BAKU, Azerbaijan, October 13. Investments in renewable energy sources are set to surpass spending on oil and gas for the first time, Trend reports via Rystad Energy, independent energy research and business intelligence company from Norway.
According to the research, the investments in renewables have increased significantly and are expected to reach $494 billion in 2022, while oil and gas industry is foreseeing less than usual - $446 billion.
“Up until now, returns on renewable energy projects (solar PV and wind) have been unspectacular, primarily relying on subsidies to get projects over the line. Cost pressures due to recent commodity and supply chain issues should have made matters worse as they have reversed years of rapid unit cost improvements in the sector. However, Rystad Energy analysis demonstrates current spot prices in Germany, France, Italy, and the UK would all result in paybacks of 12 months or less,” the report noted.
However, as the company pointed out, not all those involved in the renewables industry will benefit at the same level.
“Historically, projects have required certainty of cashflows to secure funding, often via feed in tariffs and/or power purchase agreements (PPAs). Although these mechanisms protect the project from downside price risk, it does mean limited or no exposure to high spot market prices. In fact, most European solar and wind projects are not benefiting from the current high prices for this reason,” Rystad Energy explained.
As the company noted, developers and financiers should try to get projects up and running as fast as possible and with maximum exposure to wholesale prices, while the prices remain high. Once the initial costs are recouped, profits will be very attractive, even if prices fall to almost historical levels.
“Our research and analysis show more capital is being pumped into renewables than upstream oil and gas (including brownfield and greenfield but excluding exploration) for the first time. If high prices are indeed here to stay and developers bring new capacity online quickly, the compelling economics might even hasten Europe’s renewable sector growth,” the report concluded.
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