The Covid-19 pandemic and resulting economic fallout have had a variety of impacts on the clean energy transition, with some sectors being more affected than others. Earlier this year, the International Energy Agency (IEA) warned of slowed progress towards sustainable energy goals due to Covid-19 and reversed progress in many areas crucial in reaching net zero, such as energy efficiency, clean cooking, or access to electricity. There is one sector, however, that has shown remarkable resilience since the beginning of the pandemic and has been able to maintain, and even accelerate, its rapid growth since 2020: green energy infrastructure.

That is not to say the sector has been immune to the challenging environment of the last two and a half years. With global value chains severely disrupted by Covid-19 lockdowns and geopolitical frictions, many renewable energy projects have seen significant delays in installations.

Orders of new solar panels or battery systems for grid-scale applications can now take anywhere between a couple of months to a staggering two years. More than 315 projects in the US, for example, are being canceled or delayed in 2022 due to supply chain constraints, according to Washington D.C.-based trade group Solar Energy Industries Association.

NextEra, one of America’s largest green infrastructure developers and capital investors, recently announced that approximately 2.1 to 2.8 GW of its solar and storage projects will need to be shifted from 2022 to 2023.

At the same time, renewable energy developers are grappling with surging metal prices. The price of polysilicon, a key material in the solar photovoltaic value chain, has grown a record 300% since January 2020. Another key substance used in electric vehicles as well as grid-scale energy storage applications, lithium carbonate, was traded in the Asian-Pacific market at US$72.15/kg in June 2022, a rapid climb from $6.75/kg in December 2020.

In an industry heavily reliant on minerals and metals that are often sourced and shipped across continents, such cost hikes threaten to inflate the costs of transitioning from fossil-based to zero-carbon energy systems.

Delivery delays and price spikes have highlighted the need for more diversified supply chains but they have also failed to undermine the green infrastructure boom. On the contrary, renewable energy capacity additions reached a record high last year, with approximately 270 GW of renewables becoming operational globally in 2021.

The trend is expected to continue in 2022 with renewable energy capacity additions forecast to grow by another 8%, with solar to account for approximately 60% of new installations. Similar trends can be seen in the job market, with US renewable energy jobs growing in 2021 after a decline in 2020 due to the Covid-19 pandemic.

This clean energy buildout comes on the back of increased M&A activity in the sector and significant private capital inflows. Global sustainable funds reached an all-time high of $3.9 trillion in Q3 2021, doubling in just 12 months.

In 2021, US battery storage, smart grid, and energy efficiency start-ups attracted a record $10.1 billion in venture funding, a stark increase from $2.6 billion in 2020. In Europe, unprecedented high deal-making activity in 2021 saw many renewable energy platforms trading at huge premiums.

In 2022, global clean energy investments are expected to top $2.4 trillion, well above pre-Covid levels. Investors’ appetite for renewable energy projects seems to show no signs of waning.

What is driving this boom?

Several factors are responsible for this growth. First, simple economics are in favor of building more renewables. Falling costs of most clean technologies now make a strong business case for renewables, as many clean energy technologies undercut even the cheapest fossil fuels on costs. In the first half of 2022, levelized costs of electricity (LCOE) of Solar PV and onshore wind were at $45 MWh and $46/MWh respectively, while LCOE of new coal and gas amounted to $47/MWh and $81/MWh, according to BloombergNEF. Costs of lithium-ion battery storage, a technology essential in providing flexibility to the grid and enabling higher adoption of renewables, went down 97% over the last three decades since its first commercial application in 1991.

Secondly, governmental commitment and green recovery packages are paramount to making green infrastructure projects bankable from the private sector’s perspective. Renewed focus on green and resilient post-pandemic growth, coupled with more ambitious net-zero targets announced by countries in recent years, have helped boost confidence in the sector and kept the renewable energy boom afloat despite the economic slowdown.

Russia’s invasion of Ukraine further shed light on the need for more diversified energy supply chains. Cheap renewables can help lower the world’s dependence on Russian fossil fuels while creating clean and resilient electricity systems.

The jury is still out on just how deep and long the current recession will be and about its lasting implications for the green energy sector. In times of economic uncertainty, tailor-made government incentives and regulatory improvements become ever more important. The passing of the Inflation Reduction Act by the US Senate that allocates $369 billion to reducing greenhouse gas emissions is a step in the right direction, but more needs to be done on the global level.

Encouraging the local production of supply chain components, availability of financing, or streamlining renewable energy permitting and grid interconnection processes are just some of the areas that can help mitigate the impact of the recession on the energy sector.

Why is green energy infrastructure booming despite global economic woes?