Oil price slump could lead to flow of capital towards renewable energy

Oil&Gas Materials 28 March 2020 11:17 (UTC +04:00)

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.”


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