Power Markets Turns to Renewable Energy Amid Falling Demand Due to COVID-19: Moody's Report

The clean energy transition might be fast-tracked due to the covid-19 pandemic that has displayed that power markets favor renewable energy amidst falling demand, a Moody's report recommends.

"Coal generation has continued to decline, while renewables have shown more resilience across major markets in the US, Europe, China and India," indicated the report.

The power demand in India has dropped by 20% due to the lockdown, with most of the impact on coal generation, they further.

Both corporate as well as household power demand are projected to be profoundly affected by declining growth and weaker long-term growth expectations. The production of conventional sources of energy such as coal and oil has also plunged, believed the agency.

Renewable energy made up the bulk of recent capacity additions both in India and globally, which continues to displace thermal generation. With a sharp decrease in power demand due to the lockdown, this trend is expected to continue, said Moody's.

"COVID-19 could have a ratchet effect, limiting any rebound in coal generation, and accelerating the decline of coal in the US and Europe by a few years," said the ratings agency.

Moody's also forecasts an increase in the use of biofuels, electric vehicles and improvements in their engine efficiencies will add to the probability of oil demand eroding over time. Although most developed countries have set targets and incentives that would require a rapid adoption of electric vehicles in the next ten years, India has not constituted such a policy yet.