Not only oil and gas, the conflict between Russia and Ukraine is also increasing the cost of new energy

The Russian-Ukrainian conflict has not only pushed up the price of non-renewable energy, but also the price of renewable energy.

In fact, renewable energy projects were already facing supply chain tensions and rising raw material prices before the conflict. The global pandemic created a bottleneck for wind and solar developers two years ago, and new pressures are hitting them now, extending the completion period for many projects again.

Governments are now calling for an accelerated transition to renewable energy to avoid dependence on Russia for oil and gas. But picking up the pace in the short term is almost impossible.

Oil prices continue to climb, and new energy projects are hit

Global wind and solar have boomed over the past decade due to rapidly falling costs, making their projects more competitive sources of electricity compared to traditional sources, and a growing number of governments advocating for low-carbon emissions.

Wind and solar accounted for about 6.4% and 4% of global electricity generation last year, respectively, up from 3.8% and 1.4% five years ago, and are expected to increase further, according to S&P Global Commodities Watch. further substantial growth. S&P estimates that the cost of solar power fell to $45/MWh last year from $381/MWh in 2010. At the same time, the cost of onshore wind power fell from $89/MWh in 2010 to $48/MWh.

However, after the Russian-Ukrainian conflict, the price of key raw materials such as aluminum and steel soared, and at the same time, rising oil prices led to higher transportation costs, and renewable energy projects were hit. According to a report by Wood Mackenzie and the Solar Energy Industry Association, one-third of U.S. solar plans will be delayed by at least one quarter starting in the fourth quarter of 2021; 13% of projects expected to be completed this year will be delayed or canceled.

How are manufacturers responding?

According to The Wall Street Journal, French utility and renewable energy developer Engie SA is currently signing contracts with customers closer to project start dates to better understand cost increases, said Dave Carroll, head of North American renewables at French utility and renewable energy developer Engie SA. or potential logistical issues. Cost forecasting is much more complex than it was a year ago, Carroll said.

Companies that make wind turbines, such as major Danish wind developer RSted, have been hit hard since the outbreak, as the cost of moving the giant blades has risen further.

In an interview with the Wall Street Journal last month, RSted said inflation and project delays had weighed on its offshore wind projects in the United States. David Hardy, chief executive of rsted US, said: "Marine fuels now tied to rising oil prices are pushing up ship contracts and signing ship contracts is akin to 'Murphy's Law'."

Competitive Power Ventures, a Maryland-based power generation company, has several ongoing renewable energy projects. The company said it was stockpiling large quantities of needed solar panels and other equipment, hoping to avoid future supply constraints, and had been screening development sites that did not require major transmission upgrades to reduce the potential for approvals to apply for access to the grid. Delay.

According to The Wall Street Journal, Deepa Venkateswaran, senior analyst for renewable energy at Bernstein Research, said the cost of developing companies for these renewable energy projects is sure to rise again, even though none of the key components come from Russia or Ukraine.

Increased attention to new energy

The Russian-Ukrainian conflict has led to a substantial increase in the cost of crude oil, which has also become an important driving force for the development of renewable energy, stirring up wind power, nuclear power and solar power, which have long been voiced but slow in progress, and the transmission speed of this trend will also increase. quick.

Venkateswaran said the current set of issues is seen as an upcoming mid-term issue for new energy projects, as demand for renewable energy projects is accelerating amid growing calls to reduce Russia's reliance on fossil fuels.

"The bigger positive impact over the medium to long term is an increased sense of urgency to develop renewable energy and address barriers such as access," Ms Venkateswaran said.