March 2020. Since
the advent of covid-19, various safety measures have been taken to minimize the spread of the virus.
Because of this spread of virus, there has sharp decline in the power consumption in the commercial
domain of loads, there has a little bit decline in industrial loads as well because of reduction of work
force complying to the safety measures. Industries are usually linked and dependent on the
performance of other industries. Hence a decline in the output of a certain industry will directly affect
the performance of the linked industry.

As the production of industry had started to decline in the early 2020’sthe energy consumption by
these industries has seen a sharp decline. As the price of electricity is set at a point where the
generation is equal to the demand. Hence this led to the reduction of electricity prices in the market.
The transportation business took a heavy hit due to COVID-19. All due to this the prices of crude oil
slipped by almost 75% in the market. The fight between Saudi Arabia and Russia in crude oil
production was held as one of the important factors in price decline of prices. The OPEC+ countries
had unilaterally decided to cut down production of crude oil to support the oil prices worldwide which
ed to cutting down production by 9.7Million barrels per day which was almost the 10% of. Global oil
consumption. These measures led to stabilize the oil price at $49 per barrel.

The global market at this point of time has touched all-time highs, the two factors leading to this
situation are monsoon weather and covid-19. Usually in monsoon season the mining activities slow
down as the safety compliance comes into picture. Also, due to this global pandemic due to covid-19
has led to slowly down mining outputs in different parts of the world. With reduced number of workers
in the mines, different countries have reported to have reduced coal output in 2021.
Shanxi, China’s highest coal producing state has carried out safety compliance checks and has
passed an order to shut down the mines who fail to satisfy the safety requirements and will be open
after proper safety precautions and measures have been taken. In light to this enforcement, a mine in
china with an output turnover of 6 MMT has been shut down due to death of a worker in the mines.

Australia being a major coal mining and exporter country has reported that covid-19 has slowed down
the coal mining and the supply chain infrastructure of coal export in the country. While there have
been testing kits being available to trace and isolate people from spread of virus, but in remote parts
of the Australia availability of such kits is in shortage hence the workers have prolonged days of
isolation in wait for the results. Australian High grade coal NAR 6000kcal/kg was priced at $169.96/t
which had gone up from $120.58/t priced on 4 th of June. Thankfully with availability of vaccines things
are picking up pace. The below figure shows the price of Thermal Coal in $/t

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India has also suffered due to the spread of covid-19 in the country. With the onset of nationwide
lockdown, isolation, testing and quarantine, the country’s power profile has changed as the share of
commercial and industrial loads have reported to have declined. The residential loads have increased
compared to 2019 due to shift of working culture to Work from Home. As the industrial and
commercial loads had more power share but with the reduction of power in that domain had led to
lower Market Clearance Price in the electricity market. The MCP for March 2020 and April 2020 was
INR 2456/MWh and INR 2448/MWh respectively compared to INR 3118/MWh and INR 3221/MWh in
2019. India has seen a dip of 26% in the electricity consumption at the end of March 2020 compared
to 2019. As the lockdowns opened and safety measures were modified, the demand rose
progressively and the demand at the end of December 2020 was 8% more than December 2019.

India is the 2nd largest coal producer, consumer, and exporter. India has the 4 th largest coal reserves
in the world. Even with such kind of capacity India’s coal fired power generation companies have seen
severe crunch in coal availability for continual operation of power plant. Out of the 135 thermal power
plants, 16 have reported to have zero coal reserves for operation. More than 100 power plants had
reported to have less than a week’s coal reserve. The reason for shortage of coal reserves is the
soaring high prices of coal in the global market while on top of that the freight and transportation
charges have been on its peak. The shortage of coal was mainly induced due to economies opening,
creating a huge demand of electricity in the sector. The basic principle in pricing of commodity is if the
demand is more than supply price will rise. Due to such high prices, the power plants are reluctant to
buy imported coal which leads to higher generation prices which has put tremendous pressure on
domestic coal mining companies. Also, according to the directory of Ministry of Power, it was ordered
to divert produced coal to power plants to relief the power generation companies from such coal
shortage.

IMPACT ON RENEWABLE PROJECTS AND ROLE OF RENEWABLES IN

POWER CRISIS.
All around the globe the power share towards renewables has seen a growth due to reduced
electricity power demand, lower cost of power generation and grid connectivity of renewables. Also,
with relieved lockdown restriction the power mix has returned to normalcy again. In the United States,
power generated from natural gas was the leading source of electricity from March onwards, while
renewables outpaced coal fired power. While the economy had started to open, the power demand
had increased which led to increase in power share from coal fired power plants. Similarly in India the
ratio of power from renewable to power from coal fired power plant increased, i.e., 30% of power was
from renewable sources. This share went down to 20% in November 2020 due to seasonal changes.
Similar pattern of power mix was also observed in China and European union as well.

The renewables project had been delayed due to restrictions and lockdowns in various parts of the
world, which slowed down the construction activities. However as and when the economy started to
recover. In the first half of 2020, the solar installation done was around 40GW which is 17% less than
what was developed at the same time of 2019. On the other hand, hydropower construction saw an
8% rise mainly due to resumption of construction activities in republic of China. In the United States
due to policies implemented, the renewable energy capacity almost doubled mainly due to rush in
commissioning of those projects to receive tax incentives. In India renewable energy development
had slowed down even before the onset of covid-19, mainly due to poor financial health and delays in
ongoing projects. However, India had added 11.3GW and 1GW of wind power in the first half of 2020.
Various countries have started issuing green bonds so that money raised from bonds can be invested
in development of renewable resources across the world. Germany has raised approximately $8bn
through green bonds, whereas the Indonesian government had raised $2.5mn through green sukuk
(Islamic Bond). Egypt has also reported to have issued $750mn worth of green bonds being the first
MENA countries to do so.

The renewables energy has supported the power grid in providing alternative source of energy which
helps in slowing down depletion of fossil fuels for the future generation to come. But the intermittency
issues of renewable sources are the main cause of reliability of such sources. For example, the solar
energy depends on the radiance of sun, where intermittent clouds can immediately disrupt the power
deliverability of the solar panels. Wind energy has also reliability issues, but the wind cannot suddenly
go to zero hence has an inertia before it doesn’t provide energy at all. With more advanced
technologies where prediction of clouds and winds can be done with greater precisions, provides with
proper planning of power generation from power plants hence leading to greater reliability. Also,

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energy storage systems also add up to the system reliability where excess renewable energy
generation can be stored for grid.