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| Wed, 13th May 2020 16:26:00 |
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Oil Crash Puts Texas Solar Boom At Risk |
The oil price crash struck right in the heart of the U.S. oil industry, Texas, where firms are curtailing production to ride out the lowest oil prices in years. If we were in normal times, the new oil crisis would have been just another bust in the boom-and-bust oil price cycle.
But these are not normal circumstances, not by a long shot. The COVID-19 pandemic and its economic repercussions have upended the plans and prospects for every industry and service sector in the top oil-producing U.S. state. And renewables are no exception.
Solar developers have canceled 2.5 gigawatts (GW) worth of projects across Texas since the oil price crash in early March, according to Bloomberg's estimates.
The thriving solar industry in the state has hit a snag in recent months.
The Oil Bust
Three months ago, the prospects for the Texas oil industry were still bright, even though analysts had started to forecast slowing production growth going forward. The Texas economy was okay, and its economic growth and expanding oil activity warranted the construction of more power plants to meet growing electricity demand.
Solar power in a state endowed with so much land and sunshine was a perfect option. Even oil companies started to sign deals to power their drilling operations with electricity from solar and wind sources.
Then came the oil price crash as oil demand collapsed in the pandemic. Suddenly, the shale patch slashed spending and operations in response to the price rout. Layoffs began.
This would have been just another oil-bust cycle had it not been for the COVID-19 pandemic that brought the U.S. and Texas economies to their knees, threatening the financing and demand for solar power projects.
The Black Swan and the Economic Fallout in Texas
Stay-at-home orders and the temporary shutdown of restaurants, entertainment and art venues, and retailers crashed economic activity in Texas and dampened consumer and business confidence as nearly 2 million Texans applied for unemployment benefits in March and April alone.
"Activity in the service sector has been more severely affected than in manufacturing, precipitating downward pressures on wages and prices. The state's oil and gas sector has been decimated," Laila Assanie and Chloe Smith with the Dallas Fed wrote in a report last week.
Read original full article
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