The leading clean-energy research firm just slashed its outlook in response to the coronavirus pandemic, revealing that solar energy installations could decline for the first time in decades

• The novel coronavirus is hampering the growth of renewable energy, including solar and wind power.
• A leading research firm slashed its projections for 2020 solar installations. It could be "the first year ever where solar build is lower than the previous year," an analyst said.
• The growth of the lithium-ion battery industry will slow as well, as fewer people buy electric cars.
• Visit Business Insider's homepage for more stories.

It was supposed to be a record-setting year for clean energy, with solar panel and wind turbine installations reaching unprecedented heights.

But the spread of the novel coronavirus - now classified as a pandemic - is causing analysts to rethink their 2020 projections.

A report today by the research firm BloombergNEF reveals that the virus is stunting demand for solar and wind energy, in addition to electric vehicles, which will likely shrink the market for lithium-ion batteries.

Read more: The novel coronavirus cratered solar panel manufacturing. Now, China is ramping back up, but top analysts say there could still be month-long delays and price hikes.

While most factories in Asia are back online, the report also highlights the need to diversify the clean-energy supply chain.

According to the research firm IHS Markit, nearly two-thirds of the world's solar panel manufacturing capacity is in China, and the number is even higher for battery cells, used in electric cars and homes.

Solar energy will be hit the hardest

Coronavirus is expected to slam the solar industry. BloombergNEF (BNEF) slashed its forecast for 2020 installations, released earlier this year, by 8%, suggesting those numbers could be as low as 108 gigawatts.

"As far as we know, it is the first year ever where solar build is lower than the previous year," Jenny Chase, the head of solar at BNEF, said by email.

Though solar panel factories in China saw steep production dips in February, the updated projections reflect a drop in demand, not supply, Chase said.

"The biggest change is that we have reduced our China demand estimate," the report said.

Today, the installation of solar energy in China is largely driven by a government "mega-auction," Chase said. During the event, solar developers submit bids and the government then awards a volume of solar energy at the lowest price.

Read more: From stunting solar panel production to threatening EV sales, here's how coronavirus is impacting the $360 billion clean-energy industry, according to 8 experts

Earlier this week, the government announced that this year's auction would be pushed back by a month. That could also mean that the deadlines for these massive solar projects - which normally fall at the end of the year - could be pushed to 2021.

The research firm also cut projections for solar installations in the US - in this case, by as much as 600 megawatts. Chase said "general recession effects" are driving that slump, as fewer people will opt to buy solar panels for their homes.

Despite what some sources have said, she doesn't think a global pandemic will inspire people to buy solar panels.

Battery production weakens as fewer people buy electric cars

The battery industry, on the other hand, is projected to grow again in 2020 - but not by as much, relative to BNEF's initial projections. Similar to solar, the slowdown in the battery market is driven by a drop in demand.

The research firm looked at changing demand through the lens of China's electric vehicle industry, where a large chunk of lithium-ion batteries end up.

"Generally, it's China where we see the demand erosion coming from," James Frith, who leads the energy storage team at BNEF, said.

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In what BNEF calls a "pessimistic" scenario, demand for batteries in China will be 9 GW lower than the firm's initial projections, whereas, in the "optimistic" scenario, demand is just 3 GW lower.

Both values are just slightly higher than the demand in China for EV batteries in 2019, the report says.

"We still expect the battery market to grow but the rate of growth will slow down," Frith said.

Frith says to watch what happens in the automotive market, where there are still a lot of unknowns.

"If you have travel bans and quarantines in place for a long time, obviously that means people can't go out and buy EVs and that will have an impact," he said.

It will still be a record year for wind

There's some good news: It will still be a record year for wind energy, BNEF says.

The firm cut its forecast just slightly, from 31.3 GW to as little as 27.5 GW, in what it calls a "pessimistic" scenario.

Unlike solar and battery markets, the wind industry is impacted by supply chain disruptions, BNEF said.

"The size of the drop will depend on how quickly Chinese suppliers ramp up to full production as staff slowly return from isolation," the report said. "Tight construction schedules leave little flexibility to accommodate later deliveries of components."