Oil price slump could lead to flow of capital towards renewable energy
BAKU, Azerbaijan, March 28
By Leman Zeynalova - Trend:
Oil price slump could lead to flow of capital towards renewable energy, Trend reports citing Wood Mackenzie research and consulting company.
“One consequence of the oil price slump could be a flow of capital towards renewable energy, where returns have often been more stable and now look relatively strong. With $60 crude, the average rate of return for oil projects could be more than the rate for merchant renewable power projects. But with $35 crude, average returns from renewables projects could actually be higher,” the company said in its analysis.
“Renewables present opportunities for companies with strong balance sheets,” wrote Valentina Kretzschmar, Wood Mackenzie’s vice-president of corporate research. “Diversification into clean energies could ensure their long-term survival.”
In the short term, however, renewable energy is clearly facing some severe challenges as a result of the coronavirus and the economic downturn it has created, according to the company.
“Corporate customers are a key segment of the market for renewables, and if businesses have strained finances and do not need as much electricity, they are likely to put a brake on their investments,” reads the report.
Stories have already started to emerge of renewable energy companies being affected by the downturn.
“SunPower, the solar company part-owned by Total, said this week that it was cutting its planned capital spending, as well as reducing management salaries and freezing all hiring and merit increases, to save US$50 million this year. The company also withdrew its previous guidance for revenues and shipments this year. In wind power, meanwhile, the effects of the pandemic have caused a downward revision of 4.9 gigawatts to Wood Mackenzie’s forecast for capacity installed this year, which is now 73 GW. That still makes 2020 a record year, however, and in the longer term the future for wind looks healthy, with an average of 77 GW installed each year during 2020-29.”
Follow the author on Twitter: @Lyaman_Zeyn