The COVID-19 pandemic is likely to impact the Middle East renewable energy market dynamics in the short term, a recent report showed.

According to data and analytics company GlobalData, the disruption in the international supply chain and low oil prices caused by the COVID-19 pandemic will dent government revenues in the region and hinder the short-term development of renewables.

The reduction in revenues could force governments to prevent the uptake of new projects, Global data said.

“The demand for oil and gas is expected to remain low in the short term, which will have a significant impact on budget outlays for the next year,” Somik Das, Senior Power Analyst at GlobalData said.

“Logic suggests that low oil price is bad news for the renewables energy sector - lower oil and gas prices will make energy transition to cleaner fuels difficult and unviable in the short term,” Das added.

According to the report, the competitive pressure of the fall in oil prices will increase the cost of capital for renewable projects in the current economic conditions.

Das said that governments are however unlikely to completely move away from the supporting the market despite low oil prices.

“The ultimate impact will depend on a range of factors, including the length and severity of the epidemic, global economic recovery, market dynamics, and the government stimulus packages,” he said.

(Writing by Gerard Aoun; editing by Seban Scaria)

(gerard.aoun@refinitiv.com)

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